Throughout the month of December, The Simple Dollar is posting a daily series focusing on specific activities you can do right now to set the stage for a great 2011. Out with the old, in with the new.

15. Get a library card and pick out a few books.

A few months ago, I wrote a detailed ode to my local public library. Among the great things available there that I mentioned included books, internet access, events, DVDs, CDs, audiobooks, and children’s resources.

A few weeks after that, though, I had a conversation with an employee of the Ames Public Library, asking for some estimates of how many people in the county actually have library cards. Ignoring collegiate students, she estimated that as few as 20% of the people in the county have a library card for this wonderful place.

That’s a shame. 80% of the people in the area are missing out on an incredible wealth of resources that are simply sitting there, waiting to be used for free.

If you’re in that 80% in your area, without a library card or a good grasp as to the abundance of things available at your local library, correct it. Get down to your local library, sign up for a library card, and see what the library has to offer.

What should I read? If you’re reading The Simple Dollar, you’re likely interested in improving your life, with finances being a part of that improvement. With that in mind, here are several books for you to check out and read during these winter months with that library card.

These books are all pretty widely available and should be found in most public libraries. If your library doesn’t have it, request it – most books can be obtained through interlibrary loan.

The Simple Dollar (my own book, discussing my experiences in rebuilding my own life)
Your Money or Your Life (the book that helped me to start turning my ship around)
The Total Money Makeover (the best debt management book I’ve ever read)
The Bogleheads’ Guide to Investing (the best investing book I’ve ever read)
The Complete Tightwad Gazette (the best frugality book I’ve ever read)
Getting Things Done (the best time management book I’ve ever read)

While you’re there, browse some of the books related to topics that interest you. What I often suggest to people who are not avid readers is that they check out a page-turner – a plot-heavy novel that will interest them. If you don’t have any ideas, go up to one of the librarians and simply say, “I’m looking for a good page-turner that’s something like my favorite television shows” and name a few of them. They’ll point you to the right place.

Beyond that, explore what else your library has to offer. Most libraries have a large selection of audiobooks (my preferred choice for a long road trip – which reminds me that I should pick one up before our next road trip). Many have a big selection of DVDs, too. Some offer community events of all kinds, which you can find out about by checking their calendar.

(One frequent complaint that people offer about using the library is that in some areas, homeless people congregate there. If this is a situation in your area, don’t avoid it. Get involved. Request that the library board change their policy about loitering at the library. It should be a resource available to everyone and if the chairs are taken up by people, that’s blocking reasonable use of resources.)

To put it bluntly, the local public library is a giant pile of free entertainment and resources, just waiting for you to use it. Go give it a shot today.

Over the past week or so, I’ve been attempting to teach my two oldest children a pile of old Christmas carols. Their interpretations are often amusing, particularly because when they’re singing, they both try to substitute in incorrect words to make the other one laugh.

There’s nothing quite like the Christmas season.

Want to Land Your Dream Job? How to Get Started as a Financial Advisor/Planner I’ve been curious about this in the past, though I don’t ever want to be a typical financial advisor. I’d be interested in it mostly just to understand the methods used. (@ good financial cents)

Make Money by Shopping at Drugstores “Making” money might be a stretch, but you can certainly save money on some items by utilizing drugstores, particularly toiletries and the like. (@ the penny hoarder)

Investing in Yourself, Time Diversification, and My Dirty Little Secret Several interesting ideas tied up in a nice pretty single package. (@ magical penny)

20 Financial Milestones You Want to Reach in Your 20′s If you manage to hit even a few of these, you’re doing better than an awful lot of twentysomethings in terms of the long-term financial game. (@ generation y wealth)

“Happiness Does Not Consist in Things Themselves But in the Relish We Have of Them.” “Happiness does not consist in things themselves but in the relish we have of them; and a man has attained it when he enjoys what he loves and desires himself, and not what other people think lovely and desirable.” – La Rochefoucauld (@ happiness project)

Throughout the month of December, The Simple Dollar is posting a daily series focusing on specific activities you can do right now to set the stage for a great 2011. Out with the old, in with the new.

14. Reduce your phone bill.

Two episodes in my own life are relevant here.

A couple years ago, I cancelled my business phone line and moved to Skype. It reduced the monthly cost of my business related calls by about $30 a month.

I figured that there would be significant drawbacks to the switch – limited availability and so forth. What I actually found was that Skype was, for my purposes, as reliable as an ordinary phone. I simply cannot remember a single time where using Skype for work purposes put me at any sort of disadvantage versus a landline.

This, of course, raised the question: why not just use Skype for personal use?

Similarly, for a long time, I had unlimited minutes on my cell phone – but I paid out the ear for them. I had this impression in my head that I used my cell phone a great deal and thus I needed unlimited minutes.

For six months, though, I kept my cell phone bills and took a look at how many minutes I was actually using each month. Even if I chose a limited minute plan that covered significantly more minutes than the heaviest calling month, I’d still be saving about $30 a month by switching plans.

If I chose a more restrictive plan, one that covered five out of the six months, I would be saving almost $50 a month.

These two stories have some key factors in common.

Knowing your actual needs for phone usage directly leads to saving money. Most of the time – and I’ve certainly been guilty of this in the past – people pay extra for a monthly service that covers everything that they actually do plus everything that they think they might do. The problem is that the “maybes” rarely occur and usually wind up being very expensive to pay for.

A much better approach is to simply pay for what you normally use, then deal with the exceptional situations as they come. For example, if you have a plan that covers 99% of your calling needs and saves you $30 a month compared to what you’re paying now, then you can use a small bit of that $30 a month to cover that extra 1% and still find yourself way ahead.

How vital is a mobile phone, really? In truth, most of the mobile calls we make can be handled at home, leaving the mobile for specific needs that can’t be met from a non-mobile device.

For example, over time, I’ve gradually moved most of my calling to Skype, which I can use on my iPod Touch anywhere where I find a wi-fi signal and (obviously) anywhere at home as well. This has reduced my cell phone usage and because I keep up on that, I was able to reduce my cell phone contract to a lower level, directly putting money in my pocket.

In fact, were it not for travel, I would probably move entirely to a “pay as you go” phone. I’ve ran the numbers several times and I seem to consistently find that my cell plan is just a bit cheaper per minute for an average month than a pay as you go phone.

I don’t suggest that people abandon their mobile phone. However, I do encourage people to rethink their overall phone plan. Replacing your landline with Skype, then making an effort to use Skype for many of your calls, will not only drastically reduce your monthly landline bill, but it will also lead to a reduction in your mobile bill as you reduce the number of minutes you actually need.

In any event, there are many options for reducing the monthly cost of your phone usage – and any reduction you can get in a monthly bill is money that goes straight towards improving your financial situation, whether through savings or debt reduction.

This is a last-minute extra addition to the homemade gift series. Sarah and I have gone back and forth for a long while about whether to post this one in the series, but when we showed the items to several people as we were making them, the comments from them were almost universal: “You need to show this to your readers, Trent!”

Why didn’t I want to do a post about it? More than the other gifts in the series, Sarah and I both feel that these gifts will be cherished by the recipients. So, yesterday, I contacted the recipients and asked them to not read The Simple Dollar for a few days – I know the recipients, and I’m quite sure they won’t if I ask them not to.

So, what did we make?

We made photo cubes (or, in our case, not quite cubes – I’ll explain below) for home decoration use or paperweight use! The cubes are made out of cedar, though most woods would also work easily for them.

We got the idea from this post at the wonderful alphamom blog and more or less followed the procedure outlined there. I’ll reiterate it here, with some details on our own experiences.

I should note that in the below procedure, I’m often stating “we” for tasks both Sarah and I did individually. She put forth quite a lot of effort during the making of these cubes; in fact, I’d easily say she handled most of the work here, particularly in terms of putting more coats of Mod Podge on the cubes throughout the day.

What You Need
The materials you need are largely straightforward.

A cube-shaped block of wood – or two, or three
Sandpaper
Six photographs
Mod Podge
A sponge paint brush
A spray sealant for the finish (to prevent tackiness from the Mod Podge)

On acquiring the wood cubes We went to Home Depot, selected a cedar 4″ by 4″, and asked them to cut the board every four inches, making (theoretically) 4″ x 4″ x 4″ cubes. I should note here that we tried both Home Depot and Lowe’s for this purpose – the people at Lowe’s wouldn’t cut the board to our specifications and basically acted as though we were a bother, while the staff at Home Depot were very helpful.

The problem with this cut is that the cubes didn’t turn out to be perfectly 4″ x 4″ x 4″. After cutting, the cedar had dried and shrunk a small amount, so we ended up with blocks that measured about 3.5″ x 3.5″ x 4″.

We had two choices at this point: we could either shave 1/2″ off of one end of each cube or we could simply go with the slightly rectangular blocks. Our decision was made after mocking up a few of them – we decided to go with the oblong ones. We found that the slightly askew blocks made for much more interesting stacking possibilities if done in multiples.

If you want cubes, ask for a tape measure to measure the 4″ x 4″ before they cut it for you. Make sure that it actually measures 4″ by 4″.

On acquiring the Mod Podge, sponge brush, and spray sealant I went to a local Hobby Lobby intending to just pick up the Mod Podge and the brush, but the person there seemed fascinated with the project. She warned me that the Mod Podge might wind up being slightly tacky when we were finished, and she suggested a clear spray-on finishing spray that would eliminate the tackiness.

Both Hobby Lobby and Michael’s were very helpful during our various homemade gift projects. I never went away from either store with disappointment with their prices, product selection, or customer service.

Choosing Photographs
Choosing the photographs made for an interesting experience, too.

We decided to make photo cubes themed around our children. In the example above, for instance, we’ve chosen pictures for a cube full of pictures of our daughter.

Now, it’s easy to choose 4″ x 6″ snapshots of your target that are wonderful pictures on their own, but you quickly begin to realize that when you’re cropping them down to fit on the face of a cube, you’re shaving off a lot of the context of the picture. This can quickly make wonderful shots unusable or greatly reduce the likeability of the shot.

In other words, when you’re choosing snapshots for such a cube, choose ones that have a lot of potential space to crop away. If a photo is filled with your target, it’s not going to work for a cube face unless you shrink it down to the cube’s size.

If you do as we did, which involved selecting photographs out of a big box of prints, this is a really important factor to think about, and considering it up front will save you some effort in finding great pictures that work on cube faces.

Making the Cubes

As is often the case with projects like this, we put the cubes together during a family arts and crafts session, in which the children were making their own projects at the same time (hence the colorful doodles next to the cubes above).

We used scissors to trim the photos down to an appropriate size for each cube face. This was more of a process of repeated trimming and comparing to the various faces of the cube until it looked appropriate.

At the same time, the cube faces were a bit rough, so we sanded them down a bit. The faces themselves do not need to be perfectly smooth as they will be covered with photos, but the edges should be smoothed down to a nice rounded edge, depending on how exactly you want your cube to look.

The photographs were attached to the cubes using Mod Podge that was allowed to dry. This worked very well for directly attaching the photos.

Typically, we attached three photos, allowed them to dry, then attached the other three photos. This enabled us to not have to sit a drying photo on the bottom side of the cube, which might have caused uneven drying or warping (better safe than sorry).

After the photos were attached, we gave three faces of the cube a coating of Mod Podge. When you first put the Mod Podge on, it’ll look like you just coated the face with something white and it’ll look frighteningly bad.

Just wait. It will dry clear and look glossy.

We applied three coats to each face of the cube. We would coat three faces, let it dry, rotate the block, then coat three more faces and allow those faces to dry. Repeat that procedure three times and you have a finished cube.

Usually, we had several cubes going at the same time, so we would put another coat on several cubes all at once and let them dry all at once. Honestly, if you’re going through the effort of making one cube, the additional effort to make more is much less – the leap from one to two cubes is much less than the effort for just one cube.

After we had three coats on it, we sprayed the cubes with a clear finishing spray so that they wouldn’t be sticky over long periods. If the cubes are stacked, for example, we don’t want them to become stuck together in a tower.

If you’re thinking of doing this yourself, remember you can make cubes of any theme you’d like. Friends have suggested cubes made up of your favorite sports team (perhaps using cropped baseball cards), cubes of the home where you and the person you’re giving the cube to grew up or spent time together when you were younger, cubes depicting a trip taken together, or so on.

If you know of a person’s passion or something they care about deeply and that can be represented visually, you probably have what you need to make a photo cube for them that will touch their heart.

In a few days, I’ll have a final “homemade gift” post that shows what we did to package many of the gifts.

Throughout the month of December, The Simple Dollar is posting a daily series focusing on specific activities you can do right now to set the stage for a great 2011. Out with the old, in with the new.

13. Reduce your cable/satellite bill.

So many people find themselves at the end of a long day, worn out on the couch, mindlessly channel surfing for an hour or two before bedtime. They don’t really have the physical or mental energy after a long, compressed day to do much else, so they finish off their hours with a sitcom or a drama program on television.

There are several distinct things there that are notable.

One, most households get something on the order of twenty over-the-air channels for free. Get yourself a digital converter box and see what channels you can pick up over the air. In my area, we can get eighteen digital channels over the air for free. People in other areas can get more – sometimes many more.

These channels aren’t duplicates of each other, either. In our area, for example, we receive three different PBS channels very clearly and three others most of the time over the air. These sets have a bit of overlapping programming but, for the most part, the programs they provide are distinct. We also get multiple weather channels in addition to digital programming for all the major networks. This is all for free, mind you – no cable bill required.

Two, there’s an overwhelming abundance of programming available to surf through on Netflix streaming (and other services) for $9 a month. A bottom-tier Netflix account gives you unlimited streaming to your home for just $9 a month, which basically means you can sit in front of your television or computer, surf through tens of thousands of programs, and watch them all on demand.

You can get this service directly to your television if you have a current-generation video game console or a newer television. Barring that, you can get a Roku box for $60 (or so) that will give you access to all of this streaming programming – about equal to one month’s cable bill for many people.

The amount of programming available on Netflix’s streaming service is tremendous – and best of all, it’s all without commercial interruption.

Three, you can also watch a free DVD from the library or turn off the television and read a purely entertaining book, again, for free from the library. If you’re just looking for something to entertain you, check out a pile of entertainment from your local library. Rent some movies on DVD, take them home, and watch them. Check out some novels that interest you or perhaps a nonfiction book or two that seem intriguing.

If you’re just spending a couple hours a night seeking out whatever entertainment is available to you, why buy it? Check it out from the library instead.

Four, are you actually watching your channels? What channels do you actually tune into on a regular basis? If you’re paying for channels that you almost never watch, eliminate those extra channels from your bill. It’s silly to spend $15 a month on a cable channel that you watch for a couple hours every few months – you might as well just buy the movie on DVD at that point.

Spend a bit of time asking yourself what you actually watch. You might find that you can really cut your cable bill much easier than you might think.

Finally, the sense of being overly tired and the hour or two spent watching television might just be tied together. If you’re consistently finding yourself completely devoid of energy in the evenings, reducing you to a state where all you want to do is crash on the couch for a few hours and watch television before staggering off to bed, there may be other problems in your life. Are you depressed? Anemic? Do you have a vitamin deficiency? Are you being hit hard by seasonal affective disorder?

Whatever it is, it’s something that’s probably worth a doctor’s visit, just to make sure that you’re not suffering from something that’s easily treatable.

There’s also the question of whether or not you’re getting adequate sleep at night. If you’re finding yourself constantly exhausted in the evenings, it may be worth your while to just crash an hour earlier each night.

All of these solutions lead to one thing – a steep reduction or elimination of your cable bill. Whenever you reduce a regular bill, that means you now have the funds available to tackle other financial concerns in your life – getting rid of your debts, for one.

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. Clearing off old debts
2. Life insurance and suicide
3. Handling three child seats
4. Various health insurance plans
5. Credit card roulette
6. Understanding employer matching
7. Tax deductible student loan interest
8. Selling old trading cards
9. What next?
10. Rebounding from a bankruptcy

For must of us, this is the start of the last full work week of the year, as next Friday is Christmas Eve.

Around our house, that means it’s a busy time of the year. Remember those homemade gifts? Well, we’re busy finishing up the packaging and some of the gifts – expect a final post or two wrapping up (both figuratively and literally) the series later this week. After continuing to work on them, we began to realize just how many gifts we’d made this year – and how much we have left to do.

Q1: Clearing off old debts
All my creditors write to me each year and offer greatly reduced settlement figures to clear the debt but, as yet, I haven’t had to money to settle any of them so would it be a good idea to implement a version of the snowball effect by saving fixed amount that I can afford each month and put it into an account to earn some interest, no matter how small, and then when I have a couple of thousand saved up contact the smallest debt creditor and offer an amount, say 30% of the balance owed to clear the debt? I am sure they would agree in order to clear the debt. Then carry on saving as before and add the amount I used to pay the creditor … and so on.

I do want to pay off my debts and so far I have done a fairly good job of working towards this goal. I want the best possible deal but I am unsure of the best strategy.
- Tom

Since these debts are in collections and thus not accruing more interest, I’d say your strategy is a relatively good one assuming that your goal is to actually be honest with your debts and pay them off now that you have your life in order.

It’s important to note that when you pay off the debts, the act of paying them will have an immediate negative impact on your credit rating which will be somewhat mitigated by an improved debt-to-credit ratio. It’s crazy, I know, but when you pay a debt that’s been in collections, you take an old debt and make it current, and your credit score pays much more attention to recent debts than to old ones.

Why am I mentioning this to you? If you’re about to take out debt for some other reason, wait until after you take out the new loan before paying off an old loan. You need your credit score as high as possible in the moment in which you’re getting a car loan or a home loan.

Q2: Life insurance and suicide
Is it true that life insurance does not pay out if you commit suicide?
- Fred

I excised a good deal of Fred’s note for obvious reasons. I sent him a personal note directly encouraging him to rethink some of the things going on in his life.

Nevertheless, Fred’s question is a good one. The truth is that most life insurance policies have some sort of suicide clause in them stating that there are either no benefits or reduced benefits in the event of suicide. This is obviously to protect a life insurance company from someone signing up for a big policy just to off themselves and give their family a big payout.

In short, if you’re considering some sort of misbegotten “I’ll get life insurance and then kill myself” plan, not only is it a dangerous and painful idea, it won’t work, either. Instead, you should spend your energy seeking out someone to talk through your problems with, whether it’s a trusted friend or a psychology professional.

Q3: Handling three child seats
My husband and I are expecting our third child. Our kids are currently 3 and 18 mos., and of course both are in car seats. By the time the next one arrives, the oldest will be in a booster, I think…but of course we’re contemplating the car question.

If we need to think about a car purchase, we want to avoid a payment if at all possible. We have about $8K, optimistically, to use for a car. We just want to be reasonable and safe. Any thoughts on a bigger car?
- Kathryn

I’ll tell you right now that you don’t need to worry about fitting three car seats into your vehicles. We have three car seats in the back of a Toyota Prius – your station wagon will be just fine.

Based on what I could find, I’m sure that your station wagon and your Regal will be able to fit three seats in the back. I’m not 100% sure when it comes to the VW GTI, but I suspect that three seats will fit in there, too.

If it turns out that the GTI doesn’t quite fit three seats, put the GTI at the top of your trade list.

Q4: Various health insurance plans
Have you ever researched the cost of private insurance vs. employer provided plans? My wife and I are both Registered Nurses and were shocked by the cost of our “employer provided health care” for next year. In order to keep our current medical plan it will be $497.00 every two weeks (per pay period) which is $12922 per year. The only other option was $390.00 every two weeks and would have required that we change all of our MDs. We are both in good health in our early 30′s, have no significant health history or any medications and rarely see our MD unless it is for our kids (ages 4 and 2). This policy also comes with the standard co-pays and deductables for usage. Basically, I am wondering if this $12922 could be put to a better use? We are planning to get pregnant this year (so it makes sense to stick with this plan this year and keep our OB doc) but I am wondering about the years ahead. Why not purchase a quality plan for the family that has a higher deductable and invest the difference in a Health savings account (that could be tapped when needed) year after year? Why do we shop around for car insurance but never look at alternatives for health insurance? I guess it never occurred to me until it reached $12922.00/ per year out of pocket. Any thoughts would be appreciated.
- Andy

This is an impossible question to answer for several reasons.

One, not all health insurance plans are created the same. Different deductibles, different premiums, different policies, different levels of customer service… the variables go on and on and on.

Two, the field of health care is going through some serious upheaval right now as insurers adjust to the changing world of health care due to the recent legislation passed. A trend today may or may not be a trend tomorrow.

With just those factors, it quickly becomes impossible to offer up an answer. When you add in the uncertainty of life, that just adds another factor.

Your best solution is to simply figure out what you actually need, then seek out the best deal available to you for a health care plan that’s close to it. It might be through your insurer – it might not. Quite honestly, this kind of legwork – really digging into what you need, then trying to find private plans that compare to your one at work – is going to be a long process which may or may not save you anything, but it will certainly give you some peace of mind and a deeper understanding of the health insurance industry.

Q5: Credit card roulette
I have three credit cards – a Chase Amazon card that I use for all of my online purchases, a Sam’s Club card that I use at Sam’s Club and Walmart, and a Barclaycard iTunes card that I got to finance my laptop at 0% last year (paid off before any interest was due). Now, the iTunes card is probably about 1/4 of my total revolving credit limit, but I use it approximately none (once in awhile I’ll throw an oddball iTunes store purchase on it ~$2.00 to remind them that I have a pulse). Does getting rid of the unused card make sense, or would the drop in total revolving credit hurt my credit rating significantly? Currently, my credit rating is pretty stellar – student and car loan in repayment ahead of schedule, credit cards never have carried a balance over month to month (unless it’s 0%).
- Michael

I don’t think it’ll have a significant impact either way since it’s only 1/4 of your overall credit limit and it seems to be your newest card.

The only exception that I can think of is if you keep your other cards charged up to near their credit limit, in which case the iTunes card is helping significantly with your overall debt-to-credit ratio. If you’re actually diligent about keeping your cards paid down (if not paid off completely each month), then there’s no reason not to cancel it.

In fact, if you don’t use it much, i would cancel it, just to minimize your identity theft risk.

Q6: Understanding employer matching
If my company matches 401(k) contributions each pay roll equal to 100% of the first 3% (free money!) and 50% of the next 2%… would my amount looks like this?

$50 a pay roll = $85 ($170/month) is this correct?
- Andy

The easiest way to calculate it is to just break it into separate offers. In your case, I would look at it as an offer to completely match 3% of your pay and an additional offer to match half of 2% of your pay. Naturally, you’ll do the full match first.

So, you calculate that 3% of your pay is $30 and thus 2% is $20.

If you contribute $30 and use that full match offer, you get $60 in your retirement plan – $30 times 2.

If you contribute $40, you’ll use $30 of it on the full match offer – $30 times 2 being $60 – and then $10 in the other match offer – $10 times one and a half being $15 – totaling $75.

If you contribute $50, you’ll use $30 of it on the full match offer – $30 times 2 being $60 – and then $20 in the other match offer – $20 times one and a half being $30 – totaling $90.

So, the math is actually a little bit better than what you thought!

Q7: Tax deductible student loan interest
I’ve got around $55,000 in Stafford Student Loans at 6.3% interest, around $10,000 with Wells Fargo Student Loans at about 8%. I also have $1000 from a Federal Pell Grant (which feels like it has no interest!) and I owe my family around $5000.

But I’m really curious about the interest for those loans, or any tax breaks I might be eligible for due to paying them back! Any ideas?
- Nick

I don’t know what your exact loan offer is, but most student loans have tax-deductible interest.

The part of your question that deals with “why would I ever make more than a minimum payment” is troubling, though. This is a tax deduction, not a tax credit.

Let’s say you have $2,000 in student loan interest this year and you made $40,000. A tax deduction means that you just pay taxes on $38,000 this year – $40,000 minus your $2,000 in interest. That will only actually save you a couple hundred bucks on your tax return – you’ll still be losing about $1,800 in interest.

A tax deduction really isn’t an enormous savings and it certainly isn’t a reason to hang onto a 6% debt.

Q8: Selling old trading cards
When cleaning out my closet, I discovered a box of old Magic: the Gathering cards from my high school days. I don’t have even the vaguest idea of what any of them are worth. How would I go about figuring out if they’re worth dealing with? What would you do with them?
- Emory

Depending on how old they are, this can be a bit of a challenge.

The first thing I’d do is start identifying what you have. You can use this page to figure out which sets your cards belong to, which you’ll need to know before you use a card-pricing site. I suggest using a retailer like Star City Games and using them as a guide.

If you find individual cards of worth – specific ones worth more than $20 – I would sell them on eBay. I’d take the rest of them and sell them as a bulk lot on eBay, listing the ones worth more than $2 in the auction listing.

It will take some time and you might find you don’t have much of value, but if you do have old cards, you very well might have some significant value there.

Q9: What next?
I wanted to run some numbers by you to see what you thought.

Any recommendations on if we should be apply more towards the Roth 401K and move away from the normal 401K? I know we don’t know what the rate will be when we retire so it’s kind of a gamble. Any opinions on this mix?
- Curtis

If a person is eligible for a Roth, I usually tell them to put their money into the Roth option.

The reasoning is simple. The United States is racking up nearly a trillion dollars in debt per year. Current income tax rates are staggeringly low compared to the 1950s and 1960s. In other words, the current taxation path isn’t a sustainable one. The fight to keep tax rates low is merely fighting the inevitable growth in rates – it will happen, sooner or later. The numbers don’t add up if we don’t do it.

If you believe that the tax rates will be higher in retirement than they are now – and I certainly do – then you’re better off paying the taxes on retirement savings now. That points straight toward a Roth.

Q10: Rebounding from a bankruptcy
I recently filed bankruptcy and am in the process of rebuilding my finances since i depleted everything in the process. I want to build my emergency fund quickly and somewhat effortlessly and thought about selling the contents of my closet (I have way too many clothes/shoes). What the best financial savvy way to accomplish this? I thought of ebay but am wondering if it would be too costly with their fees, and shipping costs and all.
- Joni

In my experience, the most effective way to re-sell quality articles of clothing that aren’t deeply worn is through a local consignment shop. Used clothes buyers on eBay are usually looking for bulk items and don’t want to be paying a high rate for them.

If I were you, I’d ask trusted friends in the area if they have any experience with clothing consignment shops and follow their lead. If you can’t find any information that way, use the yellow pages, then research the shops that you find and see what others have said online about them.

If your clothes are mostly low-end, I wouldn’t expect to get a whole lot for them, no matter what their condition.

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

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

One of the best parts about writing The Simple Dollar is the opportunity I have to hear from people who have turned their life around due to better financial choices. They usually end up finding themselves on a better personal and professional path as well because they’re empowered and de-stressed due to the improvement in their financial situation.

That’s essentially the story told in this book, Hot (Broke) Messes by Nancy Trejos, a personal finance columnist for the Washington Post. In 2008, she found herself in a situation fairly similar to the one I found myself in circa 2006. She seemed to “have it all” in her life, but she wasn’t actually able to pay the bills and was deeply unhappy with certain circumstances in her life.

Much like I did, she swallowed her pride a bit and chose to publicly share the details of her financial turnaround both on the ‘net and in the form of a book. This is her story of turning her financial life around, peppered with useful information and ideas all throughout.

One: Life in DC, as in Debt City
The book opens with Nancy relating the tale of her financial bottom in June 2008, paired with a discussion of her childhood and early years where many of the elements of those financial mistakes were already put in place. Many of the themes of this story sounded eerily familiar to me, even as the details were quite different. The general theme of having a financially strapped childhood followed by a lack of understanding of how to properly utilize a somewhat larger income sounded very, very familiar, in fact.

Two: The College Years: Keeping Up with the Jane Hoyas
When she went to college from such a financially tight background, Nancy seemed to feel fairly unworthy when she arrived at Georgetown. In order to undo that sense of inadequacy, she turned to the abundance of easy-to-acquire credit cards, using them to buy the material things that the people who “belonged” at Georgetown seemed to have. Again, this is a story I can really identify with (and I should write about at length at some point…). She offers several solutions to running into credit problems in college; I strongly agree with talking to your parents if you find yourself getting into consumer debt issues during your college years.

Three: Oops! I Did It Again, and Again, and Again
Much like myself, Nancy’s early professional life involved a lot of upheaval and a lot of personal and professional situations she wasn’t quite ready to handle – and that included her finances, which were often used as a panacea to soothe her problems. After all, after a bad breakup, why not just go to an expensive spa to make yourself feel better? Of course, this is a trap – all it does is greatly extend the period of upheaval in your life. You’ll just pay extensively for it later.

Four: Personal Finance 101
Here, the personal finance advice begins in earnest: getting a checking account, keeping your credit score under minimal control, and making sure your income taxes are paid. For most of us, this kind of thing is obvious, but for a surprising number of folks, these basic steps aren’t basic at all. I’ve met many people who are completely unaware that they should be paying income taxes at all, saying things like, “I thought filing taxes was just for rich people.”

Five: Take My Hand
The real key to personal finance is goal setting, and here Nancy talks about her first go-round with setting goals in her own life as they pertain to better personal finances. Why set goals? A well-stated goal embodies something you want deeply in your life and provides a very clear way for getting there, leaving it up to you to focus on what you need to do each and every day to move towards that goal. Of course, you don’t have to do it alone – use the people around you or even a certified financial planner for assistance.

Six: The Kiss of Debt
Debt can feel overwhelming, especially when you see that you’re in debt far, far over your head. When you see balances that compare to your annual salary and interest being dumped on top of that, it feels impossible. What you need here is a plan – one that distinctly states what you need to do each and every month to move forward on that goal. It seems long and painful, but by having a plan and then utilizing every good thing that comes your way to further your progress towards that goal, you’ll find that it’s easier than you thought.

Seven: Love and Money
Financial dependence is a dangerous thing, especially outside of a marriage. If you have a relationship that isn’t based on a long-term commitment and you’re financially dependent on your partner, you’re in a precarious situation that you should avoid. If you’re in a relationship with unequal finances, do not adjust your personal spending to a higher level because there are more resources available because, when the relationship ends, you’re likely to continue those habits and find yourself in a big financial hole.

Eight: To Have or Have Not
Everybody wants some material things. The route to success is to have a grip on your spending habits (meaning you clearly understand how much you can actually afford to spend in a given month) as well as some sensible shopping habits (meaning, for example, that you shop for clothes first at consignment stores and low-end shops instead of heading to a shop where you spend $800 on a tank top). I achieve this by having an allowance, researching my purchases, and waiting around for bargains instead of “needing” something now.

Nine: You’re So Vain
One big step is to stop worrying so much about what others think of you. The next step is to focus on less expensive ways to make yourself look and feel good. You don’t need $50 bottles of shampoo when a $5 one will get your hair perfectly clean (and, in my case, I’m talking a jumbo bottle for that $5). You don’t need tons of expensive makeup when just the basics leave you looking vibrant (or none at all – so many people look better without the makeup they wear). Stop getting your beauty advice from salesmen and those who just repeat the advice of salesmen.

Ten: The Price of Fun
It is far, far less expensive to entertain at home than it is to go out for entertainment, even if you’re consistently the host. That doesn’t mean you need to become a homebody per se, but it does mean that your wallet will thank you for changing up your entertainment a little bit instead of just doing the same things over and over. Explore some new things – potluck dinners, board games, and movie nights are highly recommended by me.

Eleven: Hot Wheels
Your car is not an expression of who you are. It’s an expensive device that helps you get from point A to point B efficiently. Once you grasp this idea – and then ask yourself if you need a car at all, and if you do, what features you actually need – you’ll find yourself buying much more appropriate vehicles, which means much less financial burden and debt just for that device that helps you move from point to point. To put it frankly, I would not own a vehicle if I lived in a place with mass transit.

Twelve: Good Debt, Bad Debt
Here, Trejos makes the typical “good debt, bad debt” comparison, where she identifies some types of debt as good (student loans, a fixed rate mortgage, your first car loan) and others as bad (credit card debt, mostly). I agree with this dichotomy only to a certain extent, mostly in a sense, for example, that some types of guns do less damage than others (pellet guns versus fully automatic rifles). No debt is really a good thing in the end.

Thirteen: Sex and the City Meets The Golden Girls
Retirement often doesn’t seem like any sort of realistic concern to someone in their twenties or thirties, but the key thing to remember is that if you start to save in your twenties and thirties, you don’t have to save nearly as much for retirement than if you wait until your forties to start. You can get away with (relatively) tiny amounts of retirement savings if you start younger. That’s why the most important thing you can do with regards to your retirement savings is simply start saving – as long as you diversify what you save, you’ll be much better off than if you wait.

Fourteen: What Do You Expect When You Didn’t Expect It?
A healthy emergency fund can make all the difference between a bad event being apocalyptic or merely being a road bump. An emergency fund means cash – it doesn’t mean a credit card that’s available to you only at the whim of a bank who might cut your line of credit when you need it most. The best way to build this up is to open a savings account, then start some small automatic transfers into that account on a highly regular basis (say, weekly). Trejos also offers brief coverage of various types of insurance and unemployment benefits here.

Fifteen: Papa Don’t Preach… Unless He’s Paying My Rent
Here, Trejos covers the phenomenon of children returning to the nest when they find themselves having financial or professional difficulties after college. This tends to happen much more often in times of economic crisis. Even worse, it can be a difficult situation for both the child and the parent if it’s not dealt with in a frank fashion. The key here is candor and discussion, with both parent and child both stating what their expectations and plans are for such an arrangement. Without that, you’re begging for hurt feelings and problems down the road.

Sixteen: Show Me the Money
Near the end of the book, Trejos addresses frugality in earnest for the first time, discussing a ton of little ways (most of them fairly well known) for saving money in just a handful of pages. My favorite? Using your home to make money by renting out rooms, something we’ve discussed doing in the past and may ultimately do in the future.

Seventeen: Somewhere Over the Rainbow
The final chapter is actually a diary by Trejos of her first few months dealing with her financial recovery. It somewhat brings the book full circle, harkening back to the deeply personal nature of the first few chapters.

Is Hot (Broke) Messes Worth Reading?
This book works best when it focuses on Nancy Trejos’ story rather than trying to be a one-size-fits-all personal finance book. The first few chapters and the last chapter are thoroughly engaging and set the stage for threads that carry throughout the book, though the thread is fairly weak in the meaty middle of the book.

If you find that ideas go down better if presented in the context of an engaging story, this will be a great personal finance book for you, particularly if you’re a twenty- or thirtysomething professional female.

If you find yourself too far outside of that description, this book will still offer great advice, but there may be other books out there that click well for you.

Throughout the month of December, The Simple Dollar is posting a daily series focusing on specific activities you can do right now to set the stage for a great 2011. Out with the old, in with the new.

12. Set up a truly useful calendar.

For the longest time, I used a tiny pocket planner to keep track of my appointments. I’d write in all sorts of things, from specific appointments I needed to keep to little bits of information I needed to recall.

This served perfectly well when I was a college student and continued to serve me well as a young professional, but as my life got more complicated – owning a home, getting married, having children, starting a small business – this pocket calendar began to get more and more overwhelmed. Things were scribbled all over the place. Arrows pointed from here to there, trying to squeeze things into tiny spaces. Shorthand began to be used, eventually to the point of being indecipherable.

At some point, I began to view the calendar not as a tool for making my life easier, but as something to constantly be wrestled with. Rather than being a stepping stone to success, it became a weight dragging me down.

The thing is, a useful calendar is a huge part of personal, financial, and professional success. Anything with such usefulness is usually rewarded by getting a very strong system in place before you even begin – and that’s the case with a calendar.

I’ve spent the last three years maximizing my own personal calendar. I’ve restarted from scratch several times in the process until I got it right. I’m going to tell you about my own system below, but the key to all of this is to keep tweaking your calendar until you get it to the best possible useful state.

First of all, the whole system is based on Google Calendar. I’ve tried many other calendaring systems, and no other system hits all of my needs quite like Google Calendar. It’s easily available online from pretty much any browser (like the one on my phone). It syncs with a bunch of different programs. It’s easy to enter new things, particularly repeating things. I can set email reminders in advance of particular appointments.

Perhaps the biggest factor that has convinced me to move to Google Calendar is the ability to have separate calendars that can be displayed individually or simultaneously.

For example, I have a distinct calendar entitled “Birthdays and Anniversaries” which, obviously, contains all of the birthdays and anniversaries I need to remember. I don’t always want to see this calendar – it often adds unnecessary clutter when I’m trying to view the upcoming week. On a normal wall calendar or planner, it would be impossible to deal with that aside from just listing the birthdays and anniversaries in another document. With Google Calendar, it’s gone in a click – and it comes back in a click.

Repeat that for every major grouping of events in my life – professional responsibilities, social events, family events, and so on – and you begin to see how viewing one calendar at a time or particular groups of calendars at a time can be really useful.

My actual list of calendars looks like this:
Bills and Finances
Birthdays and Anniversaries
Council Meetings
Community Events
Family Events
Home and Auto Maintenance
Miscellaneous
Other Professional
Personal Goals
Simple Dollar
Speaking Engagements

Virtually everything that comes into my life fits into one of these calendars, usually in a very obvious way.

The nice thing is that even if I overstuff one of these calendars, I can logically split it into two or three calendars so that each one isn’t completely overloaded. For example, I used to have “Council Meetings” (for the various community boards and councils I serve on) in the same calendar as “Community Events,” but I found it was much easier to keep track of things by having them be separate.

Another thing to note is the “Home and Auto Maintenance” calendar. I use this to keep track of all of the routine maintenance that needs to be done around our home, from changing furnace and water filters to flushing the water heater. I usually do several such items on the weekend, so I just open that calendar and look at what’s on it within two weeks of that day and it forms my “to-do” list. When I finish those items, I just delete that entry from the calendar and since I entered them as recurring events, I know that the next time I need to perform that maintenance, it’s already marked for me.

Altogether, this calendar system has made my busy life far more manageable. I’m no longer struggling to keep up with or interpret an overstuffed calendar, nor am I spending time repeating events over and over.

Now, someday, I dream that those touchscreen flat panel PCs get inexpensive enough that I can simply use one of them as a wall-mounted full screen Google Calendar portal, using that as our new wall calendar. Everything old is new again.

Get your own calendar in shape. Your time, your career, your wallet, and your family will thank you.