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.

11. Make your home more energy efficient.

Almost everyone who has a roof over their head has an energy bill that they have to face. Electricity. Heating oil. Natural gas. It’s a personal finance reality for all of us.

Thankfully, we all have ways in which we can easily reduce those energy bills without installing a windmill or using a bicycle-powered generator. Here are eight easy tactics you can do today to reduce your home’s energy use.

(Yes, I know long-time readers have seen many of these before. I’m mentioning them again because (a) they flat-out work and (b) I see tons and tons of homes where people haven’t done these things yet.)

Use more daylighting. Rather than walking into a room and immediately turning on the lights, consider just opening up the blinds or the curtains. Quite often, daylight provides all the lighting you need in a room without wasting energy (particularly if you then walk out of a room and leave the lights on).

Install a programmable thermostat. Why do this? A programmable thermostat can be set to automatically adjust the temperature in your home without you ever needing to remember it. In the winter, the temperature at night can drop. During the summer, the temperature can rise when you’re at work. Steps like these keep your furnace or air conditioning unit from running constantly, saving on your energy bill.

Alter your typical home temperature. Hand in hand with a programmable thermostat is a little bit of adjustment of the typical temperature in your home. Lowering the temperature even a degree can make for significant energy savings over the cold winter months. Similarly, raising the temperature even a single degree can help quite a lot during the hot summer. We tend to adjust our home temperature right up to the edge of being uncomfortable.

Utilize space heating. Another great tactic in the winter months is to simply use a space heater in whatever room you’re in. This allows you to keep the temperature of your home much lower than you otherwise would keep it, which results in significant energy savings over the long haul.

Air seal your home. In both cold and warm seasons, uncontrolled air flow in and out of your home is an expense you don’t need in your life. Spend the time to do a full energy audit and air sealing of your home and you’ll save in every season for as long as you live in your home.

Turn down your hot water heater. We keep ours adjusted so that our showers, on their hottest setting, is right where I like it. My wife likes it just a little bit lower than that. Why have it hotter? If we have a need for hotter water, we can easily boil some tap water for that use. Turning down the water heater is just pure energy savings, and it’s as easy as can be – there’s usually just a little dial to turn on the front of the unit.

Adjust your ceiling fans. A small seasonal adjustment to your ceiling fan can make a tremendous difference when it comes to your energy bill. Having the air blowing the right way for the season directly impacts the speed with which you need to run the fan as well as the necessary heat level in the room.

Dress appropriately. Don’t strip down when you’re at home in the winter and don’t overdress in the summer. If you’re warmly-dressed in the winter (sweatpants and a long-sleeved tee shirt or sweatshirt) or coolly dressed in the summer (tee shirt and shorts), you can allow your home temperature even more variation when it’s just you at home (and you can obviously adjust it a bit when you have guests).

Simply put, much of your energy bill is in your hands. Making better decisions regarding that energy can save you tremendously each month on your energy bill.

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 (December 5 – December 11, 2009)
Personal Finance 101: What Does FDIC Insurance Really Mean? In a nutshell, it means that if your bank fails, your account is insured up to $250,000 and, likely, it’ll appear as an account at another bank within a week or so.

Brand Preferences and Frugality Can a frugal person have brand preferences? Certainly, as long as they’re based on something tangible about the product.

Most of Us Have Never Experienced a True Economic Meltdown This is not the 1930s. It is not the Weimar Republic.

Two Years Ago (December 5 – December 11, 2008)
If You Don’t Need It, It’s Not a Deal! Bargain shopping for the sake of finding bargains on stuff you don’t need isn’t really bargain shopping at all.

Family Traditions: What Children Really Want for Christmas They want traditions. They want family. They want time with people that love them. Christmas memories aren’t created from an expensive gift from an absent parent.

The Best Moment of Your Day If you keep track of these, you’ll begin to find that most of them have very little to do with any form of spending money.

Three Years Ago (December 5 – December 11, 2007)
Building a Foundation: Ten Things To Do First If You’re Looking At Starting Your Own Business Most of the things you need to do to get ready involve planning and thinking about what you’re doing. Things like filing paperwork are just icing on the cake.

Does Peer Pressure Keep Us From Succeeding? We are often very similar to the average of our five closest friends. Your peers somewhat define who you are.

Facing A Difficult Personal Finance Decision (Or Other Major Decision)? Try These Seven Techniques I often use the “pros and cons” list idea to help me with difficult decisions.

Four Years Ago (December 5 – December 11, 2006)
Battling The Convenience and Costs of Fast Food I freely admit that I like an order of French fries when I’m on the road.

Lauren’s Problem: Overdrafts Mixed With Solid Planning Quite often, personal finance problems are resolved by being better organized.

Figuring Out What Money Really Is Money is a representation of the time you spent doing something for someone else – typically some form of work. When you spend money, you’re essentially trading away your time and energy.

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

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

1. Subscribe by email or RSS. Visiting The Simple Dollar’s website is great, but for many people, it’s more convenient to receive the articles in another form. It’s easy to join 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!

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.

10. Do a mind sweep.

Hot on the heels of the ongoing discussion of Making It All Work, I’m going to suggest a good old fashioned “mind sweep” as a brilliant way to get your financial and personal house in order to finish out the year.

What’s a “Mind Sweep”?
Simply put, a “mind sweep” is a collection in one external place of all of the ongoing concerns in your life. All of the things you’re thinking about, trying to remember, or need to do that are cluttering up your mind are a bigger distraction than you think, and simply getting them out of your head can make a big difference.

Why is it such a big distraction?

For starters, think about how your mind works when you’re focused on a task. How often does a stray thought pop into your head? Something you need to do. An appointment you need to remember. Some fact that you’ve been thinking about lately. These little thoughts break your concentration, and that causes both the task at hand to take longer and the task at hand to get finished with a little less quality. Has your mind ever wandered to something else and suddenly you’re seeing the task in front of you descending into disaster (dinner, for instance)?

More importantly, doing this makes you into a more reliable person. You’re able to deal with the many personal and professional things people expect from you and you live up to that standard – and beyond. You produce quality work and don’t let people down.

One of my own examples of a “forgotten” thing, for example, tends to be bills, mostly because many of them are billed electronically and some of them don’t let me know that they’re due. Thus, it’s up to me to remember them.

Doing a Mind Sweep
So, how do you actually go about this?

I suggest having a good chunk of time set aside before even starting. This is a perfect activity for a winter weekend day where you don’t have much going on.

I would also suggest having some sort of tool upon which you can freely write. This might be a laptop or it might be a pad of paper and a pencil.

The first step is to simply sit down and do a complete brain dump. Just sit there and let your mind wander through everything in your life and write down everything that concerns you, that you’re trying to remember, that you’re working through. All of that stuff that pops up and distracts you needs to go down on paper (or into your text editor). Just keep going with it until you feel like there’s nothing else.

When you’re done with that (it usually takes me about an hour), go through your house and visit each room. See if anything else pops into your head as you look around. Check your email. Think about your job and the stuff you need to get done there. Go through your mail.

Get it all out of your head and onto paper. Don’t worry about order. Don’t worry about filtering anything. Don’t worry about duplicating stuff. Just get it all out.

Following Through
You’ll find that the list is tremendously long when you’re done. The next step, of course, is to start dealing with all of that stuff.

Go through every item on the list and ask yourself if you can do something that takes care of the problem in the next five minutes. You’ll be shocked how many of the things actually will disappear in this way.

If you can’t deal with it that quickly, figure out what needs to be done with it. You’re likely going to be placing stuff into several separate places. Here are the key ones I use.

Trash If I look at something and, after thinking about it clearly, realize it’s not really important (like old magazines, etc.), I trash it, no questions asked. If I’m never going to look at it again, why keep it?

Calendar If I have an appointment that needs to be kept on some certain date, I add it to my calendar and forget about it.

To-do list If it’s something bigger that needs to get done, I think about it for a bit, then try to transform it into something very clear that I can do without thinking too much about it. That item goes on my to-do list.

Projects If it’s something so big I won’t be able to get it done in one shot, I add it to my “projects” list. When I’m done dealing with all of this stuff and have it in the right places, I go through all of my projects and ask myself what the first concrete thing I can do to move this forward is, and I add that single thing to my to-do list.

Reference If it’s something I’ll need to have at some future date, I file it in my filing cabinet. Don’t worry if you don’t have a filing system – just start a central place for storing such documents.

When I’m done with all of this – and it all takes a good day and a half – I have a healthy to-do list, a project list, and, most importantly, a clear mind.

At this point, I find that when I sit down to work on something, I’m not nearly as distracted by stray thoughts as I once was. This enables me to get things done substantially faster than before because my concentration isn’t broken nearly as often. Thus, I can get through my to-do list substantially faster than before and make up that time “lost” on the brain dump very quickly. After that… it’s all a time profit.

Spend this weekend doing your own mind sweep. You’ll find it helps you in many ways, often unexpected ones.

This is the final entry in a twenty part series discussing the wonderful time and priority management book Making It All Work by David Allen.

I’ve really enjoyed writing this series. It’s given me an opportunity to think deeply about this book and about some of the ongoing concerns and areas of focus in my own life from a bit of a different perspective than before.

Before I give my final thoughts on this book, though, let’s start off with the reason many of you will bookmark this post.

Everything That Came Before
Here are links to the previous nineteen entries in this series so you can go back through the series at your own convenience.

From Getting Things Done to Making It All Work
The GTD Phenomenon
The Process
The Fundamentals of Self-Management
Getting Control: Capturing
Getting Control: Clarifying
Getting Control: Organizing
Getting Control: Reflecting
Getting Control: Engaging
Getting Control: Applying This to Life and Work
Getting Perspective
Getting Perspective on the Runway: Next Actions
Getting Perspective at Ten Thousand Feet: Projects
Getting Perspective at Twenty Thousand Feet: Areas of Focus and Responsibility
Getting Perspective at Thirty Thousand Feet: Goals and Objectives
Getting Perspective at Forty Thousand Feet: Vision
Getting Perspective at Fifty Thousand Feet: Purpose and Principles
Getting Perspective: Gracie’s Gardens Revisited
In the Real World

Some Final Thoughts
I’ve now read the entirety of Making It All Work four times, on top of several readings of Allen’s other books. What have I taken away from all of that reading?

For me, five key things float to the top of all of this detail.

A good life connects the generic “meaning of life” to the little things you do every day
There was a time in my adult life where there was a great disconnect between the things I did every day and the bigger picture I had of my life. I went through the day spending money on unimportant objects and experiences, doing unimportant things, and filling my hours with unimportant activities. At the end of the day, I’d feel completely unfulfilled, but I’d wake up and repeat that day. I kept believing that all of my big dreams would be fulfilled by my “future self,” but that “future self” was a figment of my imagination.

The biggest thing I’ve learned over the lifetime of The Simple Dollar is the more you can connect your daily life to the big picture of what you want out of life, the more fulfilled you are, the more direction your life seems to have, and the easier it becomes to make the “right” choices in terms of money management, time management, and so on.

If you can’t make that connection, you’ve found something in your life that needs a change
For most of us, this means cutting back. Almost everyone is committed to things to the limit of their time, energy, and abilities – and often beyond it. We get worn out, we get frustrated with having too much on our plate, and we begin to make bad moves like letting people down or spending our financial resources on unnecessary things as a stress reliever.

The solution is to start looking at every thing you do in your daily life and start filtering it through the bigger things you want in life. If you’re having difficulty making that connection, then you’ve discovered something that you should be trimming from your life. If you’re having difficulty finding anything without a connection, then you should step back and start thinking about the big picture, figuring out what’s really important to you.

The more you do this, the more powerful it gets. You begin to find a deep connection between your day-to-day activities and your big goals in life and your ordinary days begin to feel filled with purpose.

You can be ten times more productive if you can get “into the zone,” so it’s worth spending time to make it easier to get there
I would rather spend two hours of my workday “in the zone” and six hours doing nothing at all than spending eight hours trying to make something happen. That’s how productive a zone state is for me, and thus it’s well worth it for me to find ways to get into that zone.

I will sometimes spend two or three hours of a given day doing only things that set the stage for such intense focus. I’ll clear my desk, remove distractions, make sure my inbox is processed, keep tools around me for whatever I might need in a pinch, and cut off access to distracting sites. The big one, however, is…

Getting stuff out of your head is the best way to increase “zone” time
The fewer things I have floating in my head at any given time, the easier it is for me to slip right into the zone when I need to. Thus, I put substantial effort into recording the thoughts in my head and making sure that they’re recorded in a trusted place where I can easily retrieve them.

At first, this means getting them down in my pocket notebook or in Evernote, but that’s not quite sufficient…

You’ve got to do something with the stuff when it gets out of your head
You absolutely have to get all of that stuff that you pulled out of your head into some sort of system where you can easily retrieve it. That means having a number of things around you that you rely on for managing the things you need to remember and do.

For me, these tools are several. I keep a detailed calendar, an ongoing to-do list, notes on all of my ongoing projects, a collection of additional lists (books to read, etc.), and a filing cabinet with documents that need to be stored for later. Nearly every piece of information that’s floating in my head winds up in one of these destinations, which I can then review at my own leisure, knowing that the specific information I need is always in the right place.

This takes time, but it also ensures that I can get into a “zone” state much more easily, and it’s thanks to that “zone” state that I can be highly productive and move forward on the myriad of things that are important in my life.

It all ties together in the end.

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.

9. Bank some meals.

A lot of times, after a long day of working and child care, I really don’t feel like I have the energy to cook a great meal from scratch. The temptation to just go out and eat is pretty strong, as is the temptation to make a quick and likely unhealthy and not all that delicious meal. Not only is neither of these choices all that healthy, they’re both relatively expensive.

The best bang for your buck at meal time comes from preparing your own meals from scratch, of course. You have complete control over the ingredients, you can use items that are on sale at the store, and you’re not paying someone else (or some food manufacturing company) to do the work for you with substandard ingredients.

It takes time, though, and that runs into conflict with the typical busy weeknight.

My solution – and one that’s saved my family a ton of money over the years – is to simply bank some meals on weekends. Some people refer to this as “once a month” cooking, in which they make four duplications of eight dinners and eight lunches and stock the freezer with them. I typically don’t do anything that organized, but we often make several meals on the weekend and freeze them with the intent of using them during the week.

Another financial advantage of this is that I can buy ingredients in bulk, reducing the cost per meal preparation.

The Game Plan
For my “banked” meals, I usually stick with stuff that has minimal requirements when I pull it out of the freezer. Ideally, it just has a sticker or a note on it that says how long to bake it in the oven and/or how long to microwave it.

Because of this requirement, meals like lasagna, casseroles, burritos, enchiladas, and so forth work quite well. You can make them once, wrap them, label them, store them in the freezer, and merely pull them out and put them practically straight into the oven. (Often, I’ll pull out the meal the night before, let it thaw in the fridge, then cook it that evening.)

The process is pretty straightforward.

On Friday evening, I’ll check out the current grocery flyers for big discounts. Things like tortillas and particular types of produce usually catch my eye. I try to look for ingredients that I’m confident that I can use in meals (or meal variations) that I know I like and that I know my family likes.

I plan some meals and make a grocery list. Let’s say I’ve decided to make several batches of lasagna and a big pile of three-bean burritos tomorrow. I dig out recipes (or devise my own), multiply out the ingredients, then make a shopping list that covers everything I’ll need.

I spend a large portion of Saturday cranking out a lot of meals. I’ll make a batch of 32 burritos and eight pans of lasagna, for example, that will be used in the next three months. I prepare the items to the point where all that has to be done to finish them is throw them in the oven. I also keep one of the items for my own family dinner – either a pan of lasagna or four burritos.

When I package the items for freezing, I put a tag on each one with directions. I usually just use large address labels. For large meals, I assume that the food is thawed and at refrigerator temperature but not frozen (usually adding 25% or so to the time listed in the recipe). For smaller items, I assume they’ll be frozen. The instructions mostly just tell me the temperature and the time that I need to use to finish cooking the food.

Then, when I know I’m going to have to use a “banked” meal, I just pull one out of the freezer the night before, in the case of the lasagna, or just pull them out of the freezer on the fly in the case of things like burritos.

There are two key reasons why I follow this plan.

It saves money. If I’m utilizing sales, I’m saving money on a key ingredient of these recipes. If I’m utilizing bulk buying, I’m saving money on a key ingredient of these recipes. If I’m preparing a meal at home out of my own ingredients instead of going out at a restaurant, I’m saving money. All of that saving really adds up.

It conserves time when I actually need it, and often saves a bit of time overall. Evening time is much more valuable to me than weekend time. In the evenings, I only have a few hours to spend with my family, so I want to do that with as little interference as possible. On the weekends, we can turn such meal-making into a family project or a rainy day project. Making meals in advance also saves you time overall because of the number of activities you can do simultaneously (like cooking lasagna noodles for eight lasagnas at once instead of in eight separate batches).

Spend a day this weekend making some batch meals. You’ll be surprised how much convenience it adds to your week nights and you’ll also be pleasantly surprised when you see your checking account balance at the end of the month.

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. When should we refinance?
2. What is rich?
3. Is debt snowballing still valid?
4. Precious metals investing
5. Retiring rapidly
6. Roth IRA ineligibility
7. Uneven estates
8. Where would I live?
9. Is kitchen renovation needed?
10. Next president?

My desktop computer seems to finally be going through its death throes, which means that I’m spending a lot of time (a) working on my laptop (which isn’t the most optimal place for me to work), (b) looking for a replacement desktop machine or at least some parts for this one, and (c) moving data completely off the failing computer.

I’m pretty sure it’s a faulty power supply that caused some damage elsewhere within the machine, if you’re curious.

Q1: When should we refinance?
We bought our first home in August of ’09. We currently owe $120K at 5.25% interest, 30 year fixed mortgage. I’ve been seeing interest rates as low as 4.5%, and I am wondering if we should look into refinancing while the rates are so low. I don’t know if it matters, but we did get the $8,000 first-time home buyers tax credit, and if we sell in the first few years, we have to pay part of that back — is refinancing considered selling, since you are basically paying off the one mortgage and getting a new one?
- Julie

The general rule of thumb for refinancing is that you need to have a 1% difference between rates to make it worthwhile. In your case, that rule might not be hard and fast, for two reasons.

First, refinancing is pretty cheap right now. The up-front costs of refinancing are incredibly low – you can likely find refinancing for $1,000 or less.

Second, you’ve just started on your mortgage, which means that the vast majority of your interest is yet to come. This swings the balances more in the direction of refinancing.

You really need to do two things. First, shop around and find the best deal you can. Next, use a refinancing calculator like this one to figure out whether or not it adds up for your specific situation.

Q2: What is rich?
I live in a country located in Eastern Europe. The minimum monthly wage is 120euro, the average wage perhaps 500euro.

So what do you think? Were we rich or poor? Did my parents manage their money well?
- Raya

My perspective on “rich” and “poor” is a little different. Were your parents happy? Did they fight a lot? Were they stressed out by money or work or other stresses? Did you have a happy childhood?

If those things are all true, then they were rich. What else, really, does life have to offer than joy and low stress? You can have all the material stuff in the world – a big home, a shiny car – but if you spend all of your time stressed out and working, is it really worth anything?

I think that the usual way of looking at “rich” and “poor” – in terms of one’s possessions – is just a way of keeping score against others at the expense of your own internal happiness.

Q3: Is debt snowballing still valid?
Do you still recommend doing the interest rate snow ball if it will take several years to pay of your highest interest debt? We’ve been making equal extra payments on our 3 debts that we want to pay off, one is a small student loan of $7,000 at 4.125%, a large student loan of $30,000 at 4.75%, and a pesky second mortgage of $50,000 at 9.125%. If we focus all of our extra repayment power on the mortgage, it will still take at least 3-4 years if not more for us to finish it, but if i put it towards that small student loan, we could pay it off pretty quick, though i guess it doesn’t really help us much interest wise. I do think it would be fabulous to not have that second, esp considering the market right now and our underwater status, but 3-4 years seems so far away… I’m not sure what to do. I fear putting all of my eggs in the mortgage basket, but we do have every intention of keeping our house and maybe i would feel better if we weren’t carrying so much debt on it.
- Michelle

Absolutely. Regardless of how long it takes, you’ve still got to pay off that debt.

If I were you, though, I wouldn’t do a straigt-up debt snowball. I would focus all of my extra payments on that second mortgage because of the very high interest rate.

Don’t worry about it being far off. Instead, focus on looking at the forward progress you’re making on each statement on that mortgage. Notice how the interest you’re paying is steadily going down and the principal you’re paying is steadily going up. That’s progress you can see. Compare the statements to the previous ones to see the progress. That will help keep you motivated.

Q4: Precious metals investing
Do you invest in precious metals?

My brother monitors the ups and downs of gold and silver value on a daily basis. It is his private passion. Through this obsession he has been urging me to get involved and notifies me when it’s a good time to buy. Is this worth my time and money? Would it really count as diversifying my portfolio?
- Linda

I don’t invest in precious metals. They’re too volatile and speculative to have much interest for me, and they’re currently riding a bubble fueled by people who are quite willing to advertise on behalf of gold investments on talk radio stations.

Gold and silver are riding high at the moment, but at some point, those buyers will become sellers. Remember, gold isn’t like a stock or a bond – it doesn’t return dividends or payments to you for merely holding it. At some point, buyers will want a return on investment and they will sell.

If you want to include precious metals as part of your portfolio, make sure it’s a small part and make sure your whole portfolio is well-diversified.

Q5: Retiring rapidly
I am obsessed with retiring early. However, I havent really taken advantage of all I needed to do. I’ve done the matching of a 401K but that’s it. I must say for 38 I dont feel I am where I need to be for retirement.

I read your article on how to retire early by 40. Wish I had that information at 20. My question is….I am 39 if I did the 20% of my gross payday how long would I have to work to achieve earlier retirement? It would seem being older and starting the program I wouldnt have to work 20 years doing it like a 20 year old.
- Chris

If you’re 39 years old and you start saving 20% of your gross income for retirement, you’ll likely be ready to retire at your actual retirement age – somewhere around 60 – with a very healthy retirement plan for you.

If you choose to save less, you’ll have to keep working much later in life and likely retire with less in the bank.

The truth of the matter is that the earlier you start saving for retirement, the easier it will be. Once you reach the age of forty, it becomes much, much harder to make it to a “typical” retirement age with adequate retirement savings.

Q6: Roth IRA ineligibility
I am a biologist and unfortunately don’t have a ‘real’ job. I am a government contractor (specifically, an ORISE fellow). This means that I work at a US Army base and do everything that the Federal employees do, except I don’t have benefits. I don’t have a W-2; I have a 1099. I pay taxes quarterly; they are not taken out of my paycheck.

So I was wondering if I set up a Roth IRA, am I allowed to have it? I really don’t want to sic the IRS on myself, but I would like to start saving for retirement while I am still in my 20s. Do you have any advice? Also, is the Vanguard Targeted Retirement Funds the best option for those of us who have no idea what we are doing?
- Cammie

I can’t see any reason why you would be ineligible for a Roth IRA unless your income is very, very high. It may be that you’re ineligible for the typical government retirement plan (TSP) and people are confusing that for a normal Roth IRA.

A Vanguard Target Retirement fund is a very good option for retirement. It’s quite literally the investment I’m using for my own retirement and I wouldn’t have my money in there if I didn’t believe in it.

If I were you, I’d sign up for that Roth IRA today and try to get some 2010 contributions in place before the year ends.

Q7: Uneven estates
Five years ago, as a single mom of a young son, I married a man with 6 children of his own. We decided to have one child together, and a few months ago we had a son. Recently my parents, who are millionaires and who are currently doing their own estate planning, expressed a desire to place the money they intend to leave to me in a trust, and structure it in such a way that when I die the money in the trust will then go to my two biological sons. (Fearing, I believe, that if I died and my husband later remarried, their assets would never pass to their grandchildren.) When my husband learned of this plan, he told me that he disapproves of the idea of some of our children inheriting a great deal more than others. He wants to modify our own estate plan in response, so that my son and our son together will inherit less from us as a result of them anticipating a substantial windfall from their grandparents. I feel, however, that trying to do this is unfair to my sons. What my parents choose to do with their money is their own affair; I want my sons to have a share of the fruits of MY labor if I am in a position to leave them an inheritance someday (God willing). What’s your take on all this? If you were in our shoes would you try to even things out?
- Katie

I am intimately familiar with a situation not too much unlike this one and I can certanly say that it’s uncomfortable.

First of all, you have to respect that your parents are going to do with their money what they want to do with their money. It’s their decision. I think you have to let that sleeping dog lie.

Now, as for your own estate, my suggestion is simple. If you disagree on the principle, divide the estate in half. With one half of it (your half), split it evenly among all eight children. With the other half, divide it evenly among the children not receiving the large trust (the other six).

This would essentially mean that your estate has fourteen “shares.” His six children would each get two “shares” and the other two would each get one “share.”

That’s how I would handle this unless you want a great deal of conflict.

Q8: Where would I live?
If you could live anywhere in the world, where would you want to live and why? Please don’t include family relationships in your answer.
- Ellen

I would live in a coastal area with a warmer climate. It wouldn’t have to be on the coast, just near it. The area would have to have a good school system in place or access to good reasonably-priced private schools. Southern Oregon or northern California would be possibilities.

Honestly, I haven’t researched such a question in depth. Much of our criteria for where to live involves being near family and friends. Home is where the heart is and for us, our heart is with the people around us.

If we were to leave Iowa, we would probably live in Washington state, near the coast, somewhere south of Tacoma. This would allow us to be near a significant number of people we care a lot about, perhaps the greatest density outside of the upper Midwest.

Q9: Is kitchen renovation needed?
I need some perspective: should I renovate my kitchen?
My family has lived off of the 10-10-80 rule years (give 10, save 10, live on 80).
We are a one income family, and my wife home schools our kids, so they spend the better part of most days in the home.
All my kids love cooking. And we entertain a lot. We really like our house. We love our neighborhood. We don’t think it’s wise for us to move.

Can you offer me some insight or perspective? Can you tell me, renovate that kitchen! Or tell me I’m a fool, don’t renovate, and make it work!
- George

I would keep building my savings until I could cover the entire expense without depleting my emergency fund. You’re going to want an emergency fund on hand in case of the unexpected.

Once you have that savings in hand, go for it. If a kitchen remodel is something you deeply personally value, then it’s something you should do.

Remember that the kitchen remodel will add some value to your home, so if things do collapse at a later date, you will have an increased home equity.

Q10: Next president?
Who do you think will be the next president of the United States in 2012?
- Shaun

Like any midterm election, it depends entirely on the economy. If the economy is rebounding in the summer and fall of 2012, Obama will win re-election. If the economy is stagnant, he won’t.

Almost every single time a president has faced a midterm election since World War II, the economy has decided things. Bush won in 2004 on the back of a rebounding economy. Clinton won in 1996 during a rebounding economy. Bush lost in 1992 during economic troubles. Reagan won in 1984 on the back of a rebounding economy. Carter lost in 1980 due to economic troubles. Ford lost in 1976 due to economic troubles (and the shadow of Nixon).

I think you have to go back to 1972 to find a midterm election that wasn’t just about the economy, and then you have to go back to one of the most inept modern political campaigns ever, that of George McGovern. Who would have thought that naming a person who underwent electro-shock therapy as your running mate would undermine your credibility?

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.

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.

8. Rethink your retirement plan.

If I’ve done one thing right with my personal finances since reaching adulthood, it’s been taking care of my retirement. I’ve consistently put a significant amount away for that future day when I no longer work and I’m ahead of the retirement curve for my age in almost every way you could measure it.

Having said that, of course, I’m in the huge minority there. Many people my age have scarcely thought about retirement. I regularly get emails from readers in their forties and even in their fifties that are just now beginning to think about retirement savings.

That’s a bad idea. Regardless of your age, the sooner you get started with retirement savings, the better. The more years you give yourself to save before retirement, the less you have to take out of each paycheck for retirement.

Getting a grip on your retirement plan really boils down to answering three questions.

Where are you at right now?
The first step is to understand what retirement savings you have built up right now and, to a lesser extent, what types of investments that money is held in.

Make a list of all of your financial accounts and their balances. This will, of course, require you to dig out all of those statements and log into your online accounts to retrieve this information (unless you’re using something like Quicken).

The purpose here is simply to get a grasp of the totality of your retirement savings. You need to know what you have before you can plan intelligently for the future.

Where do you need to be?
Once you have this information in front of you, you can use a retirement planning tool like this one at MSN to get an estimate of what you will actually need at retirement.

Personally, I find such software to be fairly good at giving you a starting point for your calculations, but almost every time, they tend to underestimate what you’ll actually need to do to get there.

Why? They tend to assume a very mundane rate of inflation while also assuming a more-than-healthy return on a diversified investment portfolio. If you know of a retirement portfolio that’s guaranteed to return even 7% over the next 30 years, I’d love to see it.

So why do I encourage people to use such software? First of all, you don’t have to use the default numbers they give you. Most people plug and chug with the default numbers at MSN, which suggests a 9% return on investment. Turn that down to at least 5%, if not lower.

Remember, it’s not a bad thing to save too much for retirement, but it is a very bad thing to not save enough for retirement. You can always retire a bit earlier or live a very robust retirement, but you don’t want to find yourself at age seventy or so without any ability to retire.

How do you get there?
So, how do you get from here to there? The retirement planning tool will give you a suggested amount for annual savings, and you should use that as a bare minimum.

Where do you save that amount, though? You’ll hear a lot of people tossing around suggestions of Roth IRAs and 401(k)s, but here’s the real truth: 99% of the worry about retirement savings is just simply doing the saving, regardless of where you put it. Compared to the concern of not banking nearly enough for retirement, the issue of having a Roth IRA or a 401(k) pales in comparison.

My rule of thumb for most wage earners is if you’re eligible, open a Roth IRA with some brokerage (I use Vanguard, but do your own research). This lets you be completely in control of the account. Also, money in a Roth IRA can be withdrawn at retirement age without any taxation at all, which is a nice perk, but the drawback is that you’ll be funding it with after-tax dollars – meaning the money comes directly from your paycheck. I usually recommend a Roth because I believe taxes will inevitably have to go up from where they’re at right now.

If you don’t know what to invest in among all of your choices, choose a “target retirement” fund that matches when you expect to retire. These investments will automatically balance your money for you, ensuring that you won’t be completely exposed to stocks close to retirement age (so that a big downturn like 2008 won’t sink you), but also gives you a great chance for growth now, when you’re young.

Regardless, the important thing is that you’re saving an appropriate amount. That’s the real key here. Today is the day to get started, if you haven’t already.

As I’m writing this, a big pot of well-spiced bean soup is simmering on the stove and it smells tremendous. It’s just a kit soup, but it was a kit that we picked up for less than a dollar, and there’s enough soup there for everyone to eat from several times.

I actually really like such soup kits. They’re easy to make, they preserve very well (they’re just a mix of dried beans), and if you time your purchases when there’s a sale, you can buy them at a very low price.

That’s my kind of bargain.

Store food properly and save money Without a doubt, a good food storage habit can really save you money. Keeping things like flour in resealable containers instead of in the bag keeps them good for longer, reduces the chance of infestation, and reduces the risk of bag-ripping disaster. (@ frugal)

Patience Is A Virtue, Learn It If You Can (but Please Hurry) Patience is the unheralded key to personal finance success. (@ len penzo)

Why Your Income Is So Important Personal finance is all about spending less than you earn. That gives you two routes to success – raising your earnings or lowering your spending. Ideally, you do both. (@ get rich slowly)

Stock Broker Fraud & When To Fire Your Broker For Bad Advice If you’re going to entrust your finances to a broker, make sure you know that broker well. You’re entrusting that person with your financial future, after all. (@ the digerati life)

To Pay Off Debt or Save? That is the Question Trusting yourself is a big and often undiscussed part of good personal finance behavior. If you make choices based on how you ideally want to behave without paying attention to how you actually behave, you’re going to make the wrong choice. (@ frugal dad)