About a week ago, I challenged my followers on Twitter to give me their best single piece of money advice in ten words or less.

I was flooded with responses.

After spending quite a bit of time sifting through them, here are the fifty best pieces of advice that came my way (out of well over a hundred - I actually used a spreadsheet to help me figure out the best ones to include). All of these are stellar money tips - and all of them come in with ten words or less. Enjoy.

writealvaro: Don’t invest in what you don’t understand.
mmmeg: I only need one word! ASK!
The_Weakonomist: index emergency fund to unemployment. 9% = 9 months.
MichaelBRubin: Spend more time, less money.
fiscalgeek: The secret to money management is learning to be content.
pearbudget: Know what really matters. Don’t spend money on other stuff.
creditgoddess: Don’t borrow more than you can repay.
dgstinner: A fool and his money are soon parted
jacobmlee: Be mindful of how you spend money.
JoeTaxpayerBlog: Don’t walk away from 401(k) match, regardless of debt situation.
EdenJaeger: Live below your means and save all you can.
tonyblacknyc: Better to sell a little early than a little late.
Kplavcan13: Pay yourself first, you can’t give yourself a bill.
dweliver: Be content with what’s yours and you’ll always have plenty.
centsiblelife: Spend less than you earn. Earn more.
MoneyEnergy: Don’t save at 2% when you’ve got debt at 10%.
thefinancialqb: If you try to get rich quickly, you will go broke fast.
ObliviousInvest: Diversify. Minimize costs. Stay the course.
Matt_SF: Borrowing money for a depreciating asset is a fool’s errand.
benburleson: If you can’t afford it, don’t buy it.
mapgirlsfc: Save regularly and spend less than you earn.
jj_observations: Learn to love left-overs!
tusharm: Don’t spend money that you don’t have.
danielckoontz: Never reach for yield.
randypeterman: “Where will you & your stuff be in 100 years?”
Cat8040: Don’t take on debt.
KasyAllen: Don’t be afraid to ask for the savings!
nhldigest: Best money advice “Don’t Spend More Than You Earn”.
Green_Panda: My advice: Change one money habit at a time.
MoneyEnergy: Don’t count all your chickens before they’ve hatched.
fcn: Save and invest for the long term.
MyLifeROI: If it depreciates, don’t pay interest on it!
jessw61: Save/invest as much as you can.
Lisa_S_47: working hard doesn’t mean you deserve anything you can’t afford.
mtswartz: I’ll do it in two: Spend Less!
GlennLucas: Prevent your government from bankrupting your nation.
myfindependence: Be thrifty but don’t forget to enjoy yourself
spendingsmart: You can’t outearn dumb spending.
randallkirsch: A penny saved is more than a penny earned.
Grumpicus: Use credit cards, NOT debit cards.
flexo: The only one who cares about your money is you.
ceetastic: Before purchasing, I ask myself, “Can you justify the expense?”
moneyhighway: Money comes and goes the memories stay
robertsm85: If you don’t have the money then don’t spend it.
roryboy: if you need to use plastic, you can’t afford it!
msimonkey: Keeping up with the Jones’s is plain stupid.
maverickstruth: Know what comes in, and what goes out.
crazy_eddy: Let your assets buy your toys.
sfordinarygirl: Buy generics/private label because it’s way cheaper
jasonbob7: One word: leftovers!

Now, how about you? What’s the best money advice you can give in ten words or less? Leave yours in the comments!

One aspect of buy-and-hold investing in low-cost index funds that has always attracted me is that there is an extremely low time cost. Once you have the initial investments in place, there is virtually no time cost at all. All you have to do is invest maybe half an hour a year rebalancing the investments - and that’s it.

That strategy pretty much matches the stock market. In fact, if you choose to just invest in the Vanguard 500, it almost exactly matches the ups and downs of the S&P 500 stock index.

Let’s look at the other side of the coin. Let’s say you’re following normal stock picking advice. You have a portfolio of 20 individual stocks (so that no piece of your portfolio is more than 5% of your total investment - diversification, after all). You devote an hour a week to studying each stock in detail, so you know what’s going on with that company. You also devote five hours a week to finding new, worthwhile companies to invest in, potentially replacing the slots in your portfolio.

You’re able to invest $10,000 a year - and we’re not worried about brokerage fees at all. What’s your earnings per hour doing all that research?

Let’s say all that work manages to beat the Vanguard 500 by 1% per year. Historically, VFINX has returned 9.56% per year since its inception (remember, that number includes dividends and stock price increases and decreases, and it does include 2008), so we’ll use that number as an annual return baseline.

Over a ten year period, VFINX would turn your $10,000 a year into a sum total of $170,968.66. Meanwhile, that portfolio that beats the S&P 500 by 1% would turn $10,000 a year into a sum total of $181,005.77. Your extra effort of 25 hours a week for ten years has earned you $10,037.11 during that period - an hourly wage of $0.77. Ouch.

“Come on!” you say. “Stocks are a long term investment!” So let’s look at the thirty year mark. Over a thirty year period, VFINX would turn your $10,000 a year into a sum total of $1,061,590.42. Similarly, your 1% better investment portfolio, with 25 hours a week over ten years invested in it, will turn that annual $10,000 into $1,347,885.59. Your extra effort of 25 hours a week for thirty years has earned you $286,295.18 - an hourly wage of $7.34. Congratulations, your investing expertise has earned you minimum wage.

“Come on!” you say. “I can do better than 1% over the S&P 500 every year for thirty years!” (Of course, if you actually believe that, I have a bridge to sell you.) So let’s make it 2% - you beat the S&P 500 by 2% every year for thirty years. Your extra effort for 25 hours a week for thirty years earns you an hourly wage of $16.60.

If you have the intellectual ability to do enough rigorous analysis to beat the market by 2% year in and year out, you can most certainly be earning more than $16.60 an hour with your time.

But what if you can invest more than $10,000 a year? If you’re in that group, where you’re able to invest significantly more than $10,000 a year in whatever you want and you’re sure you can beat the market consistently over the long haul, by all means, choose the route that’s right for you. However, I argue the statement above still holds - with those kinds of resources and intellectual acumen, you likely have better ways to earn money.

Here’s the take-home message: individual stock investing, done with adequate research, is a lot of work. Unless you have a very large amount to invest, the extra work is simply not worth it in terms of the extra income per hour.

Now, that’s not to say that you shouldn’t dabble in individual stock investing. I see nothing wrong with taking a sliver of your investments and playing the market, so to speak. However, recognize that such investments are largely a gamble unless you do adequate research. And, if you do adequate research, you have to blow away the overall market to make it worth your time.

My conclusion is simple. If you’re an individual investor without a ton of money to invest, it’s simply not worth your time to chase individual stocks. The time that’s required to adequately study individual stocks and build a truly diverse portfolio will make the gains small enough per hour of your work that you might as well do something else with your time, like build your skill set for your career, improve your health, or start your own side business.

Instead, just invest in a very broad index fund and ride the market at a low price with little time investment of your own. Better yet, do it with a balanced portfolio - don’t put it all into stocks, so that you can ride through the down markets with less worry and smaller losses.

One of the best personal finance articles I’ve ever read is Snowflaking: A Primer, at I Paid For This Twice Already. Here’s an excerpt so that you get the idea:

Snowflaking is a spinoff of the Snowball approach to debt reduction popularized by Dave Ramsey. With the Debt Snowball method, you figure out what amount you can pay to debt every month, and then you keep paying that amount, even as your debts shrink and your minimums get smaller. To implement it, in a nutshell, make a list of all your debts, order them from either smallest to largest or highest interest to lowest interest (that is a debate in itself), and you focus all extra money above the minimum payments on a single debt (either the smallest total or the highest interest, I use interest order). As you eliminate debts, you apply the payment you were making to that debt to the next debt in line until the snowballing effect of decreasing minimums and increasing amounts applied to particular debts eliminates all the debts on your list.

Well, what are snowballs made of? Snowflakes! I have a set amount I pay to debt without fail every month that is above my minimum payment due (about $800). On top of that, I also try to collect up little bits of money wherever I can and I apply those as well to my top priority debt as immediately as possible. I take surveys online, I sell possessions on craigslist and ebay, I have yard sales, and any money I get from these endeavors goes directly to my debt. I also keep a very strict accounting of all the money that comes in every month and what I spend and everything left over at the end of the month not earmarked for future expenses also goes directly to debt. These are my snowflakes. I have averaged over $200 extra going to pay down my credit card debt every month due to these snowflaking efforts.

Many small snowflakes make a snowball, and no amount is too small for me to snowflake. I used to pay my credit card directly every time I collected a snowflake through their online interface, but now that I have moved my credit card debt to another card with a 0% interest offer, I collect the snowflakes and pay them once per week (I am limited to the number of payments I can make to this card a month). If you are able to and your debt is not at 0% interest, I highly recommend the “pay snowflakes immediately” method. The faster your balance is reduced, the less interest you will accrue.

Snowflaking is, quite simply, a great way to get aggressive with your debts. It gives you a little extra push towards achieving your goals. Even better, you can also “snowflake” towards any savings goals you might have.

Don’t know how to get started? Here are 15 ways you can get snowflaking going in your own life. These are low-impact ways - far from starting a side business - to earn a few bucks without devoting countless hours to a major project, things that sync very well with what you already do or can be picked up whenever you feel like it.

Have a yard sale. Go through your house, identify the items you don’t use much, and sell them. Put them out for sale in your yard over a weekend (with reasonable prices) and put that money straight towards your debts or other goals.

Keep your aluminum cans separate. In Iowa (and in many other states), there is a nickel “deposit” that one pays for each aluminum can (or bottle) purchased. Keep these cans and bottles separate from other trash, then occasionally return all of them for $10 or so. It helps the environment and gives you a bit of snowflaking cash.

House-sit. If someone you know goes on vacation, offer to house-sit for them, look after their pets, and so forth. It’s pretty easy work and can earn you some quick cash to knock down some debts.

Walk pets. If you already walk your own pet in the morning, it’s not much of a stretch to stop by another house or two, pick up their pet, and walk that pet as well - for a fee, of course. Put that fee straight towards your financial goals.

Blow snow. Got a snowblower? You’ll be blowing the snow from your own lawn anyway, so why not set up an arrangement where you’ll blow the snow from your neighbors’ driveways and walks for $10 or $20. Then, take that cash and put it towards your goals.

Eat a “free” meal. Freeze your “utility” leftovers, then make a meal out of them once in a while - mix your leftover rice, vegetables, and chicken pieces to make a “free” meal. That’s worth $5, easy, so just snowflake $5 when you do it.

Take surveys. It’s a great way to make a few bucks at your computer while watching a TV show or a movie. It’s not a great money maker, but it’s low-intensity and can be done whenever it fits your schedule.

Mow lawns. Got neighbors who can’t mow very often? Mow their lawn whenever you mow theirs for a few dollars. You’ve already got the mower out, right?

Write. You don’t have to start a blog and post regularly (though there’s success to be found there, too). Instead, just write articles and submit them to services like Associated Content or make “lenses” at Squidoo. It’s a great way to burn an hour or two on a lazy evening and earn a few bucks in the process.

Do simple tasks. Amazon’s Mechanical Turk will pay you a few cents for a mindless task that just takes a few seconds. One of my friends does this on her laptop during commercial breaks when she’s watching a television show and makes enough to cover basic cable.

Babysit. If you already have kids at home, put out your shingle as a babysitter. Most evenings, you’re already at home, so you’ll be getting paid just to mind another little one around the house. I know several people who do this.

Deliver groceries. If you know of any elderly folks or shut-ins who have difficulty getting out to buy groceries, give them a ring whenever you shop and offer to pick up what they need. They’ll often pay you several dollars extra for the service (and even if they don’t, it’s a great way to help someone in need).

Make crafts. Many people enjoy some sort of craft as a hobby. Create projects that reflect the best of your work, then sell them on sites like etsy. Anything from knitting to woodworking to scrapbooking to jewelry making can make you a few dollars in your spare time.

Be a “search guide.” If you’re just browsing the ‘net, why not help others find what they’re looking for online and make a few bucks? Cha Cha does just that - people send text messages to the service with questions, they pop up on your computer, you figure out the answer, send it back, and earn a bit to throw towards your debts.

Give charitably. Give what you can to charities - goods and other donations. Then, when you get the receipts for tax deductions, figure up how much you “get back” on your taxes and contribute that to your debts.

Good luck!

Recently, I’ve been reading Nassim Nicholas Taleb’s book The Black Swan. Most of the book has to do with economics and mathematics and is not very relevant to personal finance at all, so I won’t bother doing a detailed review here. However, there are two pieces of the book that I think are worth talking about, so let’s dig in.

The Black Swan and Your Emergency Fund
The basic premise of The Black Swan seems like common sense: life is full of unexpected events. Big ones (like, say, 9/11), medium sized ones (like, say, a career shift), and small ones (like, say, your daughter wetting her pants just before you’re about to leave on an errand).

The Black Swan argues that our minds use a lot of tricks to hide these so-called “black swans” (his term for largely unpredictable and rare events) from us. We need to see the future as at least somewhat predictable, or else we wouldn’t bother making many plans at all. So, when we reflect on our past, it seems much more orderly than it actually was. Also, when we think about the future, we imagine something much more orderly than what will happen.

This idea makes a lot of intuitive sense to me. I know that quite often, when I think about the past, it does seem like an orderly progression of things. However, when I look at old diary entries and old videos, I see that there were actually a lot of “black swans” floating around. I didn’t see The Simple Dollar’s success coming at all, for one. When I went to college, I didn’t see myself working for a slightly eccentric German fellow who would basically set up my first career for me and also taught me how to pack effectively for business travel - he was a black swan.

Given that, I think there are a lot of things one can do in their own life that will prepare oneself for the arrivals of black swans of all magnitude.

Learn a wide variety of skills. I don’t just mean transferable skills, either. Know how to make things. Know how to build things. These skills will come in handy over and over again, often in unexpected ways.

Live frugally. I believe that’s one of the underlying messages here - frugality is a great economic and personal advantage. Knowing how to always maximize one’s resources makes one much more able to survive great changes in life - and also gives the person the ability to build up resources (as mentioned below).

Minimize your future costs. If you can use your money now to invest in things that will reduce your costs in the future, do it. The fewer resources required in the future to maintain your way of life means that fewer “black swans” can disrupt you.

Have a large, stable emergency fund. Having a large amount of cash reserves makes it possible for you to ride right through any small and medium-sized “black swans.” Your car unexpectedly dies? Not a problem. A career opportunity comes up? You can jump at it. You lose your job? Not the end of the world.

Have a good “opportunity” fund, too. Sometimes the unexpected comes along and it requires you to have resources. For example, there’s a large chunk of land near our house for sale. If it suddenly makes a nice drop in price, I’ll jump on it. If I happen to see the owner sometime soon, I may negotiate. It’s been up for sale for quite a while, so something nice may happen soon - not quite a black swan, but a good example. A real “black swan” might be that a neighbor is in a pinch and puts a sign on his car that says “$5,000 or best offer” and you can walk over there with $3,000 in cash, snipe it, then resell it for $5,000 with some footwork.

In short, keep some resources at hand, make yourself more useful, and minimize what you’ll need in the future.

The Black Swan and Investing
One particularly interesting point in The Black Swan comes when Taleb briefly discusses investing. His suggested portfolio for taking advantage of black swans is very unusual, yet it makes some sense.

He advocates putting 85-90% of your investment money into something extremely stable, like treasury notes. The other 10-15%, invest it in the riskiest things you can find - things where a black swan might make it go crazy.

So, let’s translate that into dollars. You have $10,000 to invest. You put $8,500 of it into treasury notes, which return 2% annually. You put the other $1,500 into Bangladeshi startups (for example).

At the end of the year, even if you lose all of the Bangladeshi money, you still have $8,670 - your total loss is only 13.3%. On the other hand, let’s say that your Bangladeshi startup goes bonkers and you get a 900% return on that investment, turning $1,500 into $15,000. You now have $23,670 - a 136.7% return.

Basically, Taleb’s argument is that, as I mentioned above, there are many more black swans out there than we initially believe there are, so one should take them for a ride without too much exposure to risk.

My feeling is this - if you have enough risk tolerance in your investments to put them into stocks, there’s some logic in using Taleb’s investment ideas. It puts a floor on the worst case scenario and gives a lot of upside.

Much of the rest of The Black Swan suffers from the same condition that befalls Taleb’s other books - lots of good ideas, but also lots of ego and self-congratulation. It’s thought provoking, but at times you want to go wash your hands.

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

The second I picked up Oblivious Investing by Mike Piper, I was immediately reminded of Michael Mihalik’s excellent Debt Is Slavery.

The two books have much in common. They’re written by people who aren’t personal finance gurus - instead, they just bring a lot of very specific passion about a very specific topic to the table. The books are short and very tight, drilling right in on their points. Their ideas are realistic and sensible - and the concepts are repeatedly backed up by both life experience and with the more lofty and scholarly writings of others.

While Mihalik drilled in on the dangers of debt, Piper’s focus is simple: investing can and should be simple and it shouldn’t require all your focus. Worrying about market fluctuations is bad. Picking stocks is a nerve-wracking gamble. Moving your money around all the time requires too much attention. Instead, Piper argues that we should be largely oblivious to our investments - and the idea is backed up with a lot of sound principles.

Piper’s book has two interconnected parts.

Part One: The Plan
Piper’s plan is very simple, but in those few pages he incorporates quite a lot of the ideas that have been written about for years by hundreds of investing experts - Burton Malkiel, John Bogle, and so on.

Here’s the idea. It’s possible to pick the best stocks if you have all of the information. However, there is so much information that it’s actually impossible for people - even people who devote their lives to the study - to absorb enough information to make those picks consistently.

What we can do is step back and look at some bigger patterns. Over the short term, the stock market fluctuates a lot - one only has to look at 2007 and 2008 to see that. Over the long term - ten to fifteen years or more - the stock market shows positive returns. Over even longer terms - twenty years or more - it shows very nice positive returns.

So, the first step is to figure out your goals. What are you saving for? How far off is that goal? If it’s not very far off, avoid the stock market - it’s too volatile. If it’s very far off (more than ten years), invest in the stock market - but invest in the whole stock market and do it as cheap as you can.

How do you do that? Buy index funds. Extremely broad index funds (like, for example, the Vanguard Total Stock Market Index) let you own every stock in the stock market all at once, and the costs are very small.

So, your investment plan is this: if your goal is short term, invest a certain amount each week/month into bonds or CDs or something else very stable and with positive low returns. If your goal is long term, invest a certain amount each week/month into a broad based index fund. Then, forget about it until you get close to your goal.

Part Two: The Noise
Once you’ve made the decision to invest, the real trick is to filter out the noise.

First, train yourself to ignore what’s going on today, this week, this month, and this year. The stock market is volatile - live with it. The trick is to remember that you’re investing for the long term. Volatility doesn’t equal long-term risk. Another thing to remember is that short term stock market volatility is entirely unpredictable. So just ignore it.

Second, don’t bother chasing the “best” funds. Instead, just put your money in an index fund that matches the market for cheap. Why? A fund that’s the “best” one year is quite likely to not be the best in subsequent years - the market changes, investors herd into the fund and flood it with too much money so that the strategy doesn’t work any more, and there’s a lot of cost in jumping from fund to fund. Just pick a steady, average fund and leave it there - ignore the “fund of the minute” and the talking heads on CNBC.

Third, ignore specific stock tips. The ones in the media are often placed there by analysts who are set to profit from people following that tip. The one from your uncle might be useful or it might not be - but don’t bet your future on it. Ignore all the specific investment tips.

If you’re filtering out all of that, you’re left with just one thing: your plan. Keep investing, steady and surely, and don’t sweat the little swings or the panicked talking heads.

Is Oblivious Investing Worth Reading?
Oblivious Investing does a fantastic job of laying out the “buy and hold” strategy in layman’s terms that anyone can understand. For a person who simply wants to begin investing their money for the long term but doesn’t want to spend every day praying at the altar of CNBC, Oblivious Investing is a great read.

If you want detailed advice on portfolio management, this isn’t your book. If you want comparisons of individual investment strategies, this isn’t your book. Piper makes one big point throughout this book - he makes it thoroughly and clearly, but Oblivious Investing doesn’t try to be a Swiss Army investment book. If you want that, read The Bogleheads’ Guide to Investing.

I should say, though, that I subscribe to the investing strategy in Oblivious Investing. It works well for me and this is the best layman’s description of it that I’ve yet read.

Quite often, financially intelligent young professionals get out of school, start in the professional world, and actually stick quite strongly to the “spend less than you earn” mantra. They fund their Roth IRAs and their 401(k)s, but they still find themselves spending much less than they’re bringing in. And they wonder what’s next.

“Fred” writes in with a question along these lines:

I’m in my mid 20’s and just got my first job, currently make ~$50k. In 3 years I will graduate from medical residency and be making 3-4x that. I’ve had a very fortunate upbringing- no student loans, no credit card debt, and about $100k invested in securities. My question is regarding IRA and 401k contributions. Once I’ve contributed up to my 401k’s match, and max out my Roth IRA what should I do next? The current wisdom is to max out my 401k contribution. I feel quite certain that my taxes (once I make ~$200k annually) will eventually be much higher because of our spiraling debt/ Obama tax plan. Would it still be wise to max out my 401k?

There are several pieces of the puzzle worth discussing here.

First, never, ever count your chickens before they hatch. The most common mistake that I see people making is their assumption that they will be earning more in the future. That may be the plan, but plans can change - they are often derailed by life, health, changing interests, opportunities both missed and otherwise, and so on. Do not make spending decisions now based on what you hope will happen in the future.

When I found myself in a very long-term stable job in 2004, I made the mistake of essentially betting that I would have that income in perpetuity - nothing would keep me from earning that money until retirement. Flash forward to 2009 and what do I see? An opportunity came along and I jumped on board. I’m earning less than I might have otherwise, but every morning I feel absolutely that I made the right choice.

So many things can happen over the next few years. You might become disenchanted with your current work. You might fall in love and have a child. You might fall into ill health. In each of these events, you likely will not be earning three times your current salary in a few years.

Instead, a much more prudent path is to build a firm foundation for whatever may come. As I noted above, many people are at least peripherally aware of this, investing money into retirement. But retirement investing is just the start.

Build a very healthy emergency fund. It’s always useful to have at least six months’ worth of living expenses available in a very liquid place, like a high-interest savings account. Don’t be afraid of the size of the goal - just start an automatic plan to scoop some portion of your paycheck right into that savings account. Hold onto it - use it for big emergencies, then replenish it afterwards.

Invest in yourself. Never be afraid to invest money in making yourself better. Lose weight - if you have difficulty doing it on your own and can afford it, hire a trainer to motivate you. Get your teeth straightened and cleaned. Work on your self-confidence and take opportunities to speak in public. Invest in clothes that are well-made and durable - ones that will last through whatever may come.

Invest in a taxable account. If you’ve got an emergency fund, no debts, and a well-padded emergency fund, start investing in a taxable account. How exactly you do this depends on your risk - my recommendation is to invest in index funds using a buy-and-hold strategy. Hold onto that money for now and wait for opportunities to come to you. That money may eventually become a home. It may become the basis for a business. It may become the backbone of a very early retirement. Whatever it is, having it in a taxable account means you can utilize it for whatever you need, whenever you need it.

What about investing more for retirement? If you’re already maxing out an IRA and picking up all of your employer’s matching in your 401(k), your bases are pretty well covered for retirement. Investing beyond that can be helpful over the long run, but if you’re doing it at the expense of an emergency fund, your own personal health, or other personal goals, you should spend some time asking yourself what your true goals are.

My argument is simply this: money invested in a taxable account is likely a good option in this situation. While you do have to pay capital gains tax on the dividends (as well as on the gains if you sell the investments), that money can be used for any purpose without penalty: retirement, a home, startup money for a business, a wedding, education for a new career, or anything else that might come your way. Your future is not set in stone - don’t set all of your savings and investments in stone, either.

Good luck!

A very kind reader recently sent me a link to a fascinating article at Salon.com entitled How I Learned to Haggle. The article outlines a woman’s experience with haggling, culminating with the author actually requesting a discount at a dollar store:

So before I can think too hard about it, I drive to my kids’ favorite place of business, the 99-cent store — where everything is now upward of $1.29 — to shop for an upcoming holiday. My extended family is coming to town for a big celebration, so I stock up on several items in bulk. Taking deep, relaxing breaths and focusing on the joy the plastic doodads I’m clutching will bring to my offspring and their cousins, I wait for the long line at the register to taper off. Then I unload the contents of my basket onto the raised counter, look up at the woman on the platform behind it and say, with a surprisingly steady voice, “I’m buying a lot. Would it be possible to get a discount?”

She looks at me, clearly taken aback and a little irritated. “I’d have to get the owner,” she says, as if that will end the conversation.

“OK,” I say.

She rings up three more customers while I wait, probably hoping I’ll give it up and go away, then reluctantly rouses herself and comes back with the owner, a kindly man to whom I repeat my question and fall silent.

He smiles at me. “Well,” he says, “you are buying a lot.”

He turns to the woman at the register. “Charge her 99 cents for these,” he says, pointing to eight items in my basket priced at $1.29. And these,” he says, waving at eight more priced at $1.49.

Then he looks at me apologetically, eyeing two large items selling for $1.99. “I can’t go any lower on those. Just the delivery charges have gotten so expensive.”
Quantcast

“I understand,” I say.

Then he says, “OK, charge her $1.49.”

The woman at the register sourly does as she is told. I thank them both and pay in cash.

Unsurprisingly, with a story like that, the comments are pure gold, alternating between people sharing their own haggling tips and cheering on the writer to others disgusted at the thought of haggling at the dollar store.

My thoughts were pretty diverse on the issue, but I largely support what the woman did. Here are some of my thoughts on haggling - many of which I’m sure will generate some discussion.

A person’s desire and ability to haggle depends on their personality. Some people are born to haggle. Others are brought into it culturally. Others simply have neither the innate desire or the cultural pressure to do so - or only feel like it’s appropriate in some situations. Given that there are so many personal feelings about bargaining and there are vastly different cultural expectations about it in different parts of the world, it’s pretty much impossible to come to a single clear set of rules about what’s appropriate and what’s not when it comes to this art.

At the same time, it seems that in a world of haggling, introverts are directly financially penalized. A person who is naturally introverted or timid will simply not negotiate as strongly as an extroverted person who is willing to make a public scene to save a few dollars. Should the introvert be financially penalized for their nature? Would it be similarly appropriate to financially penalize people for other aspects of their nature - for the color of their skin, perhaps?

It’s because of this that I largely support standardized pricing within stores and competition among stores - everyone gets the same deal and the people who are rewarded are the people willing to put in the footwork and do comparison shopping, not the people who are willing to be pushy for it.

Businesses that expect haggling will price accordingly. Take yard sale pricing, for example. Whenever I run a yard sale, I usually price things on the high end of what I think is a reasonable yard sale price and I allow and encourage haggling. As the weekend goes on, I drop my prices over time.

This is true of many businesses, particularly “mom and pop” type businesses and also businesses from other cultures outside of the United States. They expect some degree of haggling from some percentage of customers and price accordingly. Quite often, I don’t mind not haggling at these events and paying their face price because I like supporting local businesses, but I have no qualms with haggling if a price seems particularly out of line.

Businesses that don’t expect haggling won’t tolerate it. On the other hand, in many stores, haggling simply does you no good. Large chain stores - particularly on less-expensive items - simply have no room at all to change prices. They’ll simply refuse - and you’ll simply have wasted your time. So, don’t haggle over the price of a tube of toothpaste at your local Target.

Taking those factors into account, I see no reason not to ask for a discount in many situations - but doing it where there’s no real chance of it working is annoying to those around you and potentially damaging to your reputation. If you’re standing in line at the local department store (that is obviously not a place with a haggling reputation) and make a big scene over trying to haggle over a few items, your only outcome will be to frustrate and annoy those around you. Even worse, some of those people might remember you - and your annoyance to them may come back to haunt you later.

My final point is perhaps the biggest one of all. If you feel the need to haggle for the item, why are you buying it at all? Take the example in the original story. Why is that person in the dollar store at all? Are “plastic doodads” from the dollar store really a worthwhile purchase?

While I can surely appreciate the sentiment of wanting to make a child happy, why not actually do something special with that time and money, like make a batch of their favorite kind of homemade ice cream together? Or even play a few simple games in the yard with them? Children are happy whenever you show them genuine love - it doesn’t have to take the form of a “plastic doodad” you bought for a buck at the dollar store.

This expands into a more general principle. Most of the items you might haggle for aren’t necessities at all. Unless you truly do want the item (and it passes the ten second rule), don’t even bother haggling over it or putting it into your cart. Just walk away and keep that cash in your pocket. Haggling to get a “deal” on something you don’t truly want and don’t need is just another way to watch your money slip through your fingers.

I look forward to your comments on haggling.

Amy writes in:

You often talk about investing in bonds. I don’t even understand what bonds are, let alone how to invest in them!

Well, let’s start at the beginning.

What Is a Bond?
To put it simply, a bond is a way for an investor to buy a piece of someone’s debt, usually a government or a large company.

Here’s a clear example. Let’s say your city wants to raise money to put in some new roads. They don’t have enough money in their current budget to pay for it, but they’re quite able to put aside money in future budgets for the bridge.

The city’s solution? Issue bonds. They sell bonds to the general public for a certain price (the issue price) to raise money. Investors buy these bonds from the city, putting their money directly in the city’s coffers.

What does the bond buyer get? A bond states that on some regular basis, the person buying the bond will receive a certain small payment (known as the coupon). Then, when the bond matures, the person who bought the bond will receive the face amount of the bond.

So, here’s another example. Let’s say you buy a $10,000 bond from the city. It’s set to mature in ten years (meaning the city will give you back your $10K at that time). Until then, the bond states that you’ll receive a payment of $175 every six months - that’s the coupon rate.

Usually, bonds are issued by governments and large corporations to finance big purchases that they don’t have the cash on hand to pay for at that moment. But that’s a risk, right? What if they can’t make good on that payment? That’s why bonds come with bond ratings, which give an indication of how reliable the organization issuing the bond is. Some issuers are very secure (like the governments of first world nations), while others are much less secure (companies that are in poor financial shape) - the latter are usually called junk bonds and aren’t solid investments for laypeople.

Advantages of Bonds
The big advantage of buying bonds is that they’re reliable. The bond issuer is legally bound to make those regular payments to you and to pay you back the face value when the bond matures. The only real risk is the stability of the bond issuer, which is why many people not involved in financial careers stick to very safe issuers, like the federal government.

Thus, if you stick to big issuers like the federal government, they’re quite safe, too.

Another benefit of bonds is that some types of bonds (particularly municipal bonds - ones issued by cities for improvement projects) have tax advantages. Most municipal bonds are exempt from federal and state income tax.

Disadvantages of Bonds
So why would you not invest in bonds, if they’re so safe? Typically, very safe bonds don’t have a very strong return at all.

Take, for example, current returns on bonds issued by the U.S. government. Short term ones (3 month, 6 month, and 1 year treasuries) are paying no coupon rate at all, which means that all the government has to do to fulfill the bond is pay you back the face value at the end - no interest, no nothing. The only way to make money on these right now is to buy them a bit below their face value - thankfully, the government sells these at auction, which means that you can buy them just a bit below their face value (but still return less than 1%). Alternately, you can lock your money down for thirty years - but you’ll only get 3.5% of the amount you invest in annual payments, which isn’t great, either.

While this is an extreme example that’s only occurring because of the special economic times we live in, the basic idea is still true - bonds typically don’t earn great returns. What they do is earn safe returns.

Buying Bonds
So how can you buy bonds?

If you’re interested in buying them from the federal government, you can buy them directly via Treasury Direct. For many people who want to handle all of their own investing, this is a great way to buy individual bonds.

If you’re interested in municipal bonds, you’ll likely have to buy them through a brokerage. Some municipalities allow individuals to buy bonds directly from them, but minimum investments are usually well into the thousands.

If you want to buy other types of bonds (bonds issued by other governments or by corporations), you’ll likely have to use a brokerage for such purposes.

My recommendations are pretty simple. Either buy federal bonds directly from Treasury Direct, or buy a bond index fund from a reputable investment house, like Vanguard (the one I use). Going beyond this requires both a strong sense of risk and a lot of time to appropriately research your options.