Every other Sunday, The Simple Dollar reviews a personal finance book of interest.

1/2 Price Living by Ellie Kay has a particularly noteworthy subtitle: Secrets to Living Well on One Income. A quick read of the back makes it clear who Kay is talking to – people who want to give stay-at-home parenting a go.

I picked up this book (off of PaperBackSwap) because my wife and I are discussing the possibility of trying out stay-at-home parenting for a year – the year in which we have three preschool aged children at home. According to our math, after all of the tax implications and the like, our finances would only slightly be better if my wife worked full time during that year. Of course, the math rebounds strongly after that one year (when our oldest goes to school) and the year after that (when our daughter goes) and, add on top of it the fact that my wife really loves her job, we’re still not fully committed to a plan yet.

Thus, as we often do when we’re piecing through such decisions, we turn to the books, and 1/2 Price Living was one of them.

Did the book provide any lasting value for us, or did it just repeat ideas found elsewhere? Let’s dig in and find out.

1. Mommy’s Gone Wild: Why Live on One Income?
An awful lot of parents wish they had the financial wherewithal to stay at home with their children, particularly when they’re young. Ellie quotes a survey by ClubMom that indicated that 89% of mothers would choose to stay at home if it was financially feasible for them – and there are an awful lot of dads who would do the same. Ellie doesn’t really dive into the issues of whether or not stay-at-home parenting is the right choice, instead focusing on making the book a guide for people who have already made that decision. This is a wise choice, because the actual decision-making process concerning stay-at-home parenting is fraught with a lot of emotion for a lot of people, an element that doesn’t belong in a book that needs to be breaking down some hard facts.

2. I Can’t Afford to Stay at Home: Working Girl vs. Girlie Mom
The big block that most people find in their way when they consider being a stay-at-home parent is the financial question. How can they possibly afford to stay at home? Two big factors pop out here. One, work is often not as lucrative as we think, once we subtract taxes, commuting costs, eating out costs, clothing costs, and so on. Two, staying at home trims your family’s budget substantially because of the home economics of it – meals are made at home, for example, and more planning and thought can be put into grocery trips.

3. Half the Income, All the Benefits: Seven Steps to Come Home
The big key to making all of that work, though, is to plan, plan, plan. If you don’t have a clear gameplan in place, it’s very hard to make the financial transition to one income successfully. Ellie has a nice set of worksheets in this chapter to help guide through the transition, but the big idea is that you need to do a before-and-after budget and carefully think about the real changes to each category. What will change? How can you make that happen?

4. The Family Meeting: Half the Work, All the Fun
One big part of this process is regular family meetings. There will be a lot of changes in your life if you choose to do this and many of them will involve all of the family members. Set aside a meeting time to discuss all of this stuff. Lay everything you can think of on the table and let everyone else do the same. Talk through this – it’ll help you see things you hadn’t thought of.

5. Chopping on a Chewstring: How to Cut Your Food Bill in Half
Ellie advocates “layering” for savings, using a large number of techniques to apply them all to the same item (store coupons, manufacturer coupons, store flyers, and so on). That works to an extent, but the real winners (in my experience) involve figuring out which store is the best to shop at and also, perhaps most importantly, using a grocery list.

6. Three, Four, or More: A Clotheshorse’s Guide to Outfitting Ponies
Start at the secondhand stores – and plan ahead. These are two key pieces of advice for dressing your family on a budget. We take these both deeply to heart already. Many of the clothes my family wears come from secondhand stores – in fact, my daughter’s favorite dress is a secondhand one. If you spend some time actually doing it, you’ll be amazed how many great items are stuck in there alongside the overly-worn stuff.

7. Scrambled Nest Eggs: How to Make Cake When Your Savings Takes a Beating
This chapter mostly just reviews various places families can sock away their money, from retirement accounts to certificates of deposit. Having a cash reserve can be a make-or-break thing for stay-at-home parents, so the advice in this chapter is useful in a very basic way, but it shouldn’t be substituted for any sort of thorough money management primer.

8. The Wednesday Factor: Half-Price Shopping to Maximize Savings
If you’re going to spend money on stuff – from amusement parks to travel to eating out – Wednesday is usually the best day of the week to do it, for several reasons. Many places cut prices on “hump day” to try to spur business in the middle of a work week. Similarly, many competitive businesses operate on a weekly cycle and Wednesday is usually the best day to jump in on that cycle. If you’re going to do something, do it on Wednesday.

9. Taming the 800-Pound Gorilla: Ten Steps to Simplify Home and Hearth Savings
The biggest step? Pay everything on time. After that, the keys to housing savings revolve around saving, saving, saving and spending as little as you can. Why? You are far better off writing a check for home improvements or other such big expenses than taking out debt for them. If you keep on top of the little things each day, it’s easier to stay on top of the big things.

10. That’s My Business: How to Own a Home Business That Doesn’t Own You
Many stay-at-home parents engage in starting a side business to fill in the time gaps they sometimes have during the day. This chapter provides a huge list of ideas for starting such a business and offers some general advice on how to make it work. It can work – among the stay-at-home parents I know, at least two of them have some sort of side business that they’ve started.

11. Fiesta or Famine: How to Finish Great, No Matter Where You Start
Here, Ellie goes down a spiritual path, citing how her faith played a central role in making stay-at-home parenting possible for her. While that’s admirable, the intense focus on specific Christian ideas and texts could be a bit alienating to non-Christian readers.

12. The Porpoise-Driven Life: How to Restructure Vacations and Build Memories
The good financial advice returns here with a detailed discussion of how to have low-cost vacations on the cheap. The biggest piece of advice in the chapter is to “double-up” – traveling with others can almost always drastically reduce the cost of a vacation, assuming of course that the people you travel with are of a similar mindset as you .

13. The Sowing Club: The Benefit of Sharing and Stewardship
The book closes with a discussion of the value of good character and being an active part of your community. I find that, time and time again, being involved in the community in a positive fashion goes a very long way toward building a successful financial life, because the support of others around you makes all the difference in the world.

Is 1/2 Price Living Worth Reading?
If you’re considering being a stay-at-home parent – and troubled by the financial and other personal implications of that – 1/2 Price Living is a really worthwhile read. It gave us quite a lot to think about as we puzzled through our decision. If you’re in a similar boat, I would consider this a nearly essential read.

I had one big quibble, though: most of the book assumes that it will be the mother that chooses to be the stay-at-home parent. I actually know more fathers who are doing the stay-at-home parenting right now. Assuming that the mother will be the one to do this is a bit… outdated, I think. If this book gets a revised printing, I would strongly suggest toning down the “mommies club” language in the book, as it could be pretty off-putting for fathers who are considering staying at home.

That’s not to say that the advice isn’t spot-on, useful, and thought-provoking, because it is.

Every other Sunday, The Simple Dollar reviews a book of interest.

Over the last few years, I’ve come to believe that the biggest key to personal finance success is controlling your own psychology and impulses.

Our entire lives are filled with quick decisions we must constantly make – and, for the most part, we’re good at it. We commute to work without getting in an accident. We make constant little decisions at work – and at home, too. We’re able to effectively take several pieces of information, combine them together, and make a pretty good choice based on the result – and we do it over and over again.

Unfortunately, that same ability often doesn’t serve us well at all when it comes to personal finance. The ultra-quick decision making process that leads us to making great little choices in everyday life often leads us to making disastrous financial decisions. Very rarely do snap decisions work out well in the financial world.

This concept is the central focus of Snap Judgment by David Adler. He makes a two-fold argument. First, such snap decisions fail us financially and, if we’re able to get control over them, we’re much more likely to find financial success. Second, understanding how people make such snap decisions can help us to predict and prepare for the choices that other people will make, pushing us to further success.

Sound interesting? Let’s dig in.

I: The Psychology of Financial Decisions
The basic rule of thumb for success in any financial arena is “buy low and sell high.” It rings true in everything from stock investing to grocery shopping. The problem is that most of our normal financial cues tell us to do virtually anything but that. For example, we often believe there must be value to be found if everyone else is buying something, but quite often that means that it’s the opposite of a bargain – the price is overinflated.

Similarly, we are often wired to overlook what we view to be small amounts of risk – if we didn’t, we’d never leave our house in the morning. However, when we apply the same philosophy to investing, we overlook those seemingly small risks and chase what looks like the biggest returns – and then we get bitten by those risks. That’s why so many people got caught losing big chunks of their retirement in 2008?

II: The Track, the Stock Market, and Other Types of Gambling
Our brains are wired to see patterns in our lives, from traffic to grocery shopping to financial markets. Most of the time, when we act based on how we think things will go based on those patterns, we guess right.

The problem is that the stock market and most forms of gambling present false patterns to us, ones that have nothing to do with what happens next. People stare at charts and sit at slot machines because our minds are convinced there’s a pattern in the chaos and that a big winner is about to emerge. Quite often, though, it’s not coming down the pipe.

III: Personal Decisions, Personal Safety, Personal Finance, and Health Choices
Another method in which people falsely assess risk is in our own health and mortality. Many, many people don’t have life insurance because they simply see the risk of their own death as being too minute to really concern themselves with, whether in a conscious or subconscious way. For the same reason, many people don’t bother with annual checkups at the doctor.

In each case, the concern isn’t the chance of the risk, but the severity of the event when risk comes to call. We assess the chances themselves quite well, but we’re poor at assessing the consequences of the bad event actually occuring and whether or not a small cost now is worth covering that big bill later on.

The latter three sections of the book are much shorter and focus on very narrow issues, mostly ones that have really popped up as a result of the 2008 financial crisis.

IV: CEO Behavior
CEOs rise to the top of the corporate ladder by taking risks and having those risks pay off. That’s how a future CEO stands out from the pack – they stick their neck out and succeed. When they get to the top, they often have huge confidence in their abilities, whether it’s warranted (Jack Welch) or not (Bob Nardelli). Often, one sign that a company is either going to succeed wildly or utterly fail is in the behavior of the CEO: are they full of their own hubris? Do they hold onto stock options too long? Good signs include a laserlike focus on their company. Bad signs include self-promotion, like writing books and going on book tours.

V: Psychology and the Credit Crisis
Investment bubbles happen for the reasons outlined above: people see others rushing in and making good money and decide to rush in themselves. Inevitably, though, any market eventually runs out of buyers, at which point the bubble pops and people lose big. The opposite is also true – think of someone shouting “fire” in a theater or a bank run. Quite often, that kind of trampling panic can cause far more damage than is warranted in the situation.

VI: Debiasing
How can you avoid all of this stuff? First of all, slow down. Very few financial decisions have to be made in a “snap” context. Second, communicate. Talk it over with others. Have a “money buddy” or even a group of people to talk decisions through with. Third, cover your risks. Don’t invest in stocks unless you can afford the losses and have insurance unless you’ll be fine without it.

Is Snap Judgment Worth Reading?
Snap Judgment is a thorough and interesting review of how psychology affects investment and financial choices. It’s written approachably and thoughtfully and does a good job of covering the 2008 crisis in the latter sections of the book.

The only real drawback with the book is that the topic area has been covered by a lot of other books, many of which are very, very similar.

If you’ve read a book on financial psychology, Snap Judgment probably isn’t a necessary read, but if you’ve never read one, you ought to, and Snap Judgment is a pretty fine place to start.

Every other Sunday, The Simple Dollar reviews a personal finance book.

The title of this book pretty much sums it up.

One Year to an Organized Financial Life by Regina Leeds basically lays out a week-by-week plan for getting your financial house in order. The book is divided into twelve chapters (months), each containing four subsections (weeks in a month), and each of those sections details how to take control of a specific aspect of financial life.

The end result is something that feels very much like a detailed plan to follow. Personally, such a plan gives me mixed feelings – while it’s great for a person who just wants to be told what to do, I’m a big believer in understanding your finances and your motivations and, at times, this book feels more like a “just follow these steps” kind of guide than a “understand what you’re doing” book.

The big question, though, is whether the information is worthwhile. Let’s dig in.

January: Take Control
More than anything, this opening chapter focuses on information management. Quite often, people’s personal information is in a very unorganized state, with cards and receipts jammed in purses and papers tossed into boxes and filing cabinets. The solution? Start from scratch. Clean out your purse and figure out a good place to put that stuff. Start a real financial filing system. Even more important, go through your mind and start asking yourself why you make the choices that you do.

February: Assess Your Finances
This month is all about creating a budget. The process is standard by now: record all of your expenses, then parse them into groups that make sense to you, then from there figure out what you should be spending in each category and shoot for that new target. My concern here, though, is that to set up a really accurate budget, you need more than just a month. You have to record your expenses over a longer period of time than a mere month to get an accurate grasp on your money. Although the procedure here makes sense, stuffing it into such a short timeline does not.

March: Get Ready for Taxes
This chapter summarizes the process of doing your taxes. Collect your documents and your relevant receipts. Decide whether or not to use a professional or do it yourself. Then, take the plunge – fill out the paperwork and file. It’s a process that most of us (painfully) have to go through each spring. A big key suggested here is to start a filing system now to store all tax-related documents throughout the year so that when you do your taxes the following year, all of the receipts and other materials you need are ready to go.

April: Spend Less, Save More
Frugality is the buzzword here. This chapter focuses strongly on cutting your expenses – much of the advice is right in line with the ongoing “Trimming the Average Budget” series on The Simple Dollar. Hand in hand with that kind of trimming, though, is the need to actually save what you’ve been cutting, because the tendency often is to take that money and spend it on things that you seemingly couldn’t afford before, thus raising your standard of living and sticking you right back in the spot you started in.

May: Borrow Smart
Leeds covers the ins and outs of borrowing money here, largely supporting the good debt, bad debt dichotomy. The advice is smooth and straightforward: trim the “bad debt” (high interest debt) as quickly and efficiently as you can and don’t take on any more of it. Leeds does subscribe to the idea that “good debt” is largely good and mostly focuses on shopping around for home loans and auto loans, but as time goes on, I’m less and less of a fan of any kind of debt.

June: Build a Nest Egg
Retirement savings are next. Leeds’ advice is pretty straightforward: max out your 401(k) and then run the numbers to see if you need even more using a reliable retirement calculator. She also advises against underestimating what you need for retirement, making it clear that you’re better off with more than you need at retirement time than not enough.

July: Make Long-Range Financial Plans
What about your other long-term savings goals, like saving for your dream home? Leeds encourages most people to get a financial advisor for this task. On the other hand, given the great tools available on the internet, I think that most people today can actually handle their own long-term savings. The big keys are to make sure you’ve clearly specified your goals and to automate your savings so that it’s building on a regular basis over time without your manual intervention.

August: Refinance and Downsize Options
Sometimes, the old home mortgage gets to be overwhelming. In those times, refinancing and downsizing are two choices that people usually consider, and Leeds walks through these optiosn here. Ideally, of course, the tactics from the earlier chapters have put you in a better place with your money so that this isn’t a worry. A big key: maintain your good credit. Put a priority on maintaining a high credit rating and things like refinances will go much easier – plus you’ll find that your insurance rates are lower.

September: Children and Money
This chapter is of particular interest to me, since I’m a parent and I enjoy reading ideas for teaching good money values to my kids. Leeds suggests giving your child as much practice as possible with managing their own money, from an allowance to a job in their teen years. For college, parents should start a 529 as soon as possible and, perhaps more importantly, should get their children actively involved in saving and preparing financially for college.

October: Protect Your Assets
Here, the book felt perilously close to insurance salesmanship, as several different types of personal insurance are pushed hard. Leeds also encourages people to pay more in order to lave lower deductibles on their medical bills, which actually is a policy that I feel runs contrary to the advice given elsewhere in this book. After all, when you have your financial house in order with a nice emergency fund, you can afford the higher deductibles, so you should save on the premiums if you can on your health insurance.

November: The Season for Sane Spending
How do you keep your holiday spending under control? The best way to do it is to plan your shopping carefully. Instead of heading into the store with a head of steam and a big list, spend some time coming up with great gift ideas for each person you need to buy for, then researching how to get those items for a great price. Don’t let your impulsiveness run the day or you’ll find yourself spending a lot more than you ever intended to spend.

December: Year-End Money Moves
Most of the year-end money moves involve reviewing your spending and financial activity over the course of the past year (an awesome idea) and preparing for your taxes by doing things like harvesting any investment losses by selling now and making sure your charitable contributions are taken care of and adequately recorded (another great idea). In short, you should end the year by making sure all of your ducks are in a row and ready to set sail for the next year (and the coming tax season).

Is One Year to an Organized Financial Life Worth Reading?
One Year to an Organized Financial Life doesn’t offer many new ideas, perspectives, or angles on personal finance. Instead, what it offers is a clear organizational scheme – a very thorough step-by-step plan for people who simply prefer to have a plan to follow. In that regard, One Year to an Organized Financial Life is a home run.

I think what it comes down to is this: do you learn better by figuring things out for yourself, or do you learn better by following the patterns that someone else has set in place? If you’re in the former group – and I’d put myself there – One Year to an Organized Financial Life won’t do much for you. If you’re in the latter group, One Year to an Organized Financial Life will be an incredibly useful read.

One Year to an Organized Financial Life depends more on the reader than on anything else, as it provides exactly what the cover promises: a one year, step-by-step plan to financial organization.

Every other Sunday, The Simple Dollar reviews a book of interest that’s not directly related to personal finance, but can provide deep insights into the elements of personal success.

One of my favorite books I’ve ever reviewed for The Simple Dollar is Twyla Tharp’s excellent The Creative Habit. In fact, it’s one of the few books that’s found a permanent place in my home after having read it for a Simple Dollar review.

Naturally, when I found that Twarp had written a follow-up of sorts, entitled The Collaborative Habit, I couldn’t resist. Simultaneously knowing the high esteem I gave to her first book and also recognizing the ever-increasing importance of collaboration and collaborative work in modern personal and financial success, I couldn’t wait to tear it open.

Much like its predecessor, The Collaborative Habit is notable for its exquisite design and layout. It’s crisp, clean, easy to pick up, and incredibly easy to annotate with your own personal notes and thoughts. Also like its predecessor, it’s not terribly long – it gets right down to the point and the only anecdotes it offers up are ones that get right to the heart of the matter.

The $64,000 question, though, is whether or not it really says anything useful to us. Let’s dig in and find out.

What It Is, Why It Matters, Why It’s the Future
In its simplest form, collaboration means working with others towards a goal that would be difficult to complete without multiple contributions. It goes beyond that, though – collaboration also has the potential to improve what we ourselves individually contribute to the goal. Many people resist collaboration because interacting with people can be difficult, but that in itself can be a reward if we step back and ask ourselves whether we might be the ones at fault – at least in part – and work ourselves to overcome those faults.

Collaboration Is Second Nature
The core of any great collaboration is, in her words, “a clearly stated and consciously shared purpose.” In other words, collaborations work best when you all have the same end result in mind. Collaborations are often undermined when others are secretly working towards other goals and purposes. How can you overcome this? The biggest step anyone can take to make collaboration work well is to establish a routine of work in which each member contributes – without that, collaboration falls apart. Set that before you ever continue or else you will either fail or have to run a marathon to achieve some semblance of success. Another important element is a champion – someone who pushes and inspires the members of your team.

Partnerships Challenge and Change Us
Many collaborations are merely partnerships of two people. A marriage is one such collaboration, as are dance partners and, often, tech startups. The key to a successful partnership is to not have a partner that’s just a duplicate of you, your ideas, and your perspectives. They should be different than you. They should challenge you. They should regularly see things in a different way than you. This forces you to grow and gain something personal beyond the mere outcome of the collaboration.

Working with a Remote Collaborator
The vast majority of my own collaborations are with remote collaborators – and they can be difficult. The key, I’ve found, is communication – and it’s a key that Twarp strongly agrees with. However, that communication shouldn’t boil over into dealing with the individual problems of your collaborator. Instead, focus on maximizing what you are bringing to the table and focus entirely on what your collaborator is bringing to the table. If they produce something that’s subpar for their portion of it, do your thing with what they’ve brought to the table. The other option is to slam on the brakes – and that ends in disaster almost every time.

Collaborationg with an Institution
When you collaborate with an institution, it’s often important to lead with exactly what you need from that institution in terms of resources. State it up front and clearly, so that they know exactly what you will need to carry out your parts of the collaboration. Also, continuing the thread of working with people who aren’t producing at first, if you give your best with what they’ve provided, you’ll often push others to step up their game as well. Your peak performance is a motivator for others to bring out theirs.

Collaborating with a Community
A community is a group of impassioned people. When you collaborate with them, the trick isn’t so much finding good output, it’s channeling that output into something usable that pushes both you and the community forward. In general, the more you ask – and the more you produce in response to their requests – the more you’ll get back from the community. This chapter is really spot-on for anyone who is involved with interacting with a large community – like a blog readership, for instance.

Collaborating with Friends
The biggest key to collaborating with friends is precise communication. Why? Without it, it’s easy to miscommunicate something and, because you’re friends, the other person will attempt to pick up the slack and quite possibly move in the wrong direction with things. Not only that, a collaboration gone bad between friends can often strain a friendship, something that isn’t a desirable outcome for anyone.

Flight School: Before Your Next Collaboration
The biggest thing to think about before you collaborate is whether or not you’re really up to the collaboration and what it will take to make it succeed. We’re very good at deceiving ourselves – it’s easy to just blow this off and just believe we’re completely up to it. Spend some time and ask yourself – seriously – whether or not you’re capable of giving what needs to be given to pull off the collaboration.

Is The Collaborative Habit Worth Reading?
Tharp’s writing is incredibly strong in one key category: it makes you completely rethink what you’re doing in your normal course of activities. Rather than just giving me a checklist to follow, The Collaborative Habit really made me re-think some of the collaborative projects I’m working on – and the results have been profound.

I made the choice to back out of at least a few collaborations and focus more intently on some others. In one collaboration, I’ve adopted a much clearer communication policy because I found that at times we were going in different directions. I’ve also started scheduling more phone calls with people I’m working with remotely on various things.

If the measure of success of a book is whether or not it causes you to rethink things you’re doing in your life and to actually take action and make changes, then The Collaborative Habit is definitely a success, at least to me. If you’re involved with many collaborations in your own life, I suggest picking this one up.

Every other Sunday, The Simple Dollar reviews a personal finance book.

The Elements of Investing by Burton G. Malkiel and Charles D. Ellis is a nice small volume, reminiscent in size and length to one of the Little Book investment volumes. I chose to pick this up because I highly respect Malkiel’s books A Random Walk Down Wall Street and The Random Walk Guide to Investing (click on the titles for my reviews) and I was looking for a succinct collection of the main points in those books (which are a little dense – and perhaps a little long – for the typical reader).

That’s pretty much exactly what The Elements of Investing delivers.

Malkiel and Ellis break down the … well, elements of investing down to five key principles, which make up the five main sections of the book. Given that this book isn’t excessively long, each of these sections gets straight to the point, making it clear what you need to do.

This book doesn’t offer (much) specific investment advice. Instead, what the book focuses on is the foundational elements you need to have in place in order to make good specific investment choices, along with a few very general principles on how to invest. If you’re looking for a list of hot stocks or other specific investment choices, this isn’t the place for you.

Let’s dig into the five key principles that make up the book.

I. Save
The book opens with what I consider to be the key of successful investing: saving your money, living without personal debt, and spending less than you earn. If you’re not following those principles, you’re giving money you could be potentially investing to financial institutions in the form of finance charges, unnecessary insurance, and so forth.

Before you begin to invest (outside of matched retirement savings and the like), get your personal finances in order. Eliminate all of your high-interest debt, as investing in such debt payments has a very high rate of return. Get into the practice of spending less in your personal life than you’re bringing in, because the less you spend, the more you have to invest. Live frugally. Build up a nice cash emergency fund to handle the curveballs life will throw at you so that such curveballs don’t disrupt your investing plans. Set goals for yourself and know why you’re investing.

II. Index
Malkiel and Ellis recommend investing your money in index funds rather than in individual investments (like individual stocks or individual commodities) or in mutual funds. First, investing in individual investments requires a substantial amount of research and access to information in order to compete – something not available to the average investor. Second, investing in mutual funds means paying substantial fees – and even after you do that, you’re still merely betting that, after you pay the fees, the fund manager can still beat the market, something no fund manager (other than arguably Peter Lynch, who retired about two decades ago) has ever done with any consistency.

Index funds simply buy a little sliver of everything and rides the market as a whole, doing it for an extremely low cost. You won’t beat the market – but you’ll match it without worry and extensive research. For the average investor who doesn’t have unlimited time and resources, that’s a pretty strong deal.

III. Diversify
Putting all of your eggs in one basket might get you rich, but it might also cause you to lose everything. For example, if you put everything into tech stocks in 1998, you were riding very high in 2000 – but in 2002, you were in an apocalyptic situation.

Instead of falling into this trap, diversify. Spread your money across a lot of different investments – domestic stocks, international stocks, bonds, cash, real estate, and even a bit of commodities, too. Buy index funds for all of these markets and spread your money across them. This way, you’re protected if any specific market collapses, but you also get some benefit if any particular market goes crazy.

IV. Avoid Blunders
Don’t get overconfident – no one can predict the future. Don’t try to time markets because, again, no one can predict the future. Be careful about fees and don’t invest in things that charge you a lot simply to invest in them.

To put it simply, be careful. Take your time. Your goal is to succeed in the long run – it’s not some sort of mad dash to the finish line. Besides, those who sprint often fall flat on their face when they’re in the investing game.

V. Keep it Simple
If things are getting too complicated and confusing and you’re finding that you’re having a hard time keeping track of your investments and properly following them, simplify. Move into fewer investments while still keeping as much diversity as possible. Instead of having your fingers in twenty different stock investments, invest in a much smaller number of index funds, for example.

Simplicity enables you to actually keep track of and understand your investments in a reasonable period of time. Without this, you’re essentially leaving your investments up to serendipity – which is never a good decision.

Is The Elements of Investing Worth Reading?
The Elements of Investing is an excellent first book for people to read once they begin to think about investing. Instead of drowning the reader in specific investment advice, it focuses on foundation materials. Why are you investing? How do you get ready to take advantage of the financial rewards of investing? How do you begin to invest if you barely know how to read a prospectus? How can you avoid some of the most obvious blunders that beginners have?

This isn’t a be-all end-all guide to investing, nor does it claim to be. If you want a deep, technically rich guide to investing, read The Bogleheads Guide to Investing. If you’re just starting to think about investing, read this one instead – it’s a truly great beginner’s book written by a author with a great reputation.

Yesterday, I had a conversation with a Simple Dollar reader named Kip, who brought up the classic novel Silas Marner by George Eliot (if you’d like to read it, here’s the entire text, or if you’d just like a summary, here are the Sparknotes). I was so inspired by the conversation that I dug my copy of Silas Marner out and re-read most of the novel in a single sitting.

Silas Marner is a tale of the ups and downs of the life of the titular character, Silas, over the course of his adult life.

The middle part of the book is the part that consistently sticks in my head. After being falsely accused of theft and basically run out of his town, Silas becomes a miser, hoarding every dime that he earns. He keeps the money under his bed and counts it every night and, because he has become a social outcast by a mix of fortune and choice, the money is the center of his life.

One night, the money is stolen – all fifteen years’ worth of it. Silas is completely shaken by this, as you can well imagine. He doesn’t deal with it well and eventually becomes completely hysterical, having a breakdown in his home. As he is passed out from this episode, a woman and her small child are walking in the snow near his home. The woman takes a draught of opium, passes out, and dies in the snow. The child, looking for warmth, finds her way into Silas’s cottage and falls asleep near the fire, almost exactly in the spot where Silas last left his money before it was stolen.

Silas awakens to find that his gold has been replaced by a golden haired child. Eventually, he adopts her and takes on the role of her father, which gives him an entirely new lease on life.

On the surface, Silas, in his miser years, is following good financial practice. He’s completely financially independent, he saves his money, he is an independent businessman (he’s a weaver), and he spends much less than he earns. This is often the very goal that many of us strive for.

Yet his life is so single-focused that one unfortunate event sent his entire life off of the rails, resulting in him having a breakdown in his home. In his pursuit of money, he failed to pursue a well-rounded life. It took the replacement of his money with the child for him to rediscover the beauty of life.

Never let the single-minded pursuit of wealth stand in the way of your life. The pursuit of wealth for wealth’s sake is an empty pursuit, one that will leave you without the things you most need when the time comes.

Instead, seek wealth with a purpose. Why are you making the choice to succeed financially? Are you seeking to provide a stable home for your family? Perhaps you have a passion that you’d like to chase that doesn’t earn a large income. Perhaps you’ve got a philanthropic bent.

Whatever that purpose is in your life, that purpose should be in the lead, not the money. Money is merely a tool to help you do the things you want to do.

What do you want to do today?

Every other Sunday, The Simple Dollar reviews a non-personal finance book of interest to Simple Dollar readers.

One of the biggest underlying themes of The Simple Dollar is that personal finance is merely a tool to improve the quality of your life. Of course, it’s an unwieldy and dangerous tool, one that, if used without care and forethought, can add quite a lot of difficulty and pain to your life. Take credit cards, for example.

In connection with that theme, I often read intriguing books about personal happiness – take my reviews of Stumbling on Happiness and Happier, for example, both of which were excellent reads.

Perhaps the most enjoyable book on happiness I’ve yet read, though, is The Happiness Project by Gretchen Rubin. A quick note: I know Gretchen professionally, have exchanged several messages with her over the years, and enjoy reading her excellent blog on happiness topics. Of course, if I didn’t like her writing already, I might never have read the book – which I suppose means I already knew I would like the book before I opened the cover. But enough with that…

The Happiness Project largely focuses on Gretchen’s own experience applying mountains of classic advice on happiness (from Thoreau to Epicurus to the Dalai Lama to Oprah) to see what actually worked – and what didn’t. It’s mostly written in a memoir form covering a single year in which she applied these ideas, which works really well for the material covered (and makes it engaging to read).

Although I’ve had this book for a while, I decided to save this review until the start of the new year because it relates so well to the resolutions that people make for themselves.

January – Boost Energy
It’s often hard to tackle all the things we want to do in life if we don’t have a high level of energy. If your energy is sapped, it becomes all that much easier to simply take the path of least resistance and simply not work on the important things in life, which of course contributes greatly to a sense of unhappiness. Thus, there’s a great deal of sense in beginning a happiness journey by lifting one’s energy.

The two techniques that really stood out in this chapter – and in my own life – were to get more sleep and to simply move around more and get a bit of exercise. I’ll speak for myself in saying that when I don’t get adequate sleep for a few nights in a row, I feel tired and lethargic and unable to do much of anything productive. Similarly, when I fall off the “exercise wagon,” my energy level drops like a rock after about a week.

February – Remember Love
Marriages aren’t easy. Add kids and they become even more difficult. At times, marriages can seem like an emotional negative on the whole. What works? First, don’t expect appreciation for the things you do – and don’t feel a need to point them out and lord them over your partner. It does nothing more than instigate fighting and resentment over something you chose to do. If you want something done, do it and don’t use it as a psychological weapon.

Second, don’t just use your partner as someone to dump your problems on. Don’t blame them for problems. Don’t nag them over things left undone – if it’s undone, it must not occupy a high level of importance for them. Instead, focus on ways to accentuate your partner’s positives. What do they do well? Encourage that in a positive way instead of browbeating over the things they don’t do well. You’ll both wind up happier.

March – Aim Higher
There are few things that feel better than success, particularly when that success occurs at something you never expected to be successful at. When you think to yourself, “I could never do that,” then after investing work you find that you can do that, you’ll find yourself at a big emotional peak.

The best way to aim higher and go beyond what you think you’re capable of is to simply give it a shot. You should expect to fail at first. The first ten times. The first fifty times. That’s fine – you’re learning what it takes to succeed each time you fail. The key is to not give up, to not beat yourself up over the failure, and to get up and try again. Eventually, you will succeed – and that success will lift you high.

April – Lighten Up
People are often happiest when they’re doing something. Gretchen refers to this as “fog happiness” – a sense of happiness, or at least contentment, that comes from working towards a goal. Often, that happiness is borne of a sense that what you’re doing will make others happy.

Another big piece of the puzzle is to simply act happy. Act lighthearted. One effective way to do that is to simply sing on a regular basis – Gretchen suggests doing it in the morning. Play some simple pranks on other people. Do things that make you laugh. It’ll lift everything else.

May – Be Serious About Play
Happiness is often found when you seek out sources of happiness – things you do that bring you joy, no matter what they are. Those things are different for each of us, but when you find those things, devote some serious time to them. Block out time for fishing or for playing the piano. Those times will become powerful personal refreshers for you.

If you don’t have a hobby or activity that brings you such joy, find one. Set aside time to explore potential new interests – and block that time off. Make time for it. When you find something that brings joy into your life, it often works like a “happiness battery,” charging your entire day.

June – Make Time for Friends
Friendship is an easy thing to neglect in our busy lives. We often think to ourselves that our friends will always be around, but when we look again, we find that the friendship has drifted away. Even more importantly, we get joy from time spent with friends, but because we define such interactions as “important but not urgent,” we often replace them with the “urgent but not important” things in our lives.

One powerful way to maintain friendships is to schedule regular events with them. Start a weekly potluck dinner at your house and invite several friends (something we’re in the process of setting up). Another effective tool is to avoid gossip – don’t talk negatively about people behind their backs.

July – Buy Some Happiness
This chapter more or less focuses on one of the major themes of The Simple Dollar – the connection between money and happiness. Without directly touching on it, Gretchen touches on the idea of the fulfillment curve – that everyone has some point that maximizes the enjoyment they get from their spending. Spend too much and you’re not happy. Spend too little and you’re not happy, either.

How do you find that balance? Focus on just buying things you know will bring value into your life, but don’t chide yourself constantly for doing so. Look at your true passions and focus on things that complement those passions and don’t spend as much on the rest.

August – Contemplate the Heavens
Spirituality is another interesting beast in the stable of happiness. For many, there is a lot of solace in contemplating the mysteries of life. If you find peace in seeking these answers, seek them. Gretchen suggests reading about the lives – and beliefs – of spiritual leaders of all stripes (like the Dalai Lama or the Pope or any of a huge number of historical figures).

I find a lot of power in keeping a gratitude notebook. Simply by writing down five things I’m grateful for each day, I keep in mind how many gifts and blessings have found their way into my life. It also often opens a window into religious exploration for me as well.

September – Pursue a Passion
In a way, pursuing a passion builds upon many of the themes already in this book. If you discover you’re passionate about something, chase it. Dig in deep.

For me (and for many others), one great way to build upon a passion is to embark on a big, ambitious project that requires us to dig deep. Write a novel. Build a new deck. Master a particular technology. Start an ambitious blog. To do these things, you have to set aside time – but the projects themselves provide a lot of spiritual happiness and personal reward.

October – Pay Attention
Quite often in life, it’s easy to feel as though we’re swept along by currents largely out of our control. Yet, just as often, if we study our lives, those currents make sense. We have a surprising amount of control over them as well. Most importantly, that awareness can be a real source of happiness.

One effective way to do this is to meditate a bit each day. Spend some time doing nothing more than emptying your mind of all of the mental junk you’ve picked up and clear out that space. Looking at the world with fresher eyes makes all the difference.

November – Keep a Contented Heart
If you’re finding more happiness in your life, how do you maintain it? To put it simply, just pass it on.

It’s very easy to do this. Laugh when others are around. Help others out. Use good manners and be polite. Be positive when you talk about things. Surround yourself with people who do the same thing. This will all add up to a lot of reflected happiness in your life.

December – Boot Camp Perfect
If all of these changes seem overwhelming or impossible, remember one thing: the perfect is the enemy of the good. Take small steps and do them when you think of them or when you can do them. Put these ideas into your calendar and mark off some boundaries for your happiness – but don’t despair if something happens to take one of them out.

The key is to put little positive steps into your life and let the aggregate of those steps help you reach a higher level of personal joy.

Is The Happiness Project Worth Reading?
Regardless of any value you might get out of the advice, I think The Happiness Project is worth reading for the pure entertainment factor. I was sucked into the narrative and wound up reading it much more like a novel than like the nonfiction books I typically read for The Simple Dollar. In fact, this book has found its way into my “to-be-read” pile for purely personal re-reading, a rarity for the books I review for The Simple Dollar.

The advice itself throughout the book overlaps well with many of the books I’ve read on happiness. I think the real key comes through here: listen to yourself carefully and act on what you hear. Your mind is often telling you what you need to be happy, but we often overrule it because of what we’ve consciously decided makes us happy. We buy stuff when we don’t need it and get ourselves into financial pinches. We hang onto relationships too long. We stick with old tired patterns. Quite often, we know these are choices that will make us unhappy, but we don’t listen.

The Happiness Project is a very enjoyable read. It takes a topic – personal happiness – and runs with it, making it personally engaging and entertaining. Drier books fail to entertain at times and fictional narratives often fail to inform – this balances the two quite well. If you’re seeking your own happiness, read this one. You’ll enjoy it.

Every other Sunday, The Simple Dollar reviews a personal finance book.

The Little Book of Safe Money by Jason Zweig is the ninth book in the “Little Books…” series, which each tackle a particular investing topic or strategy. To date, I’ve reviewed all of the previous books in the series, so here are links to my reviews of the previous eight entries.

The Little Book That Makes You Rich
The Little Book That Beats The Market
The Little Book of Common Sense Investing
The Little Book That Builds Wealth
The Little Book That Saves Your Assets
The Little Book of Bull Moves in Bear Markets
The Little Book Of Value Investing
The Little Book of Main Street Money

So what’s the focus this time around? To sum it up in one word: risk. Zweig focuses on risk through the overarching idea of keeping your money safe and avoiding unnecessary risk, recalling that risk is often a reasonable portion of a successful investment.

The book goes beyond investment risk, however, and focuses on risk in many aspects of financial life. Let’s dig in and see more of what Zweig has to say.

One – The Three Commandments
Zweig’s “commandments” are simple and straightforward. Don’t take risk you don’t need to take. Don’t put money at risk that you can’t afford to lose. Don’t take risks if they don’t have a clear reward for that risk. These rules are pretty straightforward to apply in most situations – basically, stay away from truly murky things and only invest money that you can afford to invest in risky things.

Two – Solid, Liquid, or Gas?
A liquid asset is something you can convert into cash quickly and easily without losing much value in doing so. Many people think of some of their very illiquid assets as being liquid assets – like their home, for example, or their art collection. To be liquid, you have to have a seller, a buyer, a secure way of completing the trade at a low cost, and a price that’s reasonable to both parties. Stocks? You’ll probably be able to do that. Real estate? A bit less likely. An art collection? Not very likely.

Three – You Are an Egg
There are many risks that aren’t often discussed in financial writings, at least not all together. Inflation risk, your health, your location, your professional future – those are all risks that are often overlooked as people invest. There are investments that will let you hedge against all of these risks, from treasury inflation-protected securities to long-term disability insurance, that should be part of an overall plan.

Four – Keeping Your Cash from Turning into Trash
Cash is a key part of any portfolio. It can be held onto to ensure no loss in the money you’ve saved and can often be put places to earn a small, virtually guaranteed return (in an FDIC-insured savings account, for example). However, virtually everything beyond cash introduces some sort of risk – even treasury notes and money market accounts. Keeping some money in cash (or at least in TIPS) helps hedge all of the risks across your portfolio.

Five – Guarantees Are not All They’re Cracked Up to Be
Most guarantees have loopholes in them that often allow companies to slip right through them if they’re ever called on their guarantees. Things like SIPC insurance, for example, often don’t hold up when you most need them. The most trustworthy guarantees usually come from the federal government in the form of things like FDIC insurance, which are backed by the full faith and credit of the government. If the government fails, all bets are off on many, many, many things.

Six – Fixing Your Fixed Income
Don’t reach for yield. In other words, don’t go chasing bonds based on their yield because such bonds often have really high costs and fees associated with them that eat away quickly at your returns. Instead, focus on bonds and bond funds that have very low costs, like bond index funds. I myself use a bond index fund through Vanguard for part of my investments.

Seven – Stocks for the Wrong Run
Stocks are not guaranteed to beat every other investment over the long run. If you start investing in stocks near the peak of a bull run, you’ll have a hard time ever catching up to returns on other possible investments, even over a very long period. Instead, treat stocks as though they’re likely to earn better long-term returns, but not guaranteed, meaning they need to be mixed with other investments with lower risk (like cash).

Eight – Rules for Stock Investors to Live By
Don’t worry about stock prices. Instead, invest in the stocks of businesses you know well and you know are well-run. You should also do all you can to minimize costs. Diversification often isn’t the big deal it’s made out to be – you’re far better off investing in the things you actually know and understand than diversification for the sake of diversification.

Nine – Little Things Mean a Lot
Frugality. Yes, stare at that word. Here, Zweig makes the very good point that by cutting your personal spending in areas that work for you, you can easily come up with more money to invest and prepare for your future. Use a programmable thermostat and you’ll have $100 a year more to invest – no different than an extra 1% return on a $10,000 investment. Eat at home more often and you’ll have hundreds more to invest per year.

Ten – How to Get Your Kids Through College without Going Broke
Zweig’s real message here is to not overlook prepaid 529 plans – ones offered in some states that effectively allow you to pay tuition in advance for an education at a state school. While they’re not as flexible as investment-based 529 plans, they’re also nowhere near as risky as long as you know what school you’re attending, as you’re passing off the investment risk to the school. If you’d still prefer a normal 529, you’re better off investing as conservatively as possible within it and focus on contributing more (by living frugally).

Eleven – What Makes Ultra ETFs Mega Dangerous?
“Ultra” ETFs – those that are leveraged in other investments – are incredibly risky investments that many investing advisors promote as a good solution in a down market. In fact, such investments are incredibly volatile, swinging wildly on a daily basis. To put it simply, don’t invest in such things – avoid them like the plague.

Twelve – Hedge Fund Hooey
Another common misconception spread around is that hedge funds are a ticket to financial success. Much like “ultra” ETFs, hedge funds also carry a substantial amount of risk, because hedge funds often operate in secret. The name Bernie Madoff comes to mind. Why do hedge funds have such a reputation? Survivorship bias (the ones that survive get to tell the story, ignoring the mountain of failures) and backfill bias (the losing funds are never reported at all) are two big reasons.

Thirteen – Commodity Claptrap
Are commodities (like gold) a sure way to riches? Actually, commodities are incredibly volatile, showing huge gains and losses almost every year. In order to profit from commodities, you have to deeply understand and know them – and be able to eliminate as many variables as possible. For most investors at home, that’s not a realistic picture. If you simply must invest in commodities, balance those investments with some very stable investments (like TIPS).

Fourteen – Spicy Food Does Not Equal Hot Returns
Another investment often promising huge returns is emerging markets. If you invest in countries that are rapidly developing their industries, you reasonably have a chance to invest in companies that get huge very quickly – and make you a mint, right? Several problems. First, such markets are often really poorly regulated. Second, there are a lot of failures in such emerging markets. Third, it’s often hard to get reliable information about what’s actually happening there. In other words, avoid such markets.

Fifteen – WACronyms: Why Initials Are So Often the Beginning of the End
Acronyms are often tossed onto complex investments to make them sound much more palatable. Of course, that means that such investments are being marketed to someone, which then means that the person who developed the investment is selling a product instead of investing in this discovery. Who gets rich when you buy a carefully marketed product? Usually, it’s not the end buyer.

Sixteen – Sex
Men and women work together far better than they work individually, because their various strengths (on the aggregate) balance well. When you enter into a long-term relationship with someone of the opposite gender, you’re far better off opening up your investing and other financial choices to that partner and discuss them in detail. It’s not just because honesty is the best policy, but because your partner often has a different perspective that can counterbalance yours and lead you toward a better solution.

Seventeen – Mind Control
We all have lots of psychological biases. In day-to-day life, those biases help us manage the complexities of everything going on around us. Quite often, though, in investments, the biases work against us, causing us to make mistakes. The best solution is always to do your homework – and lots of it. Move slowly. Make careful choices. Bounce your ideas off of others and see if they see things you don’t.

Eighteen – Financial Planning Fakery
Similarly, it’s usually worthwhile to wait a bit to act on “tips” and advice that you hear. Quite often, such tips are based on rumor and innuendo and are proven to be wrong – or, when they’re proven right, the insiders have already run away with all of the profits and you’re left holding the bag. If you have some good information, sit on it for a day. Watch what happens. Do some follow-up.

Nineteen – Advice on Advice
If you don’t want to manage your investments yourself and want a financial advisor to handle it for you, take your time in making that choice. Take it slowly. Meet lots of people and ask lots of questions. Look at their hard numbers and figure up how much they’ll cost you over a long period. Don’t sign up for an advisor unless you’ve done lots of legwork and are very confident about your choice.

Twenty – Fraudian Psychology
A simple rule of thumb: if someone sends you an email or calls you about a particular investment, ignore it. You’re far better off doing the seeking and discovery themselves. People don’t waste the time and effort to spam you or to call you if they don’t have something that they’re trying to sell – and something that they’ll make a profit from when you jump on board with it.

Twenty-One – The Terrible Tale of the Missing $10 Trillion
People rarely do as well (on average) as one would expect given the annual returns on investments. Why? People often get out at the bottom of a market and get in at the top of a market, meaning their actual returns are worse than the long-term annual returns of a long-term investment. How can you beat that? Be patient. Ride the crests and the valleys. Only sell when you have a personal reason to sell, not because you think you can “time” the market.

Twenty-Two – How to Talk Back to Market Baloney
When people talk about something that “beats the market” or claims large returns, it’s going to be bogus, period. If someone actually had such knowledge, would they be selling it at all? Would they be giving it away? Even more important, if such returns did exist, then everyone would quickly invest that way and such returns would become the norm. They’re not. Stay away from such nonsense – and use some common sense.

Is The Little Book of Safe Money Worth Reading?
The Little Book of Safe Money is a great book for beginning investors to read because it counterbalances the aggressive salesmanship of most of the investment press. The book is logical, accurate, and points toward some great choices to make to keep you safe from the multitudes of risk out there.

Having said that, the book doesn’t really cover a lot of new ground if you’ve read a lot of books and articles on investing over the years. It’s mostly just a thorough coverage of the risks that an investor is exposed to – and investors that are well-studied and have seen risk hammer people (from Bernie Madoff to housing bubbles) are familiar with many of the points.

Zweig’s writing style is really accessible, solid, and dare I say it, enjoyable. If you’re a beginning investor, pick this one up. You won’t regret it.