Every Sunday, The Simple Dollar reviews a personal finance or other book of interest. Also available is a complete list of the hundreds of book reviews that have appeared on The Simple Dollar over the years.

One of the biggest keys to personal success is found in the title of this book. Willpower. Do you have the ability to consistently take the less easy path in an effort to achieve a goal?

Willpower is a struggle for most everyone, including me. It’s hard to consistently make the right choice for a greater good, particularly when there is a lot of appeal in the easier choice. It can be hard to not buy an item you want. It can be hard to not take another drink. It can be hard to devote your evenings to building a business. I’ve been there.

Roy Baumeister and John Tierney have put together a fascinating book on the topic of willpower here and since it’s a topic that runs through The Simple Dollar, I felt a review of it might be worthwhile.

Is Willpower More Than a Metaphor?
Willpower definitely exists. It’s observable in the sense that people will choose not to make the choice that would bring short-term comfort and will make the choice that brings longer-term benefits. The authors draw on the example of Amanda Palmer, who worked as a “living statue” through some pretty horrible situations. She made herself stand still in order to do the job and to build a reputation as someone who could handle this through whatever might happen. The key? In Amanda’s words, focus on one project at a time. Be so single-minded that nothing else really matters.

Where Does the Power in Willpower Come From?
In other words, how do people find the ability to “power through”? Usually, the basis for willpower comes from a backbone of something enjoyable or something you value or something you physically need. The authors discuss all of these things, including the need for adequate sleep and adequate nutrition to have adequate willpower as well as less basic desires such as family and friendship and human interaction. All of these things create the “power” we need to push through and achieve great things.

A Brief History of the To-Do List
To-do lists typically don’t work because they’re usually loaded with things that drag you in different directions. One thing might involve a commitment to your family, while another things points you to your office and yet another involves a promise made to a friend. One’s at home, one’s at the office, and one’s somewhere else. It’s incredibly hard to follow through on such a list if there’s no consistency. The authors actually take a look at the GTD time management philosophy as an approach to solving this challenge.

Decision Fatigue
Sometimes, our willpower breaks because we’re faced with too many decisions in a given day, which results in “decision fatigue.” We’re tired of making decisions and just don’t want to think. What’s the solution here? You should create a situation where the “easy” path is the one that matches your goal through advance work. Create situations for yourself so that it becomes very easy to continue to press toward your goal.

Where Have All the Dollars Gone?
Another area where willpower shines is money, something that readers of The Simple Dollar may have picked up on over the years. You have to have willpower to not spring money leaks all over the place. What’s the solution to this? Quantifying. Keep track of every penny you spend so that you know exactly where every dime is going. This works in other areas, too, such as food consumption and exercise.

Can Willpower Be Strengthened?
Just like almost anything else, willpower is strengthened through practice. If you find yoursel able to push through to achieve one goal through consistent willpower, other goals that require such willpower become easier. This ties in well with the single-minded nature of willpower, which is itself something to practice. When you focus in on a goal over and over again and show yourself that you can do it, doing it again becomes just that much easier.

Outsmarting Yourself in the Heart of Darkness
How do you keep going in particularly trying times? The authors use the example of Henry Morton Stanley’s exploration of Africa to show how one effective method for mastering willpower works: cutting off your route back to the place where you were at. Tempted by food? Throw out all of the junk food and you’ve made it much harder to eat that junk food.

Did a Higher Power Help Eric Clapton and Mary Karr Stop Drinking?
Here, the authors look at Alcoholics Anonymous. Does belief in God cause people to stop drinking? The authors seem to say that faith in a higher power can be a powerful self-motivator in terms of willpower. When it becomes difficult, people can look to their faith. They don’t go deeply into theology here, but I think there’s some very interesting possibilities in terms of looking at faith’s connection to willpower and the idea of free will.

Raising Strong Children
How do you raise children to have willpower? The key is to not focus on the end goal of the things they’re doing. Instead, focus on the process. Focus on making those individual hard choices along the way that produces a goal. Don’t praise the “A” on the report card. Instead, praise the hard work that it took to get that “A.” I fully intend to tell my children someday that I’m not really proud of the good grade, but that I’m proud of the work that went into it and the improvement as a person that came out of that work.

The Perfect Storm of Dieting
The book winds down by tying together many of these threads into one common application of willpower in the modern world: dieting. Most of the tactics and ideas in this book show up in dieting, from making the small decisions to cutting off the escape route, and it ties deeply into self-esteem issues for many. One big tactic: focus on the day-to-day achievements, not the numbers on the scale.

Is Willpower Worth Reading?
Willpower addresses a fundamental human challenge with good humor, great ideas, and science backing it up. It’s loaded with thoughtful approaches backed up by research and intriguing stories all over the place.

I view the challenge of willpower as a fundamental human challenge, and this book is a brilliant analysis of that condition. I’d recommend it to anyone and it’s one of the best books I’ve read this year.

I am absolutely going to re-read this book, and soon. I can’t pay a higher compliment to a book than that.

Check out additional reviews and notes of Willpower on Amazon.com.

Connie writes in:

Roth, IRA, 401(k), 403(b), FERS, TSP – what on earth does it all mean? I know they all have to do with retirement savings, but it’s all just a word salad to me.

This is going to be something of a “dictionary” post where I spell out, as simply as I can, what these terms mean and what it means for you. I’m not going to get into every single detail of each term, but instead I want to give you enough information that you can sensibly navigate other articles you might read about retirement planning.

A 401(k) is a retirement plan, meaning it’s a special way for you to put aside money for when you’re of retirement age. What makes a 401(k) better than a normal retirement account? For one, you can put aside money directly from your pay before taxes are taken out of it. This reduces the income tax you have to pay right now.

For most people, it means that you sign up to have a certain amount of money withdrawn from your paycheck each pay period. This money will come out before taxes, as mentioned above. This means your paycheck will be a bit smaller than it otherwise would, but it won’t go down quite as much as the amount you withdraw (because your taxes will be smaller, too). So, if you sign up to have 10% of your check taken out, your gross income might go from $2,000 to $1,800, but your take-home might only drop from $1,700 to $1,530.

When you’re retired and go to take money from a 401(k) account, that’s when you’ll pay income tax on your withdrawals. In a way, you’ll be able to think of it as a normal paycheck coming out of your 401(k) account, as it’ll have taxes taken out of it.

Sometimes, employers will match what you have withdrawn from your check. If this is available to you, get every dime you can. This is free money. Yes, you don’t have access to it right now, but there’s no easier way to cause your retirement savings to skyrocket than to get every dime of matching you can.

Typically, a 401(k) plan offers a lot of different options for how to invest your money. This can seem overwhelming. Thankfully, there’s a pretty easy solution that works for most people. Just ask your investment advisor for a “target retirement” fund and put all of your money into that fund. Usually, there are several different funds of this type, each of which “target” a specific retirement year. So, let’s say you’re 25 and you want to retire when you’re 64. That’s 39 years from now. Since I’m writing this in 2011, that puts your retirement date at 2050. Thus, you’d want to put your money into a “target retirement 2050″ fund. These funds take care of things like rebalancing for you so you don’t have to worry about it.

A 403(b) is almost identical to a 401(k). Why the different name? Generally, 403(b) plans are offered at non-profit organizations and institutions of public education, whereas 401(k) plans are offered from businesses. A 457 plan is also similar, except it’s typically offered by governments.

An IRA is a retirement account that you can set up on your own, usually with an investment house like Vanguard. You have to make your own contributions to this plan, which is usually done via an automatic deduction from your checking account.

Contributions to an IRA are tax-deductible, which means that when you do your taxes, you can subtract the amount you contribute to your IRA from the total amount of income you’ll be paying income taxes on. For many people, this means a larger rebate check from the IRS.

As with a 401(k), when you make withdrawals from an IRA at retirement age, you have to pay taxes on those withdrawals as though they were normal income.

An IRA involves a lot more effort than a 401(k) for most people. You have to independently sign up for an IRA with an investment house. Once signed up, you’re going to have many more investment options than you would have with a 401(k), which is both good (options are good) and bad (lots of options can be overwhelming). As before, I typically encourage people to use a “target retirement” fund for all of their retirement savings if they’re unsure, which you can read about above in the 401(k) section.

OK, so what does Roth mean? A Roth IRA or a Roth 401(k) work similarly to the plans described above, except that instead of using pre-tax money, you’re using post-tax money for contributions.

How does that work? Your contributions come out of your take-home money in the case of a Roth 401(k), and your contributions aren’t tax deductible in the case of a Roth IRA.

Well, what do you get in exchange for that? All of the money you withdraw from these accounts at retirement is tax free. You won’t pay a dime of tax on any of it.

Naturally, this causes people to start asking questions like “is it better to pay taxes now or pay taxes at retirement time?” This is a debate that’s gone on for years and, frankly, there is no clear answer to it. My usual suggestion to people is to diversify. If you can, put some money into a Roth IRA or a Roth 401(k) and put some money into a regular 401(k) or a regular IRA.

A final note: what about FERS? FERS is essentially a federal pension plan available to federal employees. Many states offer a similar program with similar benefits to their employees. Typically, these plans offer a retirement pension based on years of service and salary and, typically, you don’t have to make any decisions after the initial sign-up.

Hopefully, this article helps you with the basics of various retirement plan options and makes it possible to navigate more in-depth articles about setting up things to cover your retirement.

I mentioned a while back that I had some big plans in place for 2012 with regards to some projects for The Simple Dollar. I thought I’d share part of these plans with you today.

One of my big goals for 2012 is to find a publisher for my fantasy novel. The novel is mostly written at this point and I’m pretty happy with it. I intend to pass the completed document along to some friends this winter for a round of editing, then start pursuing the process of getting it published.

Obviously, one big point of leverage I could use with getting it published is the presence of The Simple Dollar. I could mention it on here and some of the readers would buy the book, simply because my long-time readers know I’ve been working on this novel off and on for almost as long as I’ve been working on The Simple Dollar (some have already publicly pledged to do so, thank you). I also know that a lot of my readers are fans of fantasy novels, too.

At the same time, I also know that there are at least some of my readers who have considered writing a novel but discarded the idea because they don’t have their foot in the door at a publisher. They don’t have any reason to get the attention of a publisher other than their finished book (or partially finished book) and it feels like an insurmountable obstacle to them.

I know I felt that way for a long time. I’ve written two complete novels earlier in my life and dreamed of getting them published. All I ever got from them were rejection letters.

My experience with writing two additional books and having them published since then (365 Ways to Live Cheap and The Simple Dollar) has shown me that if you can demonstrate that you have an interested audience, publishers will most definitely listen. My experience with The Simple Dollar has shown me that anyone can build an audience if they take the time to do it.

Are you seeing where I’m going with this yet?

In the next month or so, I’m going to start trying to build an audience for this book online completely from scratch. I won’t mention it on The Simple Dollar until I’ve either given up on the project or I’ve secured a book deal completely independent of The Simple Dollar. Obviously, I’ll use a pseudonym so that searches for “Trent Hamm” won’t find it.

If this works – and I believe that it will – I’ll actually offer up a guide for doing this, because the techniques I intend to use won’t be all that different than what I did with The Simple Dollar and they’ll work for pretty much anything you want to do. It will be a recipe for building your own side business on a shoestring budget, no matter what that business is.

Obviously, this is going to take some time. How am I going to come up with that time? To put it simply, I’ve already been writing posts for 2012 so that next year, my writing load for The Simple Dollar will be lower and I can use that saved time for this project.

Will this work? Will this fail? I don’t know, but I do know it’ll be interesting to find out. If it does, it’s going to be the source for a lot of valuable information to share here.

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. Walt Whitman on living
If you manage to do these things, you’ll live a very great life.

This is what you should do:
Love the earth and sun and animals,
despise riches, give alms to everyone that asks,
stand up for the stupid and crazy,
devote your income and labor to others, hate tyrants,
argue not concerning God,
have patience and indulgence toward the people…
reexamine all you have been told in school or church or in any book,
dismiss what insults your very soul,
and your flesh shall become a great poem.
- Walt Whitman, excerpt from the preface to Leaves of Grass

The thing I find fascinating is that many of the tenets of a better life are consistent no matter what your philosophy or religion is. They’re constantly repeated because they’re so true.

2. Dick and Rick Hoyt
Rick Hoyt is Dick Hoyt’s son. Rick was born with cerebral palsy. Yet, the two of them have competed in Ironman triathlons as a team.

It’s just an amazing story.

3. Thomas Jefferson on attitude
I often write that you can’t make someone adopt better behaviors if they don’t want to. On the other hand, people who want something can often go to amazing lengths to achieve it.

Nothing can stop the man with the right mental attitude from achieving his goal; nothing on earth can help the man with the wrong mental attitude. – Thomas Jefferson

The right attitude can lead to almost anything. The wrong attitude can lead to almost nothing.

4. Pamela Meyer on how to spot a liar
This is a really fascinating look into the science behind lying.

This video made me think quite a lot over the past week.

5. Orchard in Bloom, Louveciennes (1872) by Camille Pissarro
Ever since our family’s trip to the Art Institute of Chicago, I’ve been adding a lot of Pissarro’s art to my desktop background folder. This is just another great example of it.

Great landscapes make me want to be there, and this easily achieves that.

6. Thoreau on character
Good character is built one small action at a time, one small difficult decision at a time. It’s much easier to be of bad character.

You cannot dream yourself into a character; you must hammer and forge yourself one. – Henry David Thoreau

Have you ever noticed that I quote Thoreau a lot in these articles (and Ralph Waldo Emerson, too)? I can’t tell you how much of an impact Thoreau and Emerson’s writings have had on me over the course of my life.

7. Failure doesn’t write your story
If you’ve never failed, you’ve never lived.

Failure is often the forge for better things. It’s a chance to learn what doesn’t work so that next time you can discard those mistakes.

8. CometDocs
I can’t tell you how many times I’ve received a document from a friend in a format that’s basically unusable to me. This is the easiest tool I’ve yet found for solving this problem in a general way.

CometDocs does nothing more than convert documents from one format to another about as easily as possible. That’s a tool that’s got a permanent place in my bookmarks now.

9. Aldous Huxley on ceilings and floors
Often, when people achieve success, it becomes their new standard. Successful people often repeat that success.

Every ceiling, when reached, becomes a floor, upon which one walks as a matter of course and prescriptive right. – Aldous Huxley

Why is that? It’s something I’ve observed, but it’s something I can’t quite quantify.

10. Nat King Cole, Mel Torme, and Judy Christy performing How High the Moon
I would love to hear a great recording of this. The scratchiness of this recording adds some charm, though.

I love old jazz standards lately.

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

As we slip deeper and deeper into fall, our family is starting to eat more cold weather food – thicker soups and chowders and so on. Hand in hand with this is our ongoing effort to slowly clear out the recesses of our pantry and our freezer by using items that have been in there for a while and largely forgotten.

The result of this is our own homebrewed “Wisconsin farmhouse chowder,” which takes several different ideas from recipes we’ve heard and things we’ve tried in the northeast Iowa and southwest Wisconsin area. It’s simple to make and I hope you enjoy it.

What You Need
The ingredient list is pretty straightforward. You’ll need:
- 3 1/2 cups of milk, separated into 1 1/2 cups and 2 cups
- 2 medium potatoes, cubed
- 3 or 4 shiitake mushrooms, chopped (morels would also work if you have a source for getting them)
- A bag of flash-frozen mixed vegetables -or- one cup each of corn kernels, diced carrots, and chopped broccoli
- Dashes of a few spices, including thyme, black pepper, red pepper flakes, and salt
- Half of a cup of peas (frozen or fresh, whatever works best for you)
- 1 cup shredded sharp cheddar cheese

The Night Before (or Early That Day)
If you’re using fresh vegetables, it’s always worthwhile to make them the night before, as well as the potatoes. You’ll also want to chop the mushrooms. You might also want to make the mushroom cream as well…

Making the mushroom cream is simple. Simply take two cups of milk in a saucepan, toss in the dried mushrooms, and let it simmer for half an hour. Add a dash of pepper and a dash of salt, then add two tablespoons of flour and stir it until the mushroom cream thickens a bit. You can add more flour if you’d like, but don’t thicken it until it’s solid.

Preparing the Meal
Once you have the mushroom cream, described above, add the remaining milk to it, stir thoroughly, then raise the heat to a low boil (medium to medium-high heat should do it).

Add all of the rest of the ingredients at this point except for the peas, stir thoroughly, then allow it to simmer for fifteen minutes, stirring regularly.

Add the peas at the fifteen minute mark, stir thoroughly, and allow to simmer for about three more minutes. Pull the soup off, allow it to stand for five minutes or so, then serve.

We served the soup alongside the wraps from last week. Many different types of wraps or sandwiches could accompany this soup.

Another option is to simply toss a small handful of shredded cheddar on top of the soup, as shown here.

Optional Ingredients
One simple step would be to replace the homemade mushroom cream with canned cream of mushroom soup, though there may be a flavor degradation here. Since switching to making my own by boiling mushrooms in milk, I’ve never really wanted to use the canned kind. You can also somewhat vary the vegetables according to what’s available to you.

Each day is filled with little moments.

Playing “catch” with a soccer ball with my son in the back yard in the cool fall air, both of us bundled up and kicking a ball back and forth.

Smelling freshly-made scrambled eggs with tarragon and salt and pepper on top.

Listening to a thought-provoking program on the radio.

Going on a long mid-afternoon walk in the park and admiring the fall colors.

Having a “who can blink last” contest with my daughter where we both keep smiling at each other to try to convince the other to blink.

Sitting in my favorite chair with an interesting book from the library on my lap.

Holding my wife’s hand for a little while as we begin to drift off to sleep.

It’s easy to look back on our lives and think about the “big” moments, when we got some item that we’d wanted for a long time or went on that great vacation.

In the end, though, it’s these little moments that make the day in and day out rhythm of life bearable. It’s the people around you. It’s the tiny pleasures that make the ordinary wonderful.

These moments are always there, but it’s easy to miss them when we’re preoccupied with our overflowing to-do lists and our worries and our desires. We keep seeking something better when we’ve already got it really good to begin with.

Instead of striving to have this great life that you imagine that you might be able to have if you just squeeze in one more activity or spend one more extra hour at work, instead look at all of the wonderful things you already have. They’re found in the little moments that fill your days.

When you start seeing how much life already has to give you, it begins to feel unnecessary to chase more and more and more. Instead, you begin to want less and less and less, and the financial independence you’re seeking becomes much easier to achieve.

It’s all about those little moments, in the end. They’re more than enough, if you allow them to be.

Every so often, we’re met with a situation in our lives that represents a seriously life alteration. If we go one way, our whole life is going to go down a different path than if we chose the other option.

These can take a lot of forms. The choice to marry someone. The choice to divorce someone. The choice to change career paths. The choice to sign a long-term contract. The choice to retire.

When we’re faced with one of these moments in our lives, it can be an incredible challenge. Often, both directions offer some positives and some negatives.

The usual advice in situations like this is to make a list of pros and cons. That’s often a powerful first step, but it’s just that – a first step.

The real challenge comes in when you’re looking at those pros and cons and you’re trying to figure out which set comes out on top. Here are some of my thoughts on the issue.

Maintaining things the way they are now isn’t really much of a positive. If the way things are was satisfying you, you likely wouldn’t be at this crossroads thinking about this decision.

Keeping things the same is often very tempting because, as humans, we’re creatures of habit. However, if you’re keeping things on a path that led you to these crossroads, it’s not really much of a positive.

If you can maintain an extremely basic standard of living, choose the path with the most upside. Often, a crossroads is a choice between a “safe” path with less risk and a “risky” path with the greatest positive potential outcome. If the risky path offers at least a minimal standard of living as the worst case scenario, the risky path should be strongly considered.

Why? Almost always, when we choose the more challenging path, we never regret not choosing the easy path. However, when we choose the easy path, we often find ourselves regretting not taking that more challenging path.

Set yourself a firm deadline. More often than we’d like, a difficult decision at a crossroads is decided by indecision. We sit on it and hem and haw until the decision is essentially made for us – and that usually takes us down the safe path.

Instead, set yourself a tight deadline for resolving this crossroads and hold yourself to it. One effective way to do this is to inform interested parties of your self-imposed deadline by telling them that you’ll have a decision by that date. This puts some additional pressure on you to actually move forward with a decision.

Talk to people with experience at this same crossroads. Internet forums can be perfect for this as it allows you to anonymize yourself, but there’s also incredible value in talking to trusted friends about such things, too.

Simply put, you’re looking for advice from people who have gone through something like what you’re going through. This advice can be incredibly useful, but you also need to filter it a little. Make sure that people are being genuine, and ignore advice from people who seem to have an axe to grind. Usually, their anger has little or nothing to do with what you’re saying or what your situation is.

Crossroads can be difficult places. Good luck on whatever path you follow from here.

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. Handling small rollover
2. Parents who don’t plan
3. Loan payoff or retirement contribution?
4. Roth conversion and inheritance
5. Setting sportsmanship example
6. Fundraising
7. Is bankruptcy right?
8. Mortgage and the IRS
9. Roth for student loan repayment?
10. Thoughts on tablet PCs

Over the past week, I’ve had to write three separate notes that were very difficult for me to write. I spent an awful lot of time simply thinking of how exactly to say something that needed to be said, but was very difficult to say.

I can’t tell you the number of drafts I went through on each of these notes, but what I found is that with each re-drafting, the message somehow became easier to share.

By the time I was happy with the note, I was at peace with the message, too.

Q1: Handling small rollover
My first job out of college was an apprenticeship where I earned $1,000/month and lived in housing provided by the program. The employer matched 50% of my contributions to my 403(b), up to 6% of my contribution/3% of theirs. It was only $30 a month from them, but it was better than nothing, so I did that while I worked there.

The program ended and I’ve started a new job and now I don’t know what to do with that old 403(b). It’s under $2,400 (which wasn’t bad at $90/month for two years!), so I can’t open a Vanguard IRA to roll it over into that. At the same time, I do have to get it out of their plan, and I can’t afford to pay the extra taxes on it this year, so I need to roll it over somewhere pretty immediately.

My instinct was to open a ShareBuilder IRA because I already have my savings at ING Direct, but if I put it there, I have to decide what to direct it toward, like pick my own stock or ETF.

So should I open a rollover IRA somewhere else that has targeted retirement dates like my old allocation (2050 expected date)? A CFP who used to work for Schwab mentioned to me that they have really low minimums, but I talked to them today and they have higher expense ratios and their farthest date is 2040. Or is there a stock or ETF I could just dump all $2,400 into through ShareBuilder and leave it for the long haul?

(For my current contributions, I’m squirreling away my money in a savings account until I can get the requisite $3,000 to open a Roth IRA at Vanguard like you and so many others have recommended.)
- Kelly

A couple questions pop up here. First, why do you say you can’t open a Vanguard IRA? Is it because many of their funds have an initial contribution limit of $3,000? Their STAR fund, for example, has a minimum investment of $1,000.

Once money is in an IRA, you can move it around as you please, so if it grows in the STAR fund, you can move it to whatever you like in a few years, like a Target 2050 fund. This is what I’d probably do.

I’d use a similar strategy with a Roth there. Start off in the STAR fund, then shift to another fund when you hit the $3,000 mark.

If you’re going to use a provider that only has a Target 2040 fund, I would ask if they intend to have a 2050 fund in the future. If that’s true, there’s no reason not to initially put your money in the 2040 fund, then move it to the 2050 fund in a few years.

Q2: Parents who don’t plan
My husband and I have no credit card debt, a very small emergency fund (but we’re faithfully contributing to it), and will need at least one car within the next few months. We have $2K saved towards this, which will not be enough, so we’re facing choices regarding what sort of car to buy and whether to pull the money from another area of savings. Our only child is turning one soon. We own our home, are not under water, and pay a little bit extra toward the mortgage each month.

In short, we could be doing better, but we could be doing much worse.

My concerns are not directly under our control. My parents made some not-so-wonderful financial decisions years ago, but persist in making increasingly bad ones of late. Luckily, they have no credit card debt that I know of, but both have let it be known that they do not want to work. My dad has a modest 401K that, combined with SS, is getting him by. My mom has no savings whatsoever, but is unemployed. She stubbornly insists that people have pushed her out of jobs, but after it happened a few times, we started catching on that perhaps she needs a bit of professional help (which she refuses to get) in order to survive in the modern workforce.

I’m terrified. I wanted to stay home with our child, but I stayed working because I want the best opportunities for him. Now I’m noticing comments from both parents indicating that they have no intentions of taking care of themselves when money runs out. A conversation with my mom this morning revealed that she thinks that she is a victim and my husband and I have just been very lucky to be able to support ourselves. She seems to think she’s in the 99% and we’re in the 1%, when, believe me, as illustrated by our situation above, we are very soundly in the 99%. In her eyes, though, we are abundantly wealthy and not sharing with her. Now, I know that many hard-working people who want to work are out of jobs right now. That is absolutely true for many people. And it is absolutely true that we have been fortunate enough to have connections who have helped us along. But those connections came through friendships and networking, other things in which my parents do not invest. And my mother is not in the group of people who were laid off or who lost their jobs due to the market: she was replaced because she did not want to do the job the way the job was meant to be done.

My parents do contribute to our childcare, which is an invaluable support for us. We do not pay them for this, but they only have him about 6 – 8 hours per week. I don’t want to pay my son’s grandparents to take care of him, but if I did (since I can), it would not be enough to really change their needs or situation. Should I pay them? There are other dysfunctional behaviors going on there, though, so I do not want to increase the amount of time my son spends there.

I know I’ve included a lot of details and I know I’m passing pretty harsh judgement here, especially on my mother. I want to put my anger aside and address this issue with them, but do not know how to do so. I think they would be reluctant to sit down with us – I think they feel defeated and defensive. But this knowledge that at some date in the not-so-distant future I will be taking care of them even though they could prevent that is gnawing at me. How can we address this with them without making them feel attacked or more defensive?
- Ellen

Before you enter into any sort of discussion with them, you need to decide for yourself if you’re going to take care of them in the future. Are you going to take one or both of them into your home? Are you going to financially support them?

Those are difficult questions to answer, but until you’re clear on what you’re willing to do (or not willing to do), a discussion isn’t realy going to go anywhere other than down a road of resentment and anger.

I might also suggest seeking some counseling for yourself, as I am very afraid that resentment and anger is going to come through on your side as you discuss this. While it might be your parents’ “fault,” it’s still up to you to be in control of and understand your emotions.

Q3: Loan payoff or retirement contribution?
Would it be better to pay off $35000 balance equity loan @ 5.99 in next five years by additional $4800 annual additional payments or contribute $22500 pre-tax catch-up contributions to Thrift Savings Plan for next five years.Currently earning 6.0%.Base salary of $56508 and first mortgage balance of $135000 @5.65% value of house $220000. Currently 55 years old with $135000 TSP balance under FERS retirement plan and hope to retire in 7 years.
- Mark

If your central goal is to retire in seven years, you need to be throwing everything under the sun at your retirement plan.

You’re nowhere near where you need to be to retire with a healthy level of annual income in retirement, especially when you’re facing a mortgage that’s more than double your annual salary plus an additional home equity loan.

Even if you throw everything you can into your retirement plan, I’m still not convinced you’ll be able to retire in seven years. You’re going to still have (at least) your mortgage hanging over you at that point and only a low-end Social Security and a relatively small amount of income from TSP and FERS. I would hold off retirement until 65 at least, which gives you three more years to build savings, earn FERS years, and bump up to a higher Social Security level.

Q4: Roth conversion and inheritance
My husband and I decided to do a Roth IRA conversion this year on an old rollover IRA. We converted $6000 of it, leaving the other $4000 to be converted next year (trying to divide up the tax impact). That was the easy part, and it went smoothly. Here is where it gets complicated. His mother died very unexpectedly about two weeks later, leaving my husband and his three siblings as the heirs of her estate which includes a paid-for house, and an annuity. Everything I have found says that we will owe taxes on the annuity, and it will be treated as income (because it’s an annuity, and not cash or property). The amount we are expected to receive from the annuity will effectively put us over the $169,000 married-filing jointly income cap for Roth IRA’s. As a result, do we need to undo the Roth Conversion?

It seems like such a simple question, but I can’t find an answer anywhere! I am so frustrated and overwhelmed – I am pretty comfortable with taxes, and manage to do them just fine every year with the help of Turbo Tax. I am just starting out with investing, but I feel like I am picking it up pretty fast, and doing okay. But this has totally thrown me for a loop, and I just don’t know what to do. Any insights and help you can offer would be very greatly appreciated!
- Lindsay

My understanding is that you would now have a Roth IRA for which you’ve exceeded the income limits. The solution, unfortunately, is that you’re going to have to pay a tax penalty until this contribution issue is resolved, which basically means taking the $6,000 out of the Roth and putting it in your pocket.

I would absolutely contact a tax lawyer here, though. Their consultation fee should be low enough that it’ll be more than worth it to save you from an audit or an unwanted tax or fee.

Unexpected events like this are one of the reasons it’s a good idea to wait until the very end of the year to make these types of financial moves.

Q5: Setting sportsmanship example
How do you set a good example of sportsmanship for your kids? My son is just getting into sports and some of the kids out there really act arrogant and rude and so do their parents. If you turn on the TV and watch sports, you see people pounding their chests and even coaches getting into confrontations. How do you teach your kid sportsmanship in this environment?
- Reggie

The best way to set a sportsmanship example is to practice it in every aspect of life, particularly when competing. Show your child exactly how it should be done.

You should also express to your child what poor sportsmanship looks like and why it’s not a good thing. Ask them how they feel if someone acts like that toward them.

The key, though, is to walk the walk. At every opportunity, act in a fashion of good sportsmanship. Your kids notice more than you think.

Q6: Fundraising
I read with interest your comments on how you happily buy things from children in your neighborhood that come to your door for fundraising. Why do you do this? I usually just look at it as a waste of money and tell them “no thanks.”
- Phil

I have a very good relationship with my neighbors. They keep an eye on my house when we’re traveling, they receive packages for us, and our children play together. We have even closer relationships with some of the neighbors, including regular dinner parties with them.

Part of maintaining that relationship is to be involved with them. When one of their children comes knocking, they’re not just bugging me for money. They’re learning how to sell things. They’re practicing interacting with people in situations that are a little less easy than usual. This is useful for them.

In the future, my children will be doing the same thing. They’ll go around to our neighbors, knock on doors, and go through that same experience. It’ll further cement that connection to our neighbors.

To me, that’s worth paying $10 for a $5 item once every few months.

Q7: Is bankruptcy right?
I am a 44 year old female, single and unemployed for the past year. I am questioning whether I should file bankruptcy. I have two outstanding debts, one is a personal loan with a $17,000 balance. The other is a credit card debt of $4,000. I am currently not late, or have ever been late on any of the monthly payments. But because of my difficulty finding work, I’m afraid that situation may change. Do I claim bankruptcy? I’m afraid of what it may do to my credit. I currently drive an old vehicle and am afraid that when I do get a job, I’ll need the credit to purchase a new vehicle. Any suggestions? I’ve talked to a bankruptcy lawyer and she says I meet all the criteria and could easily claim bankruptcy but I am very hesitant. What do you think?
- Dolores

I wouldn’t claim bankruptcy now because this is debt you can easily get through if you’re employed.

Instead, I would hold onto that option until you really need it. Bankruptcy is something of an “emergency” button: it devastates your credit, but can help clean up a disastrous situation.

You’re not in a disastrous situation yet. I think bankruptcy would be premature. Wait and see if you find a job, then use bankruptcy only as a last resort if you’re falling months behind on your debts.

Q8: Mortgage and the IRS
I am at a point in my life where I need someone to point me the right direction. If feel stuck in a mortgage and therefore stuck in a relationship (engaged). I have an FHA loan, which my understanding is I have to be in the home for @ least three years as the primary residence. The mortgage is in both my and my fiancé’s name. I claimed the $8000 tax credit under my social because he had been audited that tax year and the company that gave him a ‘great deal’ on his taxes had actually messed his taxes all up. This month will be two years lived in the home. My dilemma is I do not want to marry this man. If I were not in a mortgage and facing paying $8000 back to the IRS (which I do not have) I would have broken up a while back. I have tried to make it work and live out the last year. I basically hide from him as much as I can. I just can’t stand to be around him anymore. I try to just lay low and not stir anything up. What I am looking for is a starting point to find a way out. Can you point me in the right direction as far as resources for FHA loans & the first time home buyer credit? Do you know what sort of attorney that could offer advice/help? Do you have any advice for my situation? I am dead set on not marrying this man. I am not in love with him. I could move home to live with mom for awhile if I were to leave him, but I feel chained to him because of this mortgage, my fear of ruining my credit score, & my fear of being indebted to the IRS.
- Rihanna

If I were you, I would contact a lawyer immediately. This sounds like a mix of issues – taxes, property issues, and so on. I would probably start with a property lawyer.

If you’re in a situation where you’re hiding from the person you own the property with and it’s interfering with your quality of life, I wouldn’t worry about the legal fees here. Just get into a situation where you’re safe and you’re not faced with legal entanglements.

Lay everything out on the table for this lawyer. Don’t hide anything, because if you do, you’re rendering his advice null and void. He’ll be giving you advice based on what he knows of your situation, and if what he knows is wrong because you left out or altered pieces of it, then his advice is going to be wrong.

Q9: Roth for student loan repayment?
I’ve been reading your blog for some time now and listening to various personal finance podcasts, and understand that the initial investment made into a Roth Ira can be pulled without penalty. The reason I ask is…my husband and I, both in our mid-30s with one child, have been aggressively paying down his student loan debt (now at $26k), making payments of anywhere between $600-$1,100/month based on our income (we’re both self-employed so it varies month to month). His Roth balance right now essentially matches his principal balance of 18k. With the markets performing so terribly right now, would it be more advantageous to pull the principal in his Roth so we can bring the balance down to $8k, and hopefully pay that off within the next year? We did not make any contributions in 2011 to either of our Roth IRAs to meet our debt paydown goals. Is this the right strategy or are we jeopardizing our long-term investments? In the next 2-3 years, we are considering moving and another child.
- Cherie

If you do this, you’re probably pushing your eventual retirement back by a year or two. If that’s an exchange you’re willing to make, go for it.

I usually hesitate to encourage people to go this path, however, because this is simply putting a burden on your future self. Given a choice, I would almost always encourage people to carry a burden now rather than later.

Dave Ramsey put it best when he said, “Live like no one else so you can live like no one else.”

Q10: Thoughts on tablet PCs
Now that the iPad has been out for a year and a half and other good tablets are out there, what are your thoughts on them? What would cause you to buy one?
- Sanford

If your primary use of the internet is web surfing and media consumption (watching Netflix, watching YouTube videos, etc.), then a tablet PC is just about perfect for your use. They come at a pretty good price and take up very little space in your home.

The iPad is the best one, not because of any hardware issues, but because of the application support. There are so many apps that do so many different things for the iPad these days. (I secretly drool over the boardgame apps.)

I have actually thought about giving an iPad to someone close to me as a gift this Christmas. It’s an expensive gift, mind you, but it matches that person’s needs so well.

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.