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, Amanda requested an article on “How to determine if you should sell stuff on e-bay, craigslist or at a yard sale and how to figure out the value.”

When I first began to right my financial ship, one of the initial things I did was to sell off a lot of items that were taking up space in my closet. I tried many different techniques for selling them off. Here are some of the most important things I discovered.

The value of your time
The most important factor in this process is the value of your time. Before you even start with the process of selling off items, you need to decide how much your time is worth.

Why? Generally, you can get a better return the more time you invest in selling an item. The methods of selling that require more time per item are generally the ones that offer a much better return per item.

What that means is that with an item that earns a higher return with more time invested, you’re essentially selling your time. If you can sell an item for $5 in a minute but it takes an hour of time to sell it for $10, you’re essentially still selling the item for $5 and also selling an hour of your time for $5.

Is that a good exchange for you? It probably depends a lot on your current financial state and the current demands on your time. For me, it would not be a good use of an hour.

Thus, before you start, you need to get a rough sense of how much your time is worth. The more it is worth, the more you should focus on methods that offer a low time investment per item, even if the return is worse.

eBay offers strong returns but takes lots of time per item
Setting up and managing an eBay auction takes time. You have to set up the basic auction listing – and the more effort you put into it, the more reputable you seem and the more you’re likely to get from the item. You have to handle the questions that people send you. You have to handle payment. You have to package up the item and ship it to the buyer. You have to potentially handle complaints from buyers if they issue a dispute using PayPal.

This adds up to a significant time cost. At an absolute bare minimum, you’ll invest an hour of your time total on a single eBay auction if you’re an individual seller who doesn’t have an array of templates and tools to help manage auctions.

This is where the value of your time comes into question. If you can get $2 selling a used DVD at the local used DVD shop and get $7 (after shipping costs, eBay fees, etc.) by selling on eBay and investing an hour, you’re essentially selling an hour of your time for $5.

Thus, I tend not to use eBay for individual low-value items. It’s not worth it – for me – to sell an item such as an individual DVD or an older used video game on eBay. The financial return on my time just isn’t worth it.

So, what do I use eBay for?

I use eBay for pricing items. This gives me an idea of what a huge global market will pay for an item and what I might expect to get (roughly) for that same item if I were to sell it on eBay. I’m sensible enough to realize, though, that other methods of selling the item – particularly ones that reduce my time investment per item – won’t earn the same return per item.

I use eBay for selling higher-priced individual items, bundles, and box sets. eBay works well if you’re selling a bundle of items together, such as a collection of a particular magazine, a set of related DVDs, and so on. These higher priced items earn enough more on eBay as compared to selling locally that it’s worth the extra time investment. I sold quite a few DVDs in bundles of 10 a few years ago and it was well worth my time, earning me roughly $15 per hour for my time compared to selling locally, for example.

Craigslist is heavily about luck
Craigslist is another option for selling items. However, my experience with Craigslist is that there’s a lot of luck involved with sales.

For starters, the range of eyeballs on the item is much smaller than on a site like eBay. You’re largely selling locally. That means if you’re hoping to get the same return you would get off of eBay, you’re probably going to be disappointed.

My experience has been that if you list an item on Craigslist too high, then you don’t get many bites (even if you say something like “$20 or best offer,” you’ll just get a bunch of ridiculous lowball offers). If you continually re-list an item, you’ll eventually get a moderator irritated with you. However, if you price an item well right off the bat, you can usually sell it very quickly with minimal fuss.

What I usually do is try to estimate the return I would get for the item on eBay (looking for a typical selling price, then subtracting fees off of it), knock off another 25% or so, and then list it on Craigslist. Sometimes I’ll get a buyer. Other times, I won’t. If I don’t get a buyer, I move to other means.

Yard sales offer low returns but can offer very low time per item
The next step would be to sell items via a yard sale. Yard sales work very well for certain types of items – clothes, housewares, and some media – but the success you have is dependent on a lot of factors. The weather is a big one – if you have bad weather, you won’t get customers. You’re also relying on your own promotion of the yard sale: the more time you put into promoting the yard sale through signs and leaflets and newspaper notices, the more customers you will get and the more items you will sell.

At a yard sale, you’re not going to get a great return per item. Yard sales are not going to be huge money makers on each individual item you put out there, and if you price them for a huge return, you’re not going to sell the items. You have to price the items to sell.

What I typically do is start off at about 35% or so of what I might get on eBay. As the weekend wears on, I’ll slowly lower the prices on the items. For example, individual DVDs might start at $2, then go to $1.50 after the first morning, then to $1 that evening and the next morning, then $0.50 later in the second day, then maybe $0.25 near the end (after removing any individual ones I think I might be able to do well with elsewhere). I clearly post that I’ll be slowly dropping prices throughout the weekend and I’ll note that if you want the item, you should buy it now, because someone else might snipe it later before you can return.

If you have a lot of items to sell, you can easily slice your time per item sold down into very small chunks. Let’s say, for example, that you have a big pile of DVDs that aren’t going for too much on eBay. Putting them out for $2 a pop on the first day and $1 a pop on the second day will mean that you will likely sell quite a few of them. If you sell, say, 200 items at your yard sale and invest 2 hours promoting it and 18 hours running it, you’ve cut your time invested per item down to six minutes, which is pretty small. This really makes up for the lower cash return per item.

Used media buyers offer very low returns but can offer extremely low time per item
If the time investment of a yard sale (several minutes per item) is still too high, the lowest option is probably used media shops and consignment shops. Your return per item at such shops will be very low – typically even lower than you’ll get via a yard sale. However, your time investment per item will be tiny if you have more than a few items.

This is the best way to go if you simply don’t have much time at all to invest and any return on your items is worthwhile to you. I’ve certainly gone this route in the past, particularly when I was first cleaning out my closet and selling used media of various kinds.

Typically, you just take a bundle of items to such a store, they’ll price them out for you, and they’ll either offer you some amount for the entire bundle (often minus an item or two) or offer to sell them for you at some proportional rate. In either case, you walk away either with some cash in hand or the potential of cash down the road and without having invested a major amount of time in the items.

Good luck selling your items!

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. House now or later?
2. Blender recommendation
3. Long term care insurance question
4. Enjoying music at low cost
5. Protecting a family property
6. Finding the right home
7. Birthdays and charities
8. Keeping food
9. Graduate school planning
10. Found money

Several people have asked me recently if I believe in ghosts. I can honestly say that I’m unsure. I won’t say that I disbelieve in them, nor will I say that I absolutely believe in them.

I will say that I believe that there are a lot of natural phenomena here on Earth that we don’t understand and don’t have any sort of a good explanation for. I’ve witnessed several extremely odd things in my life that have no good explanation as far as I could ever tell.

I am probably willing to believe in a broader definition of ghosts, in that there is some sort of natural visual phenomenon that appears to take on something of a human form. If you start talking about reincarnation and spirits, then I’m far more doubtful.

Q1: House now or later?
I’m entering unfamiliar territory here in contemplating a house purchase. There’s not much recent info online about what it means to do it without a mortgage. You wrote recently about how specific advice changes over time given changing markets. Here goes:

My boyfriend and I set a goal to move to a different part of the country closer to our families where we felt the quality of life is better. His company transferred him in January, and I accepted a job in our new city this month. Our salaries are roughly the same, and while the cost of living is reportedly 5% higher in our new city than in our old, so far almost all of our expenses have stayed the same or decreased. We’ve been saving for a house and have a healthy down payment (a bit more than 50%) in savings accounts because we lived so long in a city where we didn’t want to sink roots. We had been thinking about buying a house when our apartment lease ends in a few months. With the housing market predicted to decline further, we’re now talking about saving up enough to just pay cash. We think we could do this fairly easily by 2013 or 2014 if we focus on that as a stretch goal. We’ve talked about perhaps contributing less to our retirement funds for a while (we have both been fully funding our 401Ks at $16,500/yr and our Roths at $5000/yr for several years). We’re in our mid-30s and neither of us has ever owned a house or had children. We are both savers, not spenders.

In doing research about paying cash for a house, it seems like the two biggest arguments AGAINST cash and FOR having a mortgage are 1) diversification of assets and liquidity – not putting all your money into a house, and 2) using the mortgage as a hedge against inflation.

If we’ll have MORE in our retirement funds than in our house fund (plus a 6-month emergency fund and a house maintenance fund), does reason 1 even apply to us? And does reason 2 matter in a declining market, or am I reading “old news”? If we buy now, we may be able to avoid rising interest rates, but we’ll likely pay a higher purchase price. If we wait until the market bottoms out, we can get a lower price and let inflation (maybe) increase the value of our paid-for house. I’m wondering if I really understand what inflation means to the housing market, and if this is a market we should try to “time”. We don’t really view home ownership as an investment, but appreciate the security of not having to make payments. We’d also appreciate not having to pay an artificially high “bubble” price. Our new city is NOT one of the foreclosure capitals and actually has a fairly stable housing market, considering.
- Stacia

There is a huge reason for not owning a mortgage: if you don’t have one, your cash flow each month is free, meaning that you can much more easily survive a job loss or other major unexpected event. If you have a mortgage payment to cover, that’s just another minimum requirement in your monthly finances.

You just can’t predict your future. It might be as smooth as your imagination makes it out to be, but it also has a strong likelihood of including a job loss or a severe illness or a major injury or even a spectacular opportunity at a lower initial pay rate (like a startup that offers equity along with salary or instead of salary).

As for concerns about market timing, it’s not something I would put too much weight into. Making financial bets based on market timing mean that you’re betting your money largely on predictions of the future. Instead, look at what you know about the future – namely, that if you have a mortgage, you’ll have more demands on your monthly finances than if you do not have a mortgage.

Q2: Blender recommendation
I’m a big believer (as you are) in trying out a new hobby with inexpensive equipment and then upgrading if you find it’s becoming a major part of your life. About two years ago, I started making daily fruit smoothies with a cheap blender I got at Goodwill. Now, I have one of these for breakfast almost every day but the blender just stopped working. I’ve poked around online for recommendations. Do you have a suggestion for a great blender for this or at least a resource to look at?
- James

I’ve owned several blenders over the years. Much as you, I really enjoy making fruit smoothies and, beyond that, we use blenders for other things, such as making salmon burgers and making mixed drinks, so a really good blender with a lot of diverse uses was the best choice for us.

While I can’t comparatively comment across a wide range of blenders, we own a Blendtec HP3A that we found on sale a while ago. I absolutely love the thing. It blends everything perfectly, from fruit smoothies to milkshakes to salmon puree to peanut butter without skipping a beat. The only minor complaint I would have about the device is that it’s loud, but you’re only going to be running it in small amounts.

It’s a great device and if you find yourself using a blender daily (meaning that a blender is a heavy-use item in your life), I highly recommend it.

Q3: Long term care insurance question
Can you explain anything about insurance for long-term-care? Is this an add-on to life insurance? Do you have to have insurance for a number of years before you could claim on it? How does it work? How much coverage is recommended?
- Chris

Long term care policies are insurance policies that kick into effect to pay for the long term care of someone who cannot complete some number of activities of daily living (usually referring to personal hygiene, dressing, feeding, transferring such as getting out of bed, continence, and ambulation) and undressing). This number varies from policy to policy, but usually a person has to be unable to complete two of these things to receive long term care. Typically, a doctor has to certify that a person is unable to complete these tasks for a period of ninety days or longer in order for the policy to come into effect.

Usually, this is purchased as a distinct policy on its own. Policies often come with fairly high premiums because typically people who are interested in such a policy tend to be facing some concern of a long term care condition in their future.

How quickly you can claim the care depends on the policy, but there is usually a waiting period of some length. As with other insurances, you’ll have to be screened first in order to set the premium price and also to determine if insurance can even be offered.

If you’re looking at long-term care insurance as a miracle that will help you pay for a long term care situation that you know is coming, it’s not going to work like that. It will be difficult to get a policy, and even if you do, the premiums will be painfully high.

Q4: Enjoying music at low cost
I’m trying to find a balance between my desire to enjoy music at a low cost along with my feeling that music piracy is wrong. What are sources for low cost music that actually has a decent selection?
- Kelly

A few options immediately come to mind.

The first one is Pandora, which essentially lets you listen to high quality streaming audio for free. Typically, it works like this: you type in the name of an artist you like and Pandora creates a station based around that artist and similar artists. As new songs appear, you vote them up or down depending on your tastes and, gradually, the station becomes more and more customized to your particular tastes. Pandora is free for a small amount of listening per month and there is an inexpensive pay service if you want to listen more than that.

Another option is Grooveshark, which functions a lot like an mp3 player inside of your browser. You can listen to the tracks you want within the service and then optionally purchase them for offline use. The selection isn’t perfect here, but it’s pretty solid all around and I can always find something to listen to.

A third option is simply using Youtube, which has tons of music videos and performances available for viewing and listening.

Q5: Protecting a family property
My 2 siblings & I will be inheriting a family cottage when our parents pass away. I don’t anticipate this happening for awhile, but I want to be prepared when that day comes along. When my father’s parents passed away, they left the cottage to my parents & his siblings. Long story short, the fund they had set up, dried out & my father bought out his siblings. Some of them were okay with this, others were not. I don’t want another buy out situation to happen to me and my sisters in the future. We’ve talked about this and all agree, that starting something sooner is a better plan than trying to catch up later. I’m thinking we’d collect about $600 a year ea. for starters and need these funds in about 15+ years. The funds would be used for taxes, utilities and upkeep around the cottage. I anticipate the mortgage being paid off when it gets handed down. Ideally, all 3 of us would have access to the account. So what I’m looking for is some feedback on what type of account would you start for these funds we’d like to start setting aside?
- Tim

Your plan sounds good except for the “all three of us would have access to the account.” This sets up a situation where you are all relying on the individual honesty of each other and that’s never a good situation.

The best situation is to put the cottage into a trust with rules defined that allow only people who contribute to the trust to be able to use the cabin. Then, set up a single person to manage that trust and make sure bills and such are paid on the cottage.

This provides a legal backbone for everyone to rely on instead of just having some account that a bunch of people have access to (which, in my experience, smells like a lawsuit in the making).

If you want guidance in doing this, contact a property lawyer.

Q6: Finding the right home
My husband and I recently started looking into buying a home. As we see places we like, but don’t love, we find ourselves wondering how much we should buy into the idea that we’ll find a house that’s “the one” and we’ll know right away versus a house that meets most of our major criteria. Lots of variables here, of course, but generally speaking perhaps you have some input? Side note: We are looking around the Greater Boston area, so the number of decent houses on the market that we can (responsibly) afford is lower than it would be in many other markets.
- Jen

The idea of “the one” relies heavily on the person doing the search. For some people, there will be a house that just clicks for them. For other people, they’ll simply see a lot of houses that match some of the features they want. I find myself in the latter camp. I don’t think there is “one” house that is “perfect” for me.

Our house search mostly involved us seeking out the house that had a significant majority of the features we wanted within our price range. When we found one that had several of the features, we struck. It’s the house we’re living in now. Is it “the one,” the house that’s just perfect? No. Does it have a lot of features that we value? Absolutely.

In your shoes, I’d just spend some time identifying what things a house must have and what things you’d like to see in a house, define a price range, and jump on any house that has the musts with some of the likes without having any features that scare you off.

Q7: Birthdays and charities
My daughter recently had her first birthday. We kept her party small and simple (thanks to me searching your blog for some good advice) but she still received a huge pile of presents. I am not a fan of electronic toys, plus she can only play with one thing at a time. I’ve also really started to simplify our life and feel “less is more.” Thus, I returned a lot of stuff and bought a few things we really needed. Right after her birthday we opened up her own savings account. And it occurred to me that next year I’d like to say, “please help us celebrate L’s birthday. Instead of a gift, we would appreciate a $10 donation to her college fund.” $10 is less than what most of these people spent on these presents and I would much rather have the money than more stuff cluttering up my house. So how do I do this politely? Or do I resign myself to a lifetime of stuff? Or do I include a list of suggested gift ideas with the invitation?
- Alissa

My general feeling is that if you’re having a party where gifts are welcome, you have to allow the gift-givers some control over their gifts. They’re not offerings of appeasement. They’re gifts selected by the giver because they believe the recipient will like them.

If you have a good relationship with the person you’re inviting, have a chat with them about it. Explain your situation and give some informal ideas.

If you don’t have a good enough relationship with the person you’re inviting to do this, then either don’t invite them or accept that you may receive a gift that you don’t like. There’s absolutely no harm in quietly returning them later on or donating the toys to a charity.

Q8: Keeping food
How long do you keep leftovers and still feel safe using them?
- Andy

It depends heavily on the food. If I’m unsure, I use a constant “three and out” rule. If I prepared the meal within the last three days, I consider it okay if it’s kept in the refrigerator.

Some foods are obviously exceptions to this. For example, I will eat bread as long as it’s mold free, for example. I often make homemade bread and homemade bread tends to form molds on the surface fairly easily – after all, there are no preservatives in it.

Another big key in this equation is freezing. If I know that I’m not going to use an item within that three day period, I usually freeze it if I think there’s any chance I’d use it again. I usually try to freeze leftovers in individual meal sizes so that I can easily pull out a package and eat it for lunch in a pinch.

Q9: Graduate school planning
I work in an unchallenging, boring nonprofit job that underutilizes me, yet pays me a comfortable salary with benefits. I’ve been wanting to leave for a year now, but since my living situation is so comfortable, I only wanted to leave for a really, really good opportunity in my desired field. Despite getting to the final round of a few of those potentially wonderful opportunities, I haven’t landed anything new.

I also recently moved in with my boyfriend, which drops my expenses a great deal. We’ve discussed splitting costs and bills and the mortgage (he owns a condo), but because he earns a decent salary and is financially stable, he doesn’t need any of my income to maintain his lifestyle.

I’ve decided to apply for graduate school in my desired field for the next academic year, which leaves me with a full year to either languish at this job while socking away money for school (I may or may not receive funding and a stipend, depending on if I go for a masters or PhD), or looking for a part time job in my field that will not pay very much, but will let me get more work experience in that field (with the possibility of combining with a part time retail or other job just for money). I would probably lack health insurance benefits with this option.

My question falls into two parts: Firstly, is it stupid to leave a cozy job with benefits because it’s boring and unchallenging and not taking me where I want to go for a poorly-paid part time job in a field I plan to pursue?

Secondly, living with my boyfriend makes the part-time option much more financially feasible, but I’m reluctant to depend on him for this, even though he’s said he’s fine with it and wants me to be happier and more fulfilled–I don’t want to come to resent him for any reason. I could probably do this on my own, but having him around makes it much easier on me. Would it be wrong to take advantage of the happy accident of falling in love with someone who can support me while I follow my passion?

Final background: I carry no debt and have a small savings account and some retirement savings; he has only a mortgage as debt and has (what I consider to be) substantial savings. We have no plans to break up, but no solid plans to get married in the future (though it’s been discussed as a happy possibility in a few years). My field will never be a high-paying one. (It’s education, if you’re curious.)
- Margery

As long as you’re in a situation with no dependents and you can keep the minimum bills paid, it’s never stupid to leave a cozy job with benefits because it’s boring and unchallenging and not taking me where I want to go for a poorly-paid part time job in a field I plan to pursue. I would always recommend that people do that very thing. You’re far better off being engaged with your work and on an upward trajectory than earning more money at a job you hate in the short term.

As for the situation with your boyfriend, my only advice is this: if you take this new job and then you guys break up, would you be in truly dire straits or would it be a livable situation? I’m not sure from your description which is the case.

If you’re putting yourself in a situation where you literally could not pay the bills without your boyfriend’s help, I would be nervous about doing this unless this relationship is strongly committed for the long term. If you would be able to survive, then I wouldn’t worry about it for another second.

Q10: Found money
I found a bank envelope with [unusual writing] on the envelope but without any sort of receipt on the ground outside of my grocery store. It had [$300] in cash in it (ed: I changed the content of the writing and the exact amount of cash, but kept the order of magnitude correct.) I didn’t return it to the grocery store because I was pretty sure that the person at the customer service desk would just pocket the cash. So I kept it. Now I feel guilty about it and I’m not sure what to do. What would you do?
- Emily

If I were you, I would put up a couple of signs saying “I found an unusual envelope in the parking lot of this store. I would like to return it to its rightful owner. If you think I may have your envelope, contact me by some date” and include your contact info on the sign.

If no one contacts you by that date, consider it a windfall and keep the money. Take down the signs and move on with life.

If someone does contact you, make them describe the envelope to you so that you’re sure they’re not trying to scam you out of whatever it is that you have.

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, Jeffrey requesed that I discuss “why ‘winning the lottery’ isn’t the answer..”

In my eyes, the lottery (as it exists today) is a no-win proposition. Almost all of the time, you lose. On the rare occasions when your numbers do come up, you still lose.

If You Don’t Win: The Losing Proposition of Buying a Ticket
First of all, let’s look at the slim chance of winning. Since there are lots of lottery variations out there, let’s say that we’re looking at a PowerBall-esque lottery where you have to draw 5 white numbers and one red number to win. There are 49 white numbers and 42 red numbers.

Winning the grand prize – matching all the numbers – is a 1 in 80,089,128 chance, or roughly 1 in 80 million.

Winning common secondary prizes is also a long shot. Matching four of five normal numbers plus the “power ball” is a 1 in 1,668,523 chance. Matching all five white numbers is a 1 in 1,906,884 chance. Other small prizes are offered with better odds, but many of these amount to little more than a money refund.

The odds of being struck by lightning in a given year are 1 in 1,000,000. You have a better chance of being struck by lightning than you do of winning either the grand prize or a top secondary prize in a Powerball drawing.

In other words, the odds of you actually winning a significant amount from a single lottery ticket – or even a pile of them – is insignificantly small.

Even if the odds were perfect and you could guarantee yourself a prize by buying that many tickets, the prizes don’t match up to the ticket buying. For instance, if buying 1,906,884 tickets could guarantee you that you would win $200,000, which is the prize (in Florida, at least) for matching all five white numbers, you’d still be spending $1,906,884 to win $200,000 – a roughly 90% loss on your investment. If you were to play the “PowerPlay” version, you’d spend $3.8 million to win $1 million – a roughly 72% loss on your investment.

Every dollar spent on the lottery is far better off spent on the stock market – or even in buying gold. Yes, as much as I am against buying precious metals as your primary investment, it’s a vast improvement over buying lottery tickets. If you have $1,500 in cash, buy an ounce of gold instead of buying $10 in lottery tickets every week for the next three years. If you buy the gold, in three years you’ll have an ounce of gold. If you buy the tickets, in three years (unless you are extremely lucky) you’re going to have nothing.

What about the “distraction” and “escape” that the lottery provides? If you feel that you need “distraction” and “escape” from your life, the best way to start making that change is to invest that money. Instead of spending $5 on lottery tickets, put $5 in your savings account. Do that twice a week – as often as you would buy lottery tickets. In three years when you need to replace your car, you’ll have $1,600 for a down payment in place of a trade-in. This will make your car loan bills smaller – or possibly completely eliminate them. That kind of thing changes your life. It takes you from living paycheck-to-paycheck to a point where you can easily start socking away some money for the future.

If you still want a bubble of feeling good, go get some exercise in the fresh air. Take a long walk in the park. Start having a series of dinner exchanges with your friends for social benefit, where you all go to one person’s house once a week for a meal on a rotating basis. Join a community group. Do some volunteer work. Those will all give you a sense of feeling good while that $5 you were spending on lottery tickets goes elsewhere, creating the foundation for a truly better life for yourself.

If You Do Win: The Painful Proposition of Sudden, Unearned Wealth
The argument that people always use when talking about lottery tickets is “What if I win?” Well, what if you do win?

Cailie Rogers won $3 million in a lottery. Six years later, she’s a single mother of two working as a maid to make ends meet.

Ken Proxmire won a million dollars. Several years later, his wife left him and he filed for bankruptcy.

William Post won $16.2 million in a lottery. Within a decade, he declared bankruptcy, his brother ordered a contract killing on his life, his girlfriend dumped him and sued him, and he lives on Social Security.

Jack Whitaker won $315 million in the lottery. Within a decade, his wife divorced him, his daughter and granddaughter both died of consumption-related issues, his property was broken into repeatedly, and he wound up bouncing checks in casinos because he no longer had the cash to cover them.

I could go on listing these stories all day. There are a lot of them. Why? Money changes everything.

People you’ve known all your life suddenly start viewing you as their meal ticket. They ask for money and you either have to say no to them or start forking over cash to everyone you know. Say no to some and yes to others and you’re going to create tons of hard feelings. Criminals will target you because you’re suddenly rich without any experience in handling it.

In short, winning the lottery often means losing many of the relationships you care the most about, losing the safety of your home, and also losing the safety of your former relative anonymity. You’re now a target to criminals, a meal ticket and/or a lender to the people who used to form your close inner circle, and the source of angst not only in virtually every relationship you have with others, but often in the relationship between people you care about.

But hey, you’ve got money, right?

If someone handed me a winning lottery ticket, I would not cash it. It brings too much heartache. I would quietly (and preferably anonymously) slip that ticket into the hands of a charity that I care about and walk away from it.

Suddenly having tons of money changes everything – and rarely for the better.

Yesterday, while working on a propane grill, I cut my finger badly enough that a piece of it was actually removed from my finger. It hurt intensely and it’s left me in a state where I can’t type normally.

In other words, if you find that I miss a post or two in the next week or two, that’s probably the reason why.

What Happened to Downtime? The Extinction of Deep Thinking and Sacred Space I try to give myself an hour of downtime each day for preparation for my work. Sometimes, it’s difficult to find that time, but I’m always glad when I do. I usually come up with my best ideas during that hour of focused downtime. (@ the 99 percent)

Action, not Words: The Difference Between Talkers and Doers I went through a World of Warcraft addiction a few years ago (pre-Simple Dollar, I think), so I completely understand what he’s saying. (@ get rich slowly)

Creating a Weekly Meal Plan This is an absolutely essential piece of our budgeting for food. Without such planning, it would be much harder to keep our food budget under control. (@ unclutterer)

20 personal money practices that got me to a place of grooving prosperity This is simply an excellent list of money practices. It’s well worth a read-through! (@ white hot truth)

8 Benefits of Reading (or Ways Reading Makes You Better at Life) I’m a huge proponent of reading and I make it a regular part of my life. This article spells out quite well the value of reading. (@ life dev)

Ten Myths About Happiness To me, happiness is a natural outgrowth of a life that’s in the right place. (@ happiness project)

For the past month, my family and I had been looking forward to traveling to the Chicago area. We were going to stay for four days with my cousin (who I adore) and her children (which my children adore). We had planned on going into the city to Taste of Chicago and to the Art Institute of Chicago as well as to a great fireworks display.

On Friday morning, my oldest son woke up quite ill. We took him to the doctor and he had strep throat. Trip cancelled.

All of us were disappointed, to say the least. My son was fairly miserable on Friday, so we had a quiet day around the house. On Saturday, he felt better and by mid-afternoon he asked us when we were leaving to go to Chicago. When we told him that the trip was off, he broke down in tears, as you might expect from a five year old who just lost a trip he’d been looking forward to for a month.

The first reaction my wife and I had was to do something splurge-y to replace the trip. What sort of big, fun thing could we do to replace the disappointment of losing our trip?

After we thought about it for a bit, though, we realized that what we were missing was the fun of the trip, not the splurge of the trip, so we spent the rest of the weekend with that idea fully in mind.

We had a movie marathon with the lights turned down low and bowls of popcorn for everyone (so that the child with strep wouldn’t be sharing his germs with others).

We got some dyes out of the art kit and made tie-dyed shirts for the entire family.

We hooked up the grass sprinkler to the water hose on a warm afternoon late in the weekend.

We filled up our inflatable kid pool that day, too.

We played several elaborate games.

We made giant castles out of Legos and Magna-Tiles, too.

We made everyone’s favorite meals out of the foods we had on hand (and got everyone except for the sick child involved in the cooking).

When our sick child was feeling well, we went on a bicycle ride through our neighborhood.

In the evenings, my wife and I stayed up late – not cleaning, as is often the case, but playing games with each other and sitting on the deck together sipping wine using a bottle we’d had in the cupboard for a while.

When we took the children to visit their grandparents late on Monday (as was the plan before the illness – we were going to drop them off in the middle of our return trip from Chicago), we realized that even though we had all missed out on a trip we had been really looking forward to, we still managed to have a very fun weekend anyway without splurging on things to “take the edge off” of our disappointment.

When you miss out on something fun that you’ve been looking forward to, don’t just replace that fun with stuff. Instead, replace that fun with some other flavor of fun. It’s a lot cheaper and makes a lot more sense.

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, Shannon asked “What book/blog/resource do you recommend as a dummys guide to learning about investments? I’m not sure where to start.”

Over the past several years, I’ve read piles and piles of books and websites and other materials related to investing. Here are the gems I’ve found, focusing particularly on resources most useful for learning.

But first…

Where Not to Start
While there are quite a few great resources out there for learning about investing, there are also many resources out there that are pretty poor tools for learning for various reasons. Until you’re very familiar with investing topics, I would avoid these information sources and take the words they say about investing with a grain of salt.

Any source using a lot of terms you don’t understand This is true in any field, and investing is no different. If you tackle information that’s too full of the terminology of that field without naturally understanding what that terminology means, the information you absorb isn’t going to have much meaning. If you can’t get through a sentence without having to hit a reference book once or twice, just disregard the document for now and wait until you have a firmer grasp of the terminology. In fact, trying to read such a document should be a sign that you need to study up.

Publications directly produced by investing houses I’m not talking about investment prospectuses (the documents that investment houses have to give out that outline the specific details of a certain investment), as those are heavily regulated. I’m talking about general investing guides. Quite often, these guides are marketing materials in disguise, designed to slant you toward the investments offered by that investing house. Avoid them, particularly if you’re just getting started.

Financial magazines and newspapers This might be surprising to some, but I would avoid financial writing in such places. Most of the time, the mainstream financial press simply uses representatives from investment houses as their sources for articles, meaning that the investment advice you’ll find there often focuses heavily on whatever new investment the investment houses are pushing. Some articles in the press are legitimate and well-researched, but there are enough questionable things floating in the water and enough useful resources elsewhere that you’re better off just avoiding all of it until you have a sophisticated understanding of investing.

Websites that include opportunities to buy There are a lot of subtle hints that online information might be shady, but the biggest one is that the website eventually encourages you to buy whatever investment they’re talking about. When you see this, it’s almost always a sales pitch placed there by someone who has money to gain as a result of you buying that investment, which usually means that it’s a bad idea for you to buy it.

So what resources can you trust? The first place I’d start is at the library.

Print Resources
There are a handful of books I really trust as great introductions and references for investing information.

If you’re a complete beginner, Investing for Dummies by Eric Tyson is a strong choice.

It’s one of those books that you read once and the foundational knowledge it gives you enables you to understand most things you’ll read about individual investing, but by itself it’s not a particularly vital book on investments. I would absolutely suggest it to someone who looks confused at the word “bond.”

The single best all-around book I’ve found is The Boglehead’s Guide to Investing by Taylor Larimore, Michael LeBoeuf, and Mel Lindauer.

Why is this book so strong? It does a fantastic job of explaining the ideas behind investing. While it does make recommendations of various kinds, it faithfully explains the ideas behind those recommendations. It sticks to the conservative side when discussing and recommending investments, too, so you’re not going to fall into any risky investment traps.

If you’re looking for more on specific investment types, the Little Book series by Wiley do a great job of covering specific investment types in terms that a layman can understand. Most of the books are excellent.

Over the years, I’ve reviewed most of the entrants in this series: The Little Book of Behavioral Investing; The Little Book of Big Dividends; The Little Book of Bull Moves in Bear Markets; The Little Book of Bulletproof Investing; The Little Book of Commodity Investing; The Little Book of Common Sense Investing; The Little Book of Economics; The Little Book of Main Street Money; The Little Book of Safe Money; The Little Book Of Value Investing; The Little Book That Beats The Market; The Little Book That Builds Wealth; The Little Book That Makes You Rich; and The Little Book That Saves Your Assets. Virtually all provided a worthwhile explanation of their specific topic.

If you manage to read through all of these books, you’ll find yourself with a very strong background in individual investing.

Online Resources
The best online resource for learning about investing that I’ve found thus far is Investopedia’s Investing 101. It does a great job of briefly and clearly walking you through the basics of investing. If you wish, you can also download the whole thing in PDF format.

If you prefer to learn in audio form, there are some wonderful audio resources that do a great job of teaching investment basics. Among those, the far and away best option is Money 101: Retirement and Investing by Marketplace (American Public Media), which is a wonderful series of audio recordings that explain investing in rich detail.

If you start moving outside of these resources, though, beware. Be very careful that the “learning” resource you’re reading isn’t just a cleverly disguised sales pitch from an investment advisor or an investment house. Know what the source of the information is. Is that person or organization, in the end, trying to sell you a product? If they are, then be very, very careful.

Good luck!

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, Brittaney asked “what should every soon to be college graduate know about finances before entering the real world?”

This is actually a surprisingly difficult question to answer because different college graduates find themselves in very different positions. Some have crippling student loan debt, others have a little, others have none. Some have credit card debt, while others do not. Some have a degree and a resume that’s going to make it easy to find a job, while others will not. All of these factors are going to result in very different life trajectories when students leave college.

The question really is what advice is useful to all of these people? Here are the pieces of advice I would give to outgoing students in all of these situations.

1. That thing you really want? You don’t need it.
The single most effective tool that people have in their personal finance toolbox is self-control. A lack of self-control causes people to make purchases both big and small that go beyond what they can actually afford, which eventually results in accumulated debt and a lot of difficulty. It also encourages people to slack off on their career progress and in other areas of their life, but we’re focusing on finances here.

Whenever you feel like you’re making good money and you deserve some unnecessary item, wait. Give it thirty days. If you still want that item, go ahead and buy it. If you decide that you don’t want that item and instead want something else during that period, switch to the new item and restart the clock. This will give you plenty of time to think about the purchase and decide whether it’s really something you want to do – and if you come through on the other side with a big “yes,” you’re likely okay making that purchase.

Another powerful tactic is to leave your credit cards at home. Go out just with a bit of cash in your wallet – no credit cards, no debit cards. Spend that cash. When it runs out, you’re done. There’s no way for you to turn to the plastic in the middle of an excursion for more drinks or for items you don’t need.

2. Increasing your debt level is an extremely bad idea.
Never, ever take on any type of debt without a ton of consideration. Debt is one of the worst things you can do to yourself. If you have to go into debt for any reason, buy the least expensive thing you possibly can, eliminate that debt, then start saving up for a replacement. Never go into debt for something you don’t absolutely need.

It’s absolutely as simple as can be. When you go into debt, you’re essentially agreeing to pay some company substantially more than whatever item you’re considering buying is worth. If you buy a car with a 6% plan over 60 months, you’re going to wind up paying roughly 20% more for that car than the sticker value. If you’re looking at a $10,000 car – guess what? You just lost $2,000 out of impatience. If you buy a bunch of stuff you don’t really need on a 20% APR credit card – say, $1,000 worth – and you don’t pay it off for a year, you’ve just lost somewhere around $200. It’s gone – and you got nothing in return for it except for your impatience.

If you can’t afford something without debt, don’t buy it. Look for a less expensive alternative. Go to Goodwill or to a used car dealership. If you really want a nicer version, start saving now. That way, the interest works for you rather than against you, as the interest accumulates in your savings account rather than accumulating in the pocket of your lender.

3. Believing that “your future self will take care of it” ensures a miserable life.
The best move you can make financially and career-wise at any given moment is the move that gives you the most options tomorrow or a year from now or five years from now. Do not put burdens on your future self or your future will just look like a series of closed doors and unattainable opportunities.

“Buy now and pay later” plans are bad. Putting off big projects? Bad. Putting off opportunities to build connections in your field? Bad. Debt of any kind? Bad.

If you have a choice between sucking it up and dealing with something challenging now or putting it off until later, always suck it up and take it on right now. Live more frugally than you thought possible today so you can afford to move across the country and take that amazing job tomorrow. Stay out of debt today so you can afford to start your own business tomorrow. Go to a convention today so you can get a much better job elsewhere tomorrow.

Whenever you have a choice, make the choice to open doors for your future self, not put additional burdens on your future self.

4. Start retirement savings the first day you possibly can.
Many jobs today offer retirement plans. Many of those retirement plans include employer matching, which means that you can immediately multiply your contributions just by putting money in. Never, ever turn down this opportunity. Sign up and get on board the first day you possibly can.

How much should you contribute? 10% total (your contribution plus your employer) is good. 15% total is better.

What should you invest in? Just ask whoever runs the plan if they have a “target retirement” fund and choose the one with the year that most closely matches the year when you’ll be 70 years old. Put all of your contributions into that. It will suit you very well to start with.

For one, you’ll never miss that money in your paycheck if you never see it to begin with. If you start contributing from day one, your check with the contributions subtracted will be your normal paycheck. For another, starting right now means that you’ll essentially never have to worry about it. So often, when people move through their career, they become paranoid about retirement. What will I do about retirement? Starting from day one means you never ever have to worry about it.

5. If you don’t have any specific long term goals, use your money to eliminate debt.
The first experience that people have with money when they get their first good post-college job is the sensation of receiving a big fat paycheck. It’s usually the biggest paycheck that you’ve received to this point and it’s often very tempting to go buy something silly with it. Go do it. Once.

When you get that second check, though, it’s time to get down to business. Pay your expenses, then take a big fat helping of what’s left over and use it to make a big extra payment on one of your debts – preferably the one with the highest interest rate. Take care of it now, because the longer it sits around, the more of your money winds up in the pocket of a lender (as mentioned under tip #2) and the more restricted you’ll be with your paychecks down the road (as mentioned under tip #3).

An exception to that: the first thing you should do is make sure you have $1,000 set aside in a savings account somewhere as your emergency money. It’ll really save you in a pinch. After that, though, start hammering the debt – hard.

Get rid of your student loans. Get rid of your credit card debt. Get rid of your car loan if you have one. Get rid of any and all debts you accumulated during college. They’re weights around your neck – and the neck of your future self (never, ever forget the third tip, above).

6. If you don’t have any specific long term goals and no debt, keep your extra money in a savings account.
Why in a savings account? When you’re first out of college, you’re likely to jump around a lot. You don’t have kids and you’re likely not married, so it’s a lot easier to make a big shift. You’ll move. You’ll switch jobs. You’ll possibly switch careers.

This kind of action needs flexibility. You don’t want to have your money locked away somewhere where you can’t touch it (which means things like CDs are out). You also don’t want that money in a place where it can easily lose value (so stocks are out, too). A savings account doesn’t return much, but it is secure and it is easy to access money from. It’s perfect.

Keep your money there until you feel roots beginning to take hold. At that point, you’ll be in a much different place and have much different problems to think about. (You’ll be your “future self” mentioned above, and you’ll be incredibly happy that your younger self was sensible enough to keep a lot of doors of opportunity open.)

7. It is unlikely that you’ll stay in your first post-college job – or even your first post-college career path – forever, so plan accordingly
The most valuable things you’ll get out of your first post-college job are relationships and transferable skills. Take advantage of any opportunities that allow you to meet people in your field. Go to conferences and talk to lots of people. Take part in meetings. Get to know as many of your peers as you can – as well as the people that are further along in your carer ladder.

At the same time, focus a lot on your transferable skills. Practice your written communication skills whenever possible by writing reports and such. Practice your public speaking skills by jumping on every chance you can find to present your work or the work of your organization. The more universal skills you have – presentation skills, writing skills, time management skills – the more valuable you’ll be no matter what you wind up doing.

These are the valuable things you’ll get from your first job, not your paycheck. Your paycheck helps pay the bills, helps eliminate whatever debts you have hanging around your neck, and helps you prepare for whatever that next opportunity is.

All of this stuff will come together at once in a few years and that’s when you’ll hit your career and your finances out of the park.

8. Don’t be ashamed to live with your parents for a while, but don’t view it as a long-term solution.
You’ll find lots of different takes on this proposition. Some people will view this move as a sign that someone is failing at their post-college life. Others will look at it as the normal course of events. Some will see it only as a fallback plan.

I see it as an opportunity if your parents are willing. It’s a chance to spend your first professional year destroying your debt and solidifying your professional standing without many of the expenses of everyday independent living. It’s not a fallback plan, but a boost.

Remember, though, that a good boost doesn’t last forever. It merely launches you on your way. Have a plan to get yourself out of the situation the day you move in. Specify a deadline for you to move on and make that clear to your parents so that they can plan accordingly as well. You should not be a leech to them – they’ve already given you so much over the past twenty-odd years that you should be chomping at the bit to give them the peace of mind that comes with having a truly independent and self-sufficient child.

9. Your specific investment choices matter less than the simple fact you’re investing.
So often, people put off investing because they’re afraid of making a mistake and investing in the wrong thing. That, in itself, is a far bigger mistake. You’re far better off investing in a poorly-returning investment than not investing at all.

The first application of this is hinted at in tip #4, above. You’re better off starting the first possible day on your retirement plan. Why? It’s your investing dollars that make the difference when you’re just starting out, not the perfect investment.

Even putting money in a savings account is a form of investment (it’s a stable and highly liquid investment with low returns). Just like elsewhere, you’re far better off starting a savings plan now than you are putting it off because you’re not sure exactly where to put the money. If you don’t know, put it in a savings account. You can always move it later.

Don’t let your uncertainty about the specifics keep you from saving and investing money now. If you don’t know for sure, just go as simply as possible.

10. You have an incredibly long life ahead of you. Use that knowledge to your advantage.
If you’re just starting your first post-college job, it’s likely that you’re in your early 20s or your mid 20s. A person of that age right now will live on average well into their 80s. You will probably be working productively fifty years from now. Fifty years.

Spending two years of your career working at a startup is a blip in the big scheme of things. Taking three years to work for the Peace Corps? Another blip. Taking on risks and adventures like these do not have the same risk for someone who has fifty years of career ahead of them versus someone who is looking at retirement shortly.

Take those risks now when you’re young and single and unencumbered with debts and other obligations. This is what it means to keep your doors open. There’s a long hallway ahead of you with a lot of doors in it. You have plenty of time to look through a lot of those doors, and you should. At the same time, you should be trying to stay out of debt and give your future self skills so that you can see what’s behind as many doors as you can.

After all, you’ve got half a century to explore.

A final tip: almost all advice you get has something of value in it, and you’ll be rewarded for figuring it out.
You’re going to read and hear a lot of advice. You’re going to think that an awful lot of it doesn’t apply to you – and there’s at least a chance that you’re going to think the same thing about this article.

If you feel that way, you’re missing out on an opportunity. Almost every piece of sincere advice has something you can pull out and apply to your life.

If you find yourself discarding advice and advisors just because you can’t quickly see how they fit, you’re missing out on opportunity. Take in that advice. Let it sit in the back of your head for a while. See if you can see those patterns in your own life. You might just find that when a big problem comes along, you already have the answer in hand.

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. Refinance mortgage to add spouse?
2. Scanner recommendations
3. Paying off boyfriend’s debt
4. Investing in bond funds
5. Budget question from Phillipines
6. Financial book for teenager
7. Birthday presents for children
8. Handling extra cash flow
9. Insurance deductibles question
10. Enjoying baseball inexpensively

It’s almost tradition for our family to go to this large field about five miles from our home, set up some comfortable blankets, and watch fireworks. This field is almost directy under the fireworks, so we can lay on our backs and watch the fireworks explode above us.

Sometimes, if the wind is wrong, we’ll get some cinders on us, but they’re well worth it for the wonderful sight of seeing the sky explode before us and hearing the children laugh and point at the lights.

Q1: Refinance mortgage to add spouse?
I recently got married, and my new husband and I are having our first financial disagreement. He has asked me to refinance my house so that he can be added to the mortgage. I bought the house in July 2009, so I have owned it less than two years. I purchased the house for $135K. My rate at the time was 5.125% under a first-time homebuyer program. The bank is currently offering a conventional fixed-rate long-term loan at a 4.49% APR. In the two years of ownership, I have been dutifully putting extra money towards the monthly payment, and have essentially made 4-5 extra payments per year. The loan is currently at $119K.

While I understand the reasons why my husband wants to be on the mortgage, I am hesitant for a few reasons.

1) I believe the costs of refinancing will outweigh the benefits of the slightly lower rate. We have not yet visited a mortgage officer to get actual numbers, but basic online research suggests the costs could be around $3K. I would rather apply that money toward the principal.

2) He is a member of the military and has never owned a home. This gives him advantages such as a VA loan. We would like to buy a larger house or duplex eventually and rent out my house. (Given it’s location and size, we know that in our housing market we can rent it out for the monthly mortgage payment.) If he is added to my mortgage, we are not certain if he would be able to utilize the VA loan if we did not sell my house prior to purchasing a new house.

I have suggested we instead investigate using a quitclaim deed to add him to the title of the house. He does not seem keen on this idea. What are your thoughts on refinancing given the stated situation?
- Margery

Given these facts, I don’t think refinancing is the best option here. I would just leave the loan as it is.

So, what should you do in the interim? I would make sure that your husband has strong credit. Have him get a credit card for a specific purpose like buying gas, use it for nothing but gas, and pay off the balance in full each month. This will steadily build his credit.

You should also focus on paying off that house as quickly as possible. That house payment is a big negative in your home’s cash flow and it needs to be eliminated as soon as possible. Once the deed is in your name, you can certainly add his name to that deed.

Q2: Scanner recommendations
I think I remember an article about a scanner that you used and recommended. What was that and also do you use an external hard drive for making backups, or cloud computing, or what? Too much paper in my life and hoping to scan some of the hard copies out of my life. Thank you.
- Christine

My only recommendations for a scanner were for a specific use. If you’re scanning lots of documents, a scanner with an automatic document feeder is a must. It allows you to just put a pile of documents on the scanner. The device will scan all of them and save them as separate documents.

This sounds like the situation that you’re in, as you’re hoping to digitize as much paper as possible.

As I haven’t purchased a scanner in a long while, I do not have a specific model recommendation. However, if you’re trying to digitize lots of documents, automatic document feeding is essential. It’s a tremendous time saver.

Q3: Paying off boyfriend’s debt
I am 29, and I live with my boyfriend, who is 38. I have no debt whatsoever, and am somewhat militantly anti-debt. My boyfriend has about $5,000 in IRS tax debt, which he pays only the minimum on ($100/month).

My question is, should I help by making extra payments for him (which I really, really want to do), or let him just chip away at it himself, even though the process is killing me because it’s taking forever?

I should add that he has promised he will pay more than the minimum in those months where he is able to do so.
- Mary

The answer to this question comes down to the permanence of your relationship. Are you really in this relationship for the long term? Is he in this relationship for the long term?

I can’t answer that for you. All I can say is that if this is going to last for a decade or more, then it’s financially sensible to help him pay off this debt. If it’s a fairly rocky relationship, it’s not worthwhile for you to do this.

In reality, if you’re cohabitating and sharing costs, his debt is impacting your finances and you’re better off without that debt affecting your finances. The issue is whether you’ll be able to enjoy a period without that debt after it’s paid off. The longer term your relationship is, the longer the period you’ll be able to enjoy without that debt impacting your finances. If it’s not long term, then you’re just helping him pay off a debt early and you’ll receive no benefit from that early payoff.

Q4: Investing in bond funds
I’m 24, make 55k and live in Chicago which has a high cost of living compared to most other cities. If in, say, 10 years I would like to purchase a home with a VERY sizable down payment would you consider it wise to invest in bond funds through a brokerage firm such as Fidelity, Vanguard, etc.? My impression is that bond funds are lower risk than stocks but would have a greater return than a high yield savings account and 10 years would be long enough to see that return.
- John

Bonds generally have more risk than savings accounts but generally have better returns, but they have less risk and lower returns than stocks.

Bonds can fail (if the organization issuing the bond fails), but if you are buying into an index fund made up of highly-rated bonds, you’ll most likely just see a better return than a savings account over the long run.

It sounds like this meets your needs and risk tolerance, so I’d go for it if I were you.

Q5: Budget question from Phillipines
My monthly salary is $604. I have a Total Debt of $ 2,600 and i have ZERO Savings. Below is where my salary goes to every month.

NET PAY – $613.13
Health – $32.56 (5%)
Debts – $154.65 (25%)
Investment (through work) – $60.47 (10%)
Food – $69.77 (11%)
School – $47.67 (8%)
Memorial Plan – $24.42 (4%)
Utilities – $40.70 (7%)
Rent – $93.02 (15%)
Fare – $18.20 (3%)
Church – $46.51 (8%)
Cellphone – $9.30 (2%)
Educational Insurance – $48.06 (8%)
TOTAL $645.33 (105%)

I would really want to Zero-out my debts, i just do not know how can i make it faster? Debts were incurred due to home expenses and bad purchases before. is there any really fast way to pay off all of my debts? I want to pay them all by december 2011. I plan to use all my 1 month ($600)-salary bonus but that would mean a still zero savings for me and my son.

I want to make it faster so that i can start saving up and then finally have the courage to resign from my job. I been here for 10 years. Pay is good. Very near my house ( i can walk from house to the office). But i have this gnawing feeling that i am not growing anymore and i am not happy anymore. Add another stress that an ex is working on the same office and i cant take it…i also want to resign so that i can just forget about my stupidity and finally move on and go on with my life…i just want a new life..a new beggining..i am just scared to do it..because of my son ( i have to care for him and i cant bear him going hungry) or am i just being a real coward? ( i can take it if you thikn that way)…i used to be so brave but when a child is present, life’s decision is more difficult to do..

One of my concern is the rent, am i paying too much for it?..i like the house (2 BR;two-storey;good neighbors; nice mountain view, the free parking space, wide play area for my son. -in short ILOVEIT), It so big for a 2 adults (me and my mom) and for a child. However most of the time, when my big family comes for a visit, i do not have a problem since i have a big ,nice and a clean house for them to stay. But i still think that a $90 a month is too much, what do you think?

I have negative expenses and most of the time , i am helped by my brother. but i cant always do that. I need to manage my finances. I feel so helpless and desperate without savings and such a great amount of debt.
- Lindsay

Right now, you’re spending more than you’re bringing in, which means you have no means with which to pay down that debt early. I’m not entirely clear on how this works. Are you accumulating more debt month over month?

If you want debt freedom, you have to be spending less than you’re bringing in (so you’re not accumulating more debt) and you have to be applying that difference in some positive way (toward the debt, preferably).

Some of these expenses are going to have to go. Do you need a memorial plan? That seems like a significant chunk of your income just to cover a possible funeral. What does your investment through work consist of? Is it necessary when you’re in this kind of financial state? I’m not sure what has to be cut, but something does, and after you make cuts, you have to start applying the remaining money to the debt and get rid of it as quickly as you can.

Q6: Financial book for teenager
I’ve been trying to find a book recommendation for my 18 year old son. He is going to college in August and wants to get a credit card. I want him to read a good economics book first, what do you recommend?
- Audra

I don’t think I’d toss an economics book at him at this point. Books like The Wealth of Nations aren’t particularly relevant to the day-to-day life of most eighteen year olds.

Instead, I’d look for a personal finance book written with people like him in mind. A really good choice for a student leaving high school and entering college is Please Send Money by Dara Duguay, which I reviewed a while back.

The biggest trick will be getting him to read it. You might want to tie the credit card to reading the book first.

Q7: Birthday presents for children
I have 2 small kids (6 year old son, 2 year old daughter). It seems like every month we are invited to at least 2 kid’s birthday parties, mostly friends from my son’s school. My son loves birthday parties and is very social but the whole presents thing is bringing me down. It seems like the gifts the kids receive (based on what my son was given at his own party and also when we do go to the rare party wherein the kid opens the present in front of everyone) are in the $10-15 range.

I am trying to be frugal but this month we have 4 parties which is $40 minimum and it is a tight month financially. I try to stock up when there is a sale on big winners like lego sets and board games and art supplies, but I would love any advice. $40/month x 12 months = $480 which seems like an awful lot to spend on birthday presents for kids that aren’t even my own!
- Meredith

On the flip side of that, if your kids are going to 48 birthday parties a year, then you have a plethora of kids who should come to your own children’s birthday parties.

I think that a small gift like this is the social cost for a young child attending a birthday party when there’s no other arrangement (like a parent saying “no gifts” on the party invitation). You bring a $10 gift and get a couple hours of fun and a few strengthened friendships out of the arrangement.

That doesn’t mean you can’t contact some of the other parents in this social circle and perhaps suggest that you all tone down or eliminate gifts for a year. That’s really the only way to change the culture of the situation. If I were in your shoes and my kids were going to that many parties, this is a change I would relish as I really would not want to accumulate 48 $10 toys in my home.

Q8: Handling extra cash flow
I finally managed to be able to have money available at the end of the month ($1000). What is not very clear to me is what to do with it. The first thing that comes to my mind is to use that money to reduce the debt in my line of credit ($40,000). But at the same time I don’t have an emergency fund. What would you recommend, focus on reducing the debt in the line of credit and then build an emergency fund or using part of the $1000 to build an emergency fund?
- Ernie

I would use the first $1,000 to build up an emergency fund. That amount will help you with most of the small emergencies you’ll face in life.

After that, I would use any additional monthly surpluses to first shore the emergency fund back up to $1,000 (if you’ve used any of it) and then use the rest to pay down your debts.

If you’ve eliminated your debt, I would probably start building up the emergency fund a bit more, up to about two months of living expenses (however much that is in your life). This will be incredibly helpful in the case of job loss or other large emergencies.

Q9: Insurance deductibles question
I am a SAHM of a toddler and a preschooler. My husband works and we barely scrape by. We have not used a credit card since our son was born three years ago. We are trying to pay down our debts but it is a slow process. We have two cars, one paid for and one paid for by a loan from our parents (we make monthly payments to them). We currently have liability only on both of them in order to have lower monthly payments. We also have a high-ish deductible on our home owner’s policy – $1000. We try to keep $1000 in our emergency fund and last week our emergency hit. We had some storm damage that ripped out our electrical wires, leaving us with a $958 bill. Our emergency fund was at $950, so we are wiped out. I’m wondering if it would be smart to lower our deductibles and maybe get more than just liability on our car with the loan since we have nothing to cover ourselves if another emergency comes up. In all likelihood our emergency fund will not be replenished until tax time next year.

I have a feeling you’ll suggest getting that fund back up to $1000 asap, and we plan to do that. But we are living about as frugally as possible. We have sold things we own, rarely eat out, budget everything, and our food budget for our family of four is only $200 per month. (I was shocked when you said yours was $770! That sounds like a dream to me!)
- Jean

Yes, the first step is to rebuild your emergency fund. That’s what you should do first and foremost.

After that, though, the real question is what it would cost you in premiums to lower your deductibles. You’ll need to get some new insurance quotes so that you can decide if the higher premiums are worth the reduction in deductible. My guess is that it won’t be, as tiny deductibles usually mean big premiums.

In my own experience, I found that lowering a deductible wasn’t worth it unless I was having damage that exceeded that lowered deductible more than once every two years. If that’s happening, I’d be concerned about other factors in your life (like the climate you’re in and the structure of your house) more so than the insurance.

Q10: Enjoying baseball inexpensively
I’ve been a baseball fan all my life. Recently, though, I’ve really been put off by the high price of tickets. It’s just so expensive to go to a ball game. What do you suggest for a baseball fan who doesn’t want to bankrupt himself?
- Matt

I go to a Major League Baseball game approximately once a year. When I was younger, I used to go more often; in fact, I went to Wrigley Field five times or so in 1996.

I agree with you completely about the cost of the baseball experience, which is why I don’t go to many major league games any more. The tickets and the food add up to too much to make it a regular experience for me.

Instead, I leave such trips fully in the “splurge” camp. I go once a year and, because of that limited nature, such trips feel very special to me. They’re memorable and more enjoyable than going multiple times a month.

I then follow my team (the Cubs) via the radio and the internet, mostly.

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.