Quite often, I mention that my wife and I are pretty diligent about planning ahead. We have frequent conversations about the future and we’re pretty much in agreement with what our financial plans and goals are over the next several years. I thought I’d share some of those plans and goals with you.

Known Future Events
These are some specific future events that we know are coming down the pipeline.

Fall 2011: Our oldest child starts kindergarten, which will mean a reduction in child care costs. He’ll be able to come directly home from school on the bus. We have a small educational fund for all three of our children that will help to pay for things like musical instruments, lessons, and other such costs.

Fall 2012: Our middle child starts kindergarten, which means yet another reduction in child care costs.

2015: Our first “big” family vacation, something we hope to make annual after that. We would very much like our children to have significant exposure to other cultures and have considered living in another country for several months. Our plan is that we’re already putting $100 a month into a “travel fund” that largely won’t be touched until this point. Minor family trips (such as a weekend trip to Chicago) are paid out of pocket and not out of this fund.

Fall 2015: Our youngest child starts kindergarten, which further reduces our child care costs.

2015-2016: Both cards need to be replaced at roughly this point. Our vehicle with low mileage is the one that’s used for Sarah’s commute due to the outstanding fuel efficiency. Our vehicle with high mileage gets a lot less use. If the usage vectors continue, both will cross 175,000 miles in 2015. Our plan for this is that we’re already saving $300 a month for car replacements. When it comes time to replace one or both of these vehicles, we’ll evaluate our savings at the time. Ideally, we can pay cash for both vehicles and get late model used options for both.

Unspecified Future Events
These are events we’re planning for in the future, but the timeline on them depends on a wide variety of factors. We’re not limited by a date or by our children growing older or anything here.

Retirement savings: We contribute roughly 10% of our annual income to retirement accounts.

Education savings: We contribute roughly 4% of our annual income to education savings. We don’t intend to pay for our children’s entire education.

House payoff: Our mortgage is our lone outstanding debt at this point. Our largest financial objective right now is to get that mortgage paid off, so we’re dumping extra into each month’s payment. Right now, we’re hoping for a payoff in 2015 or so.

Country home purchase: Once our home is paid off, our focus will be on buying land and building a home on that land to our specifications. We hope to do all of this in cash (or possibly with a home equity loan on our current home that would be paid off with the sale of said home). Our target for this is 2020 or so.

Four Things to Take Home
So, what’s the value in mentioning these things?

First, communication about money and goals is a key part of our marriage. It is a frequent topic of conversation. Because of that conversation, we’re able to be in sync when it comes to our goals and our plans for reaching them.

Second, we save first and spend later. Rather than simply spending all of our paychecks, we contribute money to our various established savings goals and then spend what’s left over. That means that, in terms of the “average American,” we live well below what we bring in. However, our finances for the future are quite secure.

Third, we are aware of big future expenses and plan for them. We have no interest in ever returning to a car loan, so instead we make “payments” to a savings account. We do this for other things, too, such as large family vacations. When you live your life on credit and loans, you give an awfully big chunk of what you earn to the bank, which is silly, especially when you know such expenses are coming.

Finally, by establishing target dates for things, we can make good investment choices. Our target date for retirement is far off, so we can invest in stocks pretty hard. Our target date for other things is much sooner, so we either have all of that money in a savings account or have only a small fraction of it in stocks.

It’s all about having your money work for you towards goals that you want to have. The more you do that, the easier life becomes.

Tammy writes in:

You often tell people to put money in their savings account if they’re just saving for a year or two, but then you tell people to put money into stocks or other stuff if they are saving for lots of years. Why?

It’s probably easiest to explain this with an example.

Savings Accounts
Let’s say that, at the start of each year, you put $1,000 into a savings account. This savings account keeps your money safe and pays out 1.5% interest per year.

After the first year, you’ll have $1,015 in the account.
After the second year, you’ll have $2,045.23 in the account.
After the third year, you’ll have $3,090.90 in the account.
After the fourth year, you’ll have $4,152.27 in the account.
After the fifth year, you’ll have $5,229.55 in the account.
After the sixth year, you’ll have $6,322.99 in the account.
After the seventh year, you’ll have $7,432.84 in the account.
After the eighth year, you’ll have $8,559.33 in the account.
After the ninth year, you’ll have $9,702.72 in the account.
After the tenth year, you’ll have $10,863.26 in the account.
After the eleventh year, you’ll have $12,041.21 in the account.
After the twelfth year, you’ll have $13,236.83 in the account.
After the thirteenth year, you’ll have $14,450.38 in the account.
After the fourteenth year, you’ll have $15,682.14 in the account.
After the fifteenth year, you’ll have $16,932.37 in the account.

What’s worth noting here? First, the money is growing all the time. There is no point where the money’s not growing. There is no point where the growth is less than the year before. It’s steady, positive growth.

At the same time, it’s slow growth. You’re not seeing a skyrocketing increase in price over time. It’s going up steadily, but slowly.

Stocks
Let’s assume you put $1,000 into the Vanguard 500 (a broad-based stock market index) each year on the first trading day of the year, starting on January 1, 1996, and choose to reinvest the dividends. Here’s what happens with your money.

At the end of the first year (1996), you’d have $1,299.68 in the account.
At the end of the second year (1997), you’d have $2,996.43 in the account.
At the end of the third year (1998), you’d have $5,402.76 in the account.
At the end of the fourth year (1999), you’d have $7,231.63 in the account.
At the end of the fifth year (2000), you’d have $8,260.74 in the account.
At the end of the sixth year (2001), you’d have $7,862.39 in the account.
At the end of the seventh year (2002), you’d have $6,946.30 in the account.
At the end of the eighth year (2003), you’d have $10,862.61 in the account.
At the end of the ninth year (2004), you’d have $12,851.47 in the account.
At the end of the tenth year (2005), you’d have $15,573.23 in the account.
At the end of the eleventh year (2006), you’d have $19,308.22 in the account.
At the end of the twelfth year (2007), you’d have $20,217.50 in the account.
At the end of the thirteenth year (2008), you’d have $12,748.24 in the account.
At the end of the fourteenth year (2009), you’d have $18,745.44 in the account.
At the end of the fifteenth year (2010), you’d have $24,531.96 in the account.

While the overall growth upward is better than with the savings account, the stock investment is wildly uneven. There are individual years that are devastatingly bad, and the problem is that you can’t predict those devastating years. Your first year of investment might have been 2001, where you would have put $1,000 in at the start of the year and seen a balance of substantially less than $1,000 at the end of the year. You might have been planning to pull the money out at the end of the thirteenth year, except that thirteenth year saw a 40% drop in the balance and finds you in significantly worse shape than a simple savings account.

What Does All This Mean?
It’s actually pretty simple. If the date at which you’ll need the money is a long way off (say, fifteen years or more), the overall growth of things like stocks is the best route. Because you’re looking so far down the road, those individual bumps really don’t matter too much. You can live through another 2001 and 2002 or another 2008 if you’re looking fifteen years down the road or more.

On the other hand, if you know you’re going to need a certain amount in the next few years, you should have it in a savings account (or something else that’s highly reliable). It won’t provide rampant growth for you, but it will provide stability. You won’t lose your balance this way and you won’t find yourself in a situation where you need the money and it’s lost in a stock market collapse (in fact, people often need money when the stock market is down, as that’s a time when the economy is trending down, too, and there are job losses and so forth to worry about).

What if you’re in the middle? Have some of your money in each. As you get closer, move your money from the risky investment (stocks) to the less risky one.

Another vital point is that you should never try to time the market. Base everything on when you will need the money. If it’s a long time off, ignore what the market is doing this year. As your goal inches closer, slowly move the money into something more secure, regardless of what the market is doing at that moment.

Memorial Day is a holiday that was originally created to honor deceased soldiers, but has largely grown over the years to honor all deceased people. As a way of commemorating this day, I usually spend some time thinking about what some of the people in my life that have passed on have taught me, and this year, I decided to share five of them with you.

I could easily expand this list with more people – and I might just do it in future years. However, remembering these five and the gifts they gave me in their life and in their passing has filled me with enough emotion to last a month.

I hope that something I do in my life leaves others with something positive in their lives that outlives me. If I’ve done that, then I’ve lived a life worth living.

My grandfather, Johnnie Grandpa passed away when I was seven years old. During the last year of his life, he was very ill and he lived with us for several months near the end of his life. One of my fondest memories of him was watching the 1985 World Series with him in our living room.

I remember how he bore the many pains that the end of his life held for him with grace and dignity. I remember seeing him a few times and knowing that he was in pain, yet he was always able to grab my hand and smile at me with that gently crooked smile of his. I remember that, without fail, he’d save the comics in the newspaper for me, not for anyone else, and he remembered this even through the trials he faced near the end of his life.

He showed me how to face pain and adversity with dignity and grace, something that I’ve tried to do in my own life many times.

My great uncle, Virgil Virgil attacked life with humor and a lust for simply living. He was the type of person who would often stick real truths into the middle of a humorous comment and thus get away with saying things that others wouldn’t or couldn’t.

Virgil was the first person in my life who convinced me that I would actually do something with my life that was different than what my parents had done. Yes, I had the childish dreams of doing things like being an astronaut or a fireman, but it was Virgil that really made me believe I could tread my own path through life.

He showed me that my path wasn’t set in stone and that I could define my own way.

My first cousin, Donnie Donnie was almost exactly my age. We played together quite a lot when we were young and I have several very nice childhood memories that Donnie is a part of.

At age 16, Donnie committed suicide. I remember going to his funeral, almost stunned that someone who had been my age and shared many moments of my childhood with me could just be gone, just like that. It made me realize how mortal I really was.

Perhaps more importantly, it also showed me how your actions can echo through the lives of those you care about. When you hurt yourself or hurt someone else, that action affects a lot of people. It brings them grief and sadness. When you hurt a human being, you almost always hurt a lot of people at once, whether you see it or not.

My great grandmother, Elva All of my memories of this lady come from the final twenty or so years of her life, when she lived alone in a house well into her upper eighties. She was stubbornly independent and absolutely insisted on doing things for herself, often pushing herself to complete exhaustion in an effort to just do it herself.

I remember often wondering how this little old lady managed to keep her home clean, feed herself and keep food in the refrigerator, send an endless supply of letters to friends and family members, keep up with the hockey season (she was a Wisconsin girl and liked hockey her whole life), and all of the other things she did. She seemed so small and frail until you talked to her and watched her take care of things.

Her bravery and desire for independence was infectious, to say the least.

My uncle, Kenny Kenny passed away from a liver condition several years ago. More than anyone else, Kenny showed me that it’s okay to be whoever you are, no matter the seeming consequences.

Kenny’s life rejected so many of the expectations people had for him, from beginning to end. He truly did things his own way and he realized that the people that really mattered would stick with him throughout it.

It was because of Kenny that I’m not really ashamed of anything I do. I am who I am, and take me for that. The people that matter in my life certainly do take me for who I am.

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. Unplugging the microwave?
2. Morality and employment
3. Loan modification versus refinancing
4. Saving for vehicle replacement
5. Living expenses and college debt
6. Unequal chess skills
7. Handling banking errors
8. Repairs to increase equity?
9. Ahead on student loans
10. Investing without worry?

The Midwest has been loaded with weird weather for the last month or so. The tornadoes have captured the headlines, but most of the middle portion of the country is seeing oddly strong thunderstorms, exceptionally windy days, torrential downpours, and flash floods.

It’s enough to make a person really paranoid that something is going to strike them soon.

Q1: Unplugging the microwave?
Re: unplugging from the power switches.. you do not mention microwave….. does this use up more of the electricity and is it advisable to unplug it each time.
- Ben

It really depends on the microwave. Many microwave units do slowly sap energy. For example, if it has an LED clock on it, it’s probably sapping a bit of juice constantly.

How much juice, though? It depends quite a bit on the model. Some models have almost no “phantom” use and the trouble to unplug them and plug them back in isn’t worth it. Others use quite a bit.

I use a Kill-A-Watt meter to check on these devices. I simply unplug them, then plug the meter into the outlet and plug the device into the meter. The device tells me pretty quickly how much phantom electricity the device is using. Unless it’s more than about fifteen watts, I don’t bother unplugging it, even on trips.

Q2: Morality and employment
Now that my life is a little more under control, I am seriously thinking about my career and what I want to do with my life. I am 24 and thought I wanted to be in politics. That led me to my toxic job and taught me the hard way that it’s just not for me. In an effort to fix my situation, I took a job that meant little to me but offered a much higher salary. I like it just fine but I know it’s not my life’s work. I’m learning some transferable skills (like marketing and business development) and it puts food on the table. The main problem? I seriously disagree with the fundamental goal of my company. As in, it goes against all of my values. Although I am not directly working toward our product, it makes my stomach flip to think I am contributing.

So my question for you is: what do I do? I am so afraid to quit my job in case my finances spiral out of control again. Yet, I know I can’t stay where I am. I don’t want to take another random job that comes along. That only perpetuates my problem. My parents and friends are encouraging grad school, but I’ve learned enough from you that grad school is probably the worst thing I could do if I don’t have a plan. All that debt makes me shudder. My compromise plan is to figure out what to do with my life over the next year and in the meantime save, save, save so I can confidently quit my current job. Yet, I still have the fraud feeling and the problem that I don’t exactly know what I would rather be doing. I love to cook and want to do something with some “meaning”, that I believe in. Yes, I realize that is idealistic but I can’t kick the idea of service (which, I believe, is what led me to politics in the first place). I just feel stuck knowing what I don’t want, yet unable to decide what to do instead. Any advice? I guess I’m also looking for reassurance that if I stay in my job short-term, it doesn’t make me a horrible person.
- Meg

There’s nothing wrong at all with taking a job in the short term just for the money. When someone employs you, they’re giving you money in exchange for some work. If you’re holding up your end of that bargain, then there’s nothing at all wrong with that.

I’d suggest you use this period doing some real soul-searching, as well as exploration of areas that you might be interested in. Figure out a path while you have this good-paying job, then follow it.

No matter what, don’t get used to the high pay. Live lean and bank as much as you can so that when you do discover the right path, you’ll have the financial resources to make it happen.

Q3: Loan modification versus refinancing
We are looking to refinance our home only to take advantage of a lower interest rate. We are not in financial trouble of any kind and have the cash to cover closing costs and fees. After shopping around for rates, I found that our credit union (who the loan is currently with) has the lowest interest rate. I called to inquire about a refinance and they offered us a loan modification instead of a refinance. They do not require that we be late on any payments (in fact they won’t do a modification if there are any late payments).

It cuts the fees in half, the process is much simpler and we get the same interest rate as a refinance. I’ve heard a lot of negative things about loan modifications though and I am worried it will hurt our credit score somehow? We are fully able to do a refinance if that is better for our credit.
- Sarah

The two biggest elements that people usually worry about with a loan modification are impact on one’s credit due to late payments and large processing costs and legal fees. You seem to have both of these elements well in hand.

You’re entering into a loan modification from a different angle than most people enter loan modifications from. Many people who get a loan modification are in a very poor financial position. They’re often late on mortgage payments and are worried about foreclosure. A loan modification does not get rid of those problems for you.

Similarly, many modifications are loaded down with a pile of fees and other costs, which you seem to be avoiding here. I’d call it a good move for you.

Q4: Saving for vehicle replacement
I am writing to find out your advice on how to save to replace a vehicle. My wife and I just paid off our ’08 Ford Escape (40,000 miles – shouldn’t have bought it in the first place, but that’s in the past), and last year I paid off my ’05 Chevy Cobalt (115,000 miles). We both work and two vehicles are necessary.

Our current situation:
Monthly take home = $5,300
Debts = two student loans (total $23,500), mortgage ($125,000), no credit cards or other consumer debt
Monthly allocation to debts = $2,800

I generally follow the Dave Ramsey debt snowball plan, and by my calculations, we will be debt free except for the house in 12 months. But I have now become worried if one of the vehicles gets totaled or otherwise stops running. I believe Dave Ramsey advocates paying yourself a car payment each month to save up for a replacement, but that will greatly slow down my snowball. I could cross my fingers and hope there are no catastrophes for at least a year.

What do you recommend? Reduce my debt snowball by $300~/month or stick to my plan?
- John

I would absolutely consider saving for the next replacement car by socking at least a couple hundred away a month because I would consider that car loan that you know would be coming as part of your snowball.

The advantage you have by saving, though, is that the interest is working in your favor. If you were to continue your snowball without saving, you’d face a debt in a few years at, say, 7%.

Now, if you instead made payments to a savings account right now, you’d earn 1% on those payments. In effect, those early payments are like tackling an 8% debt – the 7% your car loan would likely be in a few years plus the 1% you’d earn on the early payments.

I’d stick that 8% “debt” into your snowball and see where it fits.

Q5: Living expenses and college debt
I currently have $16K in student loans at 6.5% rates. I have no other debt, I have a comfortable emergency fund, and I already contribute substantially (although not the maximum) to a Roth IRA (my employer does not offer a 401K plan). I have also built up an “extra money” savings account of $8K over the last three years that I think can be put to better use.

I expect to begin a Master’s program within the next 2-3 years. With the exception of three remedial classes, I am able to complete this program without paying tuition through a full-time work/study type of program. However, I will need to cover my own living expenses, books, and the other miscellaneous expenses that pop up in life and the program that I am enrolled in does not realistically allow for me to work any extra hours to earn additional income- the “free time” I have between attending work and class will be spent completing homework and assignments to get the most out of this education!

Does it make sense to use my “extra money” to pay down my current loans so that I have a reduced amount of debt going into the program or should I continue to stockpile this money and attempt to pay expenses out of pocket while in school so that I don’t have to add on any additional loans to repay?
- Jennifer

If you know you’re going through a period without any income in the near future, the best thing you can always do is buff up your emergency fund before that period.

The reason for this is simple. If you have expenses and no income, your cash reserves are going to drop. When it gets low, you’re going to have to turn to some other source and, often, that other source is credit, because credit is so easily available. Unfortunately, easy credit often has a terrible interest rate, something you want to avoid.

Thus, your best approach is to save now so you don’t have to incur that high interest debt later on. You’re far better off saving too much and carrying a bit of unnecessary lower interest debt than not saving enough and having to dip into credit cards.

Q6: Unequal chess skills
You mention board games an awful lot, so I thought I’d run this by you. My roommate and I both like to play chess, but he’s at a much higher skill level than me. We tried a piece handicap, but it seems like every one we try unbalances the game, either leaving him far better or making it easy for me. Do you have a suggestion to help us play chess on equal ground?
- Robbie

For one, you can play Chess960. This is Bobby Fischer’s preferred chess variant, in which the home row pieces are randomized using a few simple rules. This almost completely eliminates the advantage of knowing opening books, which is one thing that good chess players often know. They know a handful of opening move sets that put them in a very strong position. Chess 960 wipes out that advantage.

For another, you can simply try playing another abstract game (which chess definitely is). Go, shogi, YINSH, Arimaa, and Hive are all wonderful abstract games.

If none of those work, you can always try studying chess yourself using some strong chess-playing software. I used to use Shredder.

Regardless, abstract games are a great way to really exercise your mind. Kudos for keeping with it.

Q7: Handling banking error
Basically, back in December PayPal charged a transaction on my fiancé’s PNC bank account which caused an overdraft fee. We had switched to Bank of America a few months earlier, so we weren’t really keeping track of the account (and she had mail going to her parents house anyways so if they did send notices, they got lost in the shuffle). PNC of course started charging fees daily, and ended up closing the account and sending it off to collections. We just received a notice from a collection agency that we owe over $200.

I contacted PayPal, who gave me a form letter explaining to the bank that it was a mistake, but PNC doesn’t care because they already sold the debt. Of course, the collection agency won’t care that it was a mistake.

What should we do? All I can think at this point is to try and negotiate a deal with the collection agency.
- Cory

The best thing you can do is just get rid of the debt quickly, which probably revolves around negotiating with the collection agency. You want to get this paid off as soon as possible to minimize the damage to your credit report.

Again, none of the other businesses have any reason to be involved here. At this point, you need to focus on the business that holds your debt.

An aside: this is yet another example of why I dislike how credit reports are handled in the United States. It is incredibly easy for a misunderstanding or a record-keeping error to result in someone having damaged credit, higher insurance rates, and so on.

Q8: Repairs to increase equity?
In 2007, my wife and I bought a new house that was probably above our income level. It wasn’t a huge thing; it was about 1/3 of our monthly take-home, and we had no children and no plans for one. Bills, groceries, gas, etc, took up about another 1/3 of our income, so at the end of the month, we had about $1500 to $1700 of unbudgeted money left over, which went into savings. Flash forward to spring ’08, and we found out my wife was pregnant. Of course you know, having a child means many more new expenses, and that $1500 in monthly spare cash quickly dropped to around $400, if we were lucky. The money we had been saving before mostly disappeared due to an incident largely beyond our control. After basically a year of trying to make all this work, I told my wife a few months ago that I believed our biggest problem was the house and it’s large payment, and that I thought we should spend a year fixing it up, making some needed repairs, and put it on the market next spring. My reasoning was that I figured it would sit on the market for a few years, and since we are still able to comfortably make the payments, it would give us the ability to build more equity, give the housing market time to recover some more, and give us the freedom to turn down offers as needed. My wife agreed, so we’ve started slowly fixing things around the house.

Here’s where it gets hairy. There is a house for sale down the street that has the exact same floorplan as ours, listed for $25k less that what we’d have to get out of ours just to break even, and it’s been listed for several months (although our lot is MUCH bigger). I suggested to my wife that we not just make repairs, but make targeted upgrades to certain areas to really blow away potential future buyers (around $8,000 to $10,000 worth of upgrades). My wife is for the idea, but now isn’t sure if she wants to list the house next spring, because we may not make the money we spend back on a sale. I should mention that the costliest upgrades would be to things we have to repair anyway (for instance, the carpet in our great room needs to be completely replaced, due to muddy dogs, spilled milk, and just general wear and tear. As long as we’re ripping up the carpet, why not just lay down new hardwood floors?).
- Chris

It is often hard to tell if you make the money back on a sale after doing home improvements.

For one, the market changes over time. During the time in which you’re doing these improvements, the market might shift in ways that raise the price of a given house or lower it.

For another, the reasons why people buy particular houses are often inscrutable. The person that buys your house might be attracted to the larger lot and not care about the improvements at all. Another person that might buy your house might love the improvements you’ve made.

Home improvements generally make a profit for the homeowner when there’s a lot of sweat equity involved and they target things that buyers will really like. In other words, do it if you enjoy home improvement. Otherwise, I would bank my money elsewhere.

Q9: Ahead on student loans
Other than our mortgage, we only have one other loan payment: my student loan, currently around $18,000. The monthly payment is $150, but since August I’ve been making payments of $200 every two weeks. Currently I’m so far ahead that my next payment is not due until August 2012. However, even at this rate, it would still take me over 4 years to fully pay off the loan. Would you stop or reduce these payments in order to pay for house repairs/upgrades (or some other purpose) or continue making these payments?
- Chris

If you have another goal to fulfill, sure. Go ahead and divert some of that money into whatever project you’ve got in mind.

However, if you don’t have anything clearly in mind that you’re shooting for, keep knocking down that debt. It’ll be gone before you know it and that will be a tremendous thing for your net worth.

It sounds like you have some nebulous ideas for the future. Unless those are really clear and important to you, I’d keep paying down the debt.

Q10: Investing without worry?
I’m extremely concerned that the U.S. dollar is going to be rapidly devalued in the near future. What should I invest in?
- Kelly

I don’t agree with you that the U.S. dollar is going to be rapidly devalued. Many people point to the huge national debt, but the real way to look at the debt is in terms of GDP. How much money is the nation bringing in in comparison to how much debt we’re carrying?

The truth is that we’ve had worse debt in the past. Right now, we’re fighting two foreign wars that are winding down and we have an economy that’s starting to rebound, both of which are great signs for the debt-to-GDP ratio.

Still, if you’re under the belief that the dollar is about to be rapidly devalued, your best bet is to buy things that are tangible assets. Land and food are good places to start. If inflation goes rampant, the prices of both of those things will go up very quickly. Land and food are things that are always needed.

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.

I picked up this book on a lark off of the shelves at a library recently. I carried it back to a chair with me, expecting to leaf through it and make a quick decision about whether to review it or not (which is what I often do with personal finance books at the library).

Instead, two hours later, I found that I’d read the entire book. That seems like a review-worthy book to moe.

The 5 Lessons a Millionaire Taught Me by Richard Paul Evans is a concise book that tries to break down financial (and life) success into five key principles. Like many such thin books, the ideas here are lean. Evans has clearly taken the “less is more” approach with this one.

Decide to Be Wealthy
This seems like an obvious first step, but it’s harder than it seems. Do you want a lifetime of financial success? Or do you want to be the first person on your block with an iPad 3? Very rarely will those two things go together.

Simply put, you have to want financial success. You have to want freedom from debt and, eventually, freedom from work. More importantly, you have to want them more than the trappings of affluence often seen in the world. You can either “live rich” or be rich. Almost no one can really do both.

Take Responsibility for Your Money
This is the key first step to financial success. Know how much money you have. Be aware of where every dime goes – and why it’s going there. Once you start asking yourself the why when it comes to every dime you spend, you begin to see how much of your money is wasted on things that aren’t helpful with where you want to be going.

This is painful self-analysis for many people. You have to move from blaming others for you not getting ahead to looking at all of the choices you’re making. Often, that’s an ugly picture.

Keep a Portion of Everything You Earn
The simplest way in which people do this is withdrawing a bit of each paycheck for their retirement fund. That’s a good start, but it goes deeper than that.

For example, many people are hooked on a chain of making car payments, then eventually trading in that car for another car on loan and making payments on that car. Instead, keep a portion of each paycheck for the next car you’ll have to buy. Instead of paying interest to the car dealership on each and every loan payment, you can keep all of that interest money for yourself and even earn a bit more from the interest on your savings account where you keep that money.

It’s all about saving a little bit at a time so that you have a big mountain later on. It’s about spending less than you earn each pay period and actually conserving the rest.

Win in the Margins
Here, Evans is essentially talking about frugality. There is a lot of money to be mined from the little changes you can make in your life.

For example, if you open your windows up and stop using your air conditioning and heating as much, you’ll cut your energy bill a bit without inconveniencing your life much at all. If you try buying some generic items and raw ingredients at the grocery store, you’ll spend significantly less on food and household supplies, again, without inconveniencing your life.

Make enough of these little changes and you’ll have the money to do things like setting aside money each month for your next car. Then, when you write a check for that car, you don’t have a car payment to make and can channel that money forward into something else. It builds on itself like an avalanche rolling down the mountain.

The philosophy behind this is that long-term freedom and power are far more valuable than momentary fleeting pleasures. That’s a sound idea to look at everything with.

Give Back
Evans makes a good case for charity here, but not so much in the form of writing a check to some group and forgetting about it. You should give to the things you care about in life. Get involved in your community. Choose charities that are addressing problems that have touched your life.

Helping to solve a problem you’ve faced in your life – and which continues to trouble others – isn’t just about handing over money. It’s about truly doing something of meaning with your life.

Is The 5 Lessons a Millionaire Taught Me Worth Reading?
I agree strongly with the philosophy in The 5 Lessons a Millionaire Taught Me, and I think Evans has stated it succinctly and beautifully. This is a short and sweet expression of the “why” of good personal finance management.

Because it focuses so much on the “why,” though, it’s clearly in the area of philosophy and inspiration rather than practical nuts-and-bolts advice. Sometimes, people need philosophy and inspiration. At other times, they need the nuts and bolts. If you need a shock to the system to get started, The 5 Lessons a Millionaire Taught Me is a great choice. If you want a pile of practical advice, you may want to look elsewhere.

Check out additional reviews and notes of The 5 Lessons a Millionaire Taught Me on Amazon.com.

A few days ago, I met an employee of a local Christian talk radio station. We had a nice conversation about a variety of things, ranging from the programming on the station he manages, people we both knew, and so on.

At the end of the conversation, this person gave me a pamphlet describing a local business that offers personal finance counseling locally. This business uses a lot of Christian material in the advice they offer – in fact, I could count twelve different direct quotes from scripture in the pamphlet I had in my hand.

When I took the pamphlet, the person I was talking to immediately compared the people at the business to Dave Ramsey and implied that their advice had an additional strength due to it being Biblically based.

This business – and people like Dave Ramsey and Lary Burkett that mix Christianity and personal finance – ties Christian beliefs and strong personal finance ideas together in ways that reinforce each other.

Let’s see if I can spell it out a bit more clearly. You have a person who is in personal finance trouble and they’re also a devout Christian. Their Christian faith attracts them to a person like Ramsey or Burkett, a person who ties some very solid pieces of personal finance to Christian themes. These tactics work, reinforcing to the person not only that the personal finance ideas work, but that their Christian faith is true as well.

I see absolutely nothing wrong with that. In fact, I think it’s a very good thing.

In fact, I think a lot of books try similar approaches, tying personal beliefs to personal finance. Your Money or Your Life spends at least some of the pages appealing to community-oriented people and environmentalists. A lot of books focus heavily on women’s issues, mixing some feminism in with the personal finance message.

Here’s the thing, though. The personal finance information provided by these books work without the other material. It’s because of the strength of that personal finance material that it’s able to be coupled sensibly with religious views and secular views, with liberal views and conservative views.

I often look at such material as being something of a candy coating around a bitter pill. To a person who really hasn’t evaluated their personal finances and their future, the things you have to do to find great money success seems really difficult. However, if you can tie the principles to other core values that already exist in your life, the ideas become a lot more palatable.

In fact, as micropublishing begins to take off, the door is open to this type of theming to ever-smaller groups. Personal finance for atheists? Personal finance for liberals? Personal finance for Christian conservatives (well, we already have that to an extent)? Personal finance for Democrats or Tea Party members?

Sure, why not? As long as the personal finance principles are true (and aren’t twisted into an advertisement for buying overpriced gold or other such nonsense), it’s a great idea to tie the core beliefs of someone to good personal finance practices. Why? Good personal finance practices work hand in hand with most human beliefs, and good personal finance practices allow people to be more effective at following those beliefs.

A Christian with good personal finance habits can support a mission. A liberal with good personal finance habits can run for office or financially support candidates they believe in.

Personal finance works. It can support you no matter what your other beliefs are. If you’re finding it difficult, there are almost always powerful ties between your other beliefs and personal finance. Never be afraid to bring them together.

Synchronicity, in the words of Wikipedia, is “the experience of two or more events, that are apparently causally unrelated or unlikely to occur together by chance, that are observed to occur together in a meaningful manner.” It’s an idea that first popped up in psychology in the 1920s (thanks to Carl Jung).

Synchronicity is something that I think happens quite a bit in our lives. In fact, I think that synchronicity tends to be a big part of the reason we latch on to certain ideas and motivations. We are independently hit with ideas from completely independent sources that build up or reinforce some idea in our head. We might read an article on self-improvement on a blog, then overhear a friend talking about a similar thing. Multiple events happen very quickly in our life that pushes us onto a completely unexpected path.

We often look at “positive” synchronicity as luck. I got my first post-college job due to positive synchronicity, as a connection with one person and work on a project completely independent of that person happened to simultaneously catch the attention of the person who offered me that job. They seemed completely independent, yet they both occurred in my life at the same time and they both resulted in the same meaningful thing.

We often look at “negative” synchronicity as proof of Murphy’s Law. We get a pink slip and, on the way home, our car breaks down. A few weeks ago, my car had some minor issues and my shoelace broke almost exactly at the same time, leaving me limping around and wondering why I was cursed.

Our lives and our finances are better whenever we have more instances of “positive” synchronicity and fewer instances of “negative” synchronicity. It seems fairly obvious, but it’s true.

The trick, however, is to do what we can to make that happen. What can we actively do to encourage and amplify positive synchronicity and discourage and minimize negative synchronicity?

Have a big, fat emergency fund. The obvious impact of this is to minimize the effects of negative synchronicity. If you lose your job and your car breaks down, the impact on your life will be less if you have cash on hand to handle it.

What often isn’t noted is that it can amplify positive synchronicity. If you hear of a great sale from one person and of a particular great item from another person, you might experience some positive synchronicity by seeing that item at the sale, but you can’t take advantage of that unless you’ve got the cash. For example, I once found a bunch of vintage trading cards in the back room of a local store. Positive synchronicity enabled me to be at the right place at the right time with the right knowledge to know how valuable they were compared to what the person thought they were worth, but only cash allowed me to buy them right on the spot.

Have a wide-ranging skill and knowledge set. Let’s say you just got put in charge of a tricky new task at work, then go home and find that your toilet has exploded, leaving you exhausted and nearly in tears. Well, if you have a strong skill set for your job and some plumbing skills, this disaster isn’t nearly the disaster that it might be otherwise.

Again, diverse skills not only cover negative synchronicity, they can also help with positive synchronicity. In my own life, for example, my experience with two seemingly independent areas of knowledge eventually led me to getting a very nice college job and, eventually, a post-graduation job as well. If I had just one of those skills, I wouldn’t have had the opportunity, and I didn’t anticipate anything of the sort when I picked up the separate skills.

The more skills you have, the better. Can you use Photoshop? Can you fix an outlet? Can you do basic home plumbing? Can you prepare a meal over a campfire? Do you read a variety of materials? All of these things – and countless others – are fertile ground for synchronous moments.

Have a burgeoning social network. Over and over again, the existing relationships we have cause a positive synchronous event. You’ll be able to connect with person A because you both already know person B. On the flip side, you’ll have a multitude of simultaneous problems that can be eased by asking a person you know for help.

It’s well worth your time to grow and cultivate your personal social network. The more people you know and have some sort of real association with, the better.

Our lives are full of synchronicity. We almost always win if we put ourselves in a position to maximize positive synchronicity and minimize negative synchronicity.

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. An afternoon at the park
I came across this picture from last spring that shows my wife and my two oldest children playing together at the park on a beautiful spring day. These are the types of moments that make my life happy.

(And, for those wondering, Sarah’s shirt says “Self-Rescuing Princess” – I’ve been asked a few times about her unusual t-shirts that pop up in pictures now and again.)

2. O Captain, My Captain by Robert Frost
This is a poem of sacrifice, but also of great reward.

O Captain! my Captain! our fearful trip is done, The ship has weather’d every rack,
the prize we sought is won, The port is near, the bells I hear, the people all exulting,
While follow eyes the steady keel, the vessel grim and daring; But O heart! heart! heart!
O the bleeding drops of red, Where on the deck my Captain lies, Fallen cold and dead.
O Captain! my Captain! rise up and hear the bells; Rise up- for you the flag is flung- for
you the bugle trills,

For you bouquets and ribbon’d wreaths- for you the shores a-crowding,
For you they call, the swaying mass, their eager faces turning;
Here Captain! dear father!
This arm beneath your head!
It is some dream that on the deck,
You’ve fallen cold and dead.

My Captain does not answer, his lips are pale and still,
My father does not feel my arm, he has no pulse nor will,
The ship is anchor’d safe and sound, its voyage closed and done,
From fearful trip the victor ship comes in with object won;
Exult O shores, and ring O bells!
But I with mournful tread,
Walk the deck my Captain lies,
Fallen cold and dead.

3. The hidden power of smiling
This video does a great job of outlining the value of a smile in scientific terms. It has a multitude of benefits, both for you and for those around you.

4. Antony Jay on training for leadership
This quote sums up why I constantly encourage people to step up to the plate and take leadership in almost any situation.

The only real training for leadership is leadership. – Antony Jay

If you want to be a good leader, you have to start with just being a leader.

5. Water grafitti
This is something I used to do as a child, taken to a wonderful artistic level.

I absolutely love street art, except I don’t like the long-term destruction of private property. This seems to be a great way to execute the beauty of street art without damage.

6. Metaphors by Sylvia Plath
This just works on so many levels.

I’m a riddle in nine syllables,
An elephant, a ponderous house,
A melon strolling on two tendrils.
O red fruit, ivory, fine timbers!
This loaf’s big with its yeasty rising.
Money’s new-minted in this fat purse.
I’m a means, a stage, a cow in calf.
I’ve eaten a bag of green apples,
Boarded the train there’s no getting off.

Is there meaning there, buried in metaphors, or is the burying the meaning itself? I love it.

7. Sandra Carey on knowledge and wisdom
A good thought.

Never mistake knowledge for wisdom. One helps you make a living; the other helps you make a life. – Sandra Carey

Wisdom is the utilization of knowledge for good use. Without wisdom, knowledge isn’t really all that useful.

8. On being wrong
This video sums up the most powerful way to grow.

9. Will Rogers on spending choices
Each of the elements of this quote points to a problem many have with money.

Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like. – Will Rogers

So true and so succinct.

10. Someone playing a piano solo of The Sound of Silence
I love watching videos of people playing the piano on YouTube. They’re probably the most effective tool for getting me to actually practice. This is just a great example.

Fantastic. I look forward to the day when I’m able to do that, and I can see myself slowly inching in that direction.