Here are some little thoughts and things that have improved my finances, improved my career, and made my life better over the past decade.

Don’t throw away your childhood dreams. Find a way to still do them in the spare moments and hours of your life.

You can never judge a person by their appearance. Wait until you know something of their character.

The smell of a home-cooked meal makes a house seem like a home.

A splurge is a lot more enjoyable if you do it once a month instead of once a day.

People don’t hang out with you because of the stuff you have. They hang out with you because of the person you are. Unless you’re famous or rich, of course.

A $20 couch is worth more than a $2,000 couch if it makes you more comfortable when you sit on it.

Your house can’t be a museum if you have active, vibrant, happy children in it.

Stuff you’re not using is money that’s not invested.

Children are expensive, but they save money, too. It doesn’t cost anything to spend the evening playing Calvinball or tag in the back yard.

You can’t control the tides of humanity and society. You can control your own actions and choices.

Whenever I meet someone, I have a choice. I can either respect them and get along with them, or I can judge them. One route leads to good relations. The other route leads to failure.

Don’t overthink your investments before you start. You’re better off starting your investing now and making needed changes down the road.

Time is money. Don’t waste either one.

Your true friends are still there when you lose everything else – and you tend to always remember your true friends.

The more you give without strings or regrets, the better you feel about your own life.

A good book never lets you down.

One real relationship where the other person cares about you is worth a hundred weak relationships where the other person will drop you when it’s convenient.

If you think about every dollar you spend before you actually spend it, you’ll find more dollars in your pocket.

If you want to learn about something, surround yourself with that topic: audiobooks and podcasts in your car, books on your nightstand, printed articles on your breakfast table. Make the ideas flood your mind.

A few minutes spent taking care of your things is much less expensive than buying a replacement early because you didn’t maintain.

If you have high-interest debt, eliminating it should be your top money priority.

There is always a path to a better situation. The question is whether you have the strength to go down that path.

If you don’t feel well, your first line of defense should always be a big cup of water.

No matter what kind of positive life change you’re trying to create, it’s always easier if you have a friend doing it with you.

Tell the people you love that you love them. Often. You never know the last time you’ll be able to tell them that, and if you don’t take that chance, you’ll regret it for the rest of your life.

Spend less than you earn.

This past weekend, my five year old son caught six fish. He hauled in more fish than his age.

The fish were small ones and we tossed them back into the water, but the sheer joy he had in catching them, the pride he took in his catch, and the seriousness he applied to things like unhooking the fish and returning them to the water were beautiful to watch.

He’s growing up.

How to Write Your Congressman This is the single most useful political action you can take as an individual. You’d be surprised how well it actually works, particularly when you’re addressing an issue that isn’t extremely “hot button” and you’re rational and calm with your reasoning. (@ art of manliness)

Big House, Little House It’s never a bad idea to look at the size of your home critically. Do you really need a home of that size? Will something smaller suffice? Our home is about the right size in terms of square footage, but I would someday like another bedroom. (@ get rich slowly)

Living with Chaos This is an interesting take on planning. However, if you truly take each day without planning, you’ll have no retirement savings and no backup when things don’t go well. And they inevitably won’t go well at some point. (@ zen habits)

Everyone Wants Better. No One Wants Change. “Better” means the same things you already have with a slight improvement in quality. Change means something different. Better is safe. Change is scary. (@ jonathan fields)

Correspondence from the Home Office When I worked outside the home, most of my “leaks” were money related. I always found ways to spend money poorly. At home, my “leaks” are all time related. I always find ways to spend time poorly at home. (@ debt reduction 101)

A few days ago, Donald left a provocative comment on my recent article How to Get Rich Quickly!. Although I think his tone is a bit aggressive, he does bring up an interesting point:

Yes this is good advice – work for 45 years, squirrel away your income the whole time, and when you are ready to die, you will be rich (*disclaimer – rich in 2011 dollars, maybe not so rich in 2043 dollars)

First of all, I have no interest in being rich. My impression of being rich is that I have enough money saved that my children will have an easy life. I have no interest in that at all.

My goal is financial independence, which means simply that if I choose to engage in activities that don’t earn an income for the rest of my life, I’ll survive financially with a standard of living roughly similar to what I have now (and I don’t live like a rich person). I might choose to earn an income at that point so I can spoil my grandchildren or sponsor a charity or fulfill some other goal, but I don’t need it to survive and I certainly have no interest in supporting my children as adults.

Of course, the core of Donald’s point is that long-term savings goals are pointless because of a perceived short life and low quality of life you would have once you reach a retirement age. Donald mentions working for 45 years and, assuming that you’d start such work at age 25, you would be working until age 70.

Here’s the thing, though. The average person at age 70 can expect to live another fifteen years on average (see Table 6 in the 2007 CDC life expectancy report for the numbers). The simple fact is that people at age 70 aren’t sitting on their deathbeds. This may have been the reality fifty or sixty years ago, but it’s not the reality now. Health care and standards of living have given people much longer healthy and productive lifespans than ever before. The majority of people at age 70 have a decade or more or productive life ahead of them and the percentage will just continue to go up as time marches on.

I don’t know about you, but my plans for when I’m seventy don’t involve me sitting down in a chair and waiting for the end. I plan on being engaged with my family and with charities and other community activities until I’m truly unable to do it any more, and the statistics indicate that, for me in my early thirties, that time is a long way into the future. Estimates on life span increases indicate that I have more than fifty years of productive life yet to live and I’ve already been in the workforce for more than a decade.

Simply put, if you are young today, saving for the future doesn’t mean saving for retirement and life’s end; it means saving for financial independence and a second career.

Now, with regards to the comment of “rich in 2011 dollars, not in 2043 dollars”: you have to go back for two decades to find a year with an inflation rate higher than 4%, and some recent years have seen microscopic inflation rates. 2008 and 2009 had extremely low inflation and, by some estimates, had deflation. This is the inflation metric you’re trying to beat and if you’re investing over the long term (40 years), a well-diversified investment with diverse stocks and other assets will annihilate these returns, giving you much better than inflation. Simply put, saving properly for a second career over the long term will handle the inflation problem.

But what about the economic bogeyman? You know, the fear of a financial apocalypse that political opportunists and media members who know how to sell fear love to trot out all the time? The only thing we have to fear is fear itself. Most of the people preaching fear have been preaching fear for several years now. All I see is a prolonged recession and a national debt that was worse in the 1940s than it is now.

The things that have worked for the long term throughout human history work now. Spend less than you earn. Invest the rest in a diversity of things because you don’t know exactly what the future holds. Invest in yourself, too, and make sure you have skills and education to handle both the needs of your life and the needs of the marketplace.

One final thing: think and plan for the long term, because the long term is longer now than it ever has been – and it’s full of more opportunity than ever as well.

As I’ve mentioned before, the single most valuable personal finance book I’ve ever read is Your Money or Your Life by Joe Dominguez and Vicki Robin. I read this book at a key point in my financial turnaround: the point at which I had hit my financial “bottom” but hadn’t really started to turn my finances around in a real way yet.

One key idea that I took away from this book (and has stayed with me ever since) is the concept that the money in your pocket is merely a representation of time and effort.

First, let’s look at the money in your pocket. Let’s say you have a job that earns you $10 an hour. That means you net $400 per week. However, after taxes, you’re bringing home only $320 per week. You’re also spending $40 a week in gas just for commuting, plus (let’s say) another $20 a week in wear and tear on your car and another $20 a week in work clothes that eventually wear out. This leaves you with $240 for your 40 hour workweek. Of course, you’re also spending 30 minutes commuting each way, so you’re earning $240 for 45 hours of work a week. That’s just $5.33 per hour of work. Every hour you spend working or doing something devoted to work, you’re earning just $5.33.

Thus, the first idea worth noting is that you’re not actually putting as much in your pocket for each hour you sell as you might think you are. You’ve got a good hourly wage, but when you add in the commute time (and other time you invest outside of the workplace) and subtract out all of the extra costs (like clothing, commuting costs, and more expensive lunches, for example), the hourly wage you actually bring home drops precipitously.

So, our wage earner here is actually making $5.33 for every hour of their time. Let’s look at some of the implications of that.

A monthly cable or satellite subscription can easily equal ten hours of work. Meanwhile, a monthly Netflix subscription equals three hours of work for that person. Are these good deals? The Netflix bargain is a better one, but are you really cool with working for three hours just to have Netflix for a month? Are you willing to work ten hours to have your cable for a month?

A dinner at a modestly-priced chain restaurant can equal five or six hours of work invested. On the other hand, making the same meal at home costs two hours’ worth of work in supplies and another hour of work invested. In other words, making dinner at home shaves away three hours of total work. Is that a good deal?

A six pack of decent beer equals an hour and a half of work’s proceeds. On the other hand, going home and drinking water has no cost. Is that a worthwhile exchange?

Many people think that this type of thinking leads to miserly behavior, that you’ll wind up doing nothing fun. What I find instead is that it just makes me more selective in terms of the splurges I make. Splurges aren’t a daily thing for me and that fact conserves money.

What’s perhaps more interesting is that switching to not having a constant flow of splurges makes the splurges I do have much more enjoyable. When I go out for a nice dinner, it’s a very memorable and enjoyable occasion. Several years ago, it was a normal Thursday.

Even more important, the concept of work hours as a cost makes me really appreciate effortless frugality. By effortless frugality, I mean making choices that either require no effort or only a one-time burst of effort to consistently save money thereafter.

For example, several sockets in our home have LED light bulbs in them. According to my math, it takes about 3,000 hours of use for them to repay their initial investment versus a normal incandescent bulb – after that, I save a dime (versus an incandescent) for every 25 hours of use (approximately). I don’t have to put in any extra effort – I just buy things with lower maintenance and upkeep costs and a long lifetime that adds up to net savings over the long haul. There are lots of these types of tactics, such as air-sealing your home or installing geothermal heating in certain northern areas.

Another important angle for this idea is that the fewer of your work hours that you “spend” on unnecessary things, the more you can “spend” on saving and investing for your big long-term plans and dreams. What happens to those three work hours of income that I shaved off of dinner? What happens to those ten work hours saved by not having cable? You can use them to eliminate debts and, if you don’t have debts, saving for the future. A future where you might want a new career. A future where you might want a different home. A future where you might want to start a new business. A future where you might have children.

When you get up and go to work, what are you putting all of that energy and effort into? Are you building a better life for yourself? Or are you merely buying trinkets that are good for a laugh but don’t really change anything? The choice is always up to you.

One of the biggest themes of The Simple Dollar is how you should stop caring what other people think. This is one of the most valuable things I’ve ever done in my life. The less impact that I allow the thoughts of others to have on my own choices, the easier it is to make challenging personal choices that improve my own life, like frugality or taking up an “uncool” hobby or living in a smaller house than I can afford or driving a used car or wearing a pair of beat-up falling-apart sandals.

Of course, it’s easy to look at that phrase and take it to an absurd extreme. Doing that creates its own set of problems. You can’t ignore the thoughts of your children or your spouse. You’re also not well served by ignoring the thoughts of people who have influence in your life.

So where does the maxim of “stop caring what other people think” begin and end?

For one, worrying about the impressions of people you don’t interact with is not a very use of time and an especially poor use of money. If you’re paying hundreds of dollars for clothes so you can impress the person who walks by you on the street, your money is probably misplaced, as is your concern. If you’re hoping that another driver is impressed by your expensive and shiny car, you’re again misplacing your money. People you have no direct interaction with should not concern you at all when it comes to your spending choices. Don’t spend an ounce of yourself worrying about them or their thoughts.

Beyond that, focus on impressing casual acquaintances by the content of your character, not by your possessions. Treat people you actually interact with casually with respect and good humor and they’ll usually respond with the same. If that person is thinking quietly that you’re wearing tacky clothes or driving an old car, who cares? It’s worthwhile to do some basic things to ensure positive interaction here, like bathing and practicing good hygiene, but those basic things benefit you (by preserving your health and helping you with more important encounters).

Again, you shouldn’t spend an ounce of extra energy or a dime of your money on any of these interactions with people you don’t know and people you only casually know. If you want to leave an impression, leave an impression with your character.

The people that matter are the people you’re truly close to and the people who can directly impact your future. Your immediate family. Your closest friends. Your boss. In certain sales positions, your clients might fall into this group. Your mentor(s).

You should care what these people think, not just of you, but of their world. What do they care about? What can you do to alleviate those concerns? In many ways, you are in service to these people, and the best service you can provide is to take care of their problems. You should also value the things that they tell you.

Even for these people, though, the character you show and the skills you provide are far more valuable than the clothes you wear and the items you possess.

Your children might talk about material things they want, but what they really want is quality time with you. I could buy my children all of the toys and games in the world, but the things they actually need for me are time, attention, and love.

The same goes with your partner. A diamond necklace might be a pretty symbol, but strong relationships aren’t built on trinkets. They’re built on time, communication, attention, and love.

Your boss truly cares mostly about you doing your job with the highest level of quality. You might have a dress code, but even that is often relaxed if it means better work output. Your boss certainly doesn’t care what car you drive on your own time or whether you have an iPhone.

These important things aren’t reflected by your possessions. They’re reflected by who you are, how you spend your time, and the work that you do.

Stop caring what other people think is a call to stop wasting your money on things mostly useful in impressing other people. It’s not a good use of energy to worry about impressing people that don’t impact your life, and it’s not your possessions that impress the people that do impact your life.

Your skills, your character, your use of time, your attention, and your love matter far more than your possessions to the people that matter most. As to the rest of the people you bump into, why worry about impressing them with your stuff?

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. Car leasing question
2. Separate savings accounts
3. Handling reduced income
4. Relationships and honesty
5. Why savings accounts?
6. Planning for debt freedom
7. Upgrading credit card
8. Trusting product reviews
9. Funding retirement
10. Figuring out priorities

Opening up the window and feeling a cool breeze when your office is stuffy.

Hearing a child laugh because of the sheer joy of life.

Eating a handful of strawberries straight out of the garden.

These little things have filled my day. These little things fill my life.

Q1: Car leasing question
I have been on my own, graduated from college for a year now. I just recently moved into an apartment with a friend after living with my parents after graduation. I am asking for some advice for a newly grad.

I have been reading the simple dollar for about 6 months now trying to figure my way around the adult world. When I went to college my parents were nice enough to pay for my gas and groceries on a credit card to build credit. However, the economy has hurt even my seemingly invincible parents and I am left with $3000 left in credit card debt.

Now I know that its not terrible, but still something I am now paying off. My parents also are being very generous and paying the minimum, and I am throwing $200 extra to help them/myself with the payments. The interest rate is 20% on the credit card debt. Also I have roughly $24000 in student loans with $186 monthly payments and 6.5% interest.

I also contribute 4%, about $50, to a ROTH IRA since I have to be in my position for a year to get 401k matching. I put about $100 a month to a savings account also. Now is it worth it to continue contributing to my IRA, or put the extra $50 towards my credit card bill? I know that it is good to start investing when I am young, but does that 4% make sense right now?

I also just started leasing a car in February since mine was going to need a lot of repairs. The monthly payment on that is $200. Now I was reading an article that you wrote about the differences in buying used or buying new, but you never mentioned leasing. You said buying new would be worth $63000 over 15 years. If you do the math it would only be $36000 to drive a brand new car if you figure $200 monthly payments for a new car.

Now I am young, but is it worth it to lease a new car for $200 a month? It is a Honda Accord so it gets excellent gas mileage.
- Pat

The difference between buying new and leasing is that, when the payments are finished, you’ll wind up with a late model used car that you can drive for as long as you want if you buy new, but at the end of a lease, you don’t have a car at all unless the dealership decides to sell it to you.

The only time a lease makes sense is if you absolutely must have that new car smell. For example, it makes sense for some salespeople to be driving new cars as it’s part of the sale to the customer. Since you need the shiny “new” effect, the ability to return a car at the end of the lease and getting a new one is enormous.

Having a lease is like always having a car payment, a payment you can never escape from. The reason to actually own your vehicle is that you can go for years (sometimes many years) without a payment.

The best option is always to pay cash and own the vehicle. This eliminates the money that’s lost to interest on the loan. Used cars are usually the best deal, but you should always be doing the numbers and the research.

Q2: Separate savings accounts
I have a mundane question about logistics. when you say you put away 4% to education, and $100 a month for vacation… WHERE do you put them? separate bank accounts? smarty pigs? how do you keep money separate for specific purchases? that’s the way I think of my finances, and I end up with lots of different accounts!
- Jimena

Why not have lots of different accounts?

I use SmartyPig and ING Direct. Both of these companies allow you to open several separate savings accounts under the same service. Both pay a decent interest rate on the money you save.

If all of the separate savings are listed under one login or two, it’s not really all that inconvenient. You can manage them from your home computer with ease.

Q3: Handling reduced income
My husband works in residential real estate (he’s a builder) so needless to say our cash flow has been hammered over the past several years. Before our daughter was born in 2007, we upgraded to a larger home which was completely within our budget at the time, but I was hit with a layoff a year later. I luckily landed a job I love six months later, but I’m currently making less than I was at my old job.

A smaller paycheck, combined with a husband making much less in a troubled economy, has equaled about $15,000 in credit card debt a couple of years later. I don’t see the home market getting back to where it was in the next couple of years at least. Selling the home isn’t an option: we just refinanced and any equity in the home was wiped out during the recession based on the new appraisal.

Hammering away with extra payments on the credit cards isn’t feasible with our current cash flow. If I could just make the credit card payments go away, most of my cash flow issues would be resolved. We have just under $150K in retirement savings between monies contributed to Roth IRAs, Traditional IRAs and a whole life policy. Am I totally crazy to think about hitting the retirement savings to pay off the debts? I can withdraw monies initially invested in my Roth IRA without penalty, right? We have the mortgage and one car payment, but no student loans or anything. BTW, I’m 34. Your thoughts?
- Jennifer

If you hit your retirement to pay off these debts, you’re pretty much adding a couple years of work directly onto the end of your working career. When you’re 70 (or so), you’ll be working when you could be retired.

That’s the real exchange you make when you empty out your retirement to pay off a $15,000 credit card debt. You’re going to lose 10% of your retirement savings. Over the course of your life, that will add up to about 5% of your total when you’re older (depending on your later rate of saving, of course). There’s also the income taxes and penalties and other factors (like loan costs from borrowing from a life insurance policy).

I would be very careful before taking retirement money for credit card debt. The total cost of early withdrawal of retirement money is enormous and often stacks up to the interest rate on credit card debt when you account for the total cost of withdrawing it and the lost returns over your lifetime. If I were you, I’d try to make lifestyle changes and pay off the credit cards without tapping retirement savings.

Q4: Relationships and honesty
I know that you’re married and have been for awhile and I have been in a relationship myself for over 6 years. I was wondering, do you think that total honesty is necessary for relationships? If something has happened, the event has passed, everyone has moved on, lessons have been learned, is it necessary to bring up the truth with your significant other simply to relieve yourself of some guilt even though it would just make them temporarily upset? Or is that just selfish? Who doesn’t make mistakes right? As long as you’ve learned from them and are truly apologetic and remorseful, is it okay to move on and not speak about it? This has been bothering me for a long time. There is something I want to tell my significant other but I’m afraid I only want to tell him so I don’t have to think about it anymore–I acted selfishly (though somewhat unknowingly) and I feel like I’d be doing that again just to make myself feel better.
- Robyn

Dishonesty, especially when guilt comes from that dishonesty, often affects your relationship in more ways than you think. It changes a lot of your interactions. It makes it seem more plausible to be dishonest at other times. It makes you feel guilty, which changes your interactions and alters your relationship today.

Think about it. Right now, you feel guilt toward your relationship. I’m sure there have been times when you’ve bitten your lip and chosen to not say anything or say something else. Each of those things alters your relationship – and not in a good way.

I think you should be honest. Every moment when you’re trying to choose your words carefully with the person you should be closest to in the world is another gulf in your relationship and you should strive to have as few of them as possible.

Q5: Why savings accounts?
This is both a question and an observation. When I see people describe the benefits of Savings accounts, they always seem to use big numbers. For example, “If you use a savings account with 3% interest…” is a common one. The thing is, there are NO accounts available that deliver that kind of interest. In fact, my credit unions offer .1, and .3% APY for sub $10,000 accounts, and going up as high as .4% for >$100,000. Searching around, the very best savings account I can find offers 1.25%, but isn’t FDIC insured. ING offers 1%.

Where do people get these inflated example numbers from? Was there a time when people actually could see >1% interest on a savings account? I’d really like to store my emergency fund somewhere where it can garner some decent interest considering I’m not using it for anything for now. Most of these banks seem to be wasting my time. I know its safe, and I am earning SOME interest, but honestly seeing a whole 25 cents coming into my account each month seems insulting since I know I could make far more money off of monthly dividends should I put the money in a real estate trust. Is this something to do with the economic climate? Or have banks always had a pathetic return on savings accounts?
- Marty

Yes, there was a time where people saw interest rates higher than 1% in savings accounts. It was called 2007.

Savings accounts tend to reflect the prime lending rate, which sets interest rates on a whole bevy of things from mortgage rates to returns on government bonds. That rate has been very low since 2008. When that rate is low, savings accounts return very little – between 0% and 1%, typically. At the same time, mortgages are very low.

When the economy rebounds, the prime lending rate will eventually go up. At that point, savings accounts will begin to inch up in order to attract savers so the banks can keep lending money in a hot economy.

In other words, in our current economy, you won’t find a good interest rate on investments that are both very stable and very liquid (which is what savings accounts are). In order to get a better return, you have to either give up stability (by buying stocks, for example) or give up liquidity (by buying land, for example).

Q6: Planning for debt freedom
I have $5,000 invested, $2,000 in savings and I make net $~ 2000 a month. I am planning on going back to school and would like to have some savings as it is an out-of-state move. I have been driving the same car for the last 12 years and I know it will last me until I go to graduate school in 2012.

Here’s the thing, I have debt! The good news is I have paid off 3 credit cards in the last few years. I still owe about $5,000 in personal line of credit and this year I owed in taxes because I was an independent contractor and there was very little I could write off. I actually saved up money for the taxes, but due to a job change, and my new employer taking over 4 weeks to pay me (and not receiving that pay retro and getting it after I end the position), I had to use up what I saved for taxes to live on.

So now I owe $ approx 5,000 in my personal line of credit, $ approx 5000 to the feds and $ approx 1,000 to the state. I have $5,000 (approx) in my investments and $2,000 in savings. My goal is to be debt free by the time I enter school in Fall 2012 and I need a chunk of savings for the big move to the school and a (newer) used car. Because I am driving my car to the ground, I was not planning to sell it, was hoping to just give it away and save up for $5,000 or so for a car when I get to the new school.

Oh and I have student loans which I pat $180.00 into every month. I plan on deferring it while I’m in school.

Do you have any advise on what I should do? Getting another job right now is not an option, I am busy as it is trying to prepare to get into school.
- Erika

The only way to make these debts go away is to pay them off. If you don’t have adequate income to pay them off before you start school, then they’re not going to be paid off. If you can’t get another job right now, then you’re denying yourself routes to a more adequate income.

I am a bit confused by the “busy trying to prepare for school so I can’t get a job” bit. What sort of preparation are you doing that keeps you from getting another part-time job doing something like being a nighttime gas station clerk?

What I see here are two priorities that are in conflict: getting rid of your debt and preparing for school. Which is the higher priority? It sounds like both are very difficult. I can’t tell you which is the higher priority. That’s a decision you have to make for yourself and live with.

Q7: Upgrading credit card
I have a Chase +1 student credit card. It’s a fine card, but I’m sick of points rewards and want to switch to something else. I have seen people talking online about “upgrading” from a student card to a normal card. Can you actually do this? How do you do this? And most importantly, when you upgrade to a new card if it’s possible, is it equivalent to opening a new account and closing the old one (thereby killing my oldest credit line in the credit report)?
- Kevin

You can. What they mean by “upgrading” is simply applying for a card with a better rewards system, switching to that as a primary use card, clearing the balance on the old card, and either sitting on it (which is what I’d do since it’s the oldest card I have and beneficial for one’s credit history) or closing it.

Is it a good move? If you don’t close your old card, particularly if you don’t have other sources for your credit history, it’s not too big of a deal. If you can get significantly better rewards from the new card, it’s probably a good deal, particularly if you keep your balance paid off each month.

The only thing you can do is find the card that you want and apply for it.

Q8: Trusting product reviews
Can I trust product reviews on Amazon, or are people paid to write positive reviews to help sell their product? Any experience or research with this?
- Albert

Amazon reviews are a mix of different things. There are lots of reviews from real people legitimately describing their experience with a project. There are some reviews from people who are paid to write positive reviews (often employees of the company selling the product). There are also negative reviews from competitors or from sources with unrelated problems or axes to grind.

Of course, the same thing is true (to a lesser extent) with reviews from other sources.

When I want reviews, I usually stick to a few sources I really trust – a handful of bloggers, Consumer Reports, and so on. I use other sources as secondary sources, and Amazon reviews fall into that camp.

Q9: Funding retirement
I have started a new job and I’m trying to decide how to set up my retirement account. I have the option of a 401k or a Roth IRA. My only choice of companies is Vanguard, which is great. I get to choose which fund/s I invest in no matter if I choose the 401k or Roth. My problem is choosing which program. My employer does not contribute so I feel that I should choose the Roth but I already own a Roth account through my insurance company, USAA. Can I have more than one Roth account or should I role over my Roth to my employer’s account? I’m 36 and have not been able to save for retirement the way I want to. I would ideally like to put 15% of my income towards retirement. The contribution limit of a Roth would not allow me to do that. My first thought is to contribute 10% of my income to the 401k offered at work and then put the other 5% towards my Roth through the insurance company. I could also max out my Roth and make up the rest through the 401k at work. I would appreciate any advice you have.

Pre-tax income is around $100,000
Post tax is about $81,000
I have $63,000 in student loan debt
- Leslie

A Roth IRA is typically not tied to a specific employer. You can independently open a Roth IRA wherever you choose. You may only have one Roth IRA account, but that account can be hosted by multiple companies. So, you could open a Roth IRA here, but it would essentially be an extension of your earlier account and you’d have the investing limits spread across both investment houses.

If you’re happy with the USAA Roth, I’d leave it there and follow your second plan.

Note, though, that you’re close to the income limit for Roth IRA contributions. If you’re single and earn more than $107,000 per year, you can’t contribute the full amount that year to your Roth IRA. In that case, I’d probably just put more into the Vanguard 401(k) you have.

Q10: Figuring out priorities
I started a new job in September 2009. I am 28 years old and did not have a job before that I could fund a 401k, so I decided to try to max my contributions and contribute the max $16500. I figured that will help me catch up with my peers that have been saving since they left college. I currently make $87,700 (pre-tax) and I put $635 per bi-monthly paycheck in a 401k fund (about 19% of my pay). Since I started, I have been able to get $38,000 saved. However, I also have student loans and a car loan to pay off and I would like to set aside an emergency, house deposit, and wedding fund. I was wondering if I should put less money into my 401k (just put the 5% that my company matches) and pay off my debt and build my funds or just continue to do as I am doing and slowly pay off the other debts. I guess my question is which is better: put my savings towards things in the immediate future or put savings toward my retirement? I feel like I will lose on compound interest if I don’t save lots now for later but then again I will lose if I pay compound interest on my loans now. (student loans: $800 (5%), $1900 (3.75%), $15,600 (2.6%); car loan: $21000 (2.9%); 401k rate of return (22%); savings: $1000 (1%))
- Monica

For starters, your 401(k)’s rate of return won’t hold up over a long period of time. You’ve had a nice run recently, but that’s an incredibly good rate of return, one that doesn’t hold up over years and years. Don’t base your calculations on a 22% rate of return.

Based on your comments, you seem to be concerned about your cash flow in the future. You want to get rid of these debts so that you’re not responsible for those monthly payments, which will make it easier to save for other goals. If that’s the case, I see nothing wrong with cutting back your retirement contribution so that your contribution plus your employer’s contribution is 10%. Use that remaining money to wipe out those debts as quickly as possible.

Once those debts are gone, your monthly cash flow will be much higher. I would then return to your original contribution plan and use the additional cash flow you have to start saving for your other goals.

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 of the best books I’ve ever read is Keith Ferrazzi’s Never Eat Alone (here are some of my notes on Never Eat Alone). It really opened my eyes to the idea of how building lots of relationships based on something real can be really valuable and useful for all parties involved.

Prior to that, “networking” really seemed… cheesy to me. I’d been around people who seemed to be “networking,” but it constantly felt like I was just another person to push a business card on and call a “contact” while their eyes were searching the room for a bigger fish to talk to. It felt almost deceptive, and it felt like something I didn’t want to have any part in.

Since then, I’ve been slowly building my list of personal relationships that I value, which, in the end, is what networking really is. If the relationship you’re building has no real value (and value is built by exchanging things of worth with each other, whether it be time, information, assistance, or other things), then that relationship is worthless.

This brings us to Dig Your Well Before You’re Thirsty. This book by Harvey Mackay has been recommended to me more times than I can count by people who have read my Never Eat Alone articles. I always resisted it because I had this general impression that it espoused the type of networking that I didn’t really like.

I finally gave this book a shot when a great reader sent me his copy of the book, insisting that I read it. Was it worthwhile? Let’s dig in.

Jump In, the Water’s Fine
You can’t accomplish really great things alone. You might write the great American novel all by yourself, but you can’t publish it and get it noticed without others. Every big thing you really want to accomplish in life, at some level, relies on the people around you. Thus, one important element of making those things happen is to build good relationships with lots of people. The more good relationships you have, the easier it will be to achieve the things you want to achieve.

Time to Prime the Well
If you want to start building these relationships, you can’t stay at home. You have to get out there and interact with people. This means doing things you might not have otherwise chosen, like going to conventions related to your field, going to community events, and so on. It also means that, when you go to these events, you have to interact with those people. Don’t worry, the more you do this, the easier it gets.

Start Digging
You can’t expect others to start the relationships, either. You have to start, and the best way to start is to provide positive value for others. First, figure out a problem that the other person has. Then, offer your expertise. Offer a bit of your time. Offer a connection you already have. Help that person solve the problem they have. Mackay uses a “well” metaphor throughout the book, and he makes the point that each time you do this, you dig your “well” a bit deeper. In other words, every time you do this kind of positive thing, you build a new relationship or strengthen an old one.

Sharpen Your Edge
Your life is full of chances to build relationships. Think about how many people you see or interact with every day. There are likely many people in your work place. There are many people in your neighborhood. Each one of them is an opportunity for building a connection. You’ve got to make the first step, though. Each one of them is an opportunity, even if that opportunity is nothing more than the chance to sharpen your social skills and interaction skills.

Excavate Your Unique Skills
What kinds of things can you offer that are unique or at least fairly unusual? Everyone is good at certain things. Almost everyone is trained in a particular narrow area. What can be mined from that area that would be of use to others? What skills have you built throughout your life in other areas that sets you apart? Having a skill set that’s actually of broad use is perhaps the most valuable tool you can have in building professional and social relationships.

Dig Deeper
Success doesn’t happen overnight. It also doesn’t happen from merely having a circle of relationships that doesn’t have any outside connections. You need to build relationships with a wide variety of people and feed those relationships over time. Don’t just associate with the people in your department at work. Know people in other departments. Know people in other organizations. Know people outside your workplace, like your neighbors and people in the community. If you know someone who knows someone that seems interesting to you, don’t hesitate to ask for an introduction. Use your spouse’s social network, too.

Don’t Fall In
Some people, like the sleazy networking guy I mentioned at the start of this article, think that having a network is all that matters. It’s not. It might help open a door just a bit for you, but you have to have the character and the skills and the value to pull that door the rest of the way open. A network is just a network. It’s still up to you to be the right kind of person to handle whatever’s behind that door.

Minding the Well
If you want a relationship to be valuable, you have to maintain it. That means you have to maintain some degree of contact with that person. Perhaps even more important, you should maintain that relationship when things are up and particularly when things are down. When the chips are down, people remember who was still there for them and who didn’t have the time of day for them.

Is Dig Your Well Before You’re Thirsty Worth Reading?
I was surprised to find that Dig Your Well Before You’re Thirsty covers much of the same ground that Never Eat Alone covers. They both espouse building relationships that provide real value instead of merely “networking.”

For me, the biggest difference in the two books was the way I perceived the authors. Mackay, the author of Dig Your Well Before You’re Thirsty, feels like an extrovert. Ferrazzi, the author of Never Eat Alone, comes off as an introvert. This bleeds over into the value of the book, in my opinion.

If you find starting conversations to be easy but haven’t ever really thought how that all comes together for you in terms of building a big set of relationships, Dig Your Well Before You’re Thirsty is a great book to read. On the other hand, if you find the mere mechanics of human interaction to be difficult at times, Never Eat Alone will perhaps click better.

Check out additional reviews and notes of Dig Your Well Before You’re Thirsty on Amazon.com.

Every day, I get ten or fifteen emails from people who strongly believe in some particular issue or perspective. I hear from extreme political liberals and extreme political conservatives. I hear from devout literal Christians and outspoken atheists. I hear from people who live almost entirely off the grid and from others who are incredibly consumer-oriented.

The amazing part is that I hear a variation on the same story from all of these people. In each case, I hear from that person because they (or, on occasion, someone they care deeply about) have lost touch on some level with the values that they claim to hold dear.

Often, they’re upset about something in the world. Some are upset at environmental destruction. Others are upset about government spending. Still others are upset about the moral degradation of society. This isn’t in itself a problem, of course. It’s often very valuable to have something you care deeply about.

At the same time, I’ll see in these emails that they’re taking individual actions to make the very problem they claim to detest worse. They’re spending money on consumer goods that, during their production, damage the environment. They’re not actively involved in the political process in a non-financial basis. They’re full of anger at the moral degradation they see and spread that anger around in various ways.

Even more painful, from my perspective, is when these contradictions are costing them money. The consumer goods cost money. Being angry adds to your stress and makes you ill, costing you money. Donating money to candidates that don’t actually support your beliefs costs you money.

In almost every case, you can live a better life and save money if you live in accordance with what you value.

If you care about the environment, stop buying consumer products or at least minimize those purchases. Plant a garden. Learn how to cook at home. Spend your spare time promoting environmental causes.

If you are concerned about politics, stop giving your money to candidates until they prove themselves. When you do support candidates, support them with your feet and your time and not your wallet. Knock on doors. Send letters. Get involved at a local level.

If you worry about the morality of others, don’t spend your time worrying about others and telling them how to live. Show them how to live with every second of your life. Live every moment in a way that reflects your morals. Treat others how you would like to be treated if you were in their shoes. You’ll find a lot less stress that way, which will help with illnesses and lost income, and you’ll end up having a much more positive impact than if you spread the rage around.

If you believe in something, live your life in accordance with that belief. Don’t just try to solve problems with your words or with your wallet, and don’t make choices that contradict what you stand for. You’ll find that, time and time again, you’ll be financially better off for doing it – and you’ll be better off in a lot of other areas of your life, too.