As I’ve mentioned a few times on The Simple Dollar, we use piggy banks and allowances with our young children in our home. We have a few simple rules that go along with this, mostly allowing them to freely spend part of their allowance while they save another part of their allowance for longer-term goals (and our oldest has a few other restrictions as well). The amounts we’re talking about are small – we give them fifty cents per week for each year old they are.

When we first started doing this, we expected our children would save for small goals. Since their allowances were on the order of $2, we assumed that they would set relatively modest goals out of a lack of patience.

Saving Big
Instead, they both took the opposite approach. Instead of saving for small items, both of our children chose to save for big items – or, to be more accurate, item lots that save them money per item.

Our son is a big fan of Dragonball Z (an animated series), but the action figures are a bit hard to find around here. Since he’s wanted to use his allowance to buy the action figures, we’ve had to turn to the internet to find figures for him.

While we were searching various sites for figures, I found that time and time again, he was more interested in buying a bundle of used figures over anything else. This was the best way for him to get a low per-figure price, even if the total cost was quite high.

The amazing part? He didn’t grow impatient with the process. He kept saving week after week for a big lot of used figures (with a requirement that two specific characters be a part of whatever lot he wound up with). Eventually, after saving for many, many weeks, he bought a six-figure used lot.

Interestingly, our daughter (who is a bit younger, only three) did almost the exact same thing with the princess dolls she’s enamored with. Rather than going to the store the first second she could afford anything, she waited because she understood that she would get more for her money by waiting. Similarly, she wound up purchasing a mixed lot of dolls at roughly the same time as our son’s action figure purchase.

The patience and willingness to bargain hunt exhibited by both children during this process impressed me greatly. I could not be happier with their progress in terms of setting goals and saving for them, particularly considering the children are five and three years old, respectively.

Making This Work
So, how did we get to this point? Here are some of the tactics we’ve used along the way to get our children on a good path for saving for the future.

“Do as I do“ We don’t have a practice of telling our children one thing, then doing another. We save for goals, too, and often do this visually right in front of the children. I actually have a savings jar that I put money in to save for a goal, and that jar will often sit for months, slowly accumulating money.

Very regular goal discussion We talk about goals of all kinds all the time. What do we want to accomplish this week? This month? Where do we want to be in a year? What are we saving for? All of these questions come up very regularly in discussions with our children. We share what we’re doing and encourage our children to do the same.

Visual money use As often as possible, we use money in a visual fashion. We pay their allowance in quarters. We allow them to swap quarters for dollar bills, so that they visually understand that connection. We also count the dollars they accumulate. The money doesn’t just disappear into a savings account or a checking account. Even on the occasions when we pay using a debit card or a credit card in front of the children, we immediately relate to them that the card is just telling the store that we will pay them the money later so that it’s easier to pay.

Minimizing focus on material acquisitions Our children don’t feel the need to have something new every week because we don’t put much of an emphasis on acquiring more material things. We already have lots of things to enjoy, so why should we have more? We’re far better off waiting around for something we genuinely want instead of spending money on an impulse.

Imaginative play As often as possible, we channel play in imaginative directions. We have a “dress up” tub that our children delve into for things to wear. Quite often, we’ll pull out building blocks and build something entirely new. We’ll make up games or play simplified versions of others (like the current favorite, “Dad Is a Zombie”). Such play doesn’t require material things – in the cases where material things are used, they’re incidental. Doing this as often as possible shows that fun and joy and the good things in life do not have to come from material items.

I can’t guarantee that my children will be financially sensible as adults, but I can be sure that I’m doing what I can to give them the tools to be financially sensible as adults.

A few weeks ago, I mentioned that I was working in collaboration with a friend on a site focused on board and card gaming, and I also promised to give you guys updates on any progress on the site.

Unfortunately, my friend has made the decision to drop out of the project, mostly out of a desire to not have to commit to any sort of standard writing schedule. The idea of having a set writing schedule, coupled with a sense that he would be letting a friend down if he failed to meet that schedule, made my partner eventually choose to not be involved.

So, what’s next? I’m not interested in launching the site without a partner because, simply put, The Simple Dollar is my top writing priority and I don’t really want to “carry” another site. So, for now, I’m just going to quietly search for a gamer I know who may be interested in writing on such a schedule before we continue to move forward.

One final thing: I loved the design of the site. Loved it.

How To Stay Motivated When You Hate Your Job The key, in my opinion, is setting goals for yourself that take you away from your job, then focusing on the plan that will take you to that goal. (@ dumb little man)

A Grocery-Shopping Hiatus: How Long Can You Eat from the Pantry? You could eat for a surprisingly long time from our pantry. It’s usually stuffed full of items purchased in bulk. (@ frugal dad)

Choosing a Luxury Eccentricity My luxury eccentricity is kitchen implements, I think. The kitchen implements we use are slowly getting better and better and better over time. (@ wise bread)

Confessions of a Spendaholic: How to Curb Compulsive Spending There is some very solid advice in this article if you find yourself having difficulty curbing such impulses. (@ get rich slowly)

A Layoff Story: The Ant, the Grasshopper, the Honeybee & COBRA This is a great little story about the challenges of dealing with a layoff. (@ len penzo)

Over the past weekend, I had a long conversation with a man in our community who was nearing retirement age. He felt comfortable about his own coming retirement, but he seemed very pessimistic that his children would ever be ready to retire. “They just don’t know how to save money,” he told me.

I told him that, although I agreed with him that young people should save more, there is also a strong case that it is much more difficult today for a young person to establish themselves financially as he did when he was a young adult.

He looked at me strangely. “What do you mean?” he asked.

So, I laid it out for him, piece by piece. Afterward, it occurred to me that the entire discussion might make for a good post here, particularly with some specific research to back it up.

Real wages Let’s start with income. In 1970, the average wage earner took home $312 per week (in 1982 dollars). In 2004, the average wage earner brought home $277 per week (in 1982 dollars) – and it’s still falling. That means that, once you factor out inflation, the average wage earner in 1970 brought home about 18% more than the average wage earner today.

Home prices Even if you adjust for inflation – and even if you take into account the crash of the housing bubble from 2007 to today – the median price for a home in the United States has gone up more than 50% since 1970. Remember, that number accounts for inflation, so what that number actually means is that the cost of a home requires 50% more of a person’s paycheck than it did in 1970.

Education prices The cost index of an average undergraduate education since 1970 drastically outpaces the growth of the Consumer Price Index. In short, disregarding inflation, the cost of an undergraduate degree today is roughly 30% higher than it was in 1970.

Other essentials In order to compete in today’s workforce, a young person often must have items – paid for out of their own pocket – that weren’t needed in 1970, including a cell phone, a computer, and home internet access. Often, when searching for work, it becomes very difficult for a young person to compete without these extra expenses.

So, to summarize, in order to have housing and an education comparable to what a young person had in 1970, they must spend 50% more on housing, spend 30% more on education, and do it all while earning about 18% less money. That doesn’t even include the extra expenses needed to compete.

I look at my own parents for an example. My parents purchased the house I grew up in for $20,000 – and that included seven acres of land. At the time, that was approximately what my father earned in a year. Today, if I were to purchase a similarly-sized house with seven acres of land, I would be spending well over $100,000 – significantly more than an annual salary.

My parents were also able to find good work without the cost of a college education. Today, the jobs they both had would be completely unavailable to someone if they did not have a college education, putting significantly more expense on the back of a young person today.

“Get tough!” This isn’t meant to be an excuse for people of my generation not living up to their potential. Instead, it’s an encouragement for everyone to not obsess over comparing the success of young people today to the things that young people in the past had at a similar age.

Simply put, things that were quite possible for a 25 year old in 1970 – owning their own home, having a fully-paid-for education, having a high-paying job – are much more difficult for a 25 year old today.

It’s not so much a matter of getting tough. It’s more of a matter of recognizing that comparing the way things were when you were younger to the way things are now for a younger person isn’t really a valid comparison.

Rather than focusing on results, look for signs of progress and for the status of the journey as a whole. It’s not even remotely fair to compare results – the income you have, the house you have, the education you’ve paid for – between eras, so instead focus on positive steps in the right direction.

Quite often, in our day to day lives, we interact with people who spend with reckless abandon and don’t think for a moment about the long-term financial implications of what they’re doing – or, when they do think about it, they simply believe that someone or something will take care of it for them in the future.

For those of us who really understand the tremendous value of getting our financial houses in order, this can be incredibly frustrating, particularly when we see someone we care about falling into that trap or, even worse, believing that we will eventually be the ones that bail them out of whatever situation they’re involved with.

In these situations, the tempting response is to try to directly “set them straight.” If you simply lay out the facts of the situation and point out how their current economic path is unsustainable, they’ll begin to see the light, right?

Wrong.

Very few people really enjoy being told how they’re doing things wrong. Quite often, they’ll reject such statements and, on some level, resent you for the statements you’ve made to them. I have seen this happen far too many times when people have interventions and discussions with people on a bad financial path.

It just doesn’t add up to success.

Instead, I find that a set of completely different tactics tends to work well in these situations. Rather than trying to force the horse to drink, focus instead on leading the horse gently to the water.

Try these six tactics on for size.

Give them chances to show they’re responsible. People often start revealing their best traits when they’re given an opportunity to do so. Let the person with the poor financial history be involved with any major financial choices you may have in common – don’t just decide things for them, because that creates the impression that you’re the boss and they’re the follower, that they don’t really have to worry about it. Tell them that you trust them and that you believe they’re up to the task of carrying their part in whatever you’re working on together.

Follow failures not with rage, but with quiet disappointment. I find that, over and over again, quiet disappointment is far more effective as a response to someone who has let you down than a pile of rage ever will be. If someone lets you down, do everything you can to avoid exploding at them. Don’t let your emotions overwhelm the situation. Instead, calmly state that they did, in fact, let you down, and divest yourself of as much of the immediate situation as you can.

Offer them occasional tips for good financial living that work well for you that might actually apply in their life. Don’t send them daily emails filled with frugality tips. Instead, wait for the really good ones that might actually click with them, then send that idea along to them. The goal is to help them improve their own life, not to make their life mimic your life.

Have a heart-to-heart, but not about the finances. Tell the person how much they really do matter to you, and also tell them that if they ever need to figure out what the next step is in their life, you will drop what you can to help them figure it out. This type of talk is hard to do, but it can often be a life changer to a person who is wandering and is trying to figure out what does come next in their life.

Decide now whether you’re willing to mop up their mistakes. Some people spend years worrying about having to take care of their parents without really deciding if that’s what they’re going to do or not. Don’t put yourself in that situation. Decide, right now, whether you’re going to take care of them in the long term or not, and then act accordingly. Don’t hedge your bets because you’ll just carry a painful decision out for much longer, making your life miserable and probably adding misery to their life, too.

Wait for their “bottom,” then gently offer help. Although a low point can often be incredibly painful, it can also be an incredibly valuable learning experience for people. It is at that point that a person realizes, for the first time, that they’re following a path that doesn’t work. It’s at that time when they look around them and see who their true friends are, as they are the ones who are willing to help them at this low point. That’s when your help will really matter. That’s when a helping hand won’t cause resentment, but will be appreciated. That’s when it’ll build into something more than just a quick fix.

I’ve applied all of these at various points in my own life when helping others. Over and over again, I found that being much more passive with my help was the right thing to do.

“So, what’s The Simple Dollar about?” people will ask me when I tell them what I do for a living.

“Oh, it’s mostly about getting your life straight with money as a big part of the equation,” I say. “I talk about things like frugality and how you can use them to pay off your debts and get some freedom in your life.”

They then look at me like I’m from another planet and often follow that with, “I don’t have time to be frugal!”

Whenever I hear a statement like that, I immediately rewind to an earlier time in my life and I quickly recognize that such a statement usually points to two major problems in a person’s life, both of which can be fixed to create a much more worthwhile life for anyone. Let’s look at both of these problems.

Time management problems
This is simply the “I don’t have time” part of the equation. If you’re finding that your schedule is so full that you have the inability to even attempt something simple that may be helpful to you, then you’ve got some time management concerns that some simple techniques can help to alleviate. Here are five such techniques.

Say “no.” Many people are afraid of doing this, so they keep adding more and more to their plate until they can’t handle all of the tasks at hand. This is a dangerous situation to be in because it means that you’re going to start letting people down, which is far worse than saying “no” in the first place. When someone comes to you with yet another thing that simply seems like too much for your schedule, just simply say no.

Eliminate the chaff. Look through the activities and responsibilities that you have already on your plate and cut some of the less important ones. Simply resign from a committee, step back from another year of being a Scout director, resign from your league basketball team, or ask to be removed from a project where your skills aren’t being effectively used.

Focus. When it’s time to get stuff done, eliminate distractions. Pull the ethernet cable out from your computer. Turn your cell phone completely off. Disconnect your office phone. Pull the blinds. Close your door. Actually get some work done, instead of just working for a few minutes and then bopping over to the latest distraction.

Keep a list. Whenever you think of something you have to do or something you want to think about later, add it to the list. Then, when you’re done with the task at hand, just turn to the list instead of wandering off and trying to think of what you need to do next.

Make routine tasks as efficient as possible. If you can figure out how to shave a few minutes off of something you do every day, then you suddenly will find your time multiplying. Three minutes saved doing laundry can make the difference in convincing you to load the dishwasher tonight instead of going to bed. The clean dishes tomorrow mean one less task to worry about, giving you the space to take care of something else in your life (like one of the frugality tasks below).

Not understanding frugality
On the other side of the equation is the “time to be frugal” part of things. The assumption here is that frugality must be a time sink because the first thing or two they imagine a frugal person doing seems like a giant time sink. In truth, many frugal tactics end up being time savers as well over the long run, in addition to saving money. Here are five examples.

Install a programmable thermostat. Once one is installed and properly programmed, you’ll basically only have to touch your thermostat a few times a year. Not only that, because the furnace or A/C unit in your house is running less (assuming you programmed it sensibly, with the heat and/or the air conditioning turning off at night), you’re saving money as well.

Install long-lasting energy efficient bulbs. In areas where you don’t need perfect lighting, install CFL and/or LED light bulbs. Both will last for far longer than normal bulbs (meaning less time spent changing bulbs), plus they’re much more energy efficient, meaning your energy bill will drop with continued normal use of the lights.

Wire your entertainment center to a master switch. If you have an outlet in your family room that is wired to a switch, then just plug your entertainment center in via that outlet. Then, when you’re ready to go to bed, just flip the switch and everything loses power. No standby devices sucking down energy, plus it’s much easier to turn everything off at night.

Make double/triple/quadruple meals. When you’re actually making a homemade meal, such as a casserole, make doubles or triples of it and sock them away in the freezer. The next time you come home, feel lazy, and are just tempted to order something for supper, pull the ready-made meal out of the freezer and toss it in the oven. Instant homemade food, much cheaper than delivery.

Purge your overstuffed closets. Getting rid of unwanted stuff via yard sale or eBay means more cash in hand. It also means it’s quicker and easier to actually find the closet items that you want or need.

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. Student loans after marriage
2. Parents in financial trouble
3. 401(k) and index funds
4. Best PS3 game bargains
5. Furnace savings?
6. Used cell phones
7. Buying board games
8. Financially irresponsible parents
9. Achieving goals
10. Roth investment questions

For me, Valentine’s Day is another one of those days in which people cram sentiments they feel they should have throughout the year into one day. Much like Mother’s Day and Father’s Day, for example.

Instead of going out for some exorbitant dinner or tossing some sort of expensive “romantic” gift at your partner, why not do a little thing or two each day to show your partner how much you love them? Write a little note for him or her and stick it in a coat pocket. Make a batch of your partner’s favorite cookies. Do the dishes so your partner can relax after a stressful day.

A little bit of consistent love means a lot more than an ostentatious display once a year.

Q1: Student loans after marriage
My wife and I graduated in May of this year, and were married a week later. She has 5 student loans in her name, which her parents promised to pay. She owes around $215 per month in student loans for her. Unfortunately, her parents are unable to afford that much, and send us a check for $175 each month to help pay for the student loans. I recently spoke to her father, and he intends to apply for a tax deduction for the loans. However, based on what I’ve read, it sounds like her parents cannot claim anything– the loans are in her name, and we technically pay it each month. He claims to be a cosigner on the loan, but I don’t see it in any of the paperwork. We are married, filing joint, and they cannot claim her as a dependent.

My primary concern is that we follow the law, here. Am I correct to assume that, since our arrangement with her parents is completely off-the-books, we will be eligible for the deduction– and they will not? Her father is asking me to send him statements so he can see interest paid/principal remaining. Should I be concerned that he will attempt to claim some of that interest, or will he legally be able to? If they are not legally eligible for the deduction, should their tax attorney (they use an actual attorney, not online software) catch it, or do you think I should speak with him personally?
- Zach

If the loans are in her name, then she’s the one who can claim the deduction for the student loans. You cannot claim deductions for people who are not listed on their income tax as a dependent.

In this case, I’m guessing her parents haven’t quite realized that she’s no longer their dependent or don’t realize that the student loans do not have their name on them.

If they attempt to claim the deduction, either their attorney or their software should catch it. If they go ahead and push it through, the IRS might then catch it, too.

Q2: Parents in financial trouble
My husband and I just celebrated our first anniversary last month. I work full time and am a part time college student, he works part time and is a full time student. College is of course a challenge but my company pays for my tuition and we do all we can to cut costs. We have our own apartment, manage fine and haven’t had an overdraft since we were married. But I’m not writing to you about us.

I am considering organizing an intervention of sorts with their close friends and some immediate family members to confront them about this. My parents have had financial problems for years and have learned how to cope and how to hide the problems. I suppose my question is do you have any advice for me? Would an intervention do more harm than good? Are there any strategies you would use? And how can I work up the confidence to talk to my parents about this?
- Katrina

An intervention may help, or it may make things worse. I would strongly encourage you to do some deeper research into how to make an intervention work before trying one. Hit your local library and look for books on interventions, like Intervention by Vernon Gray.

I would also encourage you to sit down and do some serious soul searching about your own position on the subject. You seem to be just assuming that you’ll be carrying the load for them when they get older. Is this really a burden you want to assume?

Do not even start to take on that burden if you’re not willing, without resentment, to take on that burden for the long haul. If you try, you’ll build up resentment and emotion like floodwater behind a dam, and eventually that dam will explode, putting all of you in a much worse position.

Make sure this is something you’re fully willing to do, and decide it sooner rather than later.

Q3: 401(k) and index funds
When I first set up my 401K five years ago, I was fresh out of college and had very basic knowledge of investing. I picked an investment mix of roughly 5% cash, 20% bond funds, and 75% stocks (which were further diversified into small-cap, large-cap, value, growth, and international). Outside of allocation and diversification, I didn’t have a particular strategy for picking a specific fund. I think I just picked the one with the highest 10-year average return in each category.

Now that I’ve learned about low-cost index funds vs. the cost of actively managed funds, I want to invest in the index funds available through my employer’s plan. However, I’m not sure what’s the best way to start implementing that. Do I simply set my contributions to go to the new index funds? What about all the shares I bought over the past 5 years? Do I just leave them there, where they will continue to incur a 1.25%-1.50% annual operating cost? What happens if I sell those shares and put the money into index funds with a 0.25%-0.5% annual operating cost? Are there any tax implications for doing that?
- Kate

There aren’t any tax implications for such moves within a 401(k). The only tax implications occur when you withdraw money from the account, at which point you have to pay income tax on everything you withdraw.

In other words, when you want to switch things around in your 401(k), feel free to do so.

My only concern would be to make sure that you’re keeping a good overall portfolio in there for your age. You’re young, so a heavy stock portion isn’t a bad thing, but as you near retirement, you need to start moving most of that money into safer investments, like bonds and treasury notes and cash.

Q4: Best PS3 game bargains
I received a PS3 from my wife as a Christmas gift (I think the Blu-Ray player was part of the reason). Anyway, I started throwing my loose bills and change into a jar with the intent of buying a game or two for it in a few months. That time has arrived and I have about $80 to spend. What are the best PS3 game bargains?
- Clint

First of all, buy used if at all possible. The Blu-Ray format that PS3 discs use seem to be practically invulnerable. My daughter has done unspeakable things to a couple of my PS3 discs and they’ve never had a problem. I’ve traded for dozens of used discs without a single problem. So, when you go to spend this money, buy used games at your local used game store.

I would start by first knowing what genres of games you actually like. Think about the video game experiences you’ve enjoyed the most recently in your life. Are they platform games, like Super Mario 64? Racing games? Action games? First person shooters? Role playing games? Open world games?

Next, I’d hit Metacritic’s list of PS3 games, sorted by score and start looking at the top ones. Make a list of ten or fifteen or so that match the genres you like, starting at the top of the list.

Then, take that list to your local used game store and get as many of the games on your list as you can for your $80. You’ll likely be able to get three or four of them.

Q5: Furnace savings?
Thank you very much for the time and effort you invest in your blog! I’ve found it tremendously helpful. In fact, your blog and Get Rich Slowly are the only two financial blogs I follow. God has truly blessed me financially (always been debt free, always paid cash for cars and even a house) and yet I want to be a faithful steward with what He has entrusted to me, both now and in the future.

I’ve always suspected that if the furnace avoids running 2 hours overnight, how long does it take to fully (not just the first cycle) take to catch up in the morning?
- Christopher

During the winter, when your home is warmer than the outdoors, your home is constantly losing heat to the outdoors. That’s why we have insulation, of course, but insulation is never perfect. There is always some significant heat loss. Also, basic thermodynamics dictates that the greater the difference between the indoors and the outdoors, the greater the heat loss.

So, during the night, when the temperature is coldest outside, your house is losing the most heat to the outdoors. If you leave your furnace running at your normal temperature all night, it’s actually running more at night than it is during the day because your house is losing more heat to the outdoors due to the greater temperature difference.

In the morning, the temperature outside is going up thanks to the rising sun. There’s less heat being lost to the outdoors and your furnace does not have to run as much. You’re far better off heating your home to the desired temperature (and keeping it there) when the temperature is higher outside than when it’s lower.

The big reason to turn off your heat at night is that it minimizes the difference between indoor and outdoor temperature, thus minimizing the heat lost from your home. The less heat you lose from your home, the lower your heating costs.

Q6: Used cell phones
It it a good purchase to buy a “used” cell phones”? And why when i try to buy one in ebay, there will always something that will come out lower than the price I am trying to buy, that is after a few days after I paid for an item. How doest it work?
- Eileen

It can be a good purchase to buy a used cell phone as long as it works with your particular provider’s network. You need to make absolutely sure that the phone will work with your service provider before buying it.

Now, as for the issue of “a cheaper phone coming out as soon as you buy one,” that’s always going to be true with any technology purchase. If you buy a phone now, it’s going to be cheaper in a few months. The same thing happens with computers and monitors and televisions.

The key is to wait until you actually need to buy a replacement because your previous one is not working. Barring that, you should wait until a truly exceptional deal comes along, like a free phone with signing a new contract.

Q7: Buying board games
I really liked your article last week about board games. I agree 100% that the most valuable thing is the experience, and not the material goods themselves. I used to be so ardent about collection video games, but I just decided I was spending too much money, and not receiving enough satisfaction from them. Yesterday, I had a gathering at a friends house, and instead of playing video games, we watched “Scott Pilgrim vs the World”, which I borrowed from my public library. Short story: We had a great time. The great thing about the NYPL is that it has all the new releases, and I get the watch them less than a month after they come out. I just request them online and I go pick them up at my local branch. Besides, it doesn’t cost a thing!

I thought it might be a great idea to ask you where a good place to get these games would be. I would love to buy them new, but they are just so expensive. I wouldn’t mind buying them used, and I suppose that would be alot cheaper. Do you know of any great places to get board games more affordably?
- Kent

I use Cool Stuff Inc. for my board and card game purchases. I save my nickels and dimes until I have enough to surpass their free shipping minimum, then I pick up a few games all at once. Buying all four of those in one order would get you just over the free shipping threshold there at the moment.

There aren’t any online shops that sell a wide array of used board games that I know of. Local shops will sometimes carry used copies of popular games, and I’ve had some success finding good games at thrift stores, but you can’t go there and expect to immediately find a used copy of the specific game you want at a great price. The games you’re looking at are good ones that people will want to play again and again, not a copy of Monopoly that hasn’t been touched in a decade and is happily sent off to Goodwill.

My only comment on your list is with Diplomacy. I really wouldn’t recommend playing that game unless everyone in your group understands it’s just a game. It really is a lot like the television series Survivor, where you have to eventually twist the knife in someone’s back to win. There’s a common joke among boardgamers that Diplomacy has been destroying friendships for fifty years, and I’ve witnessed people in tears over the game. It can be very cutthroat – the rules make it that way.

I would strongly suggest replacing Diplomacy on that list with Ticket to Ride until you know how truly cutthroat the people in your group are – and how they accept such gameplay from others. Diplomacy can be a lot of fun, but you have to approach it with the understanding that it is just a game and that if someone backstabs you during the game, it’s just part of the game, not some sort of personal affront.

Q8: Financially irresponsible parents
I’m 25, single. Have 20,000 in student loans but no other debt. Currently working a full-time temporary assignment making $15/hr, live at home with parents, and am enrolled in school – planning on taking out another 6k in loans to pay for my classes and classes this summer so I can apply to med school. I have a BA and some credits toward an MA but never applied officially until recently. Still waiting to hear if I will get into the program. Then the recruiters started calling. Now I have two job possibilities making about 60-70k in reasonable cost of living areas in the Midwest w/relocation, etc.

After the MA I’d apply to med school. What do you think is the best route to go?
- Margaret

If you’re going to go to medical school, you’re better off doing it when you’re as young as possible so that you have few entanglements as you go through the process and the energy to make the best of medical school. The longer you wait on medical school, the less worthwhile it will be for you because you’ll have fewer years as a practicing doctor to pay off the mountain of debts.

If you’re not going to do that, then I would take the good job offer you have on the table right now and make the most of it. A bird in the hand is always worth two in the bush. See where that job takes you and use the money you’re earning to eliminate your debts. If you later decide that it’s not a path you want to continue to follow, then go back to school.

So, my order would be option three (contingent upon how serious you are about the challenge of medical school), followed by option one.

Q9: Achieving goals
Our goals are 1) pay off all but our primary mortgage within the next two years, 2) have at least 50K in rainy day funds, 3) start contributing to our IRAs monthly, 4) start saving for our two sons college expenses (they are 6 and 9), 5) and saving for a minimum of 1 family vacation trip and 1 for the wife and I each year.

We think we are on a pretty good track to achieving our goals, but we would like to know what your thoughts are on what we should do with the extra 2K savings each month that we are socking away? My first thoughts are to save half of it each month and then start applying the other half across the remaining goals. If that is reasonable then I guess what sort of distribution might you consider across the remaining goals? Thanks for the great advice you have already provided and I hope to hear from you.
- Harold

First of all, I’d make sure that all of the expenses this year are covered, first and foremost. Make sure you can get through the pile of expenses that 2011 is bringing you before anything else, as it sounds like you have a lot of expenditures lined up.

In other words, I would probably keep putting all of that $2K into savings for the time being. Make a large emergency fund, because vacations are often the time when emergencies strike and you find yourself spending far more than you ever planned to spend.

Your goal should be to emerge from this year with minimal debt. At that point, start thinking about long term goals and figuring out what you want to be doing next.

Q10: Roth investment questions
I was just reading a few posts you made back in 2007 about funding your Roth IRA through Vanguard. I am 25 years old and due to my risk tolerance I max funded my Roth IRA ($5,000) but instead of choosing a Target Retirement Fund, I simply chose Vanguard’s Balanced Index Fund, which after reading your posts, made me slightly concerned and I am now second guessing my decision. I am wondering if I should plan to start a Roth via a Target Retirement Fund next year or just continue making contributions to the Balanced Index Fund I set up.
- Karl

I went and looked at both funds. Right now, the 2055 Target Retirement Fund (the one I assume you’d have your money in) is far more aggressive than the Balanced Index Fund. Over time, though, the Target fund will slowly become more and more conservative.

For right now, the bigger question of the “right” fund to have comes down more to your personal risk tolerance than anything else. I don’t think there really is a “wrong” move if you’re putting aside the money in the first place. Can you stomach watching your Roth IRA take a big loss for the year if it’s counterbalanced with other years where you get 15% gains? Some people can. Others can’t stand seeing their retirement balance drop so precipitously.

If you prefer to be more conservative and balanced with bonds, there’s no imperative to switch. Your money will grow at a slower rate during the good years, but won’t take a gigantic drop during the bad years. Overall, this usually averages out to slightly slower growth overall.

Of course, at some point in the future (age 50 or so), you may want to go even more conservative than the Balanced Fund, but you can cross that bridge when you get there.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

Every Sunday, The Simple Dollar reviews a personal finance or other book of interest. Also available is a complete list of the hundreds of book reviews that have appeared on The Simple Dollar over the years.

One aspect of getting a good deal that I do not enjoy is the negotiation process. I’ve gotten over my unwillingness to negotiate at all. My problem now is that I’m never sure if I’m negotiating too firmly. I tend to walk away from things if I don’t get the deal that I want and I tend to negotiate pretty hard.

My approach to this, as always, is to learn more, and that’s where Stuart Diamond’s Getting More comes in. The subtitle explains the concept of the book quite well: How to Negotiate to Achieve Your Goals in the Real World.

The subtitle itself reveals a key part of negotiating: you’ve got to have a goal before you even begin. It’s much easier to negotiate if you know exactly what you’re negotiating for – at that point, it becomes something of a game.

1. Thinking Differently
Diamond boils negotiation down to three key elements: my goals, who I’m negotiating with, and what’s needed to persuade them. Each of these requires cultivation, and most of them take great advantage of forethought and planning. In short, the more footwork you do before a negotiation, the better off you are. Know what you want. Know who you’re negotiating with well enough to know what they want, especially in terms of things you can easily provide. Also, know the techniques you’ll use in convincing them that what you have is a fair exchange for what you want.

2. People Are (Almost) Everything
Negotiations are usually about people, not about substantive issues. If you focus on substantive issues, you’ll rarely win a negotiation. You have to instead focus on the elements of the issue at hand that truly matter to the person or people you’re negotiating with. What do they actually care about? What do they value? If you hit on those in negotiation, it will be much easier to achieve the goals you have for this negotiation.

3. Perception and Communication
The biggest key to successful negotiation is communication. You have to talk to and listen to the people you’re negotiating with. You also have to recognize that their words and perceptions are more important than yours in this negotiation – after all, they are holding that which you want. You need to also be dispassionate and focus on asking questions, most importantly when the negotiation seems to be going awry and the other person is negative. Don’t worry about who’s right – it’s fine to be “wrong” in the negotiation as long as you achieve your goals.

4. Hard Bargainers and Standards
Diamond uses a great technique here for negotiating, particularly against organizations. Many organizations put out statements and other material that describe their own standards and beliefs. If you’re negotiating with that business, don’t be afraid to use those statements in your defense. Almost always, this puts the other side in a sticky situation, as they either have to give you what you want or disavow their publicly-stated standards and beliefs. A great example: if you get awful fries at McDonalds, ask for replacements using their own “freshness guarantee” posted throughout the establishment.

5. Trading Items of Unequal Value
No two people value everything the same. A great negotiation results in both sides feeling like they got more out of the deal than the other side. A big part of successful negotiation is giving the little things (to you) that seem big to the other side: items or services that have value to the other person much higher than the cost to you. An example: you suggest another person hosts the party you’ve been planning together while you bring the snacks. So, rather than having a houseful of people that you have to prep for, you just bring some finger foods. Meanwhile, they’re relieved to have less to worry about as a host.

6. Emotion
Emotion is usually a big negative in negotiations. It causes people to lose track of their goals and respond based not on the situation, but on their personal emotions. A great example shown in this chapter is when a person negotiates with an upset young girl to get her to take a blood test she needs for her medical treatment. The key is to tie the emotion back very tightly with what they rationally know. In this case, the negotiator tied the emotions the girl was going through with the trust the child had in their mother, then tied the blood test to helping the child’s mother help the child get through the illness.

7. Putting It All Together: The Problem-Solving Model
Most negotiations are effectively a problem. You know what you want the result to be and you know what pieces you have to work with. How do you get from here to there? The key usually comes down to a wide assessment of the pieces you have to work with. The more attributes you know about who you’re negotiating with and what you’re negotiating, the more likely it is that you’ll succeed in the negotiation. Diamond breaks this process down into twelve problem-solving strategies: goals are paramount, it’s about them, emotional payments, each situation is different, be incremental, trade unequally valued items, use their standards, be transparent/ethical, communicate & frame, find the real problem, embrace differences, and make a list.

8. Dealing with Cultural Differences
What if the person or group you’re negotiating with has a distinctly different cultural background than you? How do you cross that gap? One key is to understand and respect their culture, which often places value on things differently than how you place value on things. You should also be open about those differences. Don’t hide it – state it clearly, as it’s something you have in common (negotiating with someone from a different culture). Find things you have in common by having some casual time to get to know each other and realize that you’re not really that different from one another. It all comes down to knowledge.

9. Getting More at Work
Often, there are intangibles in the workplace that can make a huge difference in terms of a successful negotiation. It is not all about salary. Key things that both sides can offer (or request) that can make a workplace deal work include additional time off, flexible titles, a better title, assistance with educational goals, a better working environment (like better office equipment), and so on. These can be little things for the business, but big things for the employee.

10. Getting More in the Marketplace
Here, Diamond looks at the ins and outs of specific negotiations people might do throughout their life, such as negotiating the price of a car (make a personal connection, be calm, not arguing over who’s right, not asking for too much, etc.) and negotiating with a family business (often emotional and proud of their work, often feel underappreciated, overvalued assets due to many years of personal work investment). These tips are basically clues to help you hone your negotiation for that specific situation.

11. Relationships
This is essentially a brief guide to relationships, which often boil down to a long series of negotiations. Who will pay for dinner? When will we take things to the next level? When will we get married? How will we move forward from here? Is this the time to separate? These are naturally very full of emotion, so Diamond suggests a lot of ways to help you get through these negotiations without falling into emotional negotiation traps. The best thing, he says, is to have an unemotional third party to help you work through these emotional traps before you even begin.

12. Kids and Parents
This chapter, mostly focusing on parents negotiating with kids, reflects what I’ve actually seen at work often in my own home. Children crave respect and real, focused attention. They want to be treated as mature and they thrive when you take the time to explain to them the whys of the decisions you make. The more you do that, the easier it is not only to convince children to do what you need them to do, but the easier it is for them to adopt patterns that you like.

13. Travel
Travel is often a great way to practice your negotiating chops because many of the elements of travel are fraught with fees that can be negotiated away. The key is to always be willing to walk away and find another option – many people fall into paying these fees because they’ve convinced themselves that they really have no other option and must pay it. That’s usually not true. Focus on the fees on your bills and see if you can make them disappear. Also, take note of any additional minor perks you might want, like a child car seat in a rental.

14. Getting More Around Town
What about the businesses and services you use in your own community, like the dry cleaner? Many such businesses and services are very open to negotiation. One great way to negotiate with a local service is to ask whether or not they offer a reduced rate if you refer your friends and family to their business – you’ll be surprised how many will knock a few dollars off your bill for that all-powerful referral (of course, you should follow through on your own pledge). Another technique is to bargain as a coalition. Look at the groups you’re involved in, like the PTA or the scouts or other civic clubs. Perhaps they could, as a group, negotiate a reduced rate at a local restaurant. Such arrangements start somewhere, after all.

15. Public Issues
Negotiation is often a key part of major public issues, ranging from health care to foreign affairs. Although many of us are not involved in such negotiations, putting yourself in the negotiation mindset as you look at the issue – which also means eliminating your emotions from the issue – can help you get a much deeper perspective on it. Diamond uses a bunch of public policy negotiation examples in this chapter to illustrate the idea.

16. How to Do It
The book closes with a brief chapter where many of the ideas presented earlier are broken down into an actionable recipe of attitude, preparation, location, timing, interaction, getting started, respect, information disclosure, and other key elements. It’s a good “how to” summary of the multitude of ideas in the book.

Is Getting More Worth Reading?
If you’ve ever wished you had more ability when it comes to negotiating things like credit card rates, a better situation at work, a better rate at the dry cleaner, or fewer fees on a car rental, Getting More will prove to be a valuable read for you.

Of course, as with any book of this type, it only really has value if you’re willing to go out there and use it. While there are a lot of ideas here, much of the book only clicks if you take action on it. Don’t spend your time reading this out of amusement’s sake; only read it if you actually intend to get out there and negotiate. This book will really help.

Check out additional reviews and notes of Getting More on Amazon.com.

Many readers of The Simple Dollar have come here over the years to get ideas on personal finance, improving their life, improving their career, and improving their use of money. Although many of the articles heavily include details from my own life, I don’t really have a great full summary on why I write The Simple Dollar. How am I qualified to write such a site? Where did I come from?

So, let’s address all of that.

For starters, I’m not a finance specialist. My educational background is in the hard sciences – life sciences and computer science (I received two degrees in two very different disciplines). My path to writing about personal finance comes largely from my own experience, with some very healthy support from the multitudes of stories from my readers as well as an enormous amount of reading on the topic.

Simply put, I’m not interested in theories about personal finance. I want to know what actually works in my own life or in the lives of my readers.

So, where did I come from? I grew up in a small town in rural Illinois, along the Mississippi River. My parents never had a whole lot of money. My father worked at a factory which regularly had massive layoffs followed by calling the workers back a few months later. He had several side businesses, mostly revolving around fishing and gardening, a pattern I followed, to a degree. My mother was a homemaker who had her hands full, because not only did I have two brothers, she also stepped up to the plate to be a surrogate “mom” for many children that lived near us as well as her own two younger siblings. Our dinner tables were usually crammed full of people every night.

There wasn’t a lot of money to be had, and when there was any money, my parents were always wanting to spend it in ways that would make up for the lean times.

I eventually went to Iowa State U., majoring in life sciences and, later, computer science. I wanted to major in English lit, but I didn’t believe that it would ever earn a good living for myself. I was very lucky to be able to go there as my parents had almost no money put aside for college. Instead, I managed to get enough scholarship money to cover enough of my education to get me through with large but not overwhelming student loans. I made a few money mistakes there, too.

While in college, I fell in love with my future wife, Sarah, who actually grew up pretty close to where I did.

After college, I got a good job and got married. I made one key promise to myself during my adult life, that I would always strive to be the best parent I possibly could. So, when our first child came along, I began to focus a lot of my attention on what he would need for his future.

To put it simply, I didn’t like what I saw. I was spending far more than I earned. Sarah and I had over $20,000 in credit card debt, several consumer loans (for furniture and the like), a pile of student loans, two car loans, and no money in savings. I didn’t have enough money in my checking account to cover the bills.

At the same time, I was finding that my job was often taking me away from my child (soon to be children) when I felt they needed me the most. I was away on business trips when my son took his first step and when my wife found she was pregnant with our second child. I had to skip out on lots of family events to get work done on weekends.

In short, I was obviously heading down a path to a future I didn’t want: an absent father and a tenuous financial situation.

I decided to make some serious changes to my life. Starting in October 2006, I started The Simple Dollar, to share those changes as they happened.

Since then:

I paid off every single debt listed above. I paid off all of our credit cards, all of our consumer debts, all of our student loans, and all of our car loans. We’ve also replaced both vehicles and own those as well without any outstanding loans. Our only debt at the moment is our mortgage, which we chose to get later on once our finances were in a much-improved state and we realized that mortgage payments were as good a deal for us as rent on an apartment big enough for our five person family.

In 2008, I walked away from that job. We had lowered our living expenses so much that by 2008, the income that The Simple Dollar was beginning to generate enabled me to walk away from the job that was causing such stress. I’m now a stay-at-home parent who balances that with writing.

I wrote two books. The first one, published in late 2008, was 365 Ways to Live Cheap. In 2010, The Simple Dollar, a more biographical work where I detailed how I turned my life around, was released.

I’ve written more than 3,000 articles for The Simple Dollar. I currently write two articles each day, which I give away on this site. In the past, I used to write more, but I was often unhappy with them as they often felt incomplete.

I switched to a vegan diet and lost thirty pounds. In 2010, after some medical tests, I made the choice to switch to a vegan diet for my long-term health. Since then, I’ve lost just shy of thirty pounds during an Iowa winter and I feel wonderful.

While doing all this, our household currently has three children that are still preschool aged, including one infant still in diapers.

I write The Simple Dollar for one reason and one reason alone. I write it because I know that there are people out there who are sitting at a point in their life that they’re unhappy with, and often it has to do with the grip that money has on their life. I know exactly what that painful grip feels like and there’s nothing I want more in life than to make it possible for them to escape that grip and follow whatever path life has in store for them with less fear and more personal freedom.

I write about what I do most of the time because I know how valuable it is to realize that you’re not alone in trying to escape this grip. I managed to do it and there is nothing I’d like better than to help you to do it, too. That’s why I don’t sell seminar series or audio courses. My books are available at the public library and all of my thousands of articles are available here free for you to read.

If you find even one thing on this site that helps you to put your life in a better place, then we both win.