“Have you ever written about coffee?” Sarah asked me one morning.

I haven’t written about coffee, actually, at least not in a direct way. I’m not an avid coffee drinker. I have a cup about once a month or so, and it’s usually in the afternoon. I simply don’t drink it as part of my morning routine, though a coffee shop visit used to be a part of that routine years ago.

“Well, you could write about the coffee that I make at home. I think it’s better than Starbucks and it comes in well under a dollar a cup.”

Sounds like a post idea to me.

The Beans
Sarah believes strongly in whole bean coffees. “When coffee comes already ground, it’s lost a lot of its smell and smell is a huge part of the flavor of anything.”

Her preferred coffee bean of the moment is Cafe Hope dark roast whole bean coffee, given to her as a gift this Christmas. It is very similar to the Ruta Maya whole bean coffee sold at Costco, of which you can get 4.4 lbs. of for $37. Such an amount will make a huge amount of coffee. She typically does not buy that much at once.

In fact, her most common source of coffee beans is gifts. Many of her friends know that she likes beans and thus it makes a convenient gift for her.

As for the best whole bean bargain coffee, Sarah says, “Eight O’Clock. No question. Every kind I’ve tried has been excellent and the price is wonderful.”

The Grinder
What about a grinder? Don’t you need some sort of fancy equipment for that?

Sarah has been using this Hamilton-Beach grinder (very similar to this one for sale at Amazon for less than $30) for years now with no problems whatsoever. She simply grinds the amount on the line for two cups and adds it to her drip coffee pot to start the process in the morning. She originally received this grinder as a gift as well.

The Pot
What about the pot? She typically just uses a very small drip coffee pot with very ordinary filters:

It’s very similar to this one, on sale at Amazon for less than $20.

“The key isn’t in having an expensive pot. I’ve tried very expensive coffee makers and haven’t been able to tell much difference,” she says. Instead, “the key comes from using water that’s just shy of boiling.” Do not add boiling water to the pot. Instead, bring it to a boil, wait for just enough time for it to just stop boiling, then add that to your coffee maker.

The Add-ins
For the most part, Sarah simply adds milk to coffee, along with various flavorings if she happens to have any on hand. She’ll occasionally purchase creamers at the store, but usually only if they’re on sale.

Her most common coffee additive, truthfully, seems to be sugar and just a small squirt of a generic hazelnut flavoring she picked up a long time ago in Amana, IA. She’s been using it for more than a year almost every morning and it’s still not run out. The bottle cost her $7.

“The key is just to find something simple that you like so you can assemble it quick,” she says.

I hope that some of you morning coffee drinkers find some ideas here and perhaps break that $5 a day Starbucks habit.

Each week, I highlight ten things each week that inspired me to greater financial, personal, and professional success. Hopefully, they will inspire you as well.

1. The Social Network
I finally had the opportunity to see this movie this week and it was as good as I thought it would be, if not better. It’s about the founding of Facebook, but it’s not really about the founding of Facebook. It’s about how the nature of communication between people is changing. It’s about how young people who have never lived without instant communication with others are dealing with early adulthood. Even more relevant (in terms of watchability), the dialogue is incredibly crisp and the plot manages to have a lot of depth without losing the thread. I wish I could write a tenth as well as Aaron Sorkin. The Social Network is my favorite film since The Prestige came out in 2006.

2. Amy Dacyczyn on frugality and creativity
Frugality without creativity is deprivation.
- Amy Dacyczyn, author of The Tightwad Gazette

Frugality isn’t about going without things. It’s about constantly trying new things and seeing if you can find a better way of doing them rather than just using the first method that you stumble across. Let’s be honest – that first method is usually pretty inefficient in terms of money and in terms of time. Think about your professional field – are you not more efficient now than you were when you first started? That’s because you tried new things whether you wanted to or not. Use that willingness to try new things in your own life, with a recognition that spending less is a positive attribute, and you’ve got frugality.

3. Where I want to live

This picture makes me yearn for spring and it makes me yearn to live in the country again. I want to live here. Many thanks to Ed Karjala for this wonderful picture.

4. A five year old’s dream
My son woke up a few mornings ago and told me about the dream he just had. I liked it so much that I wrote it down:

You and me and Mom and Katie and Matthew were at the park and there was a very tall slide and Matthew was scared to go down it. So I went down it with him and at the bottom there was a big pile of grass and all of us jumped in it and then we had ice cream

I hope I can always make things like that happen in their lives.

5. Duane Elgin on impact
“It is the example of each person’s life, much more than his or her words, that speaks with power. Even the smallest action done with a loving appreciation of life can profoundly touch other human beings.”
- Duane Elgin

Whenever you say something or do something, even when you’re alone, you’re affecting others. Your choice of words and choice of actions impacts the people around you. Think of all of the human behaviors and statements you’ve heard and witnessed today. How many have impacted you on some level? (More than you think, I’ll guarantee you.) How many of those actions and statements were done with the other person realizing you’d observe them or be impacted by them? Not too many, I’ll bet. Now, think of how often others are impacted by what you do, even the minor things.

We all have much more impact on others than we realize. The more positive signals we put out there, the better the world gets.

6. Steven Hyden on the moment of discovery
“I always hate that moment in documentaries about social movements where somebody insists that whatever incredibly exciting and revolutionary phenomenon they were a part of could never happen again, because the world has inevitably changed for the worse, and today’s kids are just too jaded or clueless to do what they did. What they’re really saying is that it will never happen for them again, because they’ve reached the age where they’re too jaded and clueless. When you’re young, whatever you’re doing feels revolutionary because the world is opening up for you in ways that will never be more exciting than they are right now, in this moment, forever and ever.”
- Steven Hyden, Whatever Happened to Alternative Nation

This idea, that the jadedness that people tend to describe younger people with as they get older is actually just a reflection of their own aging jadedness, made me think quite a lot over this past week. I think there’s some deep truth to the idea that nothing is ever as exciting as it is the first time you discover it. You just can’t replicate those great moments of discovery.

So how do you keep the world fresh? Keep trying new things and new ideas. To me, this quote ties in strangely well with the Amy Dacyczyn quote above.

7. PARK(ing)
I would absolutely love to share this picture with you, but thanks to copyright issues, you have to click over to Flickr to see it.

The image is a piece of street art by Banksy, in which he modified the word PARKING by nearly erasing the “-ING” to just leave the word “PARK,” then stenciled a girl swinging off of the bottom of the word.

The vandalism issues of street art aside, I admire well-done and thoughtful art, and Banksy typically manages to pull off both. This is one of my favorites.

8. “Wordless” children’s books
A few days ago, I picked up a few completely wordless books to read to my children. Each page has a piece of art that is in someway related to the page before it. This basically puts the onus of storytelling on the reader.

Because of this, I’ve been telling a lot of stories the past few days. I tell more complex ones to our oldest son and daughter and very simple ones to our infant son. The oldest has even started doing this himself, telling simple stories to his baby brother.

Writing and telling stories are wonderful things to do.

9. PianoReimagined‘s Youtube videos
His piano playing videos have given me a lot of inspiration. I’ve particularly enjoyed his piano-only takes on two songs I’ve been working on.

U2′s “Beautiful Day”…

… and Coldplay’s “Clocks”

I love his passion and obvious enjoyment of the music. Yes, he’s playing by ear, while I’m learning to sight read, but I someday hope to be able to sit down and play a few songs from memory halfway as well.

10. Mario Cortes on personal growth
“You can get sympathy or you can get better but you can’t get both. You can be in your comfort zone or you can have growth, but you can’t have both. You can be interested or you can be sold-out-committed, but you can’t entertain both. You can have excuses or have results, but you can’t do both. Choose the path that develops your visceral fortitude.”
- Mario Cortes

Sympathy and excuses are just ways to keep you from having to face a challenge. Avoid them like the plague.

Each week, I’ll present a low-cost meal (or a meal that demonstrates a lot of options for cutting costs) that my family eats for dinner and enjoys. Many of the recipes will be vegan or vegetarian, with options to add other ingredients for non-vegetarians.

Our family loves pasta. Our oldest child claims that olives are his favorite food and has been known to sit and eat a bunch of them all at once. Thus, pasta with olives is something that frequently hits our table.

What You Need
This is a very simple dish, so you don’t need too many ingredients.

12 smallish tomatoes (I use Romas if possible)
1 package pasta, preferably spaghetti
Olive oil (extra virgin, preferably)
Balsamic or other flavored vinegar
1 1/2 cups olives, a mix of green and black to your taste
Garlic powder
Basil
Salt
Pepper

We had almost all of this already on hand before we even decided to prepare this meal, so our cost was really low. If you were to buy all of this at the store, and using my best estimates of prorating the ingredients, you would have a total cost of around $6 to prepare a dish that will easily feed a family of four and provide lunch leftovers for two.

The Night Before (or Early That Day)
You really don’t have to do anything the night before unless you’re really itching for something to do. The only advance prep you might consider doing is slicing the olives and storing them in the refrigerator.

Preparing the Meal
Preheat your oven to 450 F. Get your tomatoes out and cut them into halves or quarters, your choice. I used quarters because they’re easier for our kids to manipulate.

Then, line a baking sheet with aluminum foil and place the tomato pieces on the sheet. Drizzle the tomatoes with olive oil (just a light drizzling so there’s a bit on each tomato), then with the flavored vinegar. We used homemade herb vinegar, as you can see here:

After that, dash the tomatoes with garlic powder, putting a light amount all over, then repeat lightly with salt and with pepper. When the oven is done preheating, put the tomatoes in the oven for 35 minutes until they’re cooked and perhaps very gently browned or blackened on the edges. I pull them out a bit earlier because the children recoil at the sight of anything burnt (unfortunately, because I like that gently singed flavor).

While the tomatoes are cooking, cook and drain your pasta according to the directions, then add 1/4 cup olive oil (you can add more if you’d like), the olives, a teaspoon of dried basil, a dash or two of salt, and a dash or two of pepper to the pasta, then mix thoroughly. When the tomatoes are finished, add the tomatoes and mix thoroughly. Serve.

We also took a bit of leftover Italian bread, sliced it, spread a bit of margarine on each piece, and sprinkled a bit of garlic on them. We spread the slices out on a cookie sheet and put them in the oven with the tomatoes for the last ten minutes. It came out nice and crispy and allowed us to use the tomatoes in the pasta to make a type of simple bruschetta right at the dinner table.

Easy as can be.

Optional Ingredients
Here are some optional ingredients to give this dish some extra oomph.

Parmesan cheese Freshly grated tastes the best, but you can use whatever you like. You can either sprinkle it right into the mix or else sprinkle it on top when the pasta is on your plate.

Diced pepperoni My wife, who loves her pepperoni, suggested simply dicing up some pepperoni and tossing it in near the end.

Fear drives me.

I fear feeling like I did in April 2006, when I realized that I wasn’t able to pay my bills any more.

I fear feeling like I did in November 2005, when I felt like I had to make a choice between my child and my career, and without the career I would be unable to support my child.

I fear returning to a state where I just view my own future as a complete unknown and hope that serendipity makes it all right for me.

I fear returning to a day where I’m so overconfident in my own abilities and traits that I feel I have no need to work on improving myself and instead whittle away the days.

Some might say that fear is a prison, but I look at it much differently.

It is much like the fear of a former prisoner who is now on the outside of the bars, knows what it felt like to be on the inside, and never wants to return.

In other words, it’s a fear counterbalanced with the joy of having a great deal of freedom. I know what I have now, and I don’t want to lose it. The fear I have of going backward and the joy I have from going forward combine together to keep me on a financially sustainable path.

Here are three different examples that illustrate what I’m talking about.

Groceries Not too long ago, I viewed grocery shopping as “that boring thing you did when you ran out of milk.” I’d go to the store without a list, buy some milk, buy a few other items impulsively, possibly buy a few prepackaged meals, and head out. Most of my meals came from restaurants, where I’d easily drop $10 for breakfast, another $10 for lunch, and another $20 for dinner a lot of days.

Today, I make a meal plan and a grocery list before I head out to the store. My average meal cost is $2, with more than half of my meals coming in below $1. Instead of driving to a restaurant, eating there, and coming home (burning a good two hours), I can have a good meal on the table in thirty minutes most of the time. My grocery bill is higher than before, but not much higher, and my restaurant bill is virtually gone. My food costs have halved over the past seven years and, as a family of five, we spend less on food per month now than we did when it was just my wife and myself after getting married.

Could I fall back on a routine of eating out for every meal? I probably could. Inside of me, though, I know it would be a huge mistake. Even more important, though, I would lose the joy I get from preparing my own meals (or enjoying those my wife has prepared). I wouldn’t get to have simple joys like giving my son a taste of the pasta sauce I’m making or shooing my daughter away from stealing an olive out of the kitchen. The joy of cooking would be lost in the process.

Hobbies For several years, I purchased a new video or computer game each week, on average. I played golf, which required a constant influx of equipment and green fees. We went to multiple movies a week and owned several hundred DVDs.

At some point, I began to realize that most of those hobbies, in the end, were just expensive ways to facilitate spending time with people I liked and cared about. Golf was fun, sure, but the reason to go was to spend time with people. Films were great, but they were often only great as a shared experience with my wife and with other moviegoers. Video games were tremendously fun, but quite often the icing on that cake was interacting with other video game fans.

You don’t need expensive stuff to interact with people. In fact, you really don’t need much stuff at all. Many evenings, I’ll just play a board game with my wife, often one that was given as a gift to me years ago. We can replay such a game hundreds of times, while even the best movie doesn’t stand up to such repetition. I’ll sit out on the deck with friends on a cool evening and realize that I don’t have to pay $75 to hang out with these people and enjoy the smell of dew and freshly cut grass.

An evening A great evening with my wife or with friends used to mean a night out on the town. It meant dinner at an expensive restaurant, often followed by a movie or a concert or something like that.

The problem, of course, is that those evenings eventually led to a credit card bill, a bill that would mean I’d spend quite a few evenings up at night with worry about how I was going to pay it back.

I began to realize that the easiest way to get rid of the fearful nights and keep what I loved about the other evenings was simple: it was all about the people. Rather than going out to an expensive restaurant, why not just have everyone over for a potluck dinner? The one part that matters – the people – are still constant. Rather than going out to a theater, why not just pick up a few sodas, pop some popcorn, and rent a movie from Redbox? Again, the part that matters – the people – are constant.

I was once in a desperate place. I’m now no longer in that place, but I never want to go back there. I’m in a much better place on the whole, and while there are perks of my old life that could always draw me back into poor spending habits or choices, I realize that I still have everything that really matters in my life.

And so much more.

Imagine if you had little or no ethics or morality at all. You live under the belief that if you lie and misrepresent right to a person’s face and they believe it, they deserve to have their money taken from them for being so stupid.

There are a lot of people out there that fall into this category. Rather than treating people fairly, they’re much more interested in doing whatever they can to convince you to give them something for next to nothing.

Of course, if you’re the one to fall into this kind of trap, you pay with your money, your property, and sometimes your identity.

Thankfully, there are usually big red flags for many common types of scams. Here are ten of the most common ones. I’ve built this list over the past few years while reading up on how various scams and unethical arrangements operate.

Unsolicited emails If someone sends you an email out of the blue with a business arrangement or a request for money or a request for business, ignore it. Delete it immediately. The only emails you should ever spend a second of your time looking at are personal communications and contacts from businesses you’ve already established a relationship with. Everything else should go right in the trash.

Unsolicited phone calls Similarly, if an individual or business calls you with any sort of financial transaction proposal or arrangement of any kind, ask to be removed from their call list and then hang up the phone. The risks of such unsolicited contact are far greater than the potential rewards.

Unsolicited mail Yep, junk mail. Trash all of it. Tear it up and throw it straight in the trash can. If you do happen to see an offer that interests you, research it on your own and find a legitimate way of going about it rather than following the instructions on an unsolicited mailing.

Tip #1: To sum up these last three points, don’t spend even a second of your time on unsolicited communications from any individual or business that is offering any sort of sales arrangement. If you want to purchase any sort of product or service, find the business yourself and establish contact yourself. This way, you can verify at least to some extent that the organization is a legitimate one before there is any contact between the two of you.

Pressure tactics If anyone attempts to trigger your emotions – guilt, anger, stress, anything at all like that – in order to make a sale, walk away. No “bargain” is worth that level of undue stress. Start your shopping over again and find an organization to do business with that is confident enough in their product to not have to engage you in uncomfortable practices just to make a sale.

Requests for personal information The only time a business should ever ask you for personal information is when you initiate contact with them and set up your account with them for the first time. After that, there should be no requests for personal information, period. If a business contacts you and claims to need your information, never give it to them. If it’s a business you’re already working with, contact that business yourself and make sure that the request legitimately came from them.

Refusal to provide documentation If you’ve worked out an arrangement with a business but they refuse to provide documentation for that arrangement, back out. Do not give them a dime. Do not give them any of your personal information. Any legitimate organization will provide you with all of the documentation you request with regards to the arrangement you’re entering into with them.

Refusal to provide contact information If someone contacts you for any sort of exchange of goods and services but refuses to provide verifiable contact information, walk away. The only reason a business won’t provide you contact information is if they don’t want pesky customers contacting them after they’ve taken the customer’s money. You don’t want to be that customer.

Refusal to accept trackable forms of payment If a business will only accept cash as a form of payment, walk away. It’s fine for them to accept a multitude of payment types, but if they’re refusing to take a trackable form of payment from you (a carbon-copied check, a credit card, etc.), then they don’t want you to be able to provide any sort of proof of the transaction, and that’s never a good thing.

Refusal to provide credentials or proof of their statements Again, if a business makes a claim but won’t provide any sort of proof of their claim or any type of references, close the door and walk away. This is something you should always ask for when people are providing services. Ask for licenses. Ask for references. If they can’t or won’t provide them, use a different service.

Tip #2: Simply put, if you make a reasonable information request of a business that you’re considering doing business with and they refuse, walk away. Any legitimate business will provide you with whatever documentation you request, within reason. The things mentioned above are all within reason.

Promises of extremely simple ways to earn or win money Let’s get this straight right now. You can’t sit down at home and immediately start earning thousands of dollars (not without a lot of luck or someone helping you tremendously). You can’t get a bunch of money for a little amount of money with any guarantee. These things simply don’t work – they don’t make basic economic sense. If you’re offered anything that seems to offer an incredibly easy way to add money to your pocket, just walk away. The slight chance that it is legitimate is not worth the losses you’ll incur from the overwhelming chance that it’s just another scam.

In short, walk away from anything in your life that doesn’t pass your smell test. If anything seems off at all for any reason, walk away. Trust me, you can always find a more legitimate arrangement later on without the headaches of being involved with a con artist.

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. Selling jewelry
2. Auto loan refinancing
3. Rolling over a 403(b)
4. Next generation’s big mistake
5. Gift for newborn
6. Handling personal injury settlement
7. Not caring about future
8. Off-topic topics
9. Emergency fund in a CD?
10. Retirement savings or debt payments

Earlier this week, I came across contact information for someone that, when I was younger, moved away before I had the opportunity to tell them thank you for being a friend and telling them goodbye. It was one of those little things in life that bugged me for many years, but I was never able to contact this person. I simply could not locate that person at all.

I was hesitant to say anything to that person because it had been so long, but another old friend of mine encouraged me to say something. I bit my lip and did it, and I’m extremely glad I did.

Thank you to both of my old friends: one, for encouraging me to say something, and another, for being so friendly and gracious when I decided to do it.

Q1: Selling jewelry
This coming year my husband and I are trying to slim down our spending and make a little extra money too. I have a bunch of jewelry that I no longer wear and doesn’t have meaning. While I don’t believe anything is tremendously valuable some of it is gold and silver with small stones. I received most of the jewelry as gifts from previous relationships, and at this point, I’d just like to de-clutter and make a little money. Do you have any information on reputable places to sell jewelry? I’ve heard of online places like http://www.goldstash.com/ (recommended by Dave Ramsey’s website), but I don’t know if that’s the best place to send my jewelry. Your thoughts would be most appreciated.
- Melissa

An online gold broker would be my option of last resort for selling my old jewelry.

My first line of attack would be to do what I could to clean up and “beautify” the jewelry. Depending on what you have, there are many different ways to do this. Use Google and look for ways to clean gold jewelry, gems, or whatever else you have.

I would next take the jewelry to a reputable jewelry store, preferably a local one. Overall, they’re the most likely place to get a good deal, as they have a vested interest in correctly appraising your jewelry and offering you a reasonable value for it. Virtually all other businesses have little vested interest in correctly appraising what you have or giving you a reasonable offer for it.

If the jewelry store does not want it, they should at least be able to describe it clearly for you. I would then attempt to sell the item online. Ask the jewelry store for any advice on that if they’re not interested in buying it. Most local jewelry stores with solid customer service will offer you some advice in that area.

I would only use a pawnshop or, even worse, an online gold broker as an avenue of last resort.

Q2: Auto loan refinancing
I purchased a used vehicle in April 2010 for $36,000 and have been aggressively paying down the 36 month auto loan at my credit union. The loan balance was originally for $32,000 in April and the balance at the end of December is $21,000 at an interest rate of 3.99% (which I refinanced a couple months ago down from 5.25%). At this rate, the loan should be paid off in less than 2 years (around 22 months). My payment is about $965 a month which I could very easily cover before, but due to a new job my finances are much tighter and I could use extra cash flow each month. I have the opportunity to refinance my loan again with my other bank for 3.5% for 36 months and can take cash out (I was thinking about $5,000-$9,000) and the vehicle is blue booked around $34,000. I would use all of the cash out to pay down my student loans, which are at 6.8%. Also I would plan to continue making the same payment (about $1,000) each month but I think it would be nice to have some “breathing room” in case my funds get tight, but I understand I am essentially adding another 12 months onto my loan and additional interest if I just make the minimum payments. I was wondering what your thought are on this plan?
- Erik

I think that’s a reasonable plan. My only concern is that you’re going to be able to make those car payments in the future, because your car loan is a loan with collateral, meaning they can repossess your car if you fail to pay.

On the flip side, this reduces your interest rate on the car loan and helps you pay off several higher interest loans. According to a few different models I just tried out in Excel, virtually every variant I could think of for this scenario saves you money in the long run.

Is it worth the risk? It depends on your own situation. Are you actually going to be able to make the car payments at the adjusted rate in the future? I can’t tell this for you, but if it looks as though you can easily pull it off, I’d make the move.

Q3: Rolling over a 403(b)?
I have a 403(b) which I put $100 a month into (I have state retirement as well). I don’t have the best relationship with the company and get frustrated with some of their marketing techniques. At any rate is there any benefit to rolling the 403(b) into a Roth? I am not sure how long I will stay a state employee. Is the Roth going to just sit there if I change careers and can I still contribute to it? There are many options out there. I’d like some clarity. Thanks. I am a teacher.
- Amity

Unless you are leaving your current position or are of retirement age, you can’t roll over your 403(b) without paying some very stiff tax penalties for doing so. Usually, your window of opportunity to do this comes when you switch jobs.

If you are switching jobs, then I would highly recommend a rollover for almost everyone. Not only is a Roth IRA post-tax (which means you won’t have to pay taxes on it in retirement), but you have much more control over the investments and who it’s invested with.

Of course, you do have to pay income taxes on the withdrawn money when you move it over. Typically, you convert a 403(b) into a Traditional IRA, then convert that IRA into a Roth IRA as two separate steps, but your investment house of choice can help you with all of this.

Q4: Next generation’s big mistake?
I’m wondering if you have any insights into what we should be warning our kids about doing wrong financially?

What do YOU think the next big mistake will be? Have you considered this at all? Read anything about it?
- Mike

My biggest concern with the next generation is that many of them are going to have weak face-to-face communication skills. I can easily see this translating into them being taken in by the smaller subset of people who can communicate well, convincing them to invest in substandard insurance, investments, and so forth.

If you want a taste of what I’m talking about, watch the film The Social Network.

My suggestion: if you have children, do everything you can to encourage them to have face-to-face interactions with their peers. Don’t let them hole up in their room to sit on Facebook all day. Get them out into the community doing something that involves significant interaction with their peers and with adults.

Q5: Gift for newborn
I am a recent, first time Aunt and I am really excited about it. I have been trying to figure out a way to give a meaningful gift this year, but also for future years, to my nephew. I don’t intend for this to replace a small, appropriate gift to him on his birthday each year but as a supplement (one that he won’t appreciate until he is older).

Any suggestions or ideas you have are greatly appreciated.
- Ani

You can absolutely start a 529 account for your nephew. All you do is open one with him as the beneficiary and start socking away money according to whatever plan you have in mind.

If I were you, I would start it quietly, then bring it up to them when the routine of having a child is familiar in their life. I wouldn’t try to have this conversation with the parents of a newborn, as they’re going to be frazzled as they watch all semblance of a home life go topsy turvy.

If they reject the plan, you can just change the beneficiary to yourself and sit on that money to see if you eventually have children, then change the benficiary to them, or to see if you return to school for some purpose in the future.

Q6: Handling personal injury settlement
I’m about to come into some money from a personal injury lawsuit settlement. I’m 24, living at home rent free with my father to save money, own my car, and have almost no debt (other than about $7k in Stafford loans from college). I currently make about $35,000/year as a production assistant for film and television. I don’t have any work retirement plans or healthcare plans available to me in my current line of work. I have always been really good at saving my money but I have yet to really start investing for the future. I’m pretty new to the whole investing idea but I think I want to open up a Roth IRA. Is that a good place to start? Anything else you could recommend?
- Ashley

A Roth IRA is a great place to start.

My first move with that money would be to clear all debt from my name. This will simply give you more freedom for the future no matter what you choose to do.

After that, by all means, invest it. A Roth IRA is a good start as it is a wonderful vehicle for retirement savings that also allows you to pull out your contributions penalty-free if you choose to do so at a later time. I have a Roth IRA myself, through Vanguard.

Q7: Not caring about future
My 48 year old (single w/no children) daughter graduated with a bachelor’s degree in 2000. She has yet to earn her first nickel as the fruit of her education (Creative Writing). She has managed to survive without our assistance in the meantime by working at various high school grad type jobs, sometimes seasonally at around $20.00/hr but more often at around $10 to $12. Without our knowledge because she decided to not include us as supportive or nosey parents in her life, she now has (she says) a little over $50,000 balance due on her student loans, including accumulated interest, which she borrowed while in college, now over 10 years ago.

She seems to have no idea of her own but and seems unconcerned that (1) the loan will not be available to her and (2) that it will be insufficient to finance all expenses. As of now, she has not yet repaid a single dime of the previous student loans – she says she has been given “forbearance” and/or another type of debt payment relief all these years. So, I calculate that if she does borrow another $25M, her total will be between $75 and $80 if and when she does get a master’s degree, but still without a secure job in hand that may pay enough to make all this worthwhile. Can you provide information and insight that might help us in this situation?
- Kenneth

You can lead a horse to water, but you cannot make them drink.

For me, this is the whole trickiness of personal finance right in a nutshell. You can’t make others behave in the ways you want them to. You can only push them in that direction. Quite often, the nudges you give in that direction are painful ones that seem to go against our instincts for caring for others.

The first thing you should do at this point is sit down with your wife and figure out what your long term goal is, both for getting your daughter on track and making sure she doesn’t adversely affect your life at this point. What is the minimum state you expect from her in five years? Living independently? Having a job?

You need to then ask yourself if you are willing to let her sink or swim on her own. If she falters again, will you take her in again? Does she know that, and is she banking on that? If she knows that you’re a permanent fallback, why would she not take the “fun” route that has a high chance of failure rather than the mature route that establishes an independent life?

This is a hard discussion to have, but whenever I hear about parents letting older children move back in until they get their act straight, I can’t help but think that this action enables the children to make further poor moves in life. At some point, the children have to swim alone.

Q8: Off-topic topics
What topics do you avoid at The Simple Dollar and why?
- Andrea

A long time ago, my wife and I set down some basic guidelines of what lines not to cross in our life to discuss in front of a wide audience. There are simply some aspects of our life that aren’t appropriate for and don’t need to be discussed on this site. More than once, this has caused some controversy on the site because some of the elements that have led us to certain decisions are on the other side of that line. I’d rather anger a thousand readers than to cross such a personal line.

I am as diligent as I can be about protecting the identity and privacy of readers, even to the point of retroactively editing posts to protect them. More than once, this has caused controversy because I’ve deleted elements of the story of a reader but left my response to that reader unchanged, leading to all sorts of crazy conclusions. I’d rather have 1,000 readers calling me wrong and unethical than to destroy the privacy of one reader.

I don’t like talking about the specifics of my religious or spiritual beliefs other than to say that I’m a Christian, that I greatly value science (which tends to be the big controversy these days (a great summation of my thoughts on science and Christianity is in the words of St. Augustine)), and that I believe strongly in separation of church and state, which is another hot button issue these days.

I try not to write much at all about my family and friends beyond my immediate family unless they give me specific permission to do so.

I try to avoid specific political statements, other than to say I consider an awful lot of the political discourse today to be poisonous and detrimental to all of our futures (this goes for the far left and the far right). I used to cross this line on occasion, but it’s just not worth it.

That mostly covers it in terms of topics I avoid.

Q9: Emergency fund in a CD?
I am very fortunate to be in a place where I don’t need to worry about money. I’m 21 years old, enrolled in an undergraduate program in engineering. My parents are well-off, and have been paying my tuition and rent, so that I do not have debt after I graduate. On top of this, I work 10-15 hours a week as an administrative assistant to pay for my food, sorority dues, and any other spending I want. However, I generally spend as much as I earn at work so I have almost no savings. I have $500 in a Sharebuilder account that I’m using to get to know the market, and so far I’ve done nothing but lose money in it so I am hesitant to put any more money in. I have not been paid in the last couple weeks from my job because of some HR issues, and this, combined with Christmas, has put me in about $400 in credit card debt that the first payment on it will be due in the beginning of February.

I am planning on using my first payout to pay off all my debt and pay for the rest of my sorority dues for this year, but this still leaves me with about $2000. My question is: should I put this in a savings account as an emergency fund or put it in another account such as a CD so that it can gain more interest? I read your blog all the time, and if I didn’t have the luxury of having my rent and tuition paid for, I would put it in a savings account as an emergency fund immediately. However, I’m graduating in two years, and maybe putting it in a 2 year CD would allow it to grow so that I would have a more substantial emergency fund when I graduated and therefore no longer would receive money from my mother.
- Katie

A CD right now is not a high-growth option. You might earn 2% on the money if you find a great offer.

If you want to keep this money in a form that doesn’t lose principal, I would probably encourage you just to keep it in savings, because savings offer liquidity that CDs don’t offer. The difference between a good savings rate and a good CD rate are so low right now that the liquidity that savings offers trumps the interest rate difference, in my opinion.

If you have almost no savings, I think having a cash emergency fund would be a solid idea anyway, just for unexpected events like a travel emergency and so on.

Q10: Retirement savings or debt payments?
I am 29 years old and have been out of grad school for 18 months. I am very fortunate to be well-employed because I have about $27K left in student loans ($23,600 at 6.5% interest and $3,400 at 7.5% interest). I have saved three months’ expenses in a high interest savings account and $40K in my 401K (mostly from employment prior to going back to school at age 25). I have a 1996 Honda with 180K miles on it, which I hope to drive to 200K before replacing. I rent my apartment and don’t have any credit card debt.

This situation leaves me with a couple of questions. Should I could quit contributing to my 401K to increase my debt payments and savings for the car? What about a loan from my 401K basically to “refinance” my student loan at a lower interest rate (my employer’s rate would be 4.25%)? And what do I do with the fact that I actually don’t like my job and would like to seek new employment within a year?
- Annie

At the rate at which you’re paying down your student loans, a “loan” from your 401(k) to accelerate the paydown isn’t worth it in my opinion, especially if you’re considering switching jobs as such debts will be counted as taxable income upon moving to a new employer.

As for whether you should cut your 401(k) contributions to save more for the car, it depends really on how much you’re making and expect to make in your career. If you multiply your contributions by 12, you get $7,500 per year. Are you making more than $75,000 per year? What about employer contributions?

If I were you, I’d cut your retirement contributions to 10% of your annual income. So, if you’re making $40,000 a year, that means you’d contribute $4,000 a year and you’d thus contribute $333 a month. This would leave you with an extra $300 per month with which to save and pay down debts.

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.

A reader who asked for anonymity wrote in:

I’m visiting a lawyer next week to get started on filing for bankruptcy. I have no way to pay my debts or even make the minimum payments each month. My problem is that I simply can’t find a place online that actually explains what the different kinds of bankruptcy are and how they work in any terms I can understand. What’s Chapter 7 and Chapter 11 and Chapter 13?

I’ll attempt to explain these concepts in the clearest terms I can. Of course, when you do that, you tend to lose some details in the process, so if you want to know more about your specific situation, I suggest contacting a lawyer.

What Is Bankruptcy?
Bankruptcy simply means that you can’t pay off your debts and you’re asking the legal system for help. This event appears on your credit report and can have a negative impact on your credit score for seven years, though being diligent about following through with the plan developed in bankruptcy court means you can minimize that impact. It also means that the court system will come up with some sort of plan that works for both you and your creditors for you to pay back some portion of your debts. The exact way you do that differs depending on the type of bankruptcy.

Typically, bankruptcy is an option of last resort. It has legal costs which can add up to the thousands and a very negative long-term impact on your credit. You should only turn to this if you cannot come up with a successful debt repayment plan on your own. I suggest creating your own debt repayment plan and making a serious effort to execute it on your own before considering bankruptcy. Credit counseling can also help; in fact, it is legally mandated before you file for bankruptcy.

Chapter 11 Bankruptcy
Chapter 11 bankruptcy is usually the best option if you own a business. This form of bankruptcy typically allows a business owner to remain in control of their business while going through bankruptcy proceedings. This typically occurs if you own a business that isn’t able to pay its bills at the moment. If you do not own a business, Chapter 11 is not right for you.

Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a “liquidation” bankruptcy. You can typically only use this type of bankruptcy if you have sufficient income – usually more than the median income in your state. If you qualify, what happens is that some portion of your possessions are sold and the money from selling those possessions are used to pay off your creditors.

You’re allowed to keep some of your possessions during this process depending on the specifics in your state. This usually includes your home, your clothing, minimal transportation, a few hundred dollars’ worth of personal possessions, your pensions, and a few other odds and ends. The rest of your assets are liquidated and used to pay off the creditors. At the end of this process, your creditors go away, but your credit report has a big black mark on it and you’ve lost many of your assets.

If you hear stories of people repeatedly filing for bankruptcy, that usually means they’ve adopted some form of lifestyle where they repeatedly file for Chapter 7 bankruptcy. They usually don’t accumulate assets and spend the debt money they accumulate on experiences. Then, when they file for Chapter 7, there aren’t many assets for the creditors to take.

Chapter 13 Bankruptcy
Chapter 13 bankruptcy is the most common type of bankruptcy. In this form of bankruptcy, you and your legal counsel come up with a debt repayment plan. During the process, the plan is usually adjusted a bit to match the creditor’s demands and your own ability to repay such debts. Often, these plans lower your monthly payments to the point that you can actually handle them within your income. Often, that also means that your total debt amount is lowered.

What’s the drawback? For starters, the cost usually is in the thousands – this is tacked onto the court-ordered debt repayment plan. The plan itself usually ties up almost all of your spending money for a few years as you’re paying off debts. It also damages your credit severely, as does any bankruptcy, but your successful repayments will help mitigate that damage.

Which Is Right for Me?
For most people, Chapter 13 is the best route. Chapter 7 is better if you’re a high wage earner with few assets. Chapter 11 is the one to consider if there’s a business involved.

Of course, the specifics of bankruptcy vary somewhat from state to state. If you’re considering any of these avenues, contact legal representation before you move forward and make sure you understand the specifics in your state.

Your best choice, of course, is to avoid being in a situation where you’re concerned about this in the first place. Hopefully, this advice helps those who need it – and encourages people heading in that direction to reconsider their path.

One of the fun parts of the new “Dinner with My Family” series is that it’s made me start going through all of the piles of recipe notes I’ve accumulated over the last five years, focusing in on meals we liked, meals that can easily work with my dietary constraints, and meals that are inexpensive.

As a result, I have this stack of forty or so recipes (so far) that I’m considering for this series. I’m really looking forward to making (or, in most cases, re-making) most of these dishes!

For starters, I wanted to share some of my recent contributions at OPEN Forum. These next four articles were all written by me.

Future Value: Helping Employees Move On If you own a small business and have an opportunity to help one of your best employees move to a better position, what should you do? Here’s my take on a difficult situation.

When Is the Customer Not Always Right? The Chamber of Commerce Question I overheard a customer at a local business go on an angry rant about that business being a member of the Chamber of Commerce. Sometimes, the customer just isn’t right.

The Christmas Question: Cultural Considerations with Your Customers “Merry Christmas” or “Happy Holidays”? I think the right phrase to use depends heavily on knowing your customer base, and having the right phrase will help you click with your customers. Of course, “Christmas” is just one little piece of that puzzle.

Listening In: 15 Essential Small Business Podcasts I actually wound up pointing to only seven podcasts here while explaining how to find many other similar ones.

And now, some great personal finance links.

How to Use the Power of Groups Groups and communities can be incredibly valuable and powerful. Here are some thoughts on how to utilize that power. (@ money cactus)

How to Make Pizza for 38 Cents While I’m a bit of a foodie and would almost certainly upgrade this recipe a bit if I were making it, I give this article big props for showing a recipe, then calculating the costs of it so clearly. (@ cents to share)

Preparing for Power Blackouts: Plan Ahead and You Can Weather Any Storm Where I grew up, we had multiple multi-hour blackouts each year. I recall that a few of them went on for days. (@ frugal dad)

20 personal money practices that got me to a place of grooving prosperity If everyone came out of college with these twenty ideas firmly burned into their heads, life would go so much easier for them – and there would have never been a housing bubble, either. (@ white hot truth)

I Just Lost My Job! How I’m Downsizing My Household Expenses Ask yourself this: is this person losing anything of real value in her life thanks to this downsizing? Then ask yourself this: why not do it before you’re downsized? (@ the digerati life)

Debt-Free for Life: An Interview with David Bach I enjoyed this interview, particularly since I was reading the book at the time (and I’ll be reviewing it Sunday). (@ man vs. debt)