This was originally one exceptionally long post. I chose to split it into five pieces for readability purposes. I’ll post a segment each day this week.

As mentioned previously, I was recently leafing through a book at the library discussing Japanese martial arts (I believe it was Budo Secrets) when I came upon a sidebar that listed the ten evils that prevent people from improving themselves.

As I read through the list, I couldn’t help but see how each of these evils – or character flaws, as I would perhaps describe them – have held me back in my finances, my career, and my life in different ways.

While thinking about these ten terms, I consulted a dictionary and spent some time reflecting on how each of these has held me back – and can hold you back, too.

(I decided to highlight these evils with some wonderful Creative Commons photographs that illustrate each of these traps.)

Here are the fifth and sixth evils from that list. You can check out the first two evils and the second two evils as well.

Dangerous Risk Adrenaline Suicide by Fear of Falling, by epSos

Fear
A strong, uncontrollable, unpleasant emotion caused by actual or perceived danger or threat.

All of us experience fear at some point. We’re afraid of illness. We’re afraid of losing our jobs. We’re afraid of losing the things we hold dear in our life. We experience phobias – one of mine is a fear of heights that’s almost paralyzing.

Fear drives us to make mistakes. We walk away from things we should be addressing. We become obsessed with things that should be trivial. We avoid situations that might provide great value to us.

It was my fear of the possible economic consequences of pursuing a degree in English lit that kept me away from writing for a decade and a half. It was my fear of losing my soon-to-be wife that caused me to turn down several job offers during my last year of college, more than one of which would have been quite intriguing. It was my fear of looking like a “loser” that kept me spending money and falling into debt during my early adulthood.

Fear drove me in every instance. Fear drove me away from my potential. It pushed me from what I could be into something much smaller.

In opposition to fear is bravery. This doesn’t mean the lack of fear, but merely control over it. It’s an understanding that great things are accomplished at times if fear is overcome and it’s also an understanding that some events in life simply cannot be controlled, so fearing them is a useless emotion.

Bravery means following your passions. It means not choosing your college major due to expected income, but due to what you’re most passionate about and excited about. It means choosing the lower-paying job because of the opportunities and the upside.

Bravery means not doing what everyone else is doing. It means living frugally. It means rejecting crass consumerism. It means not lusting after the same material objects that others lust after. It means defining your own goals and chasing them, even if they’re much different than everyone else. It means having your own hobbies and interests, regardless of what those around you think is “cool.”

Bravery means being your own person and taking on what you fear. Doing that brings happiness and a fuller life. Doing that consistently eventually brings respect from those around you.

Doubt, by Shahram Sharif

Doubt
To lack confidence in; to disbelieve, question, or suspect.

We don’t believe that we’re good enough to handle the task at hand, so we make an alternate choice that leads us down a sadder road. We hesitate – and in that moment of hesitation, our chance is lost.

Doubt leads us to second-guess our choices and to dwell on past mistakes instead of merely learning from our errors (and successes) and moving forward into a bright future. Doubt leads to a sense of failure, one that’s hard to escape from.

A hint of doubt is good, as it tells us that we can always sharpen our skills. More than a taste, however, and we convince ourselves that we’re not up to the task.

Opposing doubt is confidence. Not overconfidence, mind you. Overconfidence results in making impossible claims, acting arrogant, taking on unrealistic situations, and often failing to back up your statements. Overconfidence means looking like a buffoon and letting other people down.

Confidence, on the other hand, simply means that you’re certain of the truth of everything that you say and that, when you’ve chosen a course or path, you’re certain that it’s the best path. Hand in hand with having confidence is having reasons to back up your belief, while overconfidence means that you don’t have reasons to back up your belief and doubt means that you don’t take on a belief even in the face of reason.

I feel constant slight doubt about my writing, yet I keep writing. That’s confidence trumping doubt. That’s confidence using doubt as a push to keep improving, but not as enough of a hindrance to stop moving forward.

How can you build confidence? You build confidence by doing instead of avoiding. Try new things, particularly challenging ones. Tell youself that you can do this and do it.

If you fail, don’t dwell on the failure. Instead, look for what you did wrong (and the multitude of things you did right), pick yourself up, and try it again using what you learned. Keep the things you did right and try a different approach with the things you did wrong.

The more you try, the more you’ll succeed. The more you succeed, the more doubt will melt away from your heart.

Our roadtrips tend to involve the following: podcasts, conversation, reading, napping, food produced from paper bags, increasingly frequent restroom stops, games that involve things we see outside the car windows, repeated askings of the infamous question “Are we there yet?”, and complete relief when we actually arrive at our destination.

Facing the Mistakes of Life This is actually an excerpt from The Crown of Individuality by William George Jordan. It’s incredibly worthwhile reading. We all make mistakes in life. The thing that separates successful people from others is how we handle those mistakes. (@ art of manliness)

A Powerful Guide to Active Listening Actually listening to what other people are saying rather than vaguely paying attention as you develop your own witty response can make your conversations go far better and enable you to actually connect with people rather than dazzle them with your “brilliance.” (@ pick the brain)

How to Save Money and Combat Lifestyle Creep The best tactic I know of for this is to be mindful of it. You don’t need to “upgrade.” You don’t need a steady flow of “splurges.” (@ frugal dad)

14 “Dubious” Personal Finance Moves It’s OK to Do. (Really!) Often, the obvious financial move is the wrong one. Sometimes, though, it’s not. (@ len penzo)

About three years ago, I essentially switched careers.

When I look back on that decision now, what I see is that I loved my job, but I hated big aspects of my career, at least in the direction it was headed.

I spent more time than I would like away from my family on trips that felt unimportant. At the same time, I very much enjoyed the people I would spend time with on those trips and in my workplace. I still miss the daily interactions with most of them.

Although my job offered some creative outlets, I couldn’t help but feel that my career path didn’t offer many creative outlets at all without going back to school for some intense graduate work. The future held repetitive grunt work – and a lot of it.

I loved my job and felt reasonably secure in it, but if the project I worked on was eliminated, I could have wound up in a place I really didn’t want to be had I been reassigned.

I loved my job, but I hated my career. It took me some time to realize this, too.

There’s really a big difference between the two. I often get emails from people who describe a situation where they seem to hate their job but love their career. They don’t get along with their boss. They feel as though they’re being pulled away from what they should be doing by workplace forces. None of these elements were ever true for me.

Some people, of course, seem to dislike both their job and their career. They don’t like their boss or their working situation and, at the same time, they don’t see leaving their current situation as a solution, either.

Of course, each of these situations demands a different solution.

If you hate your career but love your job, as I did, you need to look at a completely different career path. For me, I switched from a research-oriented job to writing – a radical career shift. For a few years, I spent a lot of my spare energy on writing as a release and I realized that, when the writing finally took off, that this was the path I wanted to follow with my time and energy moving forward. I miss my old job, but I don’t miss my old career path and where it was seemingly headed.

If you hate your job but love your career, start polishing up your resume and your skill set now. Don’t worry about the pressures of your current work environment. Instead, focus your energy on your exit path. Don’t sit there and stew and let the stress of the situation make you become strongly bitter and, eventually, unemployable. Make a move, and move on. If your work environment is so dysfunctional that it makes Office Space seem healthy, it’s time to move on.

If you hate both your job and your career, switch to a “transition” job – and quickly. Look for employment in an area where you can easily get into that doesn’t demand too much of you and get out of the stressful situation. Once you’re in this new position, start evaluating where you want to go from here. Preferably, it’s in an entirely new direction.

Two final notes. First, security isn’t everything. Many people are afraid to move on because they feel their job is safe. Very few jobs are truly safe these days, and if you’re in a situation where you’re miserable, others are probably aware of it and you begin to slowly look more and more expendable the longer your misery continues. Don’t wait for the hatchet – take action and move on to something that excites you and makes you want to go into work, do a great job, and move forward in your career path.

Second, money isn’t everything, either. If your job or your career path is making you deeply stressed, it’s likely also making you sick, reducing your current state of health and also possibly reducing your long-term health. No amount of money is worth actively sacrificing your health and well-being. It is far better to live a frugal life with your sanity and your health than have a well-paying job that’s sapping your vitality away.

This was originally one exceptionally long post. I chose to split it into five pieces for readability purposes. I’ll post a segment each day this week.

As mentioned previously, I was recently leafing through a book at the library discussing Japanese martial arts (I believe it was Budo Secrets) when I came upon a sidebar that listed the ten evils that prevent people from improving themselves.

As I read through the list, I couldn’t help but see how each of these evils – or character flaws, as I would perhaps describe them – have held me back in my finances, my career, and my life in different ways.

While thinking about these ten terms, I consulted a dictionary and spent some time reflecting on how each of these has held me back – and can hold you back, too.

(I decided to highlight these evils with some wonderful Creative Commons photographs that illustrate each of these traps.)

Here are the third and fourth evils from that list. You can check out the first two evils as well.

Greed, by Liz West

Greed
A selfish or excessive desire for more than is needed or deserved.

Whenever I think about greed, my mind turns to an idea I’ve talked about many times on The Simple Dollar, the balance between abundance and scarcity.

A mindset of scarcity is a breeding ground for greed. It believes that there is a certain limited amount of anything and that the only way to get ahead is by grabbing what you can and holding on tight. If someone else gets a raise, it doesn’t mean that the company is doing well, it means only that you’re getting less – at least in the mind of a person with the scarcity perspective.

A mindset of abundance, on the other hand, believes that there is an unlimited amount of most things and that grabbing and holding onto things is rarely the way to get the most out of your life and career. If someone else gets a raise, that’s reason to celebrate because it indicates that the company is doing well and that a valued co-worker is getting appreciated for their contributions. In the mindset of abundance, someone else getting something is only a net positive for you by association.

A mindset of scarcity makes it very hard to succeed in life. Your primary drive is to take resources and keep them from others. Alliances only serve to enhance how much you accumulate – and when an alliance doesn’t enhance your situation any more, it can be tossed aside. A mindset of scarcity is a long sequence of burnt bridges, financial difficulties, and dead ends.

A mindset of abundance is a source of success. It enables you to step back and see the broader picture. You’re able to make choices that don’t necessarily serve your needs, but improve the situation of those around you. A consistent habit of doing this creates a situation around you that’s full of lasting value and, often, lasting wealth.

The opposite of greed is generosity, and it’s a powerful virtue to have. When you aid others in a genuinely meaningful way, that aid lifts their life in a positive direction. By direct consequence of the things you share with that person, your life is lifted in a positive direction.

Listen to others. Don’t just wait for them to take a breath so you can interject your own thoughts.

Celebrate when others succeed. Their success is never a negative for you, even if they’re getting the exact promotion you hoped to get.

Share your knowledge, your skills, and your time, particularly when what you have to give comes easy for you and very hard to the recipient.

These are acts of generosity and abundance. These acts serve to build up those around you, and we as humans always strive to meet the best of those around us. Raise them up and you raise yourself up by association.

Don’t take pictures of me while I’m fighting!, by Tambako the Jaguar

Anger
A strong feeling of displeasure, hostility or antagonism towards someone or something.

Anger is an incredibly strong emotion, one that often clouds our ability to make good decisions in a situation. When we’re driven by anger, we lose touch with our own ability to read situations and respond appropriately. Even worse, an angry person often distorts how others react, as interacting with an angry person is much different than interacting with a calm person.

Anger drives people away. It alters our ability to understand those around us. It reduces their ability and desire to be fully honest with us out of fear of our anger. It creates relationships based not on mutual respect and trust, but on fear and careful manipulation.

Anger is the killer of strong relationships.

The opposite of anger is peacefulness and calmness, the ability to address a situation without your own emotions boiling over the top. Not only does it maintain your own ability to make good decisions in a situation, it also keeps the people around you from moving into an emotion-based state from which little good can come.

One of the most useful tactics for managing one’s anger and encouraging peacefulness is to simply reduce one’s stress level. When I am under stress, I am sometimes quick to anger. Whenever that happens, I always see later on that not only did I take actions that caused the situation to turn out worse, I also caused the people I interacted with to interact with me differently, both then and often afterwards. It’s yet another reason why it’s worthwile (for me) to focus on minimizing my stress whenever and wherever I can.

I tend to de-stress through exercise and meditation. Whenever I exercise and meditate daily, my stress level is naturally lower and I’m able to maintain a level of peacefulness in my life, which is the backbone of the strong relationships in my life.

I also de-stress by getting adequate sleep. When I am exhausted, I tend to respond emotionally to everything in both positive and negative ways. When I am fully rested, I am able to check my emotions, particularly my negative ones.

Anger is a natural feeling, but it should never drive you. It can be controlled and, for the sake of your relationships and your life, it should be controlled.

This was originally one exceptionally long post. I chose to split it into five pieces for readability purposes. I’ll post a segment each day this week.

Recently, I was leafing through a book at the library discussing Japanese martial arts (I believe it was Budo Secrets) when I came upon a sidebar that listed the ten evils that prevent people from improving themselves.

As I read through the list, I couldn’t help but see how each of these evils – or character flaws, as I would perhaps describe them – have held me back in my finances, my career, and my life in different ways.

While thinking about these ten terms, I consulted a dictionary and spent some time reflecting on how each of these has held me back – and can hold you back, too.

(I decided to highlight these ten evils with some wonderful Creative Commons photographs that illustrate each of these traps.)

Insolence, by Todd van Goethem

Insolence
Arrogant conduct; insulting, bold behaviour or attitude.

Arrogance and insolence come from a sense that you can’t truly learn or obtain anything of value from this situation. Because of that, you believe the current situation has less value than you do.

If you treat others in a way that indicates to them that they have less value than you, then all you’re doing is creating a self-fulfilling prophecy. Believing that you’ll get little from this situation and acting that way ensures that you will get much less from this situation than you might have otherwise.

You’ll overlook things. You’ll convince others to not reveal things to you. You’ll walk away from the situation far poorer than you might have otherwise.

A far more useful attitude to have in any situation is an attitude of respectfulness. Every single situation we’re faced with in life has the opportunity to reveal something valuable to us, either directly or by putting pieces in place for future things. That value, in every situation and interaction, deserves respect.

You can achieve this in several ways. First, keep your internal critic in check. If you open up with criticism, the other person is likely to close up on you and you’ll not find much of value in the rest of the conversation (ideas, a job offer, ideas you can learn from and apply in your life, etc.).

Second, if you can’t think of anything to say that isn’t critical, ask a question that’s actually a question and not just a (not really) vieled criticism. Look for things that do have value to you by probing deeper.

Finally, pay attention. There are things of value in every situation if you give it your attention and look for it. Every article I read has some value in it for me, even if it’s something simple like showing me a cultural difference or a perspective difference between myself and someone else. It allows me to see the world through someone else’s eyes and that vision often reveals all kinds of things. That has great value, but an insolent attitude quickly tosses it aside.

Dwyane Wade and LeBron James, by Keith Allison

Overconfidence
An excessive degree of self-assurance.

Most people are familiar with the decision of the basketball player LeBron James to leave his hometown team, the Cleveland Cavaliers, and play with a different team that already had two star players (Dwayne Wade and Chris Bosh) that were friends of his.

I respected that decision. I can understand the appeal of wanting to associate closely with friends. I can understand the desire to want the highest quality team, because almost all work is on some level a team game. His method of announcing his decision might have been a bit schlocky, but even then, it was just one way of capitalizing on a flood of media interest.

What made me wary of this move was what he did the following night, when he appeared publicly with his new teammates and discussed how they were going to win eight championships. That type of statement, indicating that he believed his team would dominate the league for the next decade, encouraged a lot of people (including myself) to root for any team other than the Heat.

It’s one thing to be confident and say things like “I believe with this team we have assembled, we have an excellent chance of winning the title this year if we put together some hard work and come together as a team.” It’s an entirely different thing to claim you’re going to win eight titles.

The result of this is that this team spent the entire year receiving an extremely negative response almost everywhere they went and, when the season ended, it was not their team holding up the title.

It’s good to be internally confident and have a sense that we can take on life’s challenges. It’s sometimes good to even be somewhat externally confident and willing to step up to the plate in a challenging situation.

It’s never good to over-promise and under-deliver, particularly when your promise is beyond reason. You lose the respect of those around you and you turn potential friends and opportunities into enemies and lost chances.

The superior attitude here is modesty. Under-promise what you can achieve. Offer respect towards others. Play down your own contributions and play up the contributions of others. Invest your resources in a way that will allow you to cover what you promise with some potential upside if things go well.

Then, when you over-deliver, you look like a true winner, one that can hold the title and still have the respect of those around you.

Modesty and humility are always valuable tactics. They will help you build relationships that will help you in your professional career, your personal life, and your financial life, too.

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. Selling off items
2. High-interest foreign accounts
3. Putting off home ownership
4. 401(k) leftovers
5. Early payments on 0% loan
6. Vegan snacks
7. Using a windfall
8. Self-employment and taxes
9. Paying down credit card debt
10. Reference books

My parents visited us this past weekend. I love it when they come to visit us, yet I also sometimes feel some relief when they’re gone. I feel the same way with almost any guest – I’m glad they’re here, yet I also feel glad after they leave.

It’s just the natural stress of houseguests. A guest in my home for an afternoon isn’t stressful, but once someone is here for several days, I almost always find myself getting stressed out.

Q1: Selling off items
When you said the first thing you did was to sell all your media (DVD’s, CD’s, etc.), where did you sell? I have a hunch it was eBay or Amazon, but I’m not certain, and I would like to know the best way to go about selling media. I find eBay and Amazon very time consuming to use for selling. We have a local buyback store, although I’m not sure they offer a respectful amount of money for items. In a nutshell, where is it worth it and what makes it worth it?
- Sandra

I did not sell all of my media online when I first hit my financial bottom. I did use eBay for some items, but I was very selective about what items I sold (particularly after the first batch), focusing on ones where I felt the return would be worth the time investment.

What I actually did was sell a handful of items online, then sell most of the rest at a used media store. The few that were left wound up at a yard sale, and the unsold ones there wound up at a Goodwill store.

I was pretty happy with the financial return here compared to the time invested. That money went a long way in helping me deal with my initial debt load.

Q2: High-interest foreign accounts
I am a long-time reader of your blog and have loved your insights. I was wondering if you could provide some insights into how I could profit from the extremely high interest rates available in countries like Brazil or Turkey? It would seem prudent to park our money in a cash-deposit or savings account in a foreign bank paying high interest for a while… then move it back to the US.
- Tim

There are several concerns I would have here. First, in order to use the money, you’re going to be converting your currency twice and paying a fee on that conversion twice. This will eat up a significant amount of your gain.

Another concern is that, to an extent, you’re playing the foreign currency market. If the exchange rate moves in favor of the U.S. dollar while your money is in the Brazilian or Turkish bank, you’re going to see most of your gains eaten up.

Yet another concern has to do with the banking industry in those nations. I’m not clear on how stable the banks are there and how protected ordinary depositor accounts are.

There are enough uncertainties and risks in this that I wouldn’t try it unless I was actually from one of those nations and very familiar with the risks and concerns involved.

Q3: Putting off home ownership
My husband has a stable job at which he excels. I have an office job that I was happy to accept in the depth of the recession (after a two-year low-paying but freelance blogging gig) but that I don’t love. We were married in May 2008, and started our life together with $43,000 in credit card, car and student loan debt.

In just over 2.5 years, we’ve reduced that debt to about $7,500, which we are on track to pay off by the end of this year, using monthly automated payments. On January 1, we began weekly automatic savings of $230 per week to an emergency fund (we began with Dave Ramsey’s $1,000 mini-fund back in 2008).

Our gross income in 2010 was about $120,000, and in 2009 it was $96,000. However, due to our aggressive debt repayment, our entire savings consists of $2,000 in our emergency fund. I do have $3,200 in a retirement account from an old job, and I just started contributing to my current company-matched 401k in January. My husband (who earns about 70% of our combined income) is not contributing to retirement.

Here’s the quandary: we both dream of owning our own house. We are currently renting a house for $1,400 (a great deal in our area) from a family friend who would like to sell it to us. She has offered owner financing (not sure if we need this — we have good credit, but understand that lending is tight and we have no down payment), but won’t name a price range. We’re a bit concerned about this, as she previously listed the house for a price that was aspirational to the tune of $100-$150K over market value (needless to say, she received nary an offer, not even a low-ball one).

Our lease is up in June. I would like to quit my job next year to explore a new career, travel and raise children (we are in our early 30s, no kids yet). With only my husband’s salary we can afford mortgage payments up to $2,500, which, depending on what calculator we use, seems to put us in a $375,000 home. This is about the value of the house we are renting, and an average price for a “starter home” where we live. We keep and stick to a meticulous budget.

I feel like conventional wisdom would tell me to stay in my current job until the emergency fund is built, the debt is completely paid off, max out retirement, and then and only then, start saving for a 20% down payment on a home. But that might take us another 3 years or more, and involves asking to extend our lease on a property we know our landlord wants to sell, or moving to another rental that could be more expensive or far less comfortable and convenient in the meantime. Also, home prices are temptingly low right now, and while we have little savings, our income is healthy, and would still be without my income, though we’d probably qualify for a smaller mortgage (that wouldn’t be enough for a house in our area).

So what do you think? Should we ask to extend our lease? Should I plan on staying in my job longer than I’d like? Is there any good reason to halt our debt repayment and emergency fund savings to redirect towards buying a house?
- Johanna

I think you should sit down with your landlord and try to get a bead on what kind of arrangement she’s wanting for the sale. What’s the price? How does the financing work? You need more information with which to make a decision here.

If that’s a non-starter, I would try to extend the lease and then get your financial house as solid as you can. You have the right ideas – pay off your debts, build your emergency fund, contribute to your retirement.

As for your wish to take a year off, I think it’s fairly incompatible with the other things you’re mentioning. While I’m not opposed to the idea, you have to reconcile yourself to the fact that you can’t have everything. You can’t have jobless freedom while also paying off your debts and building up your down payment. You’re going to have to make a choice there.

Q4: 401(k) leftovers
I’m a 24-year-old writer who graduated from college in 2008. I was lucky (and hardworking) enough to graduate with zero dollars in student loans. But thanks to the terrible economy of the summer of 2008, I haven’t exactly had much career success. Just out of college, I had a paid internship that afforded me a 401(k) and matching funds. I contributed as much as I could, but my small intern salary for the summer left me with just around $500 in the 401(k).

Since then, I’ve been working, but not contributing to a retirement fund. I make a very modest salary as a receptionist, combined with some side money from freelance writing. The writing is my passion, though, and with my networking contacts, I’m considering making the move to be a full-time Freelancer in the upcoming year (As soon as I have my $900 credit card bill, my only debt, paid off).

But now I’m ready to start modestly (only around $100 per month) contributing to a retirement fund again; I know it’s important to sock away as much as I can while I’m young. I’m considering opening up a Roth IRA to take advantage of the tax benefits later on in life (when I hope my income and tax bracket may be higher), as well as the flexibility to take out my capital contributions if times get really tough (Journalism is a fickle industry).

But my problem is that I have no idea what to do with that 401(k). Should I take the money out and put it in my (eventual) Roth IRA? Wouldn’t that leave me with pennies after the early withdrawal fees? Should I roll it over into a Traditional IRA? If that’s the case, should I keep both a Traditional and a Roth IRA? Just the Traditional? Can freelance contractors make tax-deductable contributions to a Traditional IRA? Would that be a better idea for a self-employed person? Should I leave it in the 401(k) for simplicity’s sake? I would jump at the chance to re-join the non-Freelance workforce if the right opportunity presents itself, so perhaps I’ll have another 401(k) down the road.
- Evelyn

The usual process is to roll a 401(k) into a Traditional IRA, then convert that Traditional IRA into a Roth IRA. That’s the type of thing that a fee-based financial planner (do not use a commission-based financial planner for this – ask them if they operate on commission before using them) can help with. This usually doesn’t incur early withdrawal or other fees. However, the conversion from a Traditional to a Roth IRA will cause a taxation event because you’re moving from pre-tax to post-tax dollars. You’ll have to pay income tax on that money. If you can’t do that, leave it in the Traditional IRA.

You can certainly have a Traditional IRA and actively contribute to a new Roth IRA, just as you can have a 401(k) and a Roth.

I like IRAs because you have more control over how your money is invested. You pick the investment house and you usually get a much wider and richer range of investment options.

Q5: Early payments on 0% loan
What do you think about making early payments on a car loan that has 0% interest?

I’m torn between reducing the car loan debt (about $28k), opening a Roth IRA, or starting another account to save for a house. I already contribute 10% of my salary to a 401k which my company matches 50%, so the Roth IRA doesn’t seem urgent. I’m a few years away from wanting to buy a house, but I’d be able to pay for a mortgage a lot easier if I’m not spending $500/month on car payments (there’s about 57 months left to go!).

Selling the car to buy a “reliable, used car” instead is not in my interest, despite that being the typical finance blog approach.
- Charlotte

The reason the “typical finance blog approach” involves buying a reliable used car is because it provides the most driving bang for your buck. If you choose not to do that, you’re simply choosing to redirect money from other financial goals into having a shinier car, which pretty much opposes most financial sense. If a “typical financial blog” advocated buying a new car on a loan, then that “typical financial blog” would pretty much constantly be ridiculed for offering dodgy advice.

If you’re committed to your current car, that means you’re committed to it above your other goals, which is good – you’ve assessed your goals and figured out what you want. The advantage to paying off the loan early in this case isn’t to avoid interest, but to maximize your cash flow as soon as possible.

However, if your loan really is 0% interest for the entire life of the loan, you’re better off making extra payments into a savings account, waiting until that savings account matches the balance of your loan, and then either paying it off right then or simply using that savings account for all remaining car payments. This takes financial willpower, but it’ll put you ahead financially, perhaps saving you the equivalent of a car payment or so in interest earned.

Q6: Vegan snacks
On your diet, what kinds of snack foods do you eat? I’m amazed at how much stuff has milk or eggs in it!
- Jeff

I eat nuts. I eat fruit (I love dried apricots). I eat mushrooms that have soaked in olive oil, a touch of vinegar, and spices. I eat crackers. I eat pretzels dipped in hummus.

You just have to look around your grocery store for options. The best place to start is usually in the produce section. Look for things that look like you could munch them. Hummus is a great thing to dip these vegetables in.

Pick up some nuts and try them. Try out a variety of dried fruits. You’ll be shocked how many good things are out there once you start looking in the right places.

Q7: Using a windfall
After a year of unemployment I am now gainfully employed. I have cut my budget down to bare bones (no extra spending of any kind, no cable, no shopping, no…anything) in order to be able to save $1000 each month.
15% of my salary goes to my 401k/Roth401k
$200 a month goes to my RothIRA
I save $1000 a month (starting this month)
I have $8000 in savings
I have $9000 in debt. I pay this off at $300 a month, and there is 0% interest (praise God)
At this rate, I will be paying this debt off until December 2013.
We are planning on having a baby in Summer of 2012 and that is what we are saving up for.
We currently rent, and are not looking to purchase a home for another 5 or so years.

I am starting a certification program that will allow me to start my own business by the end of the year. The program costs $7000 and I am paying out of pocket, from my savings and replenishing my savings at a rate of $1000 a month. I am getting $1600 windfall shortly, and at my new job there are two bonuses this year. I was told I can expect to take home $2000 for each.

What do you suggest I do with those $5600 in extra funds? Should I put them to savings to replenish what I take out for the certification program? Should I put them to debt so I can pay it off faster and have that additional $300/month to go towards savings instead of debt sooner?
- Danielle

I’m not sure how much your monthly expenses are, but if you’re a permanent couple with a baby on the way, I’d make sure that my emergency fund covered at least four months of living expenses, and preferably more. With two adults and a baby, the potential for emergencies is huge.

For you, that probably means banking most of your windfall right back into that savings account and sitting on that egg until you need it.

It’s not exciting or glamorous, but it’ll take care of you when you really need it.

Q8: Self-employment and taxes
I know you previously wrote about the difficulty of being newly self employed and the taxes that come with it. Since you’ve been in that situation for a few years now, I’m wondering if you have any tips (or lessons learned from experience) for those of us facing that situation?

Our personal tax situation is this (though it isn’t really relevant): In the past, I was an employee and my husband was self-employed, so we withheld more from my paycheck to cover what little tax he owed. Unfortunately, this past year, I made partner and became self-employed and my husband’s business is starting to take off. We tried to pay quarterly estimates throughout the year, but still ended up owing a big chunk at the end. In fact, so much that we might have to take a loan to pay it (in our defense, our taxes tripled from a year ago). I’m trying to figure out how to avoid this situation next year–create an account and put money in it every week and send that in quarterly? Do something else? Our accountant advises writing the equal checks quarterly, but I don’t see how we can do that, especially with owing what we owe this year.
- Dawn

The idea of equal checks only works if you can make a really good estimate of how much you’re going to earn in the coming year, which is pretty challenging for many self-employed people (myself included).

My solution has been to just take every single drop of income I bring in from my self-employment and put half of it aside. Every three months, I cut a check to Uncle Sam for about half of what I added to the account over the last quarter, plus a check to the state of Iowa for about half that much.

This gets me pretty close to what I owe (usually). The amount that remains in that account helps me to cover any additional taxes I owe. If there’s any left over, I move that back into my normal checking account.

Q9: Paying down credit card debt
I received an 18% cut in my pay for 2011. I am an independent contractor doing medical transcription at home and because I love my job, have flexible hours, and make pretty good money, albeit less by 18% now, I do not want to look for another job. I live in a small town with no job opportunities too. My question is, I am trying to pay down 3 credit cards that are all roughly the same balance, approximately $4200-$4500 range each. Two of these are at exact same interest rate of 12.24% and one at 9.99%. Rather than snowball I want to pay all down within a 36 month time range at the very least, and more when I can throw money at them. For the next three months (while paying off a medical bill) I plan on making the minimum payments plus the interest. For example, one bill is minimum of $91 plus finance charge of $46 with total payment of and some change I will round up payment to $140. Is this a smart way to do it for short term until I pay off the medical bill? After the medical bill I will be able to pay total of $450 per month prorated to each bill and I want to continue to pay the finance charge on top of that.
- Ronnie

It depends on the interest on the medical bill. Your best approach is to make minimum payments on all of the debts, then make the largest additional payment you can on the debt that has the highest interest rate. This will pay off all of your debts in the fastest possible way.

The medical bill seems to be somewhat thrown into the mix here. I’m assuming it has some sort of payment plan involved. If that’s the case, you’re likely facing a 0% interest on that debt, so I would just make the payments on that one and hammer the credit cards.

If your goal is to get debt free as quickly as you can, this is the way to go.

Q10: Reference books
You mentioned before that you buy books for reference, not for entertainment. What kinds of books do you buy for reference?
- Angie

Mostly, I buy books for reference when I know I’ll return to them in the future for facts, inspiration, or other materials. I’ll also buy books when I know I’ll get greater value out of them if I’m able to hand-annotate the pages or highlight certain parts.

Another exception are books that I’m sure I’ll re-read again, which includes my favorite novels. We have copies of the entire Song of Ice and Fire series, for example, because my wife and I both love them.

If a book doesn’t fall under these conditions, I’m fairly hesitant to purchase it. I’ll pick other books up at sales sometimes or I’ll use gift certificates on them.

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.