A few weeks ago, I put out a call on Twitter and on Facebook for detailed posts that people would like to see. I got enough great responses that I’m going to fill the entire month of July – one post per day – addressing these ideas.

On Facebook, Joan wondered “What do you do when your financial goal seems out of reach?”

Goals that feel too out of reach are certainly a challenge. They can leave the goal-setter demoralized and feeling as though the goal will never really be accomplished, so why try at all.

I’ve fallen into this trap myself, often with fiction writing. I’ll have some great ideas for a fictional story, but when I sit down to write it, the story feels too big and the writing task just too immense to really tackle it at all. The sheer scope of it scares me away from even starting.

For others, goals such as eliminating all of their debt, starting a business, or having and raising a child can take on that particular flavor of out-of-reach hopelessness. I’ve found that there are seven techniques that really help me in dealing with my out-of-reach goals (and have helped me make some amazing progress on my fiction writing).

I’ll talk about these goals with the perspective of a recent goal-oriented experience of mine: working on my fantasy novel.

Embed yourself deeply with people who have achieved what you wish to achieve
Make friends with them. Spend time with them. Read their books and their blogs. Listen to their audiobooks and radio shows. Know their experience of succeeding in this area as deeply as you can. This not only will help you to believe that it’s possible, but also give you an abundance of techniques for making it possible.

Over the years, I’ve read countless books on the art of novel writing and follow the blogs and Twitter feeds of many of my favorite fiction writers, including Neil Gaiman and George R. R. Martin. They provide a constant reminder that it is certainly possible to take the dreams and ideas and world you’ve conceived in your head and convert it to the printed page.

Shrink the goal down to a milestone that’s not quite so immense
Instead of focusing on paying off all of your debts, focus solely and exclusively on paying off whatever debt comes first in your debt snowball. If you’re focused on saving for a down payment, focus instead on the next thousand dollar milestone – $1,000, $2,000, etc. Using smaller milestones as your focus point makes it all seem that much more reachable.

For my writing, by focusing on a plot outline or a single chapter at a time, the entire project started to become more manageable. It moved me from simply thinking that the project was too big to really embark on to actually creating something, and simply by doing that, I put myself and the project in a better place.

Take baby steps every day
A goal is made up of thousands of little actions. You don’t get in shape without making the choice to exercise every day. You don’t improve your finances without choosing to minimize your spending every day. You don’t build a better career without doing your best at work each day.

For me, it was mostly a matter of committing to writing a small number of words each day (1,000 – but that’s a small number in the grand scheme of things for me). It didn’t have to be on the novel itself; that many words in character outlines and other materials are perfectly acceptable.

Reaffirm why you’re doing this
A goal without motivation is a hard one to achieve. There needs to be some sort of motivation, whether internal or external, to keep you moving toward your big goal. Without it, it’s easy to get distracted by immediate and short-term temptations. For my financial goals, I use my family as a motivator and I still usually keep a picture of my children wrapped around my credit card.

For my writing, I really get a lot of joy out of just getting into that “zone” where time seems to stand still. I try to get into that state as often as possible because I produce great material when I’m in that state and I feel great when I snap back to “reality.”

Be obsessed
It’s a lot easier to achieve a giant goal if you become obsessed (or nearly so) with it. If you’re enjoying the progress, there’s no reason not to allow it to fill up your spare time. Use your spare hours to cut your spending through frugality projects like air sealing your home. Use those spare hours to exercise or to prepare healthy meals. Use those spare hours to learn.

Whenever I find a spare hour, I usually try to either write or to read something that will inspire me to write. An open book and/or my Kindle are constant companions, as is a notebook of some kind.

Use reasonable metrics
Measuring your idea of success or failure against an incredibly long measuring stick is a recipe for failure. If the only way you can feel successful about your financial goal is if you achieve something that adds up to more than your annual income, you’re asking to fail. Instead, measure yourself by simpler things. Instead of focusing on the mountain of debt, focus instead on measuring how much less you spend than you bring in each month. By measuring this (and using previous months for comparison), you push yourself into actions that naturally move you toward the giant goal you want to achieve while also keeping things real.

My reasonable metric is word count for a month versus earlier months. I try very hard to exceed the word count of the previous month by just a few, which keeps pushing me to put my pen to paper (or my hands to the keyboard). I don’t worry about completing a novel or anything, as I know that if I keep up with the word count, I’ll get there eventually.

Remember that the only success that really matters is internal success
In the end, what really matters is that you’re internally happy with what you’re achieving or have achieved. If you don’t feel good about the way things are going, it’s going to be impossible to keep going. You have to have a deep positive sense both about the goal and about the steps you’re taking toward that goal.

I really, really enjoy writing and I really, really enjoy looking back at and re-reading what I’ve already written. That positive feeling is strong enough that it often pulls me along to continued future progress.

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

1. Hans Christian Andersen on what we need
Just living isn’t enough. You need a little more.

“Just living is not enough. One must have sunshine, freedom, and a little flower.” – Hans Christian Andersen

I would probably add love – both in giving it and receiving it – to that list.

2. Bokeh Snow tree branches in Massachusetts blizzard by Pink Sherbet
It is always in the peak of summer that I dream about the chill of winter.

Similarly, it is always in the peak of winter that I dream about the warmth of summer.

3. Robert Louis Stevenson on what we can’t fix
Why do we, as humans, focus so much on the things that we cannot fix and instead ignore the things we can fix?

“A great part of life consists in contemplating what we cannot cure.” – Robert Louis Stevenson

I can’t change the world, but I can change one life. If I can change one life a day, though, have I not changed the world?

4. Don’t Give Up by Peter Gabriel and Kate Bush
These are probably my two favorite solo pop musicians of the 1970s and 1980s, performing a duet.

Kate Bush’s voice sends shivers down my spine every time I hear it.

5. Kickstarter
I am often inspired by this site, where people with creative projects of all kinds are able to get them funded by their fans. I have actually considered Kickstarting my long-talked-about fantasy novel as a way to get me beyond character sketches and plot outlines and onto actually writing the book.

6. Bruce Schneier on the mirage of security online
This short presentation really lays out why I’m very nervous about sharing my personal data online.

Security is only as strong as the least intelligent person who wrote software for the system you’re using. Do you really feel good leaving your personal data out there in this person’s hands?

7. Danny Kaye on living
It’s better to do something and mess it up than to do nothing at all.

“Life is a great big canvas, and you should throw all the paint on it you can.” – Danny Kaye

This blog is living proof of that maxim.

8. Brahms Violin Concerto in D Major, Op 77: I. Allegro non troppo (First Movement), played by Henryk Szeryng
This is another piece of wonderful violin music. As always, pieces like this take me to another place.

There’s a woodwind section in the middle (at about 9:50) that just takes my breath away.

9. Victor Hugo on strength and will
Most of us have the capacity for amazing things. We just don’t have the will and sustained effort in us that it takes to make amazing things happen.

“People do not lack strength, they lack will.” – Victor Hugo

The only reason you’re not successful is because you’re not doing what you dream of doing every single day. The people who are successful are the people who are doing what you dream of doing. Every. Single. Day.

10. The Story of a Sign
It’s all about perspective.

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.

My wife and I love making “panini” sandwiches at home, even though we don’t have a panini press. We’ll experiment with ingredients, then cook that sandwich up beautifully.

This exact panini recipe is based on one from the July/August 2011 issue of Vegetarian Times, with a few twists of our own devising.

What You Need
All you need are some vegetables and some bread.

2 avocados, thinly sliced
1/2 cup thinly sliced sun dried tomatoes
1/4 cup finely diced onion
2 cups baby spinach
4 ciabatta rolls, split in half

You’ll also need just a tiny bit of olive oil.

The Night Before (or Early That Day)
As always, prep the vegetables. Slice the avocados and the onions and even the sun-dried tomatoes if need be.

Preparing the Meal
You’re essentially making a sandwich here, so slice the ciabatta rolls in half (if you haven’t already). You’ll then want to put just a bit of olive oil on the tops and bottoms of the sandwiches – the parts that will be exposed to the panini press (or to the alternate solution we describe below).

Then, layer the avocado, tomato, onion, and spinach on each of the rolls, then complete the sandwiches.

If you don’t have a panini press, get out two skillets and a few heavy canned goods. Lay the paninis in one of the skillets over medium heat, then put the other skillet on top of the sandwiches. Put some weight into the top skillet, which will press down on the sandwiches.

Cook for two minutes, then remove the heavy top skillet and flip the sandwiches. Replace the weight and cook for two minutes more. Since we like ours well done, we flipped the sandwiches again, placed the weight back on, and cooked for two more minutes.

We served ours with homemade yogurt on the side. To give it a bit of a sweet flavor, we added a spoonful of strawberry jelly to the homemade yogurt and stirred it up until the jelly broke down into small specks and the yogurt took on a pink hue.

Optional Ingredients
Paninis are incredibly flexible: all you do is add the ingredients you want. Meats, cheeses, vegetables, condiments, breads – just make it how you like it, then press it while you cook it. It’ll be delicious.

A few weeks ago, I put out a call on Twitter and on Facebook for detailed posts that people would like to see. I got enough great responses that I’m going to fill the entire month of July – one post per day – addressing these ideas.

Julia on Facebook asks about “Good ways to make money on the side or as a stay at home mom.”

There is essentially infinite ways to make money on the side. The only way to really narrow down that list is to start putting some restrictions on it, which Julia does very quickly with the second part of her question. So, for starters, let’s look at the requirements of a stay-at-home parent.

SAHM Requirements
Here are some of the requirements that tighten down the options for a typical stay-at-home parent to earn money on the side.

Flexible time This is the biggest reason why people choose to become stay-at-home parents: the time flexibility. They want to be there for their children during the day and engaged with them. However, there are naptimes and there are times after spouses come home from their jobs where they can engage in “me” time or in employment time.

Limited space Typically, stay-at-home parents have at least some tightness on the space available in their home environment and usually can’t afford storefront space or even significant storage space.

Limited startup budget Most stay-at-home parents face limited cash resources that they can invest in getting a side business going. After all, stay-at-home parenting inherently means a single-income family.

Income Options Meeting Those Requirements
Even with these restrictions, there are still a multitude of options for stay-at-home parents who wish to earn a side income. Here are some of the more popular options that I’ve actually seen stay-at-home parents have success with.

Blogging and/or freelance writing There’s a reason that you can easily find an army of “mommy blogs” out there. Blogging about parenting concerns is a perfect business for a stay-at-home parent which works particularly well because you can directly involve the children in the typical article creation process. To do this successfully requires a bit of a business approach, however, and will definitely take some startup time. Another approach that can scratch the same itch and provide more immediate (but less long-lasting) income is simply engaging in freelance writing. One good place to start is freelancewritinggigs.com.

Child care Multiple stay-at-home parents I know engage in some degree of child care. They take in the children of a neighbor or friend for some fee during the day. In other situations, a small group of stay-at-home parents will rotate their children among different households during the week, giving the stay-at-home parents a free day or two a week to have a limited part time job.

Home economizing I know several stay-at-home parents that focus their energies on home economizing, which minimizes every dime of income actually spent. They’ll maintain a garden, engage in projects like air-sealing their home, prepare and freeze meals in advance, carefully plan their grocery shopping trips, and search for great free activities for their families to enjoy. They’ll research all product purchases to find the best bang for the buck and put effort into making handmade gifts as well. These actions can shave a tremendous amount from the monthly spending for a family.

Social media representative Two different stay-at-home parents I know work as social media representatives for local businesses. They’ll set up Twitter and Facebook accounts for these businesses and maintain them for a small fee, making the customer interaction as easy as possible for the harried small business owner. In exchange, they’re often paid a small fee or sometimes paid in discounts or coupons for the business.

Freelancing Two other stay-at-home parents I know engage in part-time freelance work in their previous career path (one in graphic design and one in computer programming). Most of these gigs are standalone projects that they’ve found by developing their own online resume of their work and seeking out opportunities on their own using the contacts from their previous career and within their community.

A few things to avoid If you see a system advertised that will help you make great money from your kitchen table, avoid it. Often, it simply places you in the middle of a multi-level marketing scheme that’s difficult for a person without extensive networking skills to make a lot of money at. Alternatively, the plan requires a ton of time investment to earn significant money, time that is better invested elsewhere. If someone is going to set you up with a moneymaking opportunity, they’re the ones that are going to make the money here, not you.

A few weeks ago, I put out a call on Twitter and on Facebook for detailed posts that people would like to see. I got enough great responses that I’m going to fill the entire month of July – one post per day – addressing these ideas.

Edward on Facebook asks “How about a small list of justifications and excuses people make for not getting their finances in order or for buying crap they don’t need?”

I started just making a list of the common ones I hear and came up with a fairly round number of twelve (after merging the ones that were essentially the same). You’d be surprised how often I see these excuses right in the emails of people looking for personal finance help!

“I have too many other important things to worry about in my life right now.”
Great, but that doesn’t mean it’s a good idea to ignore your personal finances. Quite often, people mention this as a reason to not cut one drop of their spending, which is strange because many spending cuts often save time.

When I stopped visiting my favorite bookstore twice a week, not only did I start spending less, I found myself with more time to actually enjoy things in my life. If you have so many important things in your life that you can’t worry about your basic finances, then you have another problem beyond your finances: a time management problem.

“Money is too hard and I’ll never understand it.”
Take it slow. Learn in bite-sized chunks. No one ever said you have to learn everything today. Start off with what you know. Ask one question about it that you don’t know the answer to and would like to know, then learn about it. If you’re confused, back down to basic meanings and information.

It’s really no different than learning about any new topic. Ask questions, find answers to those questions, and ask more questions at your own pace. You don’t have to learn everything in one gulp, and almost everyone can learn about any topic if they learn at their own pace in chunks small enough for them to mentally digest.

“The communists/Republicans/Democrats are trying to destroy the U.S. dollar.”
Global conspiracy theories are not a good reaon to completely ignore your finances. I’ve actually had multiple readers write to me stating that they’re just racking up debt like there’s no tomorrow because the collapse of such banks is inevitable due to inflation.

Let me make it very clear: your explanation for ignoring your current finances should not involve Woodrow Wilson. If it does, you need to turn off the radio for a while and get reconnected with the reality of what’s going on in your life.

“You never know what will happen tomorrow, so you need to live it up today!”
And then you wake up tomorrow to find that you have a child, live in a tiny apartment, and have so much debt that you can’t pay your monthly bills. That’s exactly what happened to me.

It’s easy to delude yourself into thinking tomorrow has no consequence, but the truth is that if you follow that philosophy, you fill tomorrow with restricted options and misery. If you overspend today, you’re only really making tomorrow miserable, which is a really bad option if your overspending today is for things you don’t really need.

“Don’t tell me what to do with my money, you busybody!”
When you read personal finance advice and feel as though your privacy is somehow being invaded, it’s not. It usually actually means that the advice is hitting a nerve in your life and instead of being angry and rejecting it, you should appreciate it and use it to evaluate that portion of your life.

Unless someone is directly speaking to you about your specific problems, they’re not being a busybody. Instead, they’re relating tactics that work in general or, at the very least, work for them. If you’ve provided information to that person asking for advice and they’re giving you advice based on the information you’ve given them, they’re not being a busybody, either. They’re doing exactly what you asked, even though you’re not liking what they’re saying.

“The advice given does not perfectly match every aspect of my life, so it must be useless.”
No advice is going to perfectly match every aspect of your life unless you hire someone to tell your complete life’s story to and give deep exposure to your personality to over a long period of time. Your spouse might not even be able to give you perfect advice on a situation.

Thus, if you’re in this boat, you must believe that all advice is useless, which makes me wonder why you would ever seek any form of advice on anything.

“Frugality is boring. I need some excitement!”
There are plenty of exciting and interesting things to do for free or for little money. The challenge is that most people are so attuned to being consumers that not being a consumer feels boring to them.

If you feel bored without spending money, you need to ask yourself whether it’s the activities you enjoy or whether it’s a psychological addiction to the act of spending and acquiring. For many people (myself included), spending can be a psychological addiction, and denial is a powerful response to threats to that addiction. Since frugality is a threat to reckless spending, denial is a perfectly reasonable response to a psychological addiction to such spending.

“How am I supposed to get my money in order when all my friends spend like maniacs?”
The problem here is with your social circle, not with personal finance advice. If you choose to keep running with these people, you choose to also spend beyond your means.

Get some control over yourself. Evaluate those relationships and ask if they’re really adding a net positive to your life. If you’re drowning in debt and they’re pulling you even deeper, they’re most likely not a net positive in your life. This means it may be time to reboot your social circle. Any time your friends are dragging you into a dangerous place, it’s time to look for new friends.

“The debt I’m in is just too big to think about.”
This is denial in the classic sense. They’re fully aware of the problem, they just choose not to think about it. The end result of this is not a magical resolution to the problem. In fact, it’s just an assurance that things are going to get still worse.

If you feel like you can’t get your hands around the problem, you need to change now. If you need help, ask for it from friends or family or in the Reader Mailbag columns here at The Simple Dollar.

“Oh, my spouse takes care of that. I just spend.”
Having someone else handling the day-to-day money management for you is not an excuse to not understand your family’s financial state. In fact, if you’re trusting that day-to-day management to someone else, you absolutely should be on some sort of “allowance” so that you’re not wrecking your family’s finances with your spending choices.

Be informed. Have some money meetings with your spouse so you understand where your family is at and where your family is headed. Talk about goals and understand how challenging they are to get there and how your spending is actually affecting those goals. You don’t have to understand numbers to understand these things.

“I don’t know where it all goes! I just look and my bank account is empty! It’s not my fault!”
Pleading ignorance is not an excuse for having no control over your money. You have bank statements, credit card statements, PayPal statements, and other sources to tell you exactly where every single dime of your spending goes. Sit down with these and they’ll tell you exactly where your money goes.

Often, this excuse means that you don’t want to know where your money goes and that if you don’t know, you don’t have to take responsibility for it. Buying into that mindset guarantees a never-ending financial disaster for the rest of your life and, the longer you stick with it, the longer it’ll take to dig out of your hole if you ever do decide to face it. The sooner you get in control, the sooner you’ll be out of the danger zone.

“I’ve already cut my spending to the bone! You want me to cut HBO and my gym membership and my unlimited data plan, too?”
Often, people cut one minor thing in their life and convince themselves that they’ve cut an extraordinary amount. They reduce their Netflix account and it’s the end of the world and evidence that cutting spending is impossible.

Nonsense. People trim and eliminate bills all the time. Go without cable. Go without a cell phone. Downsize your house (or other living quarters). It’s not the end of the world to make a change in one area of your life in order to improve other areas of your life. People do it all the time. I certainly have.

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. Dealing with no credit
2. Handling changing mindsets
3. Spousal disagreements over budgeting
4. Car loan payoff
5. High pay, hate my job
6. House financing question
7. Running for school board
8. Career choices
9. Starting a side business
10. The future of the penny

The dog days of summer are here. That means sun tea, getting really sweaty outside, dry grass, occasional big and noisy thunderstorms, wonderful trips to the pool and to the lake, and falling to sleep with the noise of the ceiling fan.

Q1: Dealing with no credit
Bad credit due to bankruptcy 10 years ago (gone from credit report now). I have no debt and as a result no credit. Grandfather signed for the 2006 car that I drive now. Car is worth ballpark 4k and just paid it off. Now I’m trying to establish credit. When I talked to a loan officer about financing a car last fall the lady pulled my credit history and said “where have you been?” 1 of the 3 reports didn’t even have a score for me :-) I guess that’s a good thing depending how you look at it. Anyway, I have credit cards now and that is helping my score but I’d like to get a car loan in my name. I’ve suggested to a local credit union that I purchase a $1,000 CD and use it as collateral for a $1,000 loan on my car. I realize that i’m going to end up paying for my credit score with the interest I pay the credit union but that’s a price I’m willing to pay. Here’s my question (finally!), I was thinking keep the loan for max 6 months and pay it off. Loan officer is telling me that in order to build my score I need to keep the loan for at least a year. I’ve tried to google research this and I’m coming up with nothing. Is this loan officer just trying to get a little more interest out of me or is there truth to this “at least a year” statement?
- David

It’s really difficult to say. I think keeping it for longer would have a slight positive effect, but not an enormous one.

The problem is that the formula for calculating one’s credit score is not public knowledge. All that’s known are the general guidelines provided by Fair Isaac (the company that developed the formula). They describe five factors in general terms:

How you pay your bills (35 percent of the score)
Amount of money you owe and the amount of available credit (30 percent)
Length of credit history (15 percent)
Mix of credit types (10 percent)
New credit applications (10 percent)

I’m guessing that having the loan will boost your mix of credit types, but that boost may drop when you pay it off, which is where the loan officer’s advice is coming from. However, I don’t think it’ll have a tremendous impact either way.

Q2: Handling changing mindsets
My husband and I got married two years ago. Neither of us had student loans or any credit card debt. My car was a gift from my parents and he had a loan for his car, which we promptly paid off with part of a trust that his grandfather set up for him when he was born. With the rest of his trust, as well as some other savings, we put a down payment on a single family home. We have less than $500 in debt, on interest-free credit cards from buying new glasses and a suit. It will be paid off before the interest-free promotion ends. We make extra payments of $300 (sometimes more) on our mortgage every month to increase the amount of equity we have so that we can get rid of our PMI earlier. We have about $15K in a CD as an emergency fund, and about $10K in savings. My husband has a 401K and a pension plan from work, and I’m opening a 401K this year (I was in school until recently). We both have life insurance policies. We’re in pretty good financial shape for 27 year olds.

But here’s the problem: we can’t get out of our youthful mindset. We both came from families who worked hard to give us everything we wanted- so we’re used to getting what we want. If we want a new camera, we go buy it. If we want to renovate our kitchen, we do it. I’m a bit of a shopaholic (although I really only buy things on sale or used- I definitely buy too much!) and he loves college football and will spend over $1.5K a year for tickets, travel, etc.

We’d like to have kids soon and begin saving for the costs of children as well as saving for their futures so they can start out the same way we did. But we’re finding it very hard to get out of spending habits and we-have-the-money-why-not-spend-it mindset. Do you have any advice for how we can change our ways? Any book recommendations? I don’t feel like the normal “save to reduce debt” ideas apply because we don’t have the burden of debt weighing on us. Thanks for any advice you can give!
- Jennifer

I don’t think any book can really help with your situation. You know what the problem is – you overspend on “wants.” You know what the solution is – spending less on “wants.” It’s up to you and your willpower to make it happen.

One method you might want to try is automating your savings right out of your checking account. Open up a savings account at another bank (like an online bank such as ING Direct) and direct them to automatically withdraw a small amount from your checking account each week. This alleviates you from the responsibility of remembering to save each week and having to make the choice to save.

The biggest factor here is simply personal growth. The more time you spend thinking about what you truly want from life, the more such inconsequential purchases begin to fade into the background as they become completely unimportant.

Q3: Spousal disagreements over budgeting
Do you and your wife ever disagree over budgeting? My boyfriend is a pretty frugal guy (doesn’t care about nice clothes, or cars, even thinks we can downgrade our one bedroom apartment to something less expensive), but is stubborn about certain things. I’d like to get rid of our cable as I feel we spend more time watching netflix and hulu and basic cable channels, but he disagrees. We spend a total of $161 for cable (we get only basic cable, no movie channels), phone and internet and my estimation is that if we cut the cable it would probably save us about $70 a month. What do you and your wife do when you disagree about cutting something from your budget or not?
- Kat

My wife and I budget in a pretty flexible fashion. We generally agree on certain bills that we both use – electricity, cell phones, the mortgage, and so on. Beyond that, we each have an informal “allowance” of sorts that allows us each to spend a certain amount each month on whatever we choose to spend it on.

As long as we each stick within our “allowance” (or stay close to it), there’s no problem. We each have separate interests that we maintain.

So far, there really has been no conflict with this arrangement, at least not in several years. We’re both happy with the arrangement.

Kat had a second question.

Q4: Rapid car loan payoff
Should I try to pay off my car loan faster? From everything I’ve read on your site I should be paying all debt down as soon as possible. However, I’ve also read that having a car loan (as long as you are making all the payments on time) can actually look good when you are applying for other loans as having “diverse” credit is good for your credit score. If I’m planning on getting a mortgage in 3 years or so, is it better to have a car loan that I’m consistently making on time payments on (which will at this point have a pretty low balance), or is it better to have no loan like that at all? I should note that the monthly payments are doable for me, barring an emergency, there is not any reason I should ever have to be late on a payment.
- Kat

If you’re looking at nothing but your credit score, it is perhaps slightly better to have a diversity of credit sources on your credit report. So, in that narrow sense, your plan makes sense.

However, in terms of looking at your finances more broadly, it’s not a good move. Paying off your car loan as fast as possible puts more cash in your hand that you can use for a down payment or for closing costs if you decide to get a mortgage.

The only situation where the credit score might trump this is if your credit score is really marginal and could use any little boost it can get. If your credit is mostly good (or better than that), you’re better off minimizing your debt and avoiding future debts.

The best solution, if you’re worried about this type of thing, is to just request manual underwriting for your mortgage when you apply for it. Manual underwriting means someone actually looks at your credit report and your situation before deciding whether to lend to you or not, so you’re probably better off in that situation paying off your car early and having some cash in hand.

Q5: High pay, hate my job
I currently work as a Technical Service Engineer at a top chemical company. I have worked here since October 2010 and did similar work for 5 years prior to that. I make a salary of $77,000 a year and support only myself ($765 rent payment, $210 car payment, utilities, etc). I live very comfortably and am able to save $400 a paycheck. I have been going to school since January 2009 to become a secondary math teacher. I currently live in Philadelphia and my boyfriend lives in Pittsburgh. His income is less than $30,000 a year but he owns a house (mortgage $700 a month including taxes and insurance). I have to quit and student teach Fall 2012 at the latest due to changes in teaching requirements. I am considering moving back to Pittsburgh earlier and student teaching Spring 2012. I need help figuring out what I should do financially. I have about $25,000 in savings. If I stick it out at my job until March 2012 (which would leave me enough time to go straight into student teaching) I would get a 15% bonus, but I would pay an extra 6 months rent (I can only sign a year lease). I can leave this October and get 25% vested in my 401K match and not have to pay any extra rent. I am really torn because I will likely not make this much money again soon in my life, but emotionally I am not interested in my job or in living away from my boyfriend.
- Christina

You’ve got the traditional dilemma of choosing between money and other life needs. It’s a call that everyone eventually has to make in their life, and different people make different choices.

From my reading of your note, my impression is that you’re leaning towards the personal side of things. If that’s where your heart lies, go for it.

Never forget that personal finance makes your life possible, not life making personal finance possible. You have $25K in savings and are heading right into a career that you want and a life with someone that makes you happy. You’re in good shape.

Q6: House financing question
I currently have a FHA 30 year fixed loan at 5.5%. I bought my town home two years ago. Since then interest rates have dropped including my house value. I called about refinancing to a lower 15 year fixed mortgage and wanted to know some your opinion. One mortgage provider I called said there is a streamline loan through FHA that I can get a lower interest rate as long as I’m up to date on my mortgage and it was an original FHA loan. The mortgage provider said my house was worth about 97,000. the stream line loan doesn’t require an appraisal so I can get the loan for the original amount of 105,000. He said I would need to bring the closing cost, 2600, and the application fee of 400, to the table when I close. My estimated new monthly payment would increase to 934, right now i pay 700.

So…
1) would this be a good choice if my wife and I plan on living here for at least 5 more years?
2) when i originally qualified for the mortgage I was single now I am married and we make about 4500 a month after taxes. would we qualify for the streamline FHA loan?
3) the only debt we have aside from the house is about 27,000 in student loans.
- Nathan

If I understand correctly, you’re saying you would move from a 30 year to a 15 year with lower interest and somewhat higher monthly payments. That loan seems like a good option, especially if you’re going to be living there for a while.

From what I understand of the FHA streamline requirements and what I understand from your story, there’s no reason you wouldn’t be qualified for it.

If I were you, I’d go for it.

Q7: Running for office
I live in a community of about 7,000 people. I am considering running for school board. This is a contested election without party affiliation.

How do I go about winning this election? I know you’ve dabbled in local politics. I’m just not sure where to start.
- Ellen

In a community of that size, your best bet is probably to simply get to know people. Name recognition is enormous in such elections.

If I were you, I’d figure out why I wanted to be on the school board. What are your key issues? Why do you have that stance on those issues?

I’d then literally go door to door in the evenings, knocking on doors and introducing yourself. Take flyers around with you so that they remember you. Be sure that, beyond introducing who you are, that you ask if there are any issues they’d like to see before the school board. Carry a notepad and a pen with you and write down things you learn along the way.

I’d also be sure to be present and as social as possible at any community events between now and then. Talk to people. Get to know them, and let them get to know you.

Q8: Career choices
I’m currently working as a System Administrator and Supervisor. I make a decent amount of money, but I only took this job because I know I’m good with computers and needed the money. The problem is I really don’t like computers. I mean… they are ok, but I’d really rather not. I’m a hard worker and I’ve gotten promoted several times in the last couple years and even doubled my income there. With my current skill set, it would be difficult to move up any further though. I would need to take a few classes, each at around $500-$900 each, and if I wanted to go even further up the chain, I would look into getting a BS in computer science or networking. Whatever career path I suppose I’d want to take, but as I said, I’m mildly interested and I’d rather not.

What I really want to do is be a firefighter. A total 180 in career choice. I like the duties and awesomeness of the job, the variety of work, and the schedule. The money is about the same starting compared to where I currently am; although, it doesn’t get too much better after that, but I’m not really worried about it. Unfortunately, I’ve been trying to get hired for the last three years; although, one of those years, I had to jump out of the application process because I was pregnant! The application is a long process (6-9months) with a slim chance of getting through. About 1400 people apply for about 20 or less spots. Obviously, the odds are against me. I get most of the way through the process to about the last 40 people every time but don’t make it past the last interview. I live in a metropolis where there’s about 7 different companies I can apply to, so I do about 3 simultaneous applications a year, which is a pretty common practice. I know I can greatly increase my chances and most likely make it if I took EMT classes toward becoming a paramedic. This can cost around 900$ just for the basics and takes a lot of hard work. And if I do make it, I’d have to hope to pass through their 3-4 month academy. I’d have to quit my current job to do this academy, and if I fail out, I’m without a job. The pass rate is normally 80-90%. Then after that, I have to worry about layoffs, which is pretty popular nationally due to the government spending cuts. I do have enough saved to get me through a decent period of unemployment, I just wouldn’t like it.

So my question is this, do you think I should increase my skill set with my current job in a field i don’t really care for although tolerable, it’s pretty stable, I’m really good at it, and I’ll most likely double my income again with further education or do you think I should I increase my skill set for a job I might get and hope to maintain but would really love to have. I don’t have money or time to do both, and the firefighter thing is kind of age dependent. The older I am, the harder it can get physically. My husband would also like another child soon, but we can’t even think about it until I decide if I still wanna go for it. Granted, he’s also fine to not have another child. It’s really up to me. So yeah, just wondering what you would suggest?
- Randy

The only thing holding me back from saying “go for it” is the presence of a child in this scenario. The career jump you’re describing is incredibly risky and provides some dangers for your ability to provide long-term care for that child.

I’m not talking merely about the risks of being a firefighter. I’m talking about the economic risks inherent in the path you’re describing. You’re going to take a big income hit and a big job stability hit with that switch.

If you were without dependents, I would absolutely encourage you to take the leap. Given your situation now, though, I’d probably encourage you to take the safer route. It’s not just you that’s involved here.

Q9: Starting a side business
I’m a software engineer, and I’ve been thinking about writing a web application and seeing if I could get that going as a small side-business. I’m comfortable with the technical aspects of doing something like this; it’s the other aspects I feel like I don’t have a clue about. Do I just come up with privacy policies and terms of service by myself? Do I need to ‘create’ the business in some official way? I guess mostly I just feel clueless about the process of starting your own business, and was hoping you could shed some light on the process.
- Sarah

My experience with creating EULAs is that the organization that I was involved with essentially read the EULAs of several respected software packages and more or less cribbed their text as a starting point. They then took this document and had a lawyer review it, which was much less expensive than having a lawyer write it.

As for starting a software business, this is the type of business that has the advantage of having rather low startup costs. You can easily start work on it in your spare time, just to see if anything comes of it.

If I were you, I’d start as a sole proprietorship – no paperwork needed. If you actually begin to create a real product, then I’d consider forming a business. Don’t bother until you’ve created something of worth, though.

Q10: The future of the penny
Do you think the penny will continue to be made in the future, considering that it costs far more to make a penny than it’s worth?
- Vince

If I were President, the penny and the nickel would vanish. Instead, we’d merely round everything to the nearest tenth of a dollar. The exception to this would be online transactions, where cents could still easily be recorded.

What will they actually do, though? My suspicion is that they’ll keep making and using pennies until they’re absolutely deprecated. This has been the policy with past currencies such as the halfpenny and the farthing (a quarter of a penny) in various English-speaking countries.

Why not do it now? I think there’d be resistance to eliminating it and I think that resistance without a real reason for it is why we’ll still have the penny for a while.

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.

A few weeks ago, I put out a call on Twitter and on Facebook for detailed posts that people would like to see. I got enough great responses that I’m going to fill the entire month of July – one post per day – addressing these ideas.

On Facebook, Alyssa asks “Is it worth investing in a washer & dryer or is it more economical to use a laundromat?”

Few people would argue that, over the long run, a washer and dryer will save you money. The question really comes down to how long that long run really is. Let’s take a look at some real numbers and see what we find.

The Raw Data
First of all, let’s look at basic costs for a laundromat.

Cost to travel to and from laundromat: $1 per trip (this is highly estimated, but there is some cost involved here)
Number of loads per trip: 8 (Again, estimated)
Cost of washer load at laundromat: $1.50 (I called three different local ones and averaged)
Cost of dryer load at laundromat: $1.50
Cost per eight loads of laundry at laundromat: $25
Cost per load at laundromat: $3.12

What about the basic costs of a home washer and dryer? This varies a lot based on how you use your washer and dryer.

Energy cost per washer load: $0.04 – $0.68, averaged at $0.36 (source)
Energy cost per dryer load: $0.31 – $0.49, averaged at $0.40 (source)
Water cost per washer load: $0.11 (40 gallons per load, using this chart)
Cost per eight loads of laundry at home: $7.76
Cost per load at home: $0.97
Savings per load at home (excluding equipment costs): $2.15

Now, let’s talk about appliance costs and lifespans. Using this data:

Average washing machine cost: $700
Average clothes dryer cost: $600
Lifespan of washing machine, one load per day: 9.5 years
Lifespan of dryer, one load per day: 11 years
Cost per load for average washing machine: $0.20
Cost per load for average clothes dryer: $0.15
Cost per load for average equipment: $0.35
Savings per load at home (including equipment costs): $1.80

One final factor – recouping the cost of the equipment:

Total equipment cost: $1,300
Savings per load at home (excluding equipment costs): $2.15
Number of washer and dryer loads to recoup washer and dryer cost: 605 loads

Conclusions
The break-even point on having an average washer and dryer in your home is around 600 loads, according to my calculations. There are lots of areas where one could quibble with the numbers used in the calculation, but no matter how much you quibble, you’ll end up with an estimate somewhere reasonably close to that number.

The real question then becomes how long you’re going to be living in your current residence. If you do a load of laundry each day, you’d need to live there two years to start really recouping the cost of a washer and dryer. If you wash less frequently, the time frame would be longer. We wash a bit over a load a day on average (two adults and three children), for comparison’s sake.

If you own your home and intend to live there more than a few years, a washer and dryer are solid additions. Even if you do not, a washer and dryer included with your home might recoup some of the value when you sell. If I owned a home, I would probably invest in a washer and dryer.

On the other hand, if I rented a home, I would probably not invest unless you have some form of long-term lease or arrangement with your landlord. Without that, the troubles you may run into with installing and then (possibly) quickly removing the equipment undoes the benefit you’d get.

I had two books set aside for airplane reading for a recent trip. It seemed like a good idea. Flying in an airplane is boring, right?

Try flying with three young children.

Very little reading happened.

How to Buy a Mattress A family member of mine once said that the only two things you shouldn’t skimp on are your mattress and your shoes. You rely on these things so much for comfort. (@ get rich slowly)

The Most Critical Hour of the Day The most critical hour of the day is the first hour of the day. If you nail that hour, you’ve set a great platform for success for your day. (@ pick the brain)

The Life Purpose Lie Does your life have real meaning before you find your one true purpose? Of course it does. (@ jonathan fields)

Cheap Sources for Board Games My only advice here is to be a little selective in the games that you choose. There are many games out there floating around, many with missing pieces, and many that aren’t as good as the marketing would have you think (like Monopoly). (@ pf advice)

How to Build a Square Foot Garden We are thinking of building one of these under a timered UV light in our basement. (@ frugal dad)