As regular readers know, I’m a very happy user of ING Direct. They provide my checking services, my savings services, and all of my online bill pay services. They even allow me to set up sub-accounts so that I can save for specific goals. In my opinion, ING Direct is the best of the full-service online banks, and I’m a happy customer of theirs.

Because they offer all of these useful tools, over time, I’ve begun to use ING Direct as my primary budgeting tool. I can set aside money in specific small pools, automatically transfer money back and forth, set up automatic bill payments, and so on. These tools allow me to effectively manage my money.

Here’s a walkthrough of how I do it.

Step Zero: Get An Account
You don’t necessarily have to have ING Direct as your bank to do the following. You merely have to have a bank that has online checking and savings access and online bill pay. Many banks offer this - Washington Mutual and E*Trade Financial are two well-known national banks that offer similar services, and your local bank may offer it as well.

Switching to a new checking account is easier than it might sound. I’ll quote the steps you need to take from an earlier post:

1. Open the new checking account. The first step is the most obvious one. Open the account and get the information you need: account number and routing number. Order checks if you need them. In other words, be prepared. Your new bank may also need the information for your old checking account so you can transfer money from the old account into the new.

2. Make a list and check it twice. Make a detailed list of all automated withdrawals and deposits from your current primary checking account. The best way to do this is to simply watch the account for a period of two to three months so that you pick up as many of these as possible.

3. Balance your checkbook. Make sure you’ve accounted for everything outstanding so there are no nasty surprises during the transition. Figure out what you have in the old account down to the cent so that you can avoid overdraft dangers.

4. Switch over all deposits and withdrawals at once. I find this is easiest to do by switching over the deposits a bit earlier than the withdrawals, so that there is money already in the new account when deposits begin to be set up. I’m also incredibly careful about such things.

5. Leave the old account open for a while with a balance in it to catch any missing deposits or withdrawals. Even though it might feel like the balance in the old account is just sitting there wasting time, it’s actually there to protect you against your own poor memory. Just be patient and give it several months; you might surprise yourself.

6. Close the old account. Be sure to leave a correct address behind. You might also want to end other services at that bank, such as a safety deposit box.

If you’re switching to ING’s Electric Orange checking, it may be useful to skip step #6 and leave the old account open, especially if there are no fees on it. I’ve kept my old checking account open for two conveniences - cashing checks with a teller and the ability to write paper checks (on the rare occasions when I do this any more, maybe once every three months).

Step One: Set Up Automatic Bill Payments For Monthly Bills
For every regular monthly bill you have, you can set up an automatic bill payment for that bill so you don’t have to worry about paying it on time. It’s quite simple.

First, click on the “Electric Orange” tab on the top, then click on “Free Bill Pay.”

Add a new business (with the name, address, and account number) by clicking on the appropriate link, then add that bill in below. You can specify the amount, the date to pay it, or the regular date to pay it.

Once you’ve done this, the next scheduled payment shows up in your basic checking account screen, so you can easily see what’s coming up and when.

Step Two: Set Up A Sub-Account For Each Irregular Bill and Savings Goal
What about the other bills, the ones that only come around every several months and seem to always crunch the budget, like homeowners’ insurance or car insurance? For those, it’s useful to set up a sub-account to slowly set aside money so that when the big bill comes, you’re ready. Here’s how.

Once you’re logged in, in the upper left, click on the “Open Account” option. You can see it clearly in the picture above.

Choose to open a new savings account on the next screen The “Open Now” link in the image above is where you should go.

From there, the process is really straightforward - you can call each account you create whatever nickname you like to identify it as a distinct fund: an emergency fund, a “house maintenance fund,” a “vehicle replacement” fund, a “house insurance” fund - whatever works for you.

After that, you should set up an automatic transfer into that account. You can do that by clicking on the Transfer Money tab along the top.

Then, fill out the information below. As with the automatic bill payments, these will appear on your default checking account view so you can quickly see the money that’s going to be automatically withdrawn from your checking account.

My recommendations? I leave the amounts for the regular but varying monthly bills in my main checking account - things like the cell phone bill and the electric bill just come straight out of the checking. Other bills, especially large ones with longer periods like car insurance and homeowners’ insurance, are handled by having a tiny weekly deduction from my checking account into a special fund just for that purpose. For example, our car insurance is about $400 every six months, so I transfer $15 a week into an account just for that. This way, I don’t really notice that $15 going away, but when the big bill comes, it’s not a panic time - the money’s just sitting there. So I transfer it back into my checking and pay the bill, all online.

Step Three: Pay Your Bills As They Come In
After this is all set up, your only real responsibility is to pay the bills as they come in. I usually pay all outstanding bills once a week, on Sunday afternoon. Keep on top of these bills, so that you’re not dinged with a late fee. With many of the bills handled now by automatic transfer, you won’t have that much to deal with - I usually just have one or two bills a week to pay attention to.

Step Four: Use Your Debit Card as a Mastercard and Use It For Regular Purchases Like Groceries
If you wish to completely centralize all of your spending until you get things under control, ING’s Electric Orange checking service will issue you a debit card that also functions as a Mastercard. If you’re just getting your budgeting under control, it may be useful to spend a few months just running all expenses through that card, so you can keep a careful eye on what you’re really spending. Once you have a strong grip on your spending, you can move on to using other mechanisms for your expenses, but sticking with a check card for a while is a great way to make sure your spending is under control.

These steps, all together, create a centralized view of your day-to-day finances and also form the basics of a budget. This is exactly how I do things right now in terms of day-to-day money management. I use ING Direct to do all of those things, and it’s done wonders for keeping my money in line.

This plan requires you to do some basic math with a calculator. Since you’re already at the computer, using the simple calculator tool on your computer for addition and subtraction should do the trick quite nicely. I tend to use Excel because I usually already have it open in order to update my net worth calculations.

Good luck!

Jon writes in:

I have a bunch of credit card debt spread across several different cards and I’m having a hard time getting started paying them off. You’ve offered a lot of little solutions for debt removal, but I need a plan I can execute to deal with these credit cards. How can I get rid of these debts?

I receive questions like Jon’s almost every week, usually involving a person who has realized that their credit card debt is completely out of control. They want to know what they can do to get out of the situation.

The most important thing to realize is that the best solution to credit card debt is a long-term one, not a “quick fix.” You’re going to need to make some alterations to your spending, because if you’re racking up that much credit card debt, you’re spending beyond your means.

Here’s a ten step plan for getting rampant credit card debt under control.

1. Hide Your Credit Cards
The first step is to hide your credit cards in a place where you could access them in an absolute emergency, but that they’d be very difficult to find. Put them in a little box way in the back up in the attic. Freeze them in a big chunk of ice. Hide them in the back of the cupboard at your mother’s house. Make sure it’s somewhere where you can’t easily access them.

Then, go to every online account where you use a credit card regularly and delete your credit card numbers there. Amazon. PayPal. World of Warcraft. All of them. Make sure that you’re not forgetting anything. If you absolutely must retain a service, use a debit card number instead of a credit card number.

Why do this? Your credit card balances need to go down, not up, and the biggest step in doing that is to break yourself of the habit of using them without a connection to the real money you’re spending. That means going back to using cash, checks, and debit cards - if you don’t actually have the money, you’re not spending it.

2. Figure Out What You Owe - And What The Interest Rates Are
The next step is to dig out the most recent statements for all of your credit card bills and determine exactly how much you owe and what the interest rates on each of the bills is. This information should be easily found on your most recent statement, but if you’re having difficulty finding the information, call up your credit card provider (the number on the back of the card) and get that information.

You should be making a list of all of these: credit card name/type, current balance, and interest rate. This way, later on, when you develop a plan, you can use this master list to figure out which credit card to pay first.

3. Request That The Companies Lower Your Rates
Now that you have all of your information at hand, go through them and try to get some of your rates reduced. For each card, call the phone number on the back and directly ask for a rate reduction. If you get a response that doesn’t give you what you want, ask to speak to a supervisor.

Some tactics:
+ Be polite, even if you don’t get what you want. Yelling won’t solve anything at all here and will likely reduce your chances of getting what you want.
+ State that you’re looking at transferring that balance elsewhere. This gives you at least some degree of leverage in the conversation.
+ Be realistic in your expectations. A 3% reduction IS a great success. If you have a $5,000 balance, 3% is a savings of $150 a year.

4. Look For Zero Percent Balance Transfer Offers
Once you’ve squeezed down the interest rates on your cards, see if there are any balance transfer offers available to you, either on your current cards or possibly on a new one (zero percent transfers are the best, but long-term ones that are lower than what you’re currently paying are solid, too).

The first place to look is with your current cards. Identify any balance transfer offers available with these (read the statements carefully) and note the interest rates and the term (the longer the term, the better, as after that term, you’ll start paying more interest).

Then, start transferring! Transfer your highest remaining card balances first and keep moving down the list until your interest rates are as low as possible. By this point, your master list has probably gone through lots of chicken scratches and revisions, so it might be worthwhile to just rewrite the whole thing with your current balance levels.

You should note that quite often doing balance transfers will result in a card having some of the balance at a certain percentage and the rest at another percentage. Since you often can’t control which portion of the debt you’re paying, I usually recommend figuring out the average interest rate for that card. So, let’s say you have $10,000 total on that card, with $7,000 at 3.9% and $3,000 at 18.9%. Just take $7,000 times 3.9 and add it to $3,000 times 18.9 to give you 84,000, then divide that by the overall bill total, $10,000, to give you 8.4%. This is the interest rate you should consider that card to have - it’s not perfect, but it’s a good thumbnail sketch. Recalculate it on occasion when you get a fresh new bill, as it will likely slightly adjust over time.

5. Look For Personal Loans
Your list of credit card debts should be looking a lot better, but let’s see if we can improve it even more by getting a personal loan. Stop by your local credit union, show them your credit card debt list, tell them your story, and ask if they have any options for consolidating these debts further. If your credit is still strong, you may be eligible for a personal loan; if not, you may still be able to get a solid loan anyway with some form of collateral (a home or something else of value).

Again, only accept such a loan if you’ve got a credit card debt with a higher interest rate still outstanding. If you can’t get a personal loan that beats any of your remaining credit card debts, don’t get one.

6. Liquidate
The next step is to liquidate some of your unnecessary possessions and use the proceeds to pay off the highest interest debts remaining. We all have stuff laying around that we don’t really need. When I went through my debt crisis, I liquidated a great deal of stuff - DVDs, video games, CDs, baseball cards, books, Magic: the Gathering cards, and some sports equipment went out the door in short order. Why? I wasn’t really using them and I knew that I could get some significant cash for all of that stuff.

Take a frank look at all of your possessions and ask yourself honestly which ones you actually are using regularly and which ones are gathering dust in the recesses of your shelves or the back of your closet. Then dig out those items and get some value for them. My recommendations:

+ Sell items that have significant individual value online, such as CD or DVD box sets, high-value individual trading cards, and so on. Those items will recover the value of the time you put into selling them online - most ordinary items won’t.
+ Take the rest of your unwanted items and attempt to sell them through appropriate dealers. Look to used media shops and collectibles dealers for places to unload the remainder of your items. If you’re trying to sell clothes, go to a consignment shop.
+ If there’s anything left, make a detailed list of it, take it to Goodwill, and get a receipt. This will help with taxes next year and you can use that tax rebate to help with your debt situation.

7. Develop a Debt Repayment Plan
Hopefully, your interest rate reduction efforts and your big sell-off have made your credit card situation a lot less scary. Now it’s time to develop a debt repayment plan. There are two big options.

The Dave Ramsey “Debt Snowball” plan means that you make a minimum payment on each debt, then make a large extra payment each month to the debt with the lowest balance. This will allow you to feel the success of eliminating a debt the fastest.

The fastest plan means that you make a minimum payment on each debt, then make an extra payment each month on whichever debt has the highest outstanding interest rate. This is the fastest route overall, but it doesn’t have that sense of success as quickly as Ramsey’s plan has.

Ramsey’s plan is easier to follow through on. The fastest plan will get you to debt freedom slightly faster. Both work. It’s up to you.

8. Practice Frugality and Snowflake
If you want to keep this train of positive progress going, the key is to learn how to be frugal in your day to day life. Look for ways to cut out unnecessary spending everywhere you look.

The best place to start is to evaluate your daily routine. Could you be using energy more efficiently? Is there anywhere you stop every day (or almost every day) to spend money? That’s likely a great thing to cut out of your routine.

How can this help? I like the technique known as snowflaking. Each time you make a choice that saves you money, immediately go home and take that much out of your checking account and put it into your savings. At the end of the month, sweep that total out and send it in as an extra debt payment. That way, you can directly see your frugal actions transformed into debt reduction.

9. Stick To That Plan With The Help Of Automated Payments
One way to ensure that you stick to the plan is to set up automatic payments through your credit card company and your bank.

Here’s one clever tactic. Set things up so that the credit card companies execute minimum payments automatically from your checking account. Then, set up with your bank a large extra payment each month to the credit card that you’re focusing on paying off. This way, you know your minimum payments are always correctly covered, plus you’re making a significant extra payment each month on one of your cards, too.

With everything being automatic, you don’t have to worry about anything other than making sure there’s plenty in your account to cover the transfers, and you can do that by learning how to be frugal with your spending. This plan also ensures no late fees or other unnecessary extra charges that you might accrue.

10. Don’t Stop
It might be tempting to stop this plan and go back to your old ways once the credit cards are under control.

Don’t. Reverting to your old habits will just cause this nightmare scenario to come back.

Instead, once your cards are paid off, start saving that money for your bigger dreams. Set up an automatic transfer with your bank into a savings account or an investing account each week so that you’re automatically saving. Eventually, that money can be used to buy a car or help you cover the down payment for a house - a much better outcome than a continuing spiral of credit card debt!

Good luck!

One thing that always frustrates me is when someone gives me a Hallmark greeting card along with a gift. Not only does one generally cost $3 to $4, the sentiment inside is often rather impersonal, merely the best fit of the choices one might find in the card aisle at a Hallmark store.

Unfortunately, many people believe that a Hallmark prewritten greeting card is the way to show someone they care and thus they spend fifteen minutes milling through tons of cards finding “just the right one” to send, when in fact it takes less time and less money just to make one yourself.

I’ve mentioned the idea of making your own greeting cards in the past, but many readers scoffed, believing it to be a waste of time. I argue that it actually takes less time and is more thoughtful than merely sending a card selected at Hallmark. Let’s take a look and see how you can make one.

Step One: Get some cheap blank cards at a dollar store.
I like to get boxes that have some variety and usually have quaint pictures on the front, usually nature scenes or a small, simple design. On the inside, I like them to be completely blank. You can usually find boxes of cards like this for just a dollar or two at a discount store. Don’t be afraid to shop around - wait for the right cards that match your personal taste and aesthetic.

Step Two: Find some appropriate poetry, lyrics, or other materials that match the occasion and person.
Whenever I hear a piece of poetry or a song lyric or a quote that makes me think vividly of someone else, I try to make sure to write it down and save it for later use on a card for that person. For example, here’s a lyric quote from Iron and Wine’s 2004 album Our Endless Numbered Days that I’ve been saving to use in such a card for my own wife.

Love is a dress that you made long to hide your knees
Love to say this to your face
I’ll love you only
For your days and excitement
What will you keep for to wear?
Someday drawing you different
May I be weaving in your hair?

Love and some verses you hear
Say what you can say
Love to say this in your ear
I’ll love you that way
From your changing contentments
What will you choose for to share?
Someday drawing you different,
May I be weaved in your hair?

Love and Some Verses, Iron and Wine

Something about the lyrics makes me think of my wife in a very deep, personal fashion. When I’m feeling more unusual, I might use something like:

Starfish and coffee
Maple syrup and jam
Butterscotch clouds, a tangerine
And a side order of ham
If you set your mind free, honey
Maybe you’d understand
Starfish and coffee
Maple syrup and jam

Starfish and Coffee, Prince

Don’t worry about finding the “perfect” sentiment - there is no such thing. Instead, just find something that personally evokes the person you’re writing for. For example, that Prince lyric makes me think of my wife immediately, and thus even though it’s quirky and might seem a bit imperfect, that’s what makes it perfect. It’s a perfect match for the beauty I see in her and our relationship - maybe it’s not the normal, plain sentiment she might expect, but it has something more than that. It’s a mix of who I am and who she is, and just like life, that mix isn’t perfect, but it does ring true.

If you’re particularly creative, you can attempt your own poetry, which I sometimes do. I usually try to draft it electronically, get it the way I like it, then transcribe it.

Step Three: Write that poetry in your own hand on the inside of the card.
Speaking of transcription, a big part of what makes this simple card work is that the material inside is written in your own handwriting. You might find just the perfect lyric or sentiment online, but copying the words in your own shaky penmanship makes the message much more personal and sentimental.

The few minutes it takes you to transcribe a simple poem or lyric in your own hand is the difference between a boring card that will be quickly forgotten and something personal that will be remembered and perhaps treasured.

Step Four: Add your own personal signature and message.
End the card with a simple note stating the occasion and a nice sentiment, followed by your signature, and your card is complete. It’s intimate, personal, and costs you a fraction of what the Hallmark special costs.

The next time you’re faced with a situation where it’s appropriate to give someone a card expressing a sentiment, consider this plan instead of the Hallmark plan. You’ll save yourself a few bucks and create something far more meaningful along the way.

My brother recently got a new job with much higher pay than he was previously making. After getting the job, he bought himself a motorcycle, something he’s wanted for a while, and he’s incredibly happy with it and proud of it, even driving it to work to save on fuel costs. For him, it was a good purchase - he’s worked hard and has desired a motorcycle for a long time, and acted on it when the situation finally presented itself.

Naturally, this whole experience got me thinking about my own purchases and I made a pretty interesting realization.

The single biggest change I made to my spending habits is that I finally became aware of the total experience of a purchase.

When you buy something at a store, many people think that the experience of the purchase ends as you walk out the door or as you’re enjoying the product. Not so. The total experience of a purchase ends when you’ve completely recovered the value spent when you made that purchase. Let me give you a clear example from my own past, in mid-2005 (before I had my financial crisis and was still spending without much control).

My Total iPod nano Buying Experience
In September 2005, Apple rolled out their iPod nano. I was already an iPod owner at the time, but the new nano models were so small and neat that I just felt compelled as a gadget lover to run right out and buy one, blowing $200.

That initial purchase rush was quite fun. I gave over the $200 and got my nifty new iPod, which I quickly loaded up with music and pictures and took around to show my friends so they could be suitably impressed by my new gadget. Those first few days were pretty fun.

But, you see, I already had an iPod, and besides that, I didn’t even use that iPod a whole lot. I would use it while walking around, but I did most of my music listening directly from my computer or out of my stereo system at home.

I also found that after just a week or so of light use, my nano was already developing little scratches. I started storing it in a pouch, which helped, but at that point it began to seem indistinguishable from my older iPod, except with less storage. My positive feelings were definitely beginning to mellow.

Of course, I’d bought that iPod nano on credit (much like many of my other purchases during that period in my life). So when the credit card bill came in, I didn’t have enough to pay it off, even though there was a nice new $200+ charge on the bill. Instead, I made the minimum payment and a bit more and felt pretty sick to my stomach about my rather large credit card balance. Yep, more negative feelings as a result of the purchase.

The next month came and went. My nifty new iPod didn’t get used very much. I couldn’t find the charger for it for a while, so it sat unused while I primarily used my old iPod. I’d see it sitting there, unused, and feel bad. Another credit card bill came, packaged up nicely with some more negative feelings.

It took me almost a year to get that credit card paid off. All told, that nano probably cost me $250 - and the net feelings and use that it generated were negative.

Using That Experience Today
That experience, along with several similar ones, has left me with a very strong sense of the whole picture of what I’m actually buying when I make a purchase. I’m not just taking home something nifty to enjoy - I’m also taking home the bill. I’m not just taking home something to play with today - it’s something that I should be enjoying over the long haul if I’m putting significant money into it. Could I perhaps get this item cheaper elsewhere, or do I even need it at all?

Is this purchase going to be a net positive, or is it going to be another iPod nano?

I ask myself this each time I go to make any kind of purchase that might even be slightly unnecessary. That thought process has talked me out of countless purchases over the last couple of years.

In the past, I’ve strongly advocated using the ten second rule whenever you’re considering buying an item. The questions above are the questions I ask myself during those ten seconds - and they usually talk me right out of buying the product.

Steve wrote in with a good question recently:

What does it actually mean to own a stock? Do you own a piece of that company? Are you just gambling that you think a company’s value will go up or down? I guess I don’t really understand the stock market.

Steve asks a good question, so let’s take a simple walk through what exactly a stock is, what owning one means, and why a person would want to own a share of stock in a company.

What is a stock? The word “stock” refers to a share of ownership in a particular company. If you own a stock, you’re an owner of some very small fraction of that company. Take, for example, Exxon. Exxon has 5.28 billion shares of stock outstanding, meaning that they have divided ownership of their company into 5.28 billion pieces. Owning a single share of Exxon stock means that you own 0.0000000189% of Exxon. That’s a very tiny fraction, but Exxon is a huge company, so that little fraction has some value.

How much value does that one share have? Right now, that one share of Exxon stock is worth $90.70 (as of this writing). Shares of Exxon are traded on an open market, meaning buyers and sellers can both make offers and sales only occur when buyer and seller agree on a price, so that $90.70 is literally the dollar amount that someone recently agreed to sell a share of Exxon stock for and someone else agreed to buy it for. In other words, that’s the value that the public estimates a single share of Exxon stock to be worth.

Right now, Exxon’s stock is worth 90.70 per share, and thus with 5.28 billion shares outstanding, that means Exxon has a market capitalization of $479.23 billion. Market capitalization is the estimate of the total value of the company based on the number of shares out there and the value that the market places on each share.

Why would you want to own a share of Exxon? There are several reasons.

First, stocks pay dividends. Exxon pays an annual dividend of $1.60 per share. A dividend is a piece of the company’s profit that a company pays out to each shareholder. With 5.28 billion shares outstanding, Exxon paid out $8.448 billion in dividends total over the last year, meaning each shareholder got $1.60. That $8.448 billion is Exxon profit that they chose not to reinvest in the company and instead pay out to shareholders.

You also own a piece of whatever would be earned if the company decided to close up shop. Exxon has a book value per share of $23.31. That means if Exxon decided to quit the business and just sell all of their assets, the shareholders would get $23.31 per share. While that wouldn’t recoup the value of the stock purchase (it’s currently $90.70 per share), it is something.

Adding the two together and one can see that a share of stock does have some cash value. It generates dividends for you while the company is in business and has some value when the company goes out of business and sells off their assets.

Larger shareholders also usually gain some voting rights when it comes to making decisions about the company. Obviously, with Exxon, an individual shareholder owns such a small portion of the company that if they allowed each such holder to have voting rights, nothing would get done with the company. Thus, there’s usually some threshold that people have to cross before they have voting rights and get to participate in corporate decision making. With some companies, that comes in the form of special voting shares - only some shares allow you to actually vote. In other companies, if you own a small amount, you vote by proxy - you basically assign someone else to vote on your behalf.

So what does that value add up to? At the moment, $90.70. The stock market is basically a free-for-all of trading where buyers and sellers can quote whatever prices they want. The “value” of a stock is whatever the buyer and seller agree on as a fair price and the $90.70 value is a recently agreed-upon value between an individual buyer and an individual seller. Other buyers and sellers then use this as a thumbnail when deciding the value of the next trade - if Exxon has good news, then it might go up to $92. If something bad happens, it might go down to $88. If things are neutral, it’ll fluctuate a bit, but stay near that value.

The chaos you see on the floor of stock exchanges is basically the chaos of tons of these trades happening at once, with people running around trying to make it happen. Much of the activity happens electronically, too.

Thus, when you buy a stock, you’re buying a piece of a company. That piece pays you dividends and also indicates ownership of a small sliver of the assets of the company. This obviously has a value, and the stronger the company is (or is predicted to become), the more value it has. Ideally, you hope to re-sell it at a higher value than you bought it for - that requires the company to demonstrate that for whatever reason it’s stronger than it was before - but in the interim, you can collect dividends and wait until you’re ready to sell it. That decision point - when to sell - is the topic of countless investment books.

If I want to buy a stock, what’s the process? In its simplest form, you basically state a price you’re willing to buy a stock for and then seek out someone willing to sell it to you at that price - this is called a “limit order.” You can also issue a “market order,” which means you’ll buy the stock at whatever price the market is currently selling it for.

Most individual stock buyers and sellers go through a stockbroker. A stockbroker is an organization that actually participates in those exchanges (it’s rather expensive to get a seat on a stock exchange). An individual, like yourself, goes to a stockbroker and pays them a fee to use their resources to get that stock for you. They might own it themselves and be willing to sell it to you, or they might have to go buy it from someone else. Either way, your fee pays for this service (and their profit margin).

Alternatively, you can buy stocks directly from individual companies. This saves on the broker fees, but it means you deal with only one company at a time and it’s also somewhat difficult to sell the shares back to the company.

In a nutshell, brokers are much more convenient for both buying and selling, but they charge a fee for the service.

So what’s a mutual fund? A mutual fund is just a collection of stocks. A typical mutual fund has their stocks chosen by a fund manager and the fees with that fund go to pay the fund manager’s salary (and the salaries of anyone working for the manager). An index fund is a mutual fund without an active manager - it operates based on a clearly-specified set of rules that do not require active intervention. Thus, the fees for an index fund are much lower. Some people prefer having an actual person manage the fund; as for me, I’ll take the index fund almost every time.

Good luck, Steve. Once you have this basic info in hand, there’s an almost infinite amount of material to learn about the stock market.

If you were to take a peek inside of our closets or on the shelves in our garage, you’d find a lot of sealed boxes with a prominent date on the outside and a label of some sort. I call these boxes our “tomorrow boxes,” and they all serve a similar purpose - they’re storing something to be utilized or re-evaluated on a certain date. Even more interesting, these boxes have saved us a tremendous amount of money and space over the years. Here are three of the best tactics we use.

A “get rid of” box Some of the boxes have a date on them that indicates when we’ve agreed to sell off or get rid of the contents because we aren’t actively using the stuff inside. For example, right now there’s a “get rid of” box in the garage with an October date on it full of about 80 DVDs - half of our remaining collection or so. The first time I notice that box after that date, I’ll know that I can just get rid of those DVDs without a worry, because we haven’t looked at them at all in almost a year. This method has convinced me to get rid of many items that I would have otherwise felt an urge to keep for some reason, when the truth is that keeping the item was totally unnecessary.

You can do this with any items that you’re tempted to get rid of but aren’t quite sure if you’ll miss it in the future. Put it in a box that says something like “DVDs to get rid of on” and specify a date several months in the future. If you haven’t looked at the box and that marked date has passed, you can pretty safely get rid of the contents of the box.

Future clothes I’m clearly in the “big and tall” clothing group, and so when I find an opportunity to buy clothes that fit me well at a cheap rate, I stock up. I actually have shoes that will fit my size 16 feet still in boxes, waiting to be worn when my current shoes wear out (I don’t need to look at shoes again until I’m 40 or so).

Rather than just stuffing my closet with a bunch of clothes, I just keep ten to twelve shirts and a similar number of pants in my closet and the excess is in storage boxes. When one of the articles of clothing gets a bit worn, I take it to Goodwill and then pop open the storage box at home to replace it.

Since I live in Iowa, I actually have “summer” boxes and “winter” boxes, and during the opposing season, I’ll just box up all of the clothes from the other season. Then, when the weather starts to warm up or get cold, I get out clothes appropriate for that season from the boxes.

This allows me to shop for clothes not based on need, but based on when I find a ridiculously good deal. That makes clothes shopping incredibly cheap for me.

Future entertainment Quite often, I’ll read a great book and realize at the end that I’ll want to re-read it again someday. At the same time, I like to keep a pretty empty bookshelf, never over-cluttering it.

I solve both problems by keeping a “future re-read” box. If I have a book I like that I’ve acquired off of PaperBackSwap or as a gift and I know I’d like to re-read it again in the future, I stick it in a box. When that box fills up, I date it about two years in the future, label it “books to read,” and stick it on a shelf out in the garage. Then, when that date comes, I pop open the box … and have a ton of fresh reading material.

Opening that box again is almost like Christmas. I usually remember two or three of the ten or so books in the box, but the rest are a very pleasant surprise and I’m really anxious to curl up with the books again. At this point, it’s basically free reading - an extremely cheap way to entertain myself for quite a while.

A tip on labeling If you actually start doing this, I strongly encourage you to use masking tape for the labels so that the boxes can easily be reused. Once the date has been reached, just empty out the box, peel off the masking tape label, and you’re ready to store something else.

Over the last few weeks, I’ve had a long conversation with a reader I’ll call Jenny. Jenny has one big thing she loves to splurge on in her life - she likes to take long weekend trips about once every three months, leaving on a Thursday night and getting back late on Monday. Those are her “vacations,” and she goes all over the place on them. She’s been to just about every major European city, much of South America, almost everywhere in the United States that one could even conceive of going, and so on. Aside from this, Jenny is ultra-frugal - in fact, she initially wrote to me with questions about my homemade laundry detergent.

An interesting mix - and so I asked her to explain it in a nutshell.

Travel is *the* thing I splurge on, nothing else. I love seeing the world - it’s the one thing I enjoy above all else. I love going to other places, trying local foods and enjoying local experiences. Because I know that’s what I love to do with my spare time, I’m highly frugal about everything else. I save my nickels and dimes up and then travel every three months or so. I usually try to save twice as much as I’ll need for a trip, then invest the other half, so that I can keep doing this for the rest of my life.

I think what Jenny is doing is brilliant and perfectly matches my definition of frugality - finding the maximum value for you and not for anyone else. Jenny figured out what she values most with her spare time and that’s travel, so she devotes her spare time to maximizing that.

Some additional thoughts:

She’s figured out her passion. She knows that the thing she’s passionate about is travel. Not clothes. Not handbags. Not a flashy car or the latest technology. She wants to travel.

She doesn’t let unnecessary things get in the way of that passion. Compared to that, the rest is all secondary - so why devote money to it? If she spent her money on the latest fashion trends or a new computer every year, she’d travel a lot less - and feel a lot less fulfilled in her life.

But she’s willing to spend to make that passion top quality. She’s taking a weekend-long (Thursday night to Monday afternoon) vacation every three months or so. That’s a pretty hefty expense to incur, without a doubt. Is it excessive? It somewhat depends on Jenny’s financial state, but we do know one thing…

For every dollar she spends on travel, she saves another one for her long term future. That indicates to me that she’s following the right plan. Travel is the one thing she splurges on, and she makes sure that splurge doesn’t get in the way of long term planning. Saving for the future comes way before a weekend of travel - and that’s a healthy personal finance plan.

What about my splurges? Not too long ago, I finally realized that I had to give up some of my hobbies if I ever wanted to achieve financial success. I gave up expensive hobbies like golf (I still have some of my clubs, but haven’t played in about a year) and Magic: the Gathering and focused in on just a few key pastimes (two of which, reading and playing with my kids, are basically free). Nowadays, my biggest splurge is occasionally buying a game for my Wii or DS - much better than the weekend golf outings (with a nice expensive trip to the golf store included).

One thing that frequently happens when people go through a personal finance and debt epiphany is a big sell-off of their unnecessary purchases. They look around their house at all of the unnecessary stuff they’ve purchased and want to get rid of it. The logic behind this usually comes from one or more sources, among them:

The stuff itself can be a mental block. The presence of a 2,000 CD collection can be a pretty blunt reminder of the foolishness of their spending ways, and it becomes a big mental weight after a while. You just want it out of there to get a fresh start.

The stuff has some cash value that can be turned into debt repayments. That 500 DVD collection has some cash value just sitting there, and now I more or less see it as a waste. Why not turn it into some cash and get rid of that debt a little faster?

It simply feels like a way to take action. When the sense that things really need to be turned around hits people, they often respond with a fervor and want to take action now. Selling unnecessary stuff off is one way to act on that fervor.

I did a big sell-off myself, getting rid of more than a thousand CDs, two hundred DVDs, three video game consoles, about sixty games, and a small mountain of baseball cards - and quite a few other miscellaneous odds and ends that I barely remember. This big sell-off was almost entirely channeled towards paying down my personal credit card debt, eliminating a sizable portion in one swoop.

Here are several tactics to consider if you’re looking at doing a big sell-off.

If you’re unsure, sell it. I started off with just the opposite attitude and I wound up just keeping stuff I didn’t use for very obscure and minor sentimental reasons. Only keep the stuff you’re sure you want to keep - if you’re feeling unsure, either directly specify your reason for keeping it or toss it. If you find that you miss it later on, buy it used - after all, you’re selling it used, right?

For most large collections, identify the individual items that have significantly higher individual value and sell those individually. For example, with my DVD collection, I separated out the box sets and sold them individually on eBay. With my baseball cards, I did the same thing, more or less - I sifted out singles that had obvious value and sold them individually.

My rule of thumb was this - if I felt I could get more than $10 for an individual item, I sold it individually - that’s profit, after all fees and such. My way of doing that was to search any items I thought might be that valuable on eBay. If they exceeded a sale price of about $12 or so, I took the effort to sell them individually.

Why? I estimated I would invest about forty five minutes per sale, all told, and I valued my time at about $10 per hour. I figured that with bulk selling I might be able to recoup a couple of dollars per item, so effectively I was deciding to make at least $8 for my 45 minutes of work for those items over $10 - about right, I’d say.

I almost exclusively used eBay for the individual item sales. eBay allowed me to get more for those individual items with some value than reselling ever would have, assuming of course that the individual items had value themselves. If you’re looking to sell a single film DVD or a single CD, for instance, or any individual baseball cards from the late 1980s, eBay probably won’t fetch you much at all as compared to the time invested, so focus only on individual items with significant value.

Sell the remainder in bulk. What about the mountains of stuff left over? The best approach in terms of time investment is to sell it in bulk. There really are two options - either create some bulk auctions online (like a specific number of DVDs per auction - say 10 - and collecting ones that might have value to the same buyer together) or just take them down to your local used media shop.

Bulk selling online can be tricky, as it relies quite a bit on multiple interested parties discovering and being interested in your small collection. Thus, if you decide to try to sell bundles of DVDs online, consider carefully how to label them. Make sure to include the most well-known items in the title of the auction.

For me, at least, I decided the time investment in selling DVDs and CDs in this fashion online was too much of a time investment and chose to sell them at a media shop. Although I’m sure I could have made more online, the time investment would have been significant.

Don’t just immediately throw that cash into debt repayment. Look down the road a little bit and ask yourself if there aren’t other moves that will pay off more, like putting that cash into items to make your home more energy efficient (like energy efficient lighting, air sealing your home, a water heater blanket, or a programmable thermostat), thus permanently reducing your home energy bills - items like these truly are an investment, as you put in money at the beginning but they pay a lot of dividends over the long haul. Then, each month, you can roll that energy bill savings into debt repayment and, over the long haul, wind up in better financial shape because of it.

Good luck with the liquidation! I’ve rarely missed all of the stuff I sold, but I’ve certainly enjoyed the freedom from oppressive debt.