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.

Al writes in: I’ve been trying to figure out whether it’s worth it to switch my home phone service to Skype or Vonage or Magic Jack or one of those other services. Do you save pennies or dollars by switching?

Well, let’s look at the three plans you named.

Skype offers unlimited long distance calling for most of North America (including all of the U.S. and Canada) for $7.99 a month. To receive calls, you’ll also need a Skype phone number, which costs $6 per month. You also will have to buy a phone adapter or use your computer for calls. You’ll also need high speed internet, of course.

Vonage offers unlimited long distance calling for the entire U.S. for $24.99 a month, but there a lot of different discounted deals floating around out there that lowers the price a bit. You’ll also need high speed internet.

MagicJack offers unlimited long distance calling for the entire U.S. for $40 for the first year and $20 for each additional year. You’ll also need high speed internet, of course.

MagicJack has the lowest prices, but also has the worst customer service and quality of service reputation. I’ve had very little problem with and heard very little complaint about Skype or Vonage, though I found Vonage’s setup to be a bit easier and Skype’s prices are lower.

What about ordinary phone service? You’re going to find a huge variety in available plans depending on who your local provider is. The local provider in our area provides unlimited free calling to anywhere in the U.S. for $46 a month. There’s also a more basic package for around $22 a month that offers free local calls, free incoming calls, and nationwide long distance for $0.10 a minute.

So, if you have high speed internet anyway, you’ll save money using any of the VoIP providers. How much money you save depends on what phone offers are available in your area, but this is definitely in the “save dollars, not cents” area.

Now, if you’re only going to get high speed internet because you intend to use it in part for the phone service, it depends on how much the internet service actually is and how much you intend to utilize it for other things. Increasing your internet speed beyond a typical low-end DSL or cable connection won’t make a whole lot of impact on how you surf the web. It mostly only shows up with things like streaming video or online games like World of Warcraft and it will certainly improve your call quality with VoIP services like these.

Will you get additional value out of high-speed internet beyond just Skype or Vonage or MagicJack? If the answer to that question is yes, then switching to VoIP will probably save you some money. If you’re unsure, then the switch probably isn’t worth it because of the extra internet costs.

This past week, I spent several hours putting together a detailed plan for some interesting things for The Simple Dollar through the end of 2012.

Instead of focusing strictly on the writing (as I often spend my time doing), I stepped back and tried to look at the bigger picture. What do I have already available to me that would be of value to my readers? What can I do to ensure long-term income from everything I’ve done with The Simple Dollar?

I think I’ve come up with some interesting answers and I hope to put a lot of them in place over the next year. Wait and see.

Long term planning can really be exciting.

Stop Crying That There Are No Jobs. Create One. In other words, what are you doing right now to build yourself a job? Stop looking at employers to solve all of your problems for you. Instead, dust off whatever entrepreneurial drive you have and start creating something for yourself. (@ afford anything)

Getting an additional job to pay off debt is actually worth more than the salary… A part-time job that has the entire paycheck go toward debt earns a lot more than the $8 per hour it seems to earn. It’s also earning the interest rate on your debt by paying it off early. If you’re earning $8 an hour in your spare time and that money enables you to get rid of a 20% debt three years early, each hour you work is actually earning you $13.82. (@ grumpy rumblings of the untenured)

The New American Family: Flexibility and Unconventional Lifestyles to Make Ends Meet If it was not for my flexible schedule, our family life would be tremendously difficult. I can’t even guess how many times I would have had to let our kids down or let my wife down over the past few years. (@ free from broke)

Is Lifestyle Inflation Unavoidable? If you’re not thinking critically about your life choices, I think lifestyle inflation is unavoidable. The key to success is to constantly think critically about your life. (@ retire by 40)

Simple strategies for changing a bad habit This is just a good set of ideas if you’re struggling with altering some portion of your behavior. (@ unclutterer)

A few days ago, a friend of mine made a comment that stuck with me. He said that his life felt like it was stuck in an endless rut and that everything he could think of to put it on a better path was so big that it seemed insurmountable.

I started off writing him an email about it, but I realized that much of what I was going to write to him would make a powerful article for The Simple Dollar.

My goal was to simply list nine things that he could do today that would improve his situation and leave him, at the end of the day, as though the day that has passed has been a valuable one and has put his life on the right track.

The Reflection
Spend half an hour and reflect on your life. Do it with nothing to distract you except a pencil and a piece of paper in front of you. Just spend that time walking mentally through every part of your life, thinking about where it’s at, what you’d like to be different about it, and what you actually like about it. Hit on what brings you joy and also what you can do to improve. Think about your dreams. Think about your biggest challenges. Look it in the face. Go through all of it.

If you come up with something – anything – that you feel like you should follow up on later, write it down. That’s why you have a pencil and paper in front of you.

Why do this? When you finish this, you’ll feel invigorated. You’ll feel far more in control of your life. You’ll have a much better sense of where things rank in your life in terms of what’s important and what really isn’t.

The List
This can follow the first one quite effectively. Make a list of ten things you want to accomplish, big or small. The best way to do this is to simply go through your mind and write down the first ten things you can think of that you want to do but just haven’t gotten around to doing.

Once you have that list, make another one. For each item on the first list, write down one single action that you can take – fifteen minutes or less – to move that item forward in some way. Then, use that second list as your to-do list for the rest of the day. Get through as many of them as you possibly can before the end of the day.

Why do this? You’ll feel a tremendous sense of accomplishment as you go to bed that night. You’ve taken forward action on a lot of things going on in your life – and forward progress on the things bothering you feels good, like that moment you’re scratching an itch that’s been bothering you for a while.

The Raise
Stop in and have a chat with your boss. Tell him or her that you’re not asking for a raise now, but that you’d like to ask for a raise in six months. Ask your boss what you can do to earn that raise over the next six months.

Take notes. Make a checklist out of what your boss tells you, then strive to go beyond each item on that checklist. Create a situation where you’re so valuable and useful to the company that they need you around.

Why do this? This is a very straightforward thing you can do to improve your own income and secure a stronger place at work. It tells you, in no uncertain terms, what you need to do to excel in the workplace.

The Book
Go to the library or to the bookstore and pick up a well-respected nonfiction book on a topic you’ve always been curious about. Start reading it today and get a significant amount of the way through the book.

The topic can be truly anything you’ve consistently wondered about over the years. All of us with even a bit of curiosity have something that we’ve regularly thought about. Now’s the time for you to sate that curiosity.

Why do this? The act of reading itself improves your language skills. Reading a challenging book improves your thinking skills. Following up on an area that you’re curious about is a great way to improve your knowledge on a topic that matters to you.

The Walk
Go for a one hour walk in your neighborhood. As you’re walking, be observant. Don’t just withdraw into your own shell or your iPod. Notice what’s going on around you with your eyes and your ears. Look for things that are interesting to you.

Along the way, say hello to everyone you see (if that’s reasonable, meaning you’re not walking in a particularly crowded area). Genuinely compliment anyone that you have a real reason to compliment. Also, make an effort to remember anything interesting that you come across, like a flyer for an interesting community activity.

Why do this? The walk itself provides exercise. The constant observation improves your observation skills and your understanding of what’s going on around you. The positive social interaction with others is a great way to practice social skills and perhaps start building connections to the people who live near you.

The Giving
Go to a charitable organization in your neighborhood that you believe in, knock on the door, and ask how you can help. It could be a church, a food pantry, a soup kitchen – anything. The key is that you believe in what they’re doing.

Most charities are happy to find something for an interested set of idle hands to do. It might be anything, from cleaning to serving food to organizing things to setting up or fixing a computer. It depends entirely on what that organization needs, and if you’re meeting that need with whatever skills and energy and time you can offer, you’re helping that charity achieve its goal of helping others who need it.

Why do this? Few things improve your outlook on life quite like investing some of your time, energy, and talent toward helping others. It gives you a strong sense of social accomplishment and pride in how you’ve spent your time, particularly when you can directly see the connection and improvement in your community.

The Cleansing
Go through your house. Gather up everything that you rarely use. Load it in your car. Drive it down to your local Goodwill. Donate it.

Yes, of course, you could have a yard sale or something like that, but the relative earnings for a lot of the things you’d donate wouldn’t earn you a lot at a yard sale and a lot of it would go unsold. Not only that, the stuff would have to sit around your house until the next time you can have a yard sale. If you want a fresh start, you’re better off just getting it out of there.

Why do this? You’re reducing the number of items you own, which means more space in your home and less time invested in upkeep and maintenance of your stuff. You’re giving those items to a charity, and you’re also ensuring that they wind up in the home of someone who wants them.

The Thanks
Call the person that has meant the most to you over the course of your entire life and tell that person that you love them and appreciate what they’ve done for you.

That person might be a parent, but it might also be a mentor or an old friend or an older sibling, depending on how the course of your life has gone.

Why do this? You’re able to let that one important person in your life really know how much they meant to you, which is an emotional gain both for you and for that person. Sometimes, this type of call can cut through a period of poor contact between the two of you, which can be a great improvement to a valuable relationship for both of you.

The Goal
Set yourself a single overarching goal – financial or otherwise – that you want to achieve in the next five years. Come up with a detailed plan for doing it. Do everything you can do for that plan on the first day, such as setting up accounts, setting up an automatic installment plan, doing some research, and so on.

For many people, the singular goal is an obvious one. It’s one that’s been dominating our thoughts for a while but has seemed so big that we’ve been afraid to take action on it. Today’s the day to start taking action.

Why do this? A big goal like this is something that can completely change your life. Taking the first steps toward that transformation can feel incredibly empowering – and they also do start you on your way to the change you dream about.

Kelly writes in:

Do you subscribe to any magazines? Why? Do you find enough value in them to be worth the cost?

This was originally a question in Thursday’s reader mailbag, but the answer became long enough that I felt it deserved a post of its own.

Sarah and I get several different magazines in the mail. Most of these magazines come about from buying magazine subscriptions from the children of neighbors who are trying to raise funds for their activities, which we try to support. It’s not an overwhelming cost for us and it facilitates good relationships with the neighbors while also supporting youth activities.

Of course, that doesn’t mean we don’t try to maximize our value from these orders. Over time, we’ve come up with something of a philosophy for deciding what magazines to order when those neighbor kids come around. The reason? It’s just another opportunity to maximize the value of each dollar we spend.

So, here’s how we decide which magazines to order when this situation comes up.

Magazines of direct professional use Sarah teaches science classes, so if she’s ordering, she’ll tend to choose magazines like Discover or Scientific American. For my own writing, I used to look at personal finance magazines like Money, but now I find more value in things like Businessweek and The Economist.

Why? We love our jobs, simply put. We enjoy reading about things related to our chosen careers. Doing so makes us better at those things, too.

Magazines covering activities we enjoy engaging in This mostly applies to cooking magazines, which is what we typically order if we don’t have any career-oriented options. Magazines like Bon Appetit and Vegetarian Times fill in the gap here.

Why? With a family of five, food is a major part of our monthly finances and a significant part of our time, too. Food preparation is also something Sarah and I both enjoy doing. We love experimenting, and having children on hand to try out our experiments makes it even more of an interesting challenge.

Challenging general interest magazines By these, we mean things like The New Yorker and The Atlantic – magazines with long, in-depth articles that strive to actually teach something to the reader on a variety of topics.

Why? Neither Sarah nor I like to read if it doesn’t challenge us in some way. Articles in magazines like these consistently do that.

Virtually always, we can find a magazine that fits into one of these three groups.

Do we renew? Once we’ve subscribed, we keep a careful eye on how much we read that particular magazine. Are there issues left unread? Do we get something valuable out of the issues that we do read? Do we take action or rethink our viewpoints because of something we read in those magazines?

Generally, when we do renew, we wait until there’s another child at our doorstep asking us to buy a magazine subscription. That way, we get both the value of the magazine and the social value of supporting neighbors and community.

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.

Jenny writes in: One thing my mom always did and that I’ve started doing is to make the equivalent of prepackaged meals and store them in Ziplocs to use in the future. How much does this really save?

On the surface, I think this is a really good idea. Many mixes that you buy at the store can very easily be assembled at home, where you have much more control over the individual ingredients and thus the healthiness of the meal mix as well as the price.

The question is whether or not you can actually save a significant amount of money by doing this. My calculations seem to show that most of the time, you do save money by making the mixes yourself.

I’ll use minestrone soup as an example.

You can easily get Bear Creek minestrone soup mix for $3.96 a bag. A bag mix weighs about 9.3 ounces and has the usual ingredients you’d expect for minestrone soup.

What about a dry soup mix? I based my “dry” minestrone soup off of this recipe from the Washington Post. A dry mix would thus contain:

2 tablespoons plus 1 teaspoon good-quality beef bouillon granules (may substitute vegetable bouillon granules)
3 tablespoons minced dried onions
3 tablespoons coarsely chopped dry-packed (not oil-packed) sun-dried tomatoes (may substitute chopped freeze-dried tomatoes or dried sweet pepper pieces or dried chives, or a combination)
1 1/4 teaspoons dried oregano leaves
1 teaspoon dried marjoram leaves (may substitute dried thyme leaves)
1/2 teaspoon dried minced garlic (may substitute garlic powder; do not use garlic salt)
Scant 1/8 teaspoon crushed red pepper flakes (may substitute 1/4 teaspoon ground black pepper)
1/4 cup uncooked pearl barley
1/4 cup dried red or brown lentils
1/4 cup dried green or yellow split peas
1/4 cup dried kidney beans
1/4 cup dried cannelloni beans or great northern white beans
1/2 cup dried medium-size macaroni, penne or corkscrew pasta

This recipe ends up making about twice as much as the Bear Creek mix.

Much like the Bear Creek mix, I found each ingredient on Amazon, estimated how much of it I would use in this mix, and added up the cost. It came up to about $4.23 a batch, which is about twice the size of the Bear Creek bag. If you divide this in half, you have a total of about $2.11 per bag – about $1.85 cheaper than the Bear Creek minestrone mix.

I did some very rough estimates of other mixes and consistently found myself coming out with an ingredient cost adding up to about 60%-75% of the prepackaged mix.

You might be thinking, “Great! Let’s make our own mixes and save money!” Not so fast.

First of all, there’s a time cost involved. You’re going to have to invest some time into this project. Each mix will have to be made by hand, measured out, and mixed.

Second, you’re going to need containers. We often use small Rubbermaid containers for these kinds of things, but Ziplocs work, too. Yes, you’ll reuse these containers a lot, but there’s still a cost.

Third, and perhaps the most painful, you’re going to have some leftover ingredients. Unless you want these ingredients to go to waste (which would reduce the value you get from doing this), you’re going to have to plan for other mixes and meals to use the leftover ingredients. One solution, of course, is to just make a lot of mixes and give the extras away as gifts.

For me, these three drawbacks aren’t severe enough to overcome the benefits and savings of making my own mixes. I love having a container in the cupboard that I can just toss into a pot, add some water (and maybe some vegetables), and immediately have soup. This is especially nice when I know the ingredients in the mix are good and it’s less expensive than buying a soup kit in the store.

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. Student making ends meet
2. Roth and regular 401(k)s
3. Difficult career choice
4. Does frugality hurt the economy?
5. File or shred?
6. When should we combine finances?
7. Cost basis choice
8. Buying things and fulfillment
9. Budgeting challenges
10. Selling The Simple Dollar

A lot of people have written me in the last week asking me what I think of the Occupy Wall Street movement and other similar events.

My opinion of it is not too different than my opinion of the Tea Party movement. It’s great to see people politically involved. I think that both have some worthwhile things to say. I think that both are often undermined by the more extreme end of the people involved. I’m a bit distrustful of the people who are organizing these events, both Tea Party rallies and Occupy events.

Most importantly, I think what they’re both saying comes from the same essential source of frustration and unhappiness, and both sides would benefit by sitting down together, figuring out what issues they both support (and there are more than you might think), and fighting for those issues, because if you put the political muscle of both groups together, that would be a tremendous force.

Q1: Student making ends meet
I’m a graduate student getting my PhD in public health. By the time I get out, I’ll probably have 80k in student loan debt. I have two credit cards that have probably a total of $6500 on them (some of which is undergraduate tuition from when I was young and stupid). I have a car debt of 7k. It’s a lot of debt. It freaks me out at how much debt it is, so I try not to think about it. I don’t know what’s going to happen in terms of paying things off, but I guess my question is more of how to become more frugal with my current lifestyle so that it doesn’t get any worse than it has to be.

I currently work 20 hours per week at a cancer institute. It doesn’t pay a lot of money, but it has a 50% tuition benefit for my school, which helps, and my boss is the most amazing mentor I could have ever asked for. I also pick up work here and there doing patient simulation for med and nursing students. I make about $1200 a month, and supplement that with about $500 per month of student loans so that I can pay my bills and buy food for me and my dog.

I would consider myself pretty frugal in most areas except for food. I buy clothes at thrift and discount stores, I like activities that don’t cost money like hiking and running, and I try to keep my expenses relatively low. Food is difficult for me. I’m recovering from an eating disorder and food is a tricky subject full of a lot of emotions that I’m trying to navigate better. I need to eat out less, but since I feel extremely poor all the time, I justify food as needed outlets for socialization, stress reduction, and because it takes less time from my already crazy life of school and work than preparing 3 meals. Regardless of the justifications, I want to get better at eating in, but at this point, more frugality feels like such pinching, it gets to me mentally and I end up spending money just to alleviate the feeling of deprivation.

With my schedule and the demands on my time, it’s not feasible for me to work more or to find a second job. Other than the food, I’m already pretty budget friendly, and don’t really know where to get better. I guess I just feel depressed about it because when I read the readers in your mailbag, they all seem so much further ahead in their financial fitness than I do, I feel overwhelmed. I don’t have a 401k, my emergency savings is student loan-based, I can’t seem to feel like I’m making progress. Any suggestions you have, or perspectives, would be much appreciated.
- Anna

There are two words in your note that stand out from everything else – “graduate student.” That statement alone implies a minimal income and a lot of time absorbed into your studies, which aren’t paying off in terms of dollars and cents right now.

Ideally, they will. The biggest reason to get an advanced degree is to improve one’s earning potential, right? Well, the years spent in your studies for such a degree are themselves an investment. You are foregoing income right now for increased income later on.

In other words, if you’re living frugally as a graduate student, I really wouldn’t worry about the other stuff. Focus instead on getting that degree and building the connections you’ll need for your post-degree career path. That’s when you’ll start seeing the proceeds from this hard work and that’s when you can focus on things like retirement plans and so on.

Q2: Roth and regular 401(k)s
My employer offers a regular 401k and a Roth 401k. I currently contribute to both (6% and 2% respectively). My employer contributes 4% as well. Being in the 25% tax bracket, should I lower my contributions to the regular 401k in favor of the Roth 401k, with the thought that taxes will go up in the future? Also, since I have a Roth 401k, do I really need a Roth IRA now? I don’t see the advantage of having both currently. I’m paying off student loans and I don’t make enough to max out the 401k let alone an IRA. If I were to switch to a different job that didn’t provide a Roth 401k, I could roll it over into a Roth IRA at that time. Regarding the forced distributions at age 70, that’s 39 years down the road for me so I’m not concerned about that either and I would assume I could roll the Roth 401k into a Roth IRA at that time anyway. Is there an advantage to having a Roth IRA that I’m missing?
- Jeff

Choosing between a Roth 401(k) and a regular 401(k) is essentially a choice based on, as you say, where you think tax rates are going in the future. If you think they’re going to go up for your income level, then the Roth is the better choice.

As to whether you need an additional Roth IRA beyond these things, it really depends on your overall picture. If you’re saving 15% of your salary for retirement in your Roth 401(k), you probably don’t need it.

There’s no reason not to diversify a little, though, to hedge your bets when it comes to taxes, but if I were you, I’d be putting more into the Roth 401(k) than the regular one.

Q3: Difficult career choice
I am 33, newly married, no children, owner of a condo with 29 years to go and have a 6 figure salary with great benefits as a graphic designer. Lately I’ve been struggling with the fact that I have been working in this same field for 10 years and I’m yearning for more. I feel like it’s now or never to take the leap or else I am just going to stay in this field. I have been dabbling as a makeup artist for the past 2 years and have been doing great shoots for major companies which allows me to make an extra income but not consistently due to me having full time. Recently I got asked if I want to be a key assistant for a makeup artist in an agency. From the artist, I can learn more and be on set as his #1 assistant whenever he gets booked. It’s hard work, on foot all the time, early call times and basically I am the bottom feeder starting from zero. I will be quitting my secure full time job to a freelancer life, basically relying on the makeup artist’s job flow as well as hussling myself for jobs. My husband has a job but I make more at this point but if I do quit, I can get on his insurance. I do want babies soon but I’ll have to wait if I do the MUA atleast for 3 years. I do have over 8 months of emergency fund, and I will be staying till I get my bonus next year which will be a good chunk. Is this unrealistic? Should I not just go for it to see if I will succeed in that field? If I crash and burn, I can always go back to my graphic design field if anyone is hiring but I am scared I am jepordizingmy future for myself and for my future kids. Steve Jobs’ Stanford speech hit me hard.
- Richard

Life is too short to spend it in a career path you’re unhappy with, and money isn’t the ultimate answer to everything.

Sit down and figure out if you can financially make this move. What would you have to change in your lives to make this work? Is that realistic?

If it is, go for it. If you don’t, you’ll find yourself regretting this opportunity for a very long time.

Q4: Does frugality hurt the economy?
I am writing to get your opinion on something that I’ve been thinking about for a few weeks now. I used to go out every week and pick up at least 5-6 new dvds, video games, comic books, etc. to the point where I couldn’t even keep up with using them. I remember you making a post about the fullfillment curve. I’d say I was somewhere around a 6. I also used to go out to eat 2 or 3 times a week.

In the past year, I’ve switched jobs, and am now making a little over double what I was at my last job. I have also cut way back on my spending. I’d say in the past year, I’ve bought maybe 4 new things, total. I rarely go out to eat, and I also bring my own lunch to work. I’ve been living as frugally as possible and saving all of my money.

Here’s the question though: Aren’t my actions having a negative impact on the economy?
- Adam

No. You’re just putting your money into a different place.

For example, if you’re bringing your lunch to work instead of eating out, you’re putting more money into the grocery store and less money into restaurants.

If you’re finding yourself with more money at the end of the month, you’re probably doing something with it. For example, if you’re keeping it in a savings account, you’re helping capitalize the bank that it’s deposited with. Even if you’re burying it in a jar in your backyard, you’re removing money from the supply and helping to curb inflation.

Your choices are not hurting the economy at all. Whether they’re helping the economy is a different discussion, but I don’t think they’re hurting the economy one bit.

Q5: File or shred?
I try to reduce as much clutter as possible in my life but one of those things I get stuck on when managing personal finance is quite characteristic of those of us born in the 20th century with 20th century parents and living in a 21st century world. The question is this: is there any merit to saving paper copies of bills that various loan and utility companies send even though I pay them all online? I’ve requested most to be paper free but some still send me them and I feel too paranoid like what if I need it at some point to throw them away? Should I start a time consuming filing system them or shred?
- Jenny

I still keep a year or two of any printed bills that I receive, just in case an issue comes up. I store such bills in a “2011″ folder box. At the end of the year, I’ll put it into storage and chuck the “2009″ box.

I don’t really worry about organization within those boxes. I just focus on making sure all the bills are actually in the box where they belong.

It’s a decent system. The only use I’ve found for it, though, is when I’ve been trying to figure out whether I’ve improved things year over year in terms of energy improvements and the like.

Q6: When should we combine finances?
My boyfriend and I have started to go through your 31 steps and think they can help us get on the road to being financially secure. The question I have is this: since we’ll be working as a couple, is there a point where we should be combining our goals & either planning for them together or prioritizing them or something?
- Lily

The point at which you should start combining goals is the point at which you’ve started combining your lives, which it sounds like you have.

Is this a long term committed relationship? Do you anticipate being together for the long haul and making this relationship legally and/or religiously binding?

If the answer there is yes, then you should be combining your goals. If you hesitate, then you have another question to think about before asking yourself about combining goals.

Q7: Cost basis choice
Today I received a letter from a mutual fund company telling me that I need to choose a Cost Basis Method to meet an IRS requirement. I honestly have no idea which one to pick; is one better than the others, overall, or is it really dependent on each individual investor? My choices are: First In First Out, Last In First out, High Cost First Out, Low Cost First Out, Loss/Gain Utilization, Specific Lot ID, and Average Cost. My funds default method is Average Cost.
- Richard

It’s dependent on each individual investor, but for most investors, it doesn’t make a huge difference.

The only situation where it would make a difference is if you’re wanting to minimize taxes one year in exchange for more taxable income in another year. This might happen if your income is widely variable. For example, I might want to choose “High Cost First Out” for my investments because I’d be likely to make a partial withdrawal during a year when my income was low, so a capital loss might be a big help on my taxes that year.

For most people, all of this is very hard to predict, so unless you have a lot of money tied up here, I’d stick with the “average cost” basis.

Q8: Buying things and fulfillment
I was curious whether you think that there are actually people out there who are truly fulfilled with owning the yacht/porsche/fine cigars/fine wines/dining out/more jewelry/huge house/servants? My sister lives in Hong Kong and has quite a few friends who got relocated to Dubai for work. She told me that her friends have told her “Dubai is SOOO cheap! Porsches are SO cheap!” and these friends are capable of living “very well” while not being extremely high paid (they are not CEOs).

That just got me thinking, “But are they really happy, and why do I always want to insist that materialistic people cannot be happy?” What do you think? Can a materialistic person be happy, and if not, why not? Why is reading a library book so darned great? why is it that it’s the “free walk on a trail or park” or “working in one’s garden” that brings happiness, and not really the 54” flatscreen TV? And if it’s really that darned simple, why do so many people not realize it? I never hear about my friends of friends who live simply or decided to live simply (I do read about it online, true); I only hear about friends of friends who “got that promotion” or somebody who is “thinking about buying a boat/porsche/joining a golf club.”
- Jeff

I know that there are people out there who get at least some degree of fulfillment from material purchases. Their lives are, in large part, based around keeping up with or keeping ahead of the people on their block. They really want to be seen as very affluent people – they get a lot of fulfillment from that and they’re willing to spend money for it.

The problem is that it’s never sustainable. There’s always someone new to compete with. There’s always someone with more money than you. There’s always someone that has something better than you. If you tie your fulfillment into this type of competition, it becomes a never-ending money pit and one that you can never consistently win.

The best fulfillment is one that comes from within. It doesn’t have to be sustainable because it’s tied directly to what you choose, not what other people do.

Q9: Budgeting challenges
I just finished graduate school and started my first job. I make $165,000 per year and after paying my rent and a loan from my employer, I have around $5000/month left. Starting in January I will begin contributing $6,000 a semester towards my younger brother’s education. I have around $50,000 in student loans (at 6.8% with a minimum payment of $400/month) and $21,000 in credit card debt. About $14,000 of that is charged interest and the rest is interest free until next September. I already have $3,000 set aside as an emergency/tuition fund (so when I pay his tuition in January, I’ll no longer have an emergency fund).

My current plan is to save $1,000/month for my brother’s tuition, make minimum payments on my student loans, pay down my credit cards as fast as I can ($500-$1000/month), and put off contributing to my 401k (which my employer does not match) until the end of next year when I’m out of credit card debt. Is this the right plan? The other problem I’m having is that I’m terrified of not having cash in the bank, so I’m leaning heavily on my zero-interest credit card (and making minimum payments) instead of paying with cash. I’m worried that after working so hard to pay down the interest-accruing cards, I’m going to be in the same situation next year with the zero-interest card. Any advice?
- Monica

This sounds like the best plan given your situation and constraints. Unfortunately, you’re correct in that by the time you get the other obstacles out of your financial path, that zero interest credit card is going to raise its ugly head.

My solution, honestly, would be to move that zero-interest balance around to other zero-interest offers over the next year or two until you can start to eliminate it. The reason for this isn’t to keep you from having to pay it, but to keep you from having to pay a lot of interest.

Until you’ve eliminated all of that credit card debt, though, I’d keep living reasonably lean and I’d focus on getting rid of that debt as rapidly as I could, focusing on the highest interest debt as the top priority.

Q10: Selling The Simple Dollar
Have you ever considered selling the site? I know that other blogs with similar levels of popularity to yours have sold for very nice money in the recent past.
- Shane

I’ve considered selling the site mostly because the elements I don’t like about running The Simple Dollar (talking to advertisers, doing server work, etc.) are the ones that a new owner would have to deal with, not me.

If I could come up with the right deal that simply left me alone to do what I enjoy doing – which is to write – I’d strongly consider it.

I’d want to keep writing about personal finance, of course, either as a hired writer or by starting a new site.

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.

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 common question I get from entrepreneurial readers is how exactly people make money with social media. How can you actually make an income posting tweets and Facebook updates?

It certainly can be done. I’ve used social media in the past to both directly and indirectly earn income, though the earnings were never big and I never devoted a ton of time to it. I know of verifiable stories of people earning quite a lot from projects revolving around social media.

This book by Jamie Turner and Reshma Shah focuses exclusively on the question of how you take something you have – an idea, a product, a book, a website, or pretty much anything else – and increase the value of it by social media.

In other words, social media doesn’t make money by itself. It makes money by connecting something of value you have to the customers who might buy it.

The Social Media Landscape
The entire purpose of social media, from the perspective of someone who has something of value that they want to share, is to get positive interest from potential customers. There are a lot of forms this can take, from creating a Facebook fan page and updating it to making a Twitter account.

Good social media use goes beyond just sending out little updates about what you’re doing. It also involves engaging the people you’re talking to by listening to what they have to say and utilizing it in your responses and in your further updates. In other words, it’s a conversation, and one that has value because people who are involved in that conversation have some sense of involvement in whatever you’re doing. It builds a connection, one that people will often follow up on with their time and/or their wallets.

How to Set Yourself Up for Social Media Success
The biggest thing you can do to set yourself up for success is find your customers first. For example, let’s say you’ve written a fantasy novel and you’re thinking of self-publishing. The best route to take is to get involved with groups that are talking about fantasy fiction. Get to know them. Where do they congregate? What do they talk about? What do they like and not like?

Jump into that conversation. Talk about the things they’re talking about. Share what you like – and what you don’t like. Ask questions, because people love to talk about what they think. The more involved you get in the conversation, the deeper the bond you’ll build with your prospective audience.

Social Media Platforms
In essence, this section of the book lists a lot of social media platforms and discusses how exactly they function and differ from each other. The authors are pretty thorough, integrating smaller social networking sites and such activities as blogging.

In the end, the platform itself is secondary. The question is whether the audience you want to talk to is there. Thus, it’s worthwhile evaluating each of these in terms of the people you want to reach.

Social Media Integration
This is where the rubber really meets the road. How do you convince people to get into whatever it is you’re interested in.

My experience has been – and this book seems to match it – is that the best route to success is to simply talk every once in a while about what you’re up to. For example, if you’re trying to get a book off the ground, occasionally mentioning your book (maybe 2% of the time at most) will intrigue people you’ve been conversing with. Overdo it and you turn them off.

How to Measure Social Media
The challenge with social media is measuring the success of it, and it all comes back to “return on investment.” In other words, the question of whether you have success or not should rest entirely on the number of clicks you get, the number of sales you get, and the number of responses you get.

The advantage of social media is that there’s little financial cost involved. The disadvantage is that there’s a lot of time involved. So, what you’re looking at really is the response you get for the time you spend. You’d be surprised how often it’s worth it.

One final thing that I really liked about this book is that it included a long checklist of things to do if you’re thinking about diving into this. This is incredibly useful, but it’s only really useful if you’ve read the book first.

Is How to Make Money with Social Media Worth Reading?
If you’ve ever wondered how people make money using social media or if you’ve ever had something you’d like to build an audience for or sell using social media, this book does a very good job of spelling it out. I would highly recommend this book to someone who has a product or an idea that they want to popularize.

In fact, I may be using it in the near future on a separate project of my own.

Check out additional reviews and notes of How to Make Money with Social Media on Amazon.com.

“A foolish consistency is the hobgoblin of little minds” – Ralph Waldo Emerson

People often ask me why I seem to enjoy frugality so much. When I tell them the real reason, they usually don’t believe me.

The real reason is that I find doing the same thing over and over again boring. So, how does that relate to frugality?

Frugality, in a big way, opened my eyes to the overabundance of options available to me. Once I broke through that barrier of thinking that free things were inherently not all that much fun, the realm of possible activities became a lot wider.

I’ll use a simple example. Let’s say I wanted to have a delicious dinner and I was in the mood for something Italian. My first reaction would have been to go to a great Italian place in the Des Moines area like Centro. I’d inherently limit myself to the handful of the same upscale Italian restaurants in the area.

Now, if I have that impulse, I’ll often think about those restaurants, but I’ll also recognize that there are a lot of lesser-known and far less expensive family-owned restaurants in the area. I’ll also keep in mind that there’s a giant mountain of food ideas that I could make at home in my own kitchen, filling our house with delicious fragrances.

When you open yourself to the idea that it’s completely okay to cut back on your spending, the realm of possibilities opens wide for you.

I might look at clothes at a nice men’s clothing store, like I used to, but I’ll also look through the racks at Goodwill. I might peruse the new cars at a dealership when I think about replacing our Pilot in several years, but I’ll also check Craigslist and used places. I might buy a day pass at a gym, but I’ll also go walk and jog all over the place near where I live.

On the other hand, when I spent much more freely, I would often find myself doing the same handful of things over and over again. We’d go out to eat at the same handful of places. We’d shop at the same handful of stores. Everything was much more routine-oriented because we simply did what we thought people who had money were doing. We did what we thought was normal.

If “normal” involves spending money and doing the same things and going to the same places over and over again, I never want to be normal. I’d far rather be frugal and face a rainbow of options before me, ranging from going for a week without buying anything to sometimes splurging on something.

Every day is something different and new. There’s never a lack of something new to experience when you don’t immediately eliminate most of your options.