The title of this post is a sentence that appears in bold on page 51 of Your Money or Your Life. In fact, it appears twice in bold on that page.

Money is something we choose to trade our life energy for.

This applies to virtually every financial transaction we make. When we work, we trade our life energy for the money we make. Even when we do things like receive an inheritance or win the lottery (a lottery ticket is a bad proposition, by the way), we still had to invest life energy or money to receive those things. Investments, for example, don’t require an input of life energy themselves, but they do require an input of money, which at some point we had to trade our life energy for.

Now, if you start digging into this, there are some interesting consequences.

First, if you earn $15 an hour at work, you’re not actually trading an hour of your life for that $15. This is a point I’ve discussed before. In truth, you’re not earning that $15. Some of it is going away to taxes. Some of it is going toward buying your work clothes. You’re also working some hours for free, including the commute time and so on. If you start calculating the numbers there, you quickly get down to a rate of $8 or $9 per hour (perhaps a little better, perhaps a little worse) that you actually earn from your job that you get to keep.

At my previous job, I had an on paper hourly rate of about $25 an hour. However, once I started figuring in the additional costs, such as child care and parking passes and good clothes for work, and adding in the additional time, such as time spent traveling and time spent working in the evenings for free and time spent commuting (an hour every day), it added up to a much more painful hourly rate.

Today, I can earn a lot less than $25 per hour and still end up with the same amount of money to keep because most of those expenses are gone. I don’t have a commute, I don’t pay for parking, I don’t have to buy work clothes, I have reduced child care expenses, I rarely (if ever) have to travel – these add up, both in terms of financial and time savings.

Second, once you start really realizing how much money you’re receiving for each hour of your life you’re trading, frugality is cast into a whole new light. Quite often, you find that the hourly return on your time while working on a particular frugality task is better than the hourly return on your time at work (or doing a work-related task).

For me, the magical rate is about $10 per hour. If it’s less than that (as gardening is), it needs to have some extra appeal for me beyond mere frugality. If it’s more than that (like turning off the lights before a trip or making our own bar soap), then it starts to become a priority to get it done.

Third, investing also has hourly returns. When you invest, you have to invest some time setting up and following the investments. Thus, investing has an hourly rate of return as well. Sometimes it can even be a negative hourly rate of return over a certain period of time.

Ideally, if you’re investing a significant amount of money and are using passive investing, the hourly rate becomes fairly large. It’s this perspective that encourages me to use passive investing techniques (essentially, I pick a fund or two in my retirement or investing account, then set up an automatic investment into those funds and sit back). I might earn a greater return if I was more actively involved, but I’d be investing significant time to earn that greater return and my hourly rate would go down.

Thus, I would only actively invest if I were having a lot of fun doing it. It would have to bring me personal enjoyment to make up for the drop in hourly rate for the time invested.

Finally, the things I do for fun are altered by this “time is money” perspective. I might enjoy golfing, for example, but to do that, I’m paying about $20 per hour for enjoyment. I could do a lot of things I personally enjoy more for that $20 an hour rate, so why would I golf?

That $20 per hour equates to about an hour and a half of work for me for that one hour of fun, so that one hour of fun better be a very good hour of fun.

When I start using this perspective, the free and fun things to do in life start to take on a lot more appeal. I could ride my bike to the park with my kids for free. I could play a round of disc golf while there with my wife and my oldest son for free. All I’m spending is that time – and I’m enjoying it. I’m not spending money doing it (which is actually time spent working).

In short, when you spend money, you’re actually spending time at work. If you actually earn $8 per hour invested in your job and you buy a $2,000 television, you’re swapping 250 (!) hours of your life working for that television. Why not buy a $1,000 television and reclaim 125 hours of your life?

If you earn that $8 an hour and buy a $200,000 house on a 30 year mortgage, meaning you actually dump in $400,000 after the interest, you’re swapping 50,000 hours of your life for that house. Why not live in a $100,000 house and reclaim 25,000 hours of your life? That’s twelve years of working 52 weeks a year, five days a week, eight hours a day.

Some food for thought this Saturday afternoon.

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

1. Dave Ramsey on work and money
Dave clues in on one of the key components of making money.

“We learned early on that if we help enough people, the money will come.” – Dave Ramsey

Do you have a skill or a product that can make people’s lives better? That’s probably your key to making money.

2. Dan Ariely discusses learning and conflicts of interest
I see this all the time, particularly when it comes to politics.

If you’ve already made up your mind before you sit down, you’re not going to learn anything. If you’re going to sit down to learn something, don’t waste your time by coming at it with preconceptions.

3. Charles Schwab on working for money’s sake
Ever notice how the people who seem to get ahead in life are the ones who are passionate about what they’re doing?

“The man who does not work for the love of work but only for money is not likely to make money nor find much fun in life.” – Charles Schwab

There’s a big connection there. People will always pay for the combination of passion and skill.

4. Artfire
Artfire is a site somewhat like the previously-mentioned Etsy. Both focus on handmade goods and provide a platform for people to make items at home and sell them to a large audience.

I often look at these sites for gift ideas (things I’ll make myself to give as gifts) and sometimes as a place to purchase a gift. It’s also a powerful way for people with an artistic or crafty bent to make money on the side.

5. Linus and Lucy
This is the song I’m trying to learn on the piano right now.

I’m going to guess it’s going to sound familiar to an awful lot of you.

6. Henry Ward Beecher on the measure of a person
I would far rather hang out with a great person without much money than an awful person with a lot of money.

“He is rich or poor according to what he is, not according to what he has.” – Henry Ward Beecher

You can decide for yourself who is worth paying attention to.

7. Van Gogh’s The Bedroom (1889), at the Art Institute of Chicago
I was there less than a week ago. This was one of the two highlights for me.

Something about this painting just lit up the room for me.

Thanks to Dawn Zarimba for the wonderful photo of this painting hanging in the gallery.

8. FDR on money and effort
I’m happiest not when I’m making money, but when I’m creating something.

“Happiness is not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort.” – Franklin D. Roosevelt

Money is a nice reward that comes later. It’s the act of doing something that’s exhilirating.

9. Camille Pissarro
I had never appreciated Pissarro’s art until my visit to the Art Institute of Chicago last weekend.

Many paintings by him spoke to me, but the one that really stood out to me was this one, Woman Bathing Her Feet in a Brook (1894/95).

This was easily my daughter’s favorite painting at the entire museum (and one of mine, too!).

Thanks to one2c900d for the picture!

(I also really liked The Place du Havre, Paris (1893) by him, as well, but I couldn’t find a good public domain picture of it.)

10. Emerson on the reality of money
People often seem nostalgic for the great times of the past. In truth, though, the past wasn’t really all that better than today. As humans, we tend to remember the good times and forget the bad ones, so the past often looks pretty good.

“Can anybody remember when the times were not hard and money not scarce?” – Ralph Waldo Emerson

One can never really roll back the clock to some earlier great times. Instead, we have to move forward from where we’re at.

Saving Pennies or Dollars is a new semi-regular series on The Simple Dollar, inspired by a great discussion on The Simple Dollar’s Facebook page concerning frugal tactics that might not really save that much money. I’m going to take some of the scenarios described by the readers there and try to break down the numbers to see if the savings is really worth the time invested.

Matt said, I’d like to see your take on changing oil at home versus having it done at a shop. I’ve done my own calculations on the matter but I think it might be worth exploring on your blog.

Oil changes are pretty simple to do at home. If you’re changing the oil, you literally just slide under the car with a pan, remove the plug so that the oil runs into the pan, then go do something else. A while later, you put the plug back in place, open the top, and add oil until full. Done. If you’re changing the filter, you also just pull out a filter in the middle and insert a clean one in the middle of this process.

The actual labor for this is five or ten minutes (once you’re used to it), and you can save the old oil in a jug in your garage until you have a chance to drop it off somewhere when you’re out and about on errands.

On the other hand, if you go get your oil filled for you, it takes at least that long to interact with the people there, plus there’s the dreaded waiting. Ideally, you have the ability to do something else while there, but that’s not always a guarantee.

My local Jiffy Lube will change the oil in your car for about $30. For roughly another $20, they’ll also change your oil filter.

I can acquire a quart of the high-quality synthetic motor oil I like to use in our car for $6 (shipped to our house for free), and it takes four quarts to fill it. I can also get an oil filter that fits for $11.

Thus, our materials cost for a single oil change is $24. If we couple that with an oil filter change, it’s $35. This compares to an oil change cost of $30 and $50, respectively.

In short, I save about $15 doing it myself. (The exact math will vary depending on your make and model of car, of course, but it will be along this order of magnitude.)

Now, here’s the tricky question: how much is it worth it to you to avoid having to climb underneath your vehicle twice? For some, it’s just a job that they don’t want to do and it’s worth the $15.

For others, there’s extra value in doing it yourself because you can be sure it’s done correctly and with oil and filters that are of your own selection and not of the dealership. What do I mean by “done correctly”? Many oil change places do not let the oil drain for a sufficiently long period of time. A few minutes of draining means there’s oil still inside, while an hour or so of draining will get rid of much more dirty oil. However, oil change businesses usually won’t let your car drain for an hour.

For still others, it comes down to the value of their time. Whenever I get my oil changed, I choose to do it simply so I can drop off my car while running other errands. I’ll walk to a nearby grocery store, choose to drive up to get my groceries, walk back to the oil change station, get my car, then drive back for the groceries. Doing this allows me to effectively multitask.

On the other hand, if it’s a Saturday afternoon and there’s nothing special going on, one might as well change the oil in one’s car and save $15.

Changing your own oil saves dollars, not pennies, but there may be other factors that convince you to hire someone to change it for you.

Dinner With My Family won’t be posted this week because, frankly, I spent most of the last week traveling or at other social events. It should resume next week.

Last night, we had a small birthday party for just a couple of our daughter’s friends to celebrate her birthday. We held the party at a park and had a simple treasure hunt and a couple of party games – a very simple and pleasant birthday party.

At the party, she only received two presents. In comparison to that, we had given her five (or so) presents at home earlier in the week, along with a gift from her grandparents.

When she opened just the two presents, she really enjoyed opening them and within just a little while had played with both gifts (one was a ring toss game and the other was an art kit).

When she opened the six presents at home, she really enjoyed opening the first two or three of them, but after that it was pure diminishing returns. Even more interesting, she has more or less chosen two preferred presents (a doll and a game) and has scarcely looked at the other ones.

The experiences for these two situations were very different, but the biggest change was simply the number of presents. Two gifts worked out far better than six.

Here are a few thoughts on that experience (that go beyond just a girl’s birthday party).

No one needs a giant pile of presents. In the end, we’re drawn to just a few of them. This is obviously true for my daughter, but it’s also true for my other children – and, frankly, true for me, too. At Christmas, I usually end up really enjoying just one or two of the gifts I receive, even if I receive several and even if they each might appeal to me greatly if I received them alone.

You only have so much time and attention. I have tons of different hobbies that I’m interested in, but in reality I simply don’t have time for all of them. I only have so much time and attention, and convincing myself that I have more than I have is simply a mistake.

Figure out how you’re going to use that time and attention. At this point, I really have two hobbies: reading (when I’m alone) and board and card games (with friends and family). I participate in online forums related to both hobbies and I engage in them as often as I can. Given the free time that I have, these two things fill it up quite quickly.

Don’t waste a dime on other areas. I’d love to have time to take up golf again, but I realize that I actually have the time for golf roughly once a year. Thus, it would be completely nonsensical to invest in a bag of golf clubs. I’ve really walked away from many hobbies over the past several years, both to save money and to give myself adequate time to enjoy hobbies that are more important to me.

Give something besides presents. When I think of Christmas, I don’t think of gifts. I think of sitting around and talking to my family and enjoying their company. When I asked my daughter this morning what she remembered about her party, she didn’t remember the presents. She remembered the scavenger hunt and riding on the merry-go-round with her best friend. The best things we receive in life are rarely wrapped up with a pretty bow.

Instead of giving your child or your spouse several presents, get them one or two that are really well thought out. They don’t have to be expensive. They simply have to be something that truly appeals to the recipient. They’ll get far more value and joy out of one gift that really matches their interests than multiple gifts that do not.

In a few months, my son turns six. Rather than giving him several presents, we’re going to instead think carefully about what he’s passionate about and get him just two or three that match those interests well. This allows us to think more about the ones he does receive, allows him to enjoy all of his presents instead of just selecting a few favorites, and saves our pocketbooks as well.

Is the United States headed in the right direction? Is it headed in as poor of a direction as many prognosticators like to say that it is?

You’re going to get as many answers to that question as there are grains of sand on a typical beach. Some people will agree completely with a certain prognosticator. Others will shout “DOOM!” from the rooftops. Still others will say, “Bah, it’s not so bad” (I tend to be in this latter group, mostly because I think fear itself reinforces and blows problems out of proportion).

Who’s right? Who knows? No one is psychic. No one can tell us what the future will bring with absolute certainty. However, we all have our opinions and we all have our own sense of where the nation is headed.

This perspective guides us in a lot of ways. It can guide us to where we get our information. It can guide us to the social groups we participate in.

Yes, it can also guide us with regards to what we do with our money.

Money Choices If You’re Negative
Here are some of the financial decisions you might make if you believe the economy is headed in a terrible direction.

Make minimum debt payments on all fixed rate debts. If you believe the dollar is going to enter a period of rapid inflation or devaluation, then you should want to delay your payments for as long as possible so you’re making your later payments with dollars that aren’t worth very much. Instead, channel those dollars into the things below.

Invest in tangible goods. Items that you can hold in your hands are always good investments during a downturn. Invest in land and in housing. Have plenty of food on hand. Improve your residence so that you’re less reliant on external services through things such as solar power, wind power, heating created by fuel you produce yourself, and so on.

Invest in international stocks and currencies. If you believe the U.S. is headed for disaster, it’s not a bad idea to buy the currencies of nations you believe will ride out this situation as well as the stocks of companies that will survive it.

Money Choices If You’re Positive
On the other hand, if you believe the economy is on solid footing, you might want to consider these things.

Pay off your debts as quickly as possible. Debts are simply money leaks. As the economy rebounds, you want to be on the firmest financial footing you can be so that you can take advantage of the abundance of work and entrepreneurial opportunities that a rebounding economy provides. The stronger your personal cash flow, the better.

Invest in yourself. Hand in hand with paying off your debts is making sure that you have all the skills you need to succeed in this growing economy. More education might be on the table, for one. Attending conferences (and actually using them) is another route to success.

Invest in domestic stocks. If the economy is heading towards a healthy rebound, stocks have nowhere to go but up. A bet on the rebound of America is a bet on the workers and the companies of America.

My Solution? Diversify!
Although some of the moves listed above are better in certain economic situations, none of them are ever a bad idea (assuming, of course, you’re not channeling your money into frivolous spending). Being self-sustaining is always good, as is having a good skill set for the marketplace. A diversity of investments is always a good idea, so consider a balance of international and domestic stocks in your retirement accounts.

You can, of course, use your political beliefs to narrow down what you do with your money, but diversification means that you’re not exposed to total failure no matter what happens.

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. IRA contributions and taxes
2. Buying on credit
3. Biggest weakness
4. Using IRA for other purposes
5. Kids and memorable experiences
6. Approaching a pastor
7. Vacation rules of thumb
8. Retirement money for housing help
9. House repairs and debt
10. Insomnia

Over the last few weeks, I’ve been re-reading some of the books that really got me excited about personal finance to begin with, like Your Money or Your Life and The Total Money Makeover. I’m really trying to see what elements of these books speak to me in the completely different personal finance situation that I’m in now compared to five years ago.

Guess what? Most of them are still enlightening and thought-provoking, just in different ways.

This will undoubtedly be fodder for posts over the next few months.

Q1: IRA contributions and taxes
As I understand it, I will have until April 15, 2012 to contribute the maximum $5000 to a Roth IRA for the 2011 tax year. How is the “tax year” determined for these purposes? What I’d like to do is up my savings (I have $0 currently designated for a ROTH IRA) and contribute $5000 by December 31, 2011 because I like using the new year to set my financial goals benchmarks and then “start over” in a sense for the new year. Would any contributions made in February of 2012 automatically count towards the 2011 tax year or would it count towards the 2012 tax year? Or do I specify these things when I make a contribution?
- John

The tax year is still January 1 to December 31. You’re allowed to apply contributions until April 15 to the previous year’s contribution totals. This makes sure that people are able to put bonus money and final paychecks that might have been taxed in the previous year toward the previous year’s retirement contributions.

You can essentially choose which year you wish to designate a contribution in that January 1 to April 15 window. You just have to appropriately label it on your tax return for that year.

It’s a messy situation, I know, but there’s not really a better way to do it that allows fairness for all.

Q2: Buying on credit
My husband and I are considering buying a second TV. The one we want costs around $750 at Sam’s Club.

There’s more than enough money in the bank to pay for this, but we really don’t want to dip into our savings. Sam’s Club has a deal where you can buy the TV with a credit card at 12 months with no interest.

We feel like it would be smarter to invest this money over the next year (as planned) and pay off the TV with the credit card little by little. I don’t see the downside since there’s no interest, but all the personal finance blogs recommend targeted saving for big purchases to avoid buying on credit.

We have zero debt and we currently save about 60% of our income.
- Monica

This is the pitfall of debt. When people look at the future, they assume that it will go along smoothly. They believe that it will always be easy for them to meet their obligations if it’s easy to meet them now and that it will always be hard for them to meet their obligations if it’s hard to meet them now.

Because of that, people in a good situation at the moment tend to burden down their future self with debts because they can’t imagine a future where it’s difficult to make ends meet. I know I certainly fell into that trap once upon a time.

In short, if I were you, I wouldn’t follow either of these plans. Instead, I would start a new savings account and start contributing some amount to it per week or month. When that account has enough cash in it to buy the television, buy it.

Q3: Biggest weakness
What is your single biggest weakness when it comes to overspending?
- Lisa

This is going to sound completely strange. My biggest weakness is startup companies, particularly ones in my areas of interest (particularly gaming).

When a small business is just starting out and I see that they’re doing something of value, I have this innate drive to want to support that business. I’ve really got a weakness for this.

I think it’s because, far beyond the item that my dollar is buying, I see how the money is really helping a real person make a go of their dreams. That’s a very heady icing on the cake for me.

The most dangerous website in the world for me right now is Kickstarter, for that reason.

Q4: Using IRA for other purposes
I have almost $39k in an IRA (it was a 401k rolled over to an IRA) and I have been considering pulling some/all of it out to do a couple things:

1) Pay off a second mortgage (I owe $16,750 and the interest rate is 13% – I know ouch and bad for even taking it.) The second mortgage is $265/month.
2) Catch up on primary mortgage (about 3 weeks behind consistently.) Total is $1050/month, but at 3.375% right now (ARM, 1% max in any direction each year.)
3) Set aside money for an emergency fund (2 paid off vehicles that occasionally need repairs, potentially need to replace 1 in the next 6 months.)

The goal is to reduce expenses to bring our income/expenses in line. While I am not super concerned about the ARM right now, if interest rates start climbing, I want to be in a position to refinance, and we cannot do that with the 2nd mortgage (value of the house is appx. equal to the first mortgage now.) Our household income is about 70K (gross), and part of that is a 2nd job I work that brings in $1600/month that I would like to find a way to quit because I would like to start my own business but find there is very little time after both jobs. So realistically we are looking about about $50k income is what we want to work with. My wife has a chronic illness which limits her ability to work more than she already is and there are medical bills every month that we pay out of pocket. We were over our heads for a bit due to job loss where I was making more money, and have been cutting back a little more every month.

Does the high interest rate of the 2nd mortgage in any way offset the 10% penalty the gov’t is going to charge? (I know there will be taxes as well as lost opportunity costs.) We are not currently adding anything to any retirement accounts as we have been paying off our debts (almost done, about 1 or 2k to go except for the 2 mortgages.)
- Andrew

Even with that high interest rate, I wouldn’t pull the money out of the IRA. The penalty is more devastating than the debt, because not only are you losing 10% right off the bat by taking money out, you’re also, as you mention, losing a ton on the opportunity costs and depleting your IRA. I would only touch it if it comes down to losing your house.

If I were you, I’d just stick to your plan like a bulldog. Get rid of that first debt as fast as you possibly can, even if it means getting rid of some creature comforts. Look at every extra thing you do as part of buying and securing your house. “I’m doing this for this house that I live in and love.”

Throw everything but the kitchen sink at it. You’ll feel incredible when that debt goes away because of your own hard work.

Q5: Kids and memorable experiences
Per your recent mailbag post on taking your kids to an art museum, I was reminded that you are the kind of level-headed parent whose thoughts on raising kids I respect. I don’t have any kids yet, and am hoping to start a family in the next year, and this is a question that’s been on my mind the last few days. I spent the weekend doing a number of tourist attractions, and I was really surprised by the number of children, from infants up. This isn’t a question about badly behaved kids wreaking havoc in public, though! My question actually concerns the well-behaved children – I know my own memories of family trips or visits to museums and whatnot is almost nonexistent before age 6 and even up until age 10 is pretty fuzzy. I don’t remember my first trip to Disney World or Washington DC or the natural history museum. I know that I was there – I’ve seen pictures. But the fact that it happened has little meaning to me.

So why are parents taking their kids on adventures that they won’t remember? It seems kind of pointless to me to take children to see things they probably aren’t all that interested in yet, spending money on tickets and snacks and wrangling strollers and diaper bags, taking pictures that someday the kid can look at without remembering, when if the parents waited just a few years, the kid might actually get something out of the trip.

Is this just about the value of the experience for the kid at their current age, even if they won’t remember it? Is it about the parents wanting to do something and taking the kids along is just how it works now? What age do you think is appropriate to take kids to places like museums or historical sites? What about places geared towards children like Disney World?
- Rachel

Before I get started, I’ll mention that the Art Institute of Chicago is free for children under the age of 14. All three of our children didn’t have to pay a dime to go there. We were also visiting family in the area and staying with them, so there was no lodging expense, either.

The biggest reason we take our children on trips like this isn’t because we think they’ll remember it in detail as adults. It’s so that next summer, we can talk about how much fun the trip to the Art Insitute was (“Do you remember when we leaned in close on those paintings? Do you remember how neat it was to see “Bedroom at Arles”? Let’s look at these vacation pictures where you’re having fun at this museum!”) and easily convince them to go to another museum.

It’s establishing a long history of positive memories, one that will encourage them to go to such things throughout their life. It’s establishing the idea that activities that provide educational benefits can be fun and enjoyable.

As for things that they’ll actually remember – really big things, like international trips – we’re waiting until they’re significantly older. We have three or four big ideas for international trips, but they’re going to wait until our oldest is in high school (at least).

Q6: Approaching a pastor
You’ve mentioned before on The Simple Dollar that if you were in a dire financial situation, one person you would talk to is a pastor at a local church.

How would you even really go about that? What would you go to a pastor for?
- Evan

I would simply go visit a church in my area of the denomination I was most familiar with (and if I wasn’t familiar with one, I’d pick one at random) and ask to meet the pastor. I’d lay out my full situation to that pastor and ask for help on what I should do next.

I have witnessed, over and over again, how local pastors tend to provide incredible help to the needy. If you have true needs and talk to a pastor, they’ll go a long way toward helping you provided you’re willing to do something to help yourself.

People often hold themselves back from this due to pride. Don’t. We all find ourselves in difficult positions at some point in our lives.

Q7: Vacation rules of thumb
How much should I spend for vacation? Do you have a rule of thumb (like 1/12th of yearly net income)?

Until now I haven’t spend much money on vacation, I usually only visit my family twice a year. But I’m plannnig bigger holidays (visiting foreign countries) and I’m wondering how much I could spend. I neither have credit card debts, nor a mortgage.
- Valerie

It depends entirely on how much you value vacations.

If I were you, I would set a budget for the year and identify a certain percentage that I was spending on non-essentials. One plan that’s often mentioned is the 40/30/30 plan – 40% on required bills (like a mortgage, electricity, basic food, and so on), 30% on things I want (like a cell phone bill, vacations, magazine subscriptions, nights out on the town), and 30% for the future (retirement savings, early debt repayment, and so on). Your vacation would come out of that 30%. If your 40% exceeds its boundaries, it should eat from the “things I want” part first.

Within that 30% you can spend on wants, you simply have to decide how important vacations are compared to the other things you want. I can’t answer that for you.

Q8: Retirement money for housing help
My husband and are are 48 and 53 and currently live in a huge 4200+ square foot old Victorian house. We are empty-nesters with our youngest still in college. Our home has 14 rooms but we are only really using about 5 of them. The rest are closed off and used for storage or are just sitting there. It is located on a busy street and a corner lot with very little yard and no garage. We have about 50% equity in our home right now based on current market value. My husband also co-owns his late mother’s home with his 2 siblings and that house is for sale but in this market, we’ve had very few people looking at it. That house is much smaller than ours and a better size for us as we move toward retirement. It is in a more residential neighborhood, has a garage and a large back yard. Our house is only about 3 blocks from his mother’s house.

We are considering buying his mother’s house from his siblings so we own it ourselves. We would then continue to live in our home while doing some repairs/remodeling in the smaller home–maybe over the course of several years. Then we would move to that house and do any repairs/whatever needs to be done to our large home and then sell it. If we did this, not only would we not have a mortgage, but because of the significant difference in prices of the two homes, we’d have a substantial amount of money to put into retirement.

Here’s the downside–first, we really like our current home but it’s a lot of work on upkeep and it seems silly to have so many unused rooms. Second, the only way we could buy his mother’s home while keeping our current home is to tap into his retirement account which I KNOW is a no-no in the financial planning world. We would need about $20,000 to buy the house outright with no mortgage. We do not want a mortgage on 2 homes at the same time.

We’d like some input from you and your readers on if this is a good idea or not. We do know about the tax implications of using retirement money. We just want to know if we’re crazy to even think about this or if anyone has any other ideas we’re not seeing. By the way, we did have some people renting his mother’s home. They moved out and now we are spending a lot of time fixing their “improvements” so we really don’t want to rent it again.
- Monica

I would sit down and talk about this plan with the siblings and see if you can reach an agreement that doesn’t involve multiple mortgages.

One approach might be that you could live in the house rent free for, say, a year, but you would cover the property taxes for the year and shift ownership of that house to 35/35/30, with you having the smaller portion. This would be in lieu of rent, of course. During that year, you could pay down your mortgage on the bigger house while spending your free time repairing it.

At the end of that period, you could sell off the big house that you’ve repaired and use the proceeds to buy the small one.

This is the approach I’d take on that situation. Get the siblings involved in the discussion and see if you can’t come up with a plan that makes you all happy.

Q9: House repairs and debt
About 4 years a go, my husband and I bought an old house (circa early 1900′s). The house was liveable but needed some upgrades to plumbing, electric, central A/C, the list goes on and on. At the time we did not have any children and had minimal credit card debt. Since then we have had two children and have had to do quite a bit of work on the house, adding to our already existing debt. We now have about $35K in credit card bills, school loan payments, car payment (I was driving my grandmothers car before), and childcare costs. Every month we seem to be spending our entire paycheck paying off debt, leaving us little to no money for even our groceries and day to day living, let alone any savings for future home renovations. Our house still requires quite a bit of work – new bathrooms, new pipe, new support beams for first floor to name a few..one job ties into the next and starting one will most definitly snowball into a huge project costing us thousands of dollars – adding MORE debt. I have since taken on a new plan of action and am following a bill payment plan as directed on mint.com to reduce credit card debt. We are going to see how things go for the next 6 months and not do any work on the house until we see if we can reduce our debt with my new plan. If we had kids at the time we bought the house we would have never bought it in the first place…it needs too much work and costs too much money. But now my question is, does it make sense to stick it out and keep the house and make it into our dream home if it means going further into debt – with the goal of it benefiting us down the line? (Maybe use as rental property in the future or sell 10 years from now when housing market will hopefully be better than it is today)Or should we just sell as is now – stop spending money on it and live in a smaller more manageable house in a differnet neihborhood.

We love this house and the area and the neighborhood is really regentrifying every year – new stores and schools and restaurants, we love our neighbors and we’ve just put so much into the house already. My husband is dabbling with the idea of moving in with his mother and renting out our home until we can get back on our feet – which I DO NOT want to do for reasons I need not explain.

I feel like we have hit a dead end – we have debt, yet we need to spend more money…how then, are we ever going to get out of debt?? Unless we make more money – but it would have to be A LOT.
- Laura

This sounds like a situation where you have to make some tough decisions about how you spend your money, and I’m not talking about the house. You have to sit down and decide whether you want to keep that house or whether you want to continue having many of the perks you have in life.

Do you have a cell phone? Do you ever eat out? Do you have internet access? Do you do grocery shopping without planning and without using resources like food pantries? Do you have Netflix? Do you have a car payment when an old beater would do the trick for commuting? Do you use public transportation or avoid it? The list goes on and on.

If you find yourself saying, “Well, yeah, I have that, but I need that,” then you’re choosing that desire over your house. This isn’t judging you – everyone has a different set of priorities. However, if you find yourself not wanting to give something up in your current situation, the only result is bankruptcy. You have to decide what to give up.

Q10: Insomnia
Have you solved your insomnia problem yet?
- Aimee

Thanks to the many readers who emailed me about my insomnia problems.

I finally had a good night of sleep. How did I do it? I took a three hour walk. I followed that with basic steps to avoid cramping, such as eating two bananas and drinking a lot of water. That evening, I found myself so physically tired after the long walk and the lack of sleep that I just passed out at about 8 PM.

I don’t know if that was the perfect solution, but it seems to have done the trick and somewhat reset my sleep cycle.

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.

Saving Pennies or Dollars is a new semi-regular series on The Simple Dollar, inspired by a great discussion on The Simple Dollar’s Facebook page concerning frugal tactics that might not really save that much money. I’m going to take some of the scenarios described by the readers there and try to break down the numbers to see if the savings is really worth the time invested.

Naomi said, Garage Sales – it takes a day to set up; we usually purchase lunch that day because we’re busy (day before and day of) adn can’t make lunch…and usually gross about $150 – 200.

I’ve found that garage and yard sales can vary greatly in their success level depending on a wide variety of factors.

The amount of promotion If you promote your yard sale with signs and flyers, you’re going to get a lot more traffic. The more you promote it, the more traffic you’ll get. Savings tip: I tend to try to schedule yard sales in conjunction with my neighbors so that we can promote our yard sales together. Our town has a regular “city wide yard sale,” so we’ll schedule things in conjunction with that.

The weather on the day of the event If the weather is beautiful, you’ll see more traffic. I’ve actually postponed yard sales because of forecasted bad weather (since I do much of my promotion during the week before the yard sale).

Meal preparation What I often do is prep all of our meals two days in advance of the yard sale. I’ll make food so that it’s easy to pull out of the fridge and eat at the table. Often, we’ll just have sandwiches for lunch the day of the sale, eating while the sale is going on. If you find yourself ordering food, you’re going to reduce the profits from the sale.

Quality of items If you have good stuff to sell, you’re going to make more money than if you’re selling retreads from previous sales. People go to yard sales to find bargains on stuff they actually want. If all you’re offering is well-picked-over stuff, you’re not going to make a lot of money.

What I usually do is give away what’s left at the end of a yard or garage sale. I’ll take the remnants to Goodwill and other stores and give them whatever they’ll take. If there are still items left, I’ll often trash them, as they have little value (I didn’t want them, my customers didn’t want them, and Goodwill didn’t want them). This ensures that the next yard sale I have will be all new items, not retreads that didn’t sell before. This drastically increases the percentage of sales I’ll make.

I also make sure the items are as clean and presentable as possible.

Quantity of items The more you have, the more you’ll sell. Of course, there’s a caveat along with that…

Organization of items If you throw everything out there in a mish-mash and it’s hard to find all of the items or find similar items, you’re going to have a hard time making the sale. This means using your space effectively so similar items are near each other and as many items as possible are easily accessible.

All of these factors play a role in garage/yard sale success. The fewer of these things that you successfully pull off, the less you’ll sell at your yard sale and the less you’ll earn per hour of time invested.

The last yard sale I ran, I netted about $600 after expenses. I estimate that 30 hours of work went into the yard sale, giving me a return of about $20 per hour. (Of course, I was selling off items that I already owned.)

A poorly managed garage or yard sale earns pennies for the hours you invest. A well managed garage or yard sale earns dollars.

Over the past week, I’ve had the worst case of insomnia I’ve had since my college years. I simply cannot get to sleep before one or two in the morning, and during the last few hours of being awake, I’m basically useless. I can’t write anything coherent and if I read, I barely remember what I’ve read.

Mostly, I’ve been filling those hours with mindless household tasks and some simple gameplaying (leveling up characters in RPGs, mostly). I’ve also left some notes for future ideas, but most of those are incoherent.

Insomnia, when will you go away?

How to Stop Reading and Start Doing I often struggle with this. I read a great deal and I often stumble across amazing ideas. The challenge is actually transitioning to executing those great ideas. (@ pick the brain)

How to Raise Your Children to Be Generous This is one of the traits I focus on with my own children. The best method I’ve found is to be generous myself. (@ christian pf)

Three Reasons to Stop Living in the Past The rules of the past are different than the rules of today. If you live by the rules of the world from 1970 or 1980, you’re not going to be able to succeed today. (@ hope to prosper)

Get What You Want When You Want It You can do this if you have your wants under control and you have your finances in a good place. If you can’t say that those things are true, you need to fix those things first. (@ money cactus)

Culinary Odds & Ends: How Eating Leftovers Saves Me $1400 Annually I eat leftovers pretty much every single day for lunch. (@ len penzo)