Here’s how to get rich quickly.

Whenever you receive income of any kind, immediately put 25% of it into a savings account. Whenever that savings account reaches $5,000 in total balance, invest it in something, ideally something different than what you’ve invested it in before. Buy stocks. Buy CDs. Buy commodity or precious metal or land ETFs. Buy shares in individual companies that you believe in. Then just watch it grow.

Wait, that sounds like normal investment advice! How will that help you to get rich quickly?

It’ll get you rich much more quickly than almost any other plan out there. You just need to re-evaluate your idea of quickly.

In terms of building wealth out of nothing, it doesn’t happen overnight (unless you happen to have a brilliant idea and the skills to perfectly execute it, which happens only a few times a generation). It takes time. It also takes discipline. Most of all, it takes patience.

Patience is a virtue that’s often overlooked. When people think of getting rich quickly, they think of buying a lottery ticket and having $50 million next week. They think of having some sort of secret insider information that will double their money in a month (like those endless penny stock scams that constantly float around). They think of arrangements where they hand their money to a guru who will magically cause it to multiply several times, never asking themselves why that guru even needs their money (hint: money gurus can’t perform magic).

In the real world, building personal wealth doesn’t work that way. It usually comes through saving up your money over a long period of time and putting that money to work over that same long period. However, the more diligent you are about the saving and putting that money to work, the quicker you will get rich.

Let’s say you have someone who is making $40,000 per year. They have no debts, but no assets, either – a net worth of $0. Let’s also define “rich” as being having 20 times your annual income in investments, which means if the investment earns just a 5% return, you can live on just that return in perpetuity.

If they save 1% of their income each year and put it in investments that earn an average of 7% per year, it will take 74 years to cross the “rich” mark.

Bump that savings up to 2% per year (from $400 to $800 per year, or from $15.50 per biweekly paycheck to $31), it will take 63 years to get there. Add 1% and you subtract nine years off of the time it takes to become rich.

Let’s bump it up to 5% per year. It then takes only 50 years to get there.

10%? It takes only 41 years.

Let’s say you’re a prodigious saver and save 25% per year. It takes you only 28 years to get there. Start at age 25 and you’re retired at age 53 on your own investments. When Social Security starts rolling in, it’s icing on the cake.

This really is the recipe for success. If you make $40,000 a year, live as though you make $30,000 a year. If you make $80,000 a year, live as though you make $60,000 a year. Bank 25% of your paycheck and live on the rest.

What you’ll find is that your lifestyle adjusts when your checking account does. The perks of life become actual perks that you appreciate instead of just a static routine of disposable pleasures. You can look forward to a future that involves doing whatever you want instead of working at a job until you’re unable to work any more.

If you want to get rich quickly, you already have the tools you need. The question is whether or not you have the courage to do it.

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.

This week, I’ve been looking at piles of public domain and Creative Commons licensed photographs for a project I’m working on. I’m going to be sharing some of the ones that really struck a chord with me this week in the “pieces of inspiration.”

1. Old couple, by Marcel Oosterwijk
I love photographs of older couples, particularly ones that show the gentlest signs of long-term companionship between the two people.

Part of it reminds me of some of the older couples I’ve cared about in my own life. Another part of me hopes to be sitting on a park bench holding Sarah’s hand in fifty years.

2. Patrick Henry on being a good member of society
Society and community only truly shine when people work together.

Bad men cannot make good citizens. [...] No free government, or the blessings of liberty, can be preserved to any people but by a firm adherence to justice, moderation, temperance, frugality, and virtue; and by a frequent recurrence to fundamental principles. – Patrick Henry

If you are incapable of cooperating with the people around you and living within your own means, why should you expect the community and society around you to cooperate with you and be able to help you when you need it? Responsibility starts with you.

3. Free Children in Sneakers at the Skate Park, by Pink Sherbet
So many of my best memories of childhood and other children involve us just sitting around, watching the world and talking to each other.

A large part of growing up is simply understanding other people, and few things do that better than just spending time with them.

4. Barn in winter, by James Jordan
Hidden away places always fascinate me and draw me in.

The thought of stumbling upon this barn after a walk in the woods on a winter day seems so comforting.

5. John Ray on industry and frugality
How do you create success? By working hard and not wasting resources.

Industry is fortune’s right hand, and frugality its left. – John Ray

The most sure path to whatever you want in life is hard work and not wasting the products of that work.

6. Untitled, by Hillary
I love images of things that people once held intimately, but have been forgotten.

I can’t help but imagine a young girl, many years ago, learning to play the piano here. Who knows what she moved on to? Perhaps she still plays. Perhaps she has forgotten. These keys are all that’s left behind.

7. Spiderman and Froggie’s lunch is about to be rudely disrupted, by Kevin Dooley
My children and I are constantly mixing together various elements of books and other things to make up our own distinct stories. This picture captures that feeling quite well.

What will happen next? It’s all up to our collective imaginations.

8. Gandhi on sharing your ideas
If you want your ideas to live on, live your ideas.

My life is my message. – Mahatma Gandhi

There is no better way to spread the values you care about than to live a life with a lot of relationships in it and to live that life as close to the values you care about as possible.

9. Leek Leaves, RHS Wisley, by Matthew Howarth
I love going outside in the early mornings when the dew is still heavy. I love the feel of wet grass under my toes and the way the garden looks as it’s beginning to catch the rays of the sun.

The leaves unfurl and slowly turn toward the sun, shedding their moisture and growing. Nature is beautiful.

10. No Going Back, by Mariano Kamp
This photo so wonderfully captures the beauty of a game well played and that feeling you get when you first get the sense that the game has turned against you.

You’re exposed. Can you turn back the tide, or is it inevitable?

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

I’m not quite sure where we picked up this simple recipe. I was extremely doubtful about it the first time we tried it, but now it’s a staple in our home.

Give it a try – you might just be surprised.

What You Need
You’ll need…

1 1/2 cups uncooked quinoa (quinoa is a grain, like rice, that’s really easy to prepare)
3 cups vegetable stock (or water if you don’t have stock)
1 pound protein (we used beans; you can use extra firm tofu or cooked chicken or beef or whatever)
2 tablespoons soy sauce
2 tablespoons vegetable oil
8 to 10 cups mixed vegetables – whatever you like
2 cups barbecue sauce (we made our own, which you’ll see below)

The Night Before (or Early That Day)
You can cut up the vegetables in advance. Also, if you’re using meat, cut it into small pieces and cook them. If you do that and aren’t using vegetable stock for the liquid, pour three cups of water in the pan at the end of the cooking, then reserve that liquid for the recipe. That’s delicious stuff.

If you’re using dry beans, soak them overnight in water. The next morning, drain the liquid, replace that liquid with water, then boil the beans until they’re well-cooked (this will vary depending on the size of the beans).

Preparing the Meal
First, boil the liquid, add the quinoa, and simmer it for fifteen minutes, stirring it a bit here and there. The quinoa should absorb all of the liquid in the pot.

Turn the oven on to 400 F. Toss the mixed vegetables together and spread them out on a cookie sheet, then bake for 10-15 minutes, turning the vegetables over at the 5 minute mark. Cook the vegetables until they’re perfectly done for your tastes.

If you want to make your own barbecue sauce, you need 1 cup ketchup, 2 tablespoons molasses, a dash of garlic powder, a dash or two of chile powder, 1 1/2 teaspoons vinegar, 2 tablespoons olive oil, and 2 tablespoons water. You can add other things to taste, too – cracked black pepper, a dash of Worcestershire sauce, a dash or two of liquid smoke.

Mix these ingredients together thoroughly in a bowl and you’ve got your barbecue sauce!

You can serve the protein (beans), the vegetables, and the quinoa separated (that’s how our kids prefer it):

You can serve them mixed together with barbecue sauce (that’s how I prefer it):

You can also serve them together without barbecue sauce or with the sauce on the side, too:

It’s incredibly flexible! It’s also quite delicious for a light summer dinner.

Optional Ingredients
This recipe is incredibly flexible. You can choose the protein you like – tofu, chicken, beef, beans. You can choose the mixed vegetables you like – broccoli, zucchini, summer squash, corn, cauliflower, etc. You can make your own barbecue sauce however you’d like or just pick up a bottle of it. You can mix everything together or keep it separate on your plate. It’s really a flexible meal that can be made in a way that anyone will like.

For many people, making a significant change in their life requires them to hit bottom. They have to reach a low point of some sort where the drawbacks of continuing down their current path are so severe that they overcome the addictions or behavioral tendencies that have taken them down their current path.

I’ve discussed my own personal finance bottom on here many times. For me, it came one April afternoon when I realized we didn’t have enough money in our checking account to pay the bills that had come in the mail that day – and there was no longer any reasonable way to borrow ahead on a credit card to make things work for another month. I got depressed and as I rocked my infant son to sleep that night, I realized that I just couldn’t continue along that path any more.

For me, that was the point where the drawbacks began to outweigh the benefits of my lifestyle. My spending-heavy choices might have created some short-term fun in my life, but when I started comparing it to the pile of debt I’d have to pay off, the dangers of defaulting on that debt, and the choices (such as my job) that were forced on me because of a constant need for more money to feed that spending need, it became clear that I needed to change.

Although the pile of debt was certainly real, it was the threat of much worse things coming down the road that convinced me to change my ways. I didn’t lose my credit rating, but I was afraid of losing it. I didn’t lose my ability to care for my child, but I was afraid of it. I didn’t lose my marriage, but I was afraid of it.

This is often referred to in recovery programs as a shallow bottom or a “high bottom.” I had seen some negative effects, but the truly heinous effects were coming and were close enough that they frightened me into change.

For some people, a shallow bottom is all they need to bring about change. That was certainly the case for me.

On the other hand, some people need a deep bottom in order to shake them into change. For some, defaulting on debts might do it. Bankruptcy might do it. Having their home and automobile repossessed might do it. It depends heavily on the person and how psychologically attached they are to their current lifestyle.

So, how does this apply to you? Almost everyone reading this has already reached their bottom. It might have been shallow – for some people, it’s very shallow. It might have been deep. The point is that something has steered you onto a good financial path.

Now, many of you can look around your life and see people that are on a destructive financial path. I get emails all the time from people worried about their parents or their brother or their niece or their children and how they seem to be heading down a financially destructive path.

Here’s the truth, though: you’re probably not going to be able to help them much at all until they reach their bottom, whether it’s shallow or it’s deep. You don’t know when or what will cause them to reach that bottom.

Even worse, offering them financial assistance before they reach that point will almost always just serve to delay their bottom. It won’t change their choices. It won’t change their eventual path. It’ll just make the current situation a bit easier.

In those moments, offer non-financial help. Listen to them. Give them a meal at your home. Offer advice if they ask – or even a bit of advice if they don’t just so those ideas are floating around for the time they need them.

You’ll know when they reach bottom. Their actions will show you. They’ll make positive choices with their time and with their money. They’ll be focused on conserving money rather than spending it. They’ll be happy about paying off debts, not about the newest thing they’ve bought.

If you want to offer financial help, that’s the time to help a little bit. At that point, it’ll mean a lot more and have a much greater impact on the long term. The thing is, once they’ve reached this point, they probably won’t be asking for your help.

This general story matches, in some way, almost every financial turnaround I’ve ever seen. In fact, it matches almost every path of destructive addiction or behavior that I’ve ever seen. You’ve got to wait for that bottom and you’ve got to hope that the bottom isn’t too deep.

When I’m writing about personal finance issues, I often use a subset of terms that, to me, feel like common sense. Stocks. Bonds. Savings. Frugality. These things all seem commonplace.

One word that’s nearly in that group for me is “asset.” It’s a simple term to describe a simple thing.

Which brings me to this email from “Jodie”:

You have mentioned assets in a few emails recently. What are assets? I’ve looked them up in Google but none of the definitions completely make sense.

In simplest terms, an asset is any item owned by you that has value. Your car is an asset. Your DVDs sitting on your shelf are assets. Your home is an asset. The money in your savings account is an asset. They’re all assets.

Usually, items that have a very direct and clear value are known as tangible assets. All of the items listed above are tangible assets. With a tangible asset, you can get a very realistic estimate of the value of the item and how much you can sell that item for to directly convert it into cash.

When people figure their net worth, they usually include their tangible assets on the positive side. Many people don’t count small tangible assets, such as individual DVDs or the used value of their refrigerator, when they do such calculations.

Most of the time, personal finance deals with tangible assets. However, there are also intangible assets, something I often touch on. Things like friendships, reputation, time, personal relationships, skills, talents, and other such attributes are intangible, but they clearly have value. You can’t put a precise dollar sign on any of these things, but they’re clearly assets.

Quite often, when investors discuss assets, they’re talking about things purchased for the primary purpose of generating a positive return, not necessarily for using them. They hope that when they buy this item, they can someday sell it for more than they purchased it for or earn enough income from the item that the total earnings and the sale price add up to a positive return.

Essentially, that’s how a savings account works. You put in $1,000 into an account that earns 1%. At the end of the year, the account has $1,010 in it. That $1,000 asset earned a $10 return over the course of a year.

Naturally, there are a lot of ways to put assets to work to earn a return. You can own some stock in a company that earns dividends, then sell that stock later on (earning a return on the dividends and a return on the sale). You can buy a house and the land it sits on, rent it out to people, then sell it later.

When people talk about asset allocation, they’re talking about owning a lot of different kinds of assets at once so that no matter what happens to the economy, they won’t go bankrupt. A person might own some U.S. stocks, some international stocks, some cash, some Euros, some gold, and some land as investment assets.

Good asset allocation means that if something bad happens in one area, like an economic downturn in the United States, you don’t significantly lose out with regard to the overall value of your assets. Obviously, asset allocation can be a very deep subject, indeed.

The idea of an asset is simple. It’s what people do with those assets that tends to sometimes get complicated.

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. Recovering from a big loss
2. A disastrous turn of events
3. Feeling scared all the time
4. Dodgy seminar?
5. Basic budgeting for young adult
6. Credit card strategies
7. SAHM transitioning to career
8. Investing with risk
9. Organizing tax-deductible expenses
10. Meetups

The month of June has seen me working like crazy to get additional posts in reserve for some periods of travel later on in the summer. My goal is to be able to enjoy these trips without worrying about writing content while also not missing a post here at The Simple Dollar.

That means, of course, that I’m working overtime right now. Today, for example, I’m assembling and working on almost a dozen reader mailbags (it’ll take me several days to do all of these).

Q1: Recovering from a big loss
In 2007/2008 I invested in some individual stocks, Citi, Fannie, Freddie etc. amongst others. Since then the portfolio is at an 90% (30K) loss. I don’t NEED this money so I’m OK with riding it out for 30-40 years, in hopes of a recovery. Even if I lose it all its fine, as fine as losing 30K can get, it still hurts but what can I do, can’t beat myself up about it.

This was my first venture in to investing for retirement. Now I’m in a place where I’d like to start investing for retirement again, with a much more conservative mindset, ETF’s, mutual funds, etc. But I am terrified of losing any more of my hard earned money. So it sits in savings accounts earning 1%. My plan actually is to wait it out until interest rates go up significantly 8% or higher and just load up on 10-20 year CD’s, to play it safe. I fear this master plan will never come to fruition and since my money won’t work for me I will have to work that much harder to retire. What do you think?
- Rachel

There have been very few times in history where savings accounts have paid 8% or more. In the mid 2000s, some accounts inched up to 5% with a few teaser rates at around 6%.

However, for such rates to exist, the economy has to churning along quite strongly, causing the Federal Reserve to raise interest rates to a point where banks can make money with such interest rates. That won’t happen soon.

The problem with your initial investment is that you bought into individual stocks. Individual stocks are a very risky investment because you’re investing in just that one company and the people running it. Do not judge all investments by your experience here.

A much better approach is to invest very broadly in stocks using an index fund. A fund like the Vanguard Total Stock Market Index essentially allows you to own a part of a share in almost every publicly traded company in the United States. This protects you from individual company failure and even individual sector failure (which seems to be what you found). Instead, it’s more like riding the stock market as a whole. You’ll have a 15% gain one year, a 10% gain another year, a 30% loss another year, but over the long run (more than, say, 15 years), it’ll trend upwards with a pretty good average annual return. You can buy index funds from many investment houses; I use Vanguard.

Q2: A disastrous turn of events
In October 2010, I had a trach installed and have weakened to where I am on a vent 24/7. I was supposed to only need the vent at night and able to continue my job full-time. Since then I have not been able to return to work on-site. I am able to connect remotely but being in IT it’s hands on so there is not much I can do from home. I am now part-time with no set hours per week.

I just received a letter that I will be terminated on June 30th. So here’s where I need help.

I haven’t driven since my surgery and the van hasn’t been started since. My thinking is (since I’m the only one who can drive it with a big hassle to seek repairs) that it’s better to let it sit and not know if there’s issues then know and not be able to do anything about it. My expenses now are roughly the same minus the gas and other vehicle related expenses. I am still paying car insurance in hoping that I will be able to drive again. My inspection is due in September.

Since October my income has been significantly less but I’ve had the money + working a few hours didn’t hurt my emergency fund. I will have no income as of July 1st. Before I started I was receiving Social Security Supplemental Income (SSI.) I plan on seeking that again. The amount I received was comparable to what I am earning now (until the end of the month.) I don’t think I will be denied as my health has gotten worse and I’m not able to leave my house. The farthest I’ve gone since October was the end of my ramp otherwise it was on a gurney to the hospital.

Should I stop paying my car insurance? I don’t know if I’ll be able to drive when it’s due in August lasting until February. I can’t really sell my van because it’s customized for me. It’s under a carport but it’s only going to get worse in condition.

I really feel stuck. I had my dream job but lost it. I’ve come to accept it when they hired another IT person since I didn’t return soon enough (or now not at all.) I plan on writing thank you emails to a few people as I don’t hold any ill feelings. They gave my months to get back an unfortunately I can’t. The work I do from home is more of a handout and would not be missed as it can be done there.

Right now my day consists of being on the internet all day either working or just looking at websites. I wanted to get off the vent but now I feel too weak to breathe on my own. I have nurses here almost 24/7, my parents are here when they’re not. I feel like I’m being babysat (I’m 32 years old) but need the help because I could get a clot and without someone to remove it will not be able to breathe after 5 minutes (therefore be dead.)

I’m really banking on the SSI to pay my expenses. If I don’t get it, I don’t know what I’ll do.
- Dan

It sounds to me like you hope to be able to drive your van in the future, but you haven’t been medically able to do so for several months. How long is it before you expect to realistically be able to drive your van?

I don’t know the answer to that. That’s something for you and your doctors to determine. However, if that time frame is more than a month or two down the road, you’re wasting money keeping insurance on that vehicle. You can always get insurance on the vehicle when you are able to drive again.

The key thing in your situation is to not give up or give in to depression. Keep your chin up. Find online communities that engage you and interest you. Get outdoors as much as you can and enjoy some fresh air. Good luck.

Q3: Feeling scared all the time
I am 26 and live with my mom (this is not a bad thing where I live). About 18 months ago my father suddenly passed away, leaving my mom devastated.

His death, aside from being a sudden and a very, very heavy blow emotionally, led to certain complications:
–mom being unstable emotionally for quite some time. She used to be such a strong person and now she rarely has the strength or desire to do anything.
–me going back home to her, leaving the friends I had from university and other people I knew
–huge money crisis since I spent two months looking for work, while having a business loan to pay
–break-up with my boyfriend of three and a half years (we lived together the whole time)
–leaving a start-up business which just started to earn tiny bits of money
–a lot of stress trying to figure out how to handle it and what to do next – go back to the big city or stay with mom, for example

By the way I LOVE my hometown and my mom, and I don’t view coming back as some sort of sacrifice (people have suggested so before but it’s really not true).

So my questions are:
1) I now realize I have this subtle feeling of being scared which doesn’t go away. I worry about mom, my future, her future. I also feel very alone because I am a single child, all my grandparents are dead. My aunt lives in the same town but we’re on bad terms. My other family is very far away. I feel like I have no one to rely on – because even though mom really does a lot, I can see she is not the same as before and I just don’t get the same sense of security as before. How do I deal with it?

2) As a result, I spent all my efforts to paying back my debt and saving. I now have growing savings which gives me some comfort and security. However, people my age tell me that I’m being too extreme with saving and trying to insure against everything. They say I should “live a little”. Do you think they are right? To be honest, so far having money in the bank really did help ease the worries to some extent, but like I said the fear of SOMETHING is still here. It is a fear that something would happen and I wouldn’t have the resources to fix it. Am I oversaving? Should I loosen up a bit and spend more on travel/entertainment? (Right now I get free-fun with books and walks etc. which I really enjoy.)
- Anne

It sounds to me that you’re afraid of losing your mother and being alone in the world.

Let me put it this way: if you’re close enough to your parents to just drop your life and move back to your hometown to help out at this point, your parents were very central in your life. You’ve also broken up with a boyfriend that you dated for three and a half years recently.

Two of the three most central people in your life have vanished recently. That’s a major thing to deal with.

My honest suggestion for you is therapy. Simply go to a therapist and talk through these problems. I don’t think you’re in a situation where pharmaceuticals are a good answer, but talking through all of this will do you a world of good.

Q4: Dodgy seminar?
My dad has just finished a seminar about Be Your Own Banker, wherein you use dividend-paying whole life insurance policies as a vehicle to give yourself “loans” to make lifestyle purchases, like a house, car, etc. I’ve gone to the web site, but it just has cursory information, and not much substance (I guess you have to pay to go to the seminars or buy the book to get the entire philosophy). What do you know about this, and in your opinion, is he being taken for a ride? I know you’re not a proponent of whole life, and neither am I – my husband and I both have term policies taken out on each other. However, if this is one way that you could build your wealth, after eliminating your debt, and also a way to finance “loans” to yourself, rather than being dependent on banks or other financial institutions, with all the tax and interest implications, it seems as if it might actually be a good way to build wealth, avoid taxes, and live your life independently. They’re not billing themselves out as a “get-rich-quick” scheme, so I have to give them credit for that, at least, but if they’re fleecing people long-term, then it’s still a scam and people should be aware of it.
- Colleen

It’s not a get rich quick scheme, but it’s not a brilliant scheme either. It’s not always as easy as they describe to borrow money from a whole life policy.

For one, there are often waiting periods to borrow money. It’s not always available just when you need it. For another, you have to pay interest on that loan at a rate specified in the contract. All that does is tie up your monthly cash flow again, no different than any other debt.

While the concept is good – have enough money in the bank so that you can borrow from it! – it doesn’t make sense to work a whole life insurance policy into the mix. Just have your own saving/investing plan and take money from that when you need it. No monthly payment, no waiting period, no interest. If you want life insurance, get yourself a term policy, as it’s a lot cheaper and provides the same peace of mind.

Q5: Basic budgeting for young adult
I just graduated from University in May and have a smallish amount of debt, $4,500 in federal student loans at about 6% interest and $450 on my credit card (interest is about $4/month and I pay 2x the minimum). I have 5 months left on my loan grace period before they start payments. In addition, because I chose to study abroad in London my last semester, I have saving of about $600. I was lucky enough to get a fulltime temp job (3-5 months) that pays about $500/wk, 75% goes straight to savings, the rest checking. I live with family so I have limited expenses aside from gas for my hour commute (Biking or busing would take 4hours total) and about $20 in coffee per week. I would like to pay off my debt, save for an apartment, and also build an emergency fund, but I don’t know how much of my income to allocate to each area. Any advice would be great because I am financially lost in this “transitional” period of my life.
- Max

If I were you, I’d prioritize those goals you have according to the specifics of your current life situation.

Since I don’t know all the details, I can only give you my impressions based on the information I have. I would probably save a small emergency fund first, perhaps $500. After that, I would knock out the debts. Once that’s done, I would start saving for an apartment.

This, of course, assumes that your living situation is tolerable both for you and for the person you live with.

Q6: Credit card strategies
I’ve got a question regarding my credit card debt. It is currently at $7,500 and has a 11.79% interest rate, but is interest free for 55 days after purchasing items. My current strategy is that every time I get paid I transfer the bulk of my salary (apart from 10% which goes into a high yield savings account, and roughly 300 dollars which I keep in case something comes up that I might need cash for) onto my credit card, and then pay for everything using my credit card. I then try and spend frugally, so that I’m spending less than what I’ve paid off, slowly chipping away at my debt. My logic is that by doing this I’m avoiding having to pay off interest for my purchases, and in fact I very rarely get charged interest, because I’m constantly paying (most) things off within 55 days.

What do you think about this strategy? Is it better to just accept that I will be charged interest and begin just paying off the minimum amount each month? Or should I keep doing what I’m doing, but work harder at trimming the fat out of my spending habits?
- Serena

The idea of using a credit card for purchases but keeping the balance at zero to avoid interest is a good one. Credit card interest rates are usually painfully high.

Your best approach for this – which might be what you’re doing, I can’t tell – is to simply have online access to your credit card account. Each time you get paid, log onto that account and then issue a payment either equal to the balance or equal to as much of the balance as you can pay. If this leaves money in your checking account, good. Ferret most of that off to your savings account.

Beyond that, I’d start looking at goals so that you can start doing something sensible with your savings. What are you hoping to achieve with that savings?

Q7: SAHM transitioning to career
I’ve been a stay at home mom (SAHM) for 5 years, and am starting to think about planning to get back to work (yes you read that right – I’m taking this slow!).

My background: before kids, I worked in IT, mostly on the support side. I did tech support (+ some business analysis, training & site implementations) for a specific system for several years. When the time came to replace this system, I was on the project team to design, develop, test, implement, and roll out the new system. I was very involved in the design and test phases, with some involvement in the other aspects.

Throughout my career, I had an interest in programming. The “puzzle solving” and “create something” aspects of programming appeal to me, plus I have some natural aptitude for it. I took some community college classes, and did some study with mentors and on my own, but didn’t get beyond a basic learning level before kiddos came and I stopped working.

As I think about returning to work in a couple years (my kids are still in pre-school), programming still has my interest, and I’m seriously considering pursuing it. I would like to start learning and preparing now, as my full-time Mom schedule allows. My issue is that I don’t know where to start. There are so many specialties in programming, and I have no idea what direction makes the most sense – what skills will be the most marketable? Two areas that interest me are web development and ipad/iphone development, but really, I’m pretty open here! The style of job I’ll be looking for is one that is flexible when it comes to schedule. I want to be home when my kids get home from school, and probably won’t want full time hours.

Do you think it’s even possible to learn programming on a “part time” schedule, rather than in college classes or on the job? Is it ridiculous to think of taking on such a technical career at this stage of my life (I’m nearly 40)? Other advice? Knowing you’ve been in a programming career before, and you totally get life-with-young-kids, I really value your input.
- Katie

My suggestion to you would be to pick out an area of programming that interests you and dive in at home with the goal being to produce a product that you can show to potential employers.

Let’s say, for example, that you’re looking at iPhone app development. Start learning that at home. Get the dev kit and start making applications on your own. Come up with a project that you think people might actually want, code it, then get it listed in the iTunes store.

If you build a small portfolio of these types of things – and you can do the same thing with websites, etc. – you can not only use that as part of your resume to demonstrate current skills, they may become revenue generators on their own.

Q8: Investing with risk
Where do you find a “high-risk” place to invest? Please do a newsletter on risk opportunies. I saw what you said about index funds. Did you mean that?
- Clay

“High risk” is a relative term. Loaning my deadbeat cousin $50 is an extremely high risk investment.

If you’re looking at investments that investors typically make that are considered high risk, you’d probably be looking at things like stocks in individual companies (which you can buy at online brokerages like E*Trade), index funds of stocks from emerging markets (which you can also buy at such brokerages, but also from low-cost investment houses like Vanguard), or precious metals. All of these things are extremely volatile. All of these things can see 50% returns in a single year – or 90% losses in a single year.

Usually, when you buy such items, they’re balanced by lower-risk items. You might buy an index fund of a huge range of domestic stocks (which might have a 20% return possibility or a 40% loss possibility in a single year, with the upturns being more likely) or simply keep money in cash (always returns about 1%).

If you have, say, 50% of your money in cash, 20% of your money in domestic stocks, and 30% in foreign stocks, you are hedging your risk while also being on board for any periods of exceptional returns.

Q9: Organizing tax-deductible expenses
How do you track your tax-deductible expenses during the year, to make things easier in filing your taxes? I tuck relevant receipts in a folder during the year, but at tax time it takes a few days and lots of piles in the living room floor, to organize and itemize everything. Our itemized expenses include things on our charge statement, checks written, automatic bill payments through our bank, direct deductions from our checking account, etc. Also, I’m self-employed, so have office expenses, and more to track and deduct.

I’ve bought Quicken and installed it, but haven’t taken the time to figure out how to make it work for me. Do you use Quicken? Or how do you organize your expenses to make tax time easier?
- Ann

I usually use envelopes to track my tax-deductible expenses. I keep all of the receipts in a big manila envelope so I have them all in one spot when I do taxes the following spring.

If I need special notes with anything, I just write the note and attach it to the receipt with a paper clip.

I don’t use Quicken at all. I use Microsoft Excel for budgeting and use TurboTax for tax filing purposes.

Q10: Meetups
I noticed that in a recent reader mailbag you seemed to be avoiding an obvious opportunity for a reader meetup at that convention you’re going to. This seems to me to be either really egotistical or really poor self-promotion. Why wouldn’t you do this?
- Kevin

For starters, I’m not really a self-promoter. I’m not into doing this to make myself into some sort of guru who sells people on stuff or that people follow blindly and angrily defend no matter what.

So why don’t I do meetups and the like? The biggest reason is that most of the interactions I have with people are one-on-one interactions. They tell me some very private things about their lives and because of that, I’m able to help them. The mailbags are a taste of this, but they’re anonymized. You can’t replicate that kind of relationship in a face-to-face group setting with people you don’t know. I regularly meet up with people one-on-one for various reasons and I’m doing so at that convention. I just don’t think what The Simple Dollar talks about translates well to a room full of strangers.

I do sometimes meet readers one-on-one. I do this because I know that usually they’ve got something that they’re trying to work through or else they wouldn’t be trying to meet up with me, and in a one-on-one meeting at a coffee shop or something, they’re likely to spill the beans and talk through it.

I can actually help someone else that way. At a big meetup, the only person I might help is myself, and that’s arguable.

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.

What you see above is one of my sandals that’s beginning to (finally) fall apart.

I’ve been wearing this same pair of sandals during the summer since 2003. They’ve went on vacations with me. I’ve worn them on walks through parks, strolls around the block, and countless other activities. They’re older than any of my children.

These shoes are actually falling apart due to wear. I’ve worn these shoes until they were falling apart.

I couldn’t be happier about it, either.

An item that is falling apart from wear is the best sign of a great purchase where the buyer got a lot of value for his or her dollar. This pair of sandals, bought for $20 eight years ago, has provided footwear for nine long summers. That’s an incredible bargain. The cost per hour of usage of those sandals is incredibly low.

I tend to use the cost per hour of usage metric on as many things as I can. For example, a book is worth buying (to me) if I’m going to read it multiple times and reference it in addition to that, which creates a very low cost per hour for that book. If I’m just going to read it once, I’d rather check it out from the library, which still has a cost per hour, but a very low one (the cost of going there, essentially).

The problem is that we purchase so many items we purchase that we never use enough to wear out or use enough to make the cost per hour of use sufficiently low. I’ve certainly done plenty of this in my own life: purchasing items, using them a few times, tossing them in storage, and selling them at a big loss (or giving them away) later on.

What sets these types of purchases apart? How do I know that I’ll get enough value out of this item before I buy it?

For me, the biggest part of the equation is that the purchase is well-considered. Impulsive buys tend to be the ones that I don’t use enough to wear out or reduce the cost per hour to a very low point. That’s not to say that spontaneity isn’t occasionally fun, but I find it’s almost always better to be spontaneous with experiences rather than purchases.

Simply put, if the purchase is significant at all, I research it first. I get a strong sense as to whether or not I’ll actually use the item a significant amount and I make an effort to choose items that will have a long lifetime. These two factors together tend to drive the cost per hour of use down quite low.

When done collectively with all of your significant purchases, buying things with the intent of wearing them out ends up saving you a tremendous amount of money.

These old shoes will be laid to rest soon, but I’ll have no guilt when I throw them away. I used them well and got every penny of value out of them.

One activity my family does quite a lot during the summer is go camping. We’ll head to a state or national park, pitch a tent for a few days, spend all day outdoors roaming around in the woods or swimming in lakes, then eat a meal prepared over a camp fire and crash in a tent all night.

The nice thing is that with my flexible schedule (I can write almost any time when I’m awake and almost anywhere I am with my laptop) and with my wife on her summer teaching break, we have a lot of flexibility when it comes to camping trips. It’s a lot easier to find a good campsite on a weekday than on a weekend, after all.

The Cooking Learning Curve I think many people who don’t cook at home and instead eat out or get takeout for every meal are people who are frustrated by the learning curve of cooking. The truth is that the learning curve has more to do with who teaches you and the approaches you take than anything. If you start off trying to make coq au vin after having never prepared a dish in your life, it is going to be a disaster. That’s a bad approach, and it’ll keep you from enjoying the pleasures and the savings of cooking at home. (@ saving advice)

When Being Who You Are Challenges the Norms All of us do something that challenges the norms. Often, merely being frugal does it. The question is how we handle our relative uniqueness in a public setting. It’s almost always a bad idea to use it as a weapon to force others to match us, for example. (@ zen habits)

The Costs and Savings of Bicycle Commuting When I was in college and lived off-campus, I often commuted on a rusty old bicycle. One of my best memories of college was riding around on it in the middle of a bone-soaking rainstorm, celebrating a personal achievement of mine. Bicycling for a commute certainly can work. (@ get rich slowly)

Trying to Get a Handle on the Value of College The value of college is directly proportional to what you put into it. If you sit in the dorms goofing off all the time, you’ll probably not get a lot of value out of it. (@ free money finance)