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

I’ve written about 250 book reviews on The Simple Dollar since I started the site in late 2006. Along the way, I’ve found a few books that I just immediately recommend for certain topics. My general personal finance recommendation is Joe Dominguez and Vicki Robin’s Your Money or Your Life. My regular debt management recommendation is Dave Ramsey’s The Total Money Makeover. For investing, I usually recommend Larimore, Lindauer, and LeBoeuf’s The Bogleheads’ Guide to Investing. Time management? I’ll point to David Allen’s Getting Things Done.

Throughout all of those books, though, I’ve never really found a single book I could recommend about entrepreneurship. There’s not been one book that really talks about the process of taking an idea you have in your head, investing your spare time and effort into it, and building it into something sustainable that can earn you significant money over time. The closest book I’ve found to that goal is Michael Masterson’s Ready, Fire, Aim, which does a very good job covering the topic, but feels incredibly rushed in places.

That’s why I felt pretty optimistic about reading Dave Ramsey’s latest, EntreLeadership. Ramsey is very good at hammering home the basic ideas you’ll need on a topic and pairing it with enough motivation to get you to go out there and try it yourself.

EntreLeadership Defined
In order to be successful, an entrepreneur has to be a leader. Even at the very start, when a business is nothing more than a side gig or the germ of an idea, it will never get started if you don’t step up to the plate and say that things need to happen. Even then, you’ll have to communicate with people and likely delegate some of the tasks that have to be done. Without some leadership skills, it will never happen. Entrepreneurship and leadership are intrinsically connected, and the principles of leadership help even the nascent entrepreneur.

Start with a Dream, End with a Goal
A lot of us have dreams of what we’d like to do with our lives. I’ve made no secret of my dream to be a writer. Others dream of other things. The difference between a dreamer and an entrepreneur is whether or not they can convert that dream into a goal, particularly a goal with a plan to get there. A dream is a fun indulgence, but it doesn’t come true if you don’t set it as your destination and focus on how exactly to achieve it.

Flavor Your Day with Steak Sauce
A big key of entrepreneurship is good time management. In order to have the time each day you’re going to need to make your business work, you’ve got to have a great grip on your time. Ramsey advocates using to-do lists, but also reflecting on Covey’s four quadrants (important and urgent, not important and urgent, important and not urgent, and not important and not urgent), where, obviously, important should always trump urgent.

“Spineless Leader” Is an Oxymoron
The best thing you can do as a leader is to make decisions quickly based on the information you have and be able to explain why you made those decisions. “Leaders” who don’t make decisions tend to lead organizations that fall apart. Leaders who make decisions without basing them on information tend to make horrible decisions. Leaders who make decisions based on information but can’t explain them tend to sow mistrust with their team.

No Magic, No Mystery
This chapter is most of the key ideas of a “business 101″ class wrapped up into a single chapter. Ramsey covers the life cycle of a product (introduction, growth, peak, decline) and how to start over again. There’s also a deep look at marketing a product, with basic ideas such as scarcity and appeal covered in the discussion. Almost any business you get into will involve some level of marketing, so it’s important to understand the basics of it.

Don’t Flop Whoppers
Here, Ramsey discusses the process of turning a detailed idea or a small side business into a larger entity. There are two keys to this, in Ramsey’s eyes: passion and calling. Passion is something that gets you excited to get out of bed in the morning. You can’t wait to get started on the activities at hand. Calling is what you want to achieve in your life. I’m passionate about writing, but my calling is using my words to change people’s lives.

Business Is Easy… Until People Get Involved
One of the biggest challenges in growing a business beyond a solo gig is the people. I can speak to this from experience: it was dealing with employees (interviewing, training, cleaning up their mistakes, etc.) that was the single worst experience of running The Simple Dollar, in my eyes. Ramsey offers a lot of good material that covers the entire life cycle of an employee, from the hiring process to maintaining good work to letting go of problematic employees.

Death of a Salesman
The best thing a good salesman can do is to focus on the customer and come up with solutions for that customer in mind. Sometimes, that means doing things that aren’t directly beneficial for your business, such as helping with things that are outside of your business or suggesting products and services that you don’t sell. If a customer walks away from you happy with the exchange and in a better place because of it, you’ve succeeded in your goal.

Financial Peace for Business
Businesses need to manage their finances well and, yes, be frugal. Owning a business isn’t a ticket to spending like a madman. Here, Dave takes the personal finance advice from Financial Peace Revisited and applies the advice to small business management. It actually works quite well, because the basic principles of personal finance – spend less than you earn, avoid debt, etc. – work very well for small businesses.

The Map to the Party
When a business grows into a multi-person outfit, the key to success is communication. The more people feel that they’re able to communicate and that their ideas are of value, the more they actually do communicate, the more involved they are, and the better decisions you can make for the business as a whole. Good communication feeds on itself, as does bad, so the best thing a leader can do is be candid and open.

People Matter Most
The people in your business matter more than anything else. If you can’t do right by them, you can’t do right by the rest of your business, and if you can’t do right by that, your business will eventually fall apart. Treat the people who work for you well. Respect what they need and work with it. Listen to what they’re telling you and don’t brush it off. The more you do that, the more they’ll respect you (if they’re good people that you want working for your business).

Caught in the Act
One key way to build your business is to make sure your business is recognized, particularly when you’re doing good things. Little steps, such as your email signature or your stationery, makes a difference. Mentions in the media also help. The more little pieces of positive recognition you have floating around out there, the more likely it is you’re going to draw in a random customer off the street.

Three Things Successful People Never Skip
Contracts, collections, and vendors. Dealing with each of these is the kind of detail work that can drive a person mad, but it’s the details of these things that can make or break a small business. Being detail-oriented in these areas almost always pays off.

Show Me the Money!
Be generous to the people that cause you to win. There are a lot of ways to do this – bonuses, higher salary, and so forth. Keep in mind, however, that the reason to do this is to reward the people that are showing good performance – and good performance is demonstrated in the form of happy customers.

Mastering “the Rope”
At some point, you eventually have to start delegating decisions to others as your business grows. The key to that is to make sure you’re surrounded by people you trust who you know will make decisions that are good for the business as a whole, people who share your perspective on how the business should be run. Your immediate team should consist of these people.

Is EntreLeadership Worth Reading?
This is the best single book on entrepreneurship that I’ve yet read.

Most of my problem with other entrepreneurship books is that they give short shrift to the early growth of a business, when it grows from an idea to a side business to perhaps a full time solo endeavor or one with one or two employees. They skip this part and move on to the point where a business has a handful of employees.

While that latter part is important to understand, so is the infancy of the business. It’s often that infancy that makes or breaks potential entrepreneurs, and Ramsey spends a good half of the book talking about issues at that level before moving on to growth issues.

Ramsey maintains the friendly tone that has worked well for him in personal finance books, and it works well here with entrepreneurship. There’s just the right level of detail in the information, mixed with great anecdotes.

If you’ve ever thought about launching your own business, this is a great book to start with.

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

I’ve been going to the same barbershop most of the time for the last fifteen years or so. We grew up in the same area, so it’s rather fun to catch up with him on things that are happening in our hometown area.

He’s a good barber, so he’s also pretty busy. He also operates almost entirely on walk-in business, so when you show up, you get on a list and have to wait for about thirty minutes or so.

When I go there to get my hair cut, I’ll often wander around the small shops nearby – and there happens to be a shop that sells board games about four doors down. Board gaming is one of my biggest hobbies, so I’ll often walk in there to browse the shelves.

That’s when I have to be careful.

When I’m in that store, there’s a lot of temptation for me to pick up and buy a new board game. I’ll think about playing it with my wife and with my friends and recall the many great experiences we’ve had around the table. I’ll think about playing it with my sons and my daughter in the future.

I’ll be sorely tempted to just buy the game. After all, I can afford the sticker price. Why not just buy it and make those dreams a reality?

That line of thinking leads to a lot of unnecessary spending. It rides the emotional wave of impulse buying right to the conclusion, where you’ve got an item you bought open in your home and you’re realizing that maybe buying it wasn’t the best idea. With those board games, for example, I often realize that we have quite a few games that we love playing already on our shelves.

My first line of defense against these types of impulsive purchases – the ones where I know I could afford the unnecessary item – is the ten second rule, which I’ve talked about before.

Whenever I’m considering making a purchase of any kind, I simply stop for ten seconds and ask myself whether this is really a worthwhile purchase. Do I actually need this item? Does it cause any sort of fulfillment in my life that isn’t already achieved by the things I currently own? Could I not put the cost of this item to better use?

I don’t watch the clock on this or anything – I just do it for roughly ten seconds or so.

At the end of those ten seconds, if I’m still convinced that making this purchase is the best idea, then I’ll go ahead and buy it without guilt or remorse.

However, I’ve come to find that the ten second rule frees me from making a lot of unnecessary purchases. By facing the doubts I have about the purchase before I make it, I often end up making the right decision rather than a decision that I’ll regret.

Doesn’t this eliminate spontaneity? Sure, it does. However, the only time I really want spontaneity that results in me spending money is when I’m with other people, and when I’m engaging in a social event, I make up my mind how much I’m going to spend on that event before I go. Spontaneity when I’m by myself is mostly just an excuse to spend money on things I don’t really need.

If you’re having trouble keeping control over your impulse spending, try practicing the ten second rule. Whenever you’re tempted, stop for ten seconds and ask yourself whether you’ll regret this purchase in the morning. If you find yourself putting the item back, you’ll end up feeling good about yourself and you’ll still have that money in your pocket.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

Each week, I highlight ten things each week that inspired me to greater financial, personal, and professional success. Hopefully, they will inspire you as well.

Recently, I was working on a project that coupled frugality tips with black and white public domain photographs. In order to find ones for the project, I spent a lot of time digging through The Commons, which is a collection of the world’s public photography archives. Along the way, I found a lot of wonderful pictures of all kinds, so I thought I’d share this week’s “pieces of inspiration” sharing ten of my favorites with you.

1. U.S. Troops Surrounded by Holiday Mail During WWII (c. 1944)
Regardless of how you feel about particular wars, the individual people on the ground are doing something incredibly courageous and quite threatening to their lives. I have a friend currently serving in Afghanistan. He made a very courageous choice to do that and regardless of whether I agree with it, I respect it and hope he makes it home in good shape.

I’d like to believe that every military mailroom looks like this around the holidays when we have soldiers putting their lives at risk.

2. Mailing Letters (c. 1880)
Recently, my six year old has taken strongly to getting the mail for us and putting mail in the mailbox. The mailbox is higher than his head, so he reaches up to pull out items, sight unseen.

One element of this picture that I found interesting is how the mailbox works. The boy appears to be dropping mail in the top of the mailbox, and there’s not a door on the front of it.

3. A Man from the Umingmaktormiut Tribe (1924)
I often feel like this during the worst parts of winter.

The thing that struck me is even though this man is obviously very cold and has been through a pretty intense weather experience, he looks pretty happy about the state of things.

4. World’s Columbian Exposition: Electricity Building, Chicago, United States, 1893.
One of the things I’d love to have been able to see is the 1893 World’s Fair in Chicago where electricity was publicly demonstrated for the first time. Stories say that the electricity building was illuminated by incandescent lights, the only building in the city lit up like that. It stood out like a beacon in the night.

I’ve read several books and seen many photos of this fair. It’s one of those moment I would have loved to have seen.

5. Farmer and sons walking in the face of a dust storm. Cimarron County, Oklahoma (1936)
I’ve never seen the great soil storms of the Dust Bowl captured so starkly before. The reason everything looks so washed out in this picture is because the air itself is just loaded with dry dust, swept off the ground by vicious winds.

This seems like another world.

6. Hotchkiss Field, Halloween (1959)
What I find noteworthy here is that the costumes almost entirely look homemade. They’re refashioned dresses, masks made from plaster at home, costumes that were hand-sewn.

Today, most of the costumes I see were purchased a few days before Halloween at the local department store. Plastic masks of well-marketed characters. There’s just something missing.

7. Two girls standing outside Desnick’s Drug Store, Minneapolis (1946)
There’s just something so Americana about this picture. It’s just two girls standing in front of a pharmacy just after World War II, but there’s something about it that seems to capture the essence of the pastoral America.

I love going to small towns that still have a thriving Main Street. There’s just something wonderful about them.

8. Man surveys his vegetable garden in the Narrabeen flood (1927)
I was a witness to the Mississippi River floods of 1993 and 2008. A flood can do an incredible amount of damage, turning enormous amounts of human endeavor into a soggy mess in an instant. In some ways, a flood is a particularly devastating disaster because there is an incredible amount of cleanup work that needs to happen before you can even begin to rebuild.

There was something incredibly familiar in this man and his child, surveying the damage of the flood in an area where he had personally invested a lot of time and passion.

9. Gold minehead and seven miners, Gulgong (c. 1871-1875)
I have this strange fascination with people who would pick up their lives and dive wholeheartedly into gold rushes in the 19th century.

Their entrepreneurial spirit was amazing, but often they would enter into a beautiful area by the thousands and lay waste to it. It’s a fascinating mix of traits I deeply respect and results that trouble me.

10. Toddler playing with a hose in a garden (c. 1912)
The thing that I love about all of these old photographs is the commonality of human experience.

I can’t tell you the number of times I’ve seen my own children do something like this, only to end in a mess just a few moments later.

One of the most generic personal finance suggestions is to “create a budget.” The advice usually revolves around setting aside money from your paycheck for all of your known expenses, then making smarter choices with what’s left over.

Here’s the problem with that suggestion: a lot of people who are in financial trouble have no idea where their money is going from month to month.

I’m speaking both from my own experience and from the mountains of emails I’ve received from readers who are struggling to get control of their own finances. Between impulse buys, credit card purchases, debit card purchases, purchases made with pocket money, and so on, it can be extremely difficult for a person without at least some exposure to personal finance to understand where their money goes.

Without knowing where your money goes, a budget is useless. It’s nothing more than a guess about the reality of your financial situation.

The first step, then, in creating a budget and getting your financial life under control is to understand as completely as you can where every dime of your money is going.

I suggest doing this for a period of at least one month. This allows you to get through one billing cycle on your utilities and your debts. While it does not cover irregular bills (like insurance), it can at least provide the foundation for regular monthly budgets.

So, how do you get started?

What I did is I designated a shoebox in which to collect receipts for every dime I paid out for a given month. If I bought gas, I saved the receipt and put it in the box. If I bought groceries, I did the same. The same goes for all of my silly incidental expenses.

If I paid cash for something and didn’t receive a receipt for it, I would write down that expense on a piece of paper and toss that paper into the box.

My regular bills also went into the box after I paid them. If I paid the bill online, I would write down the bill name and the amount on a piece of scrap paper and toss it into the box, much like my cash expenses.

At the end of the month, I would also take my bank and credit card statements and use those as a basis for comparison to make sure I didn’t miss anything, like an automated payment that I forgot about.

What do you do with all of this information? Simple. You take all of it out and sort it into groups that make sense for you. For example, you might have a group for essential bills (like electricity and rent or your mortgage payment), a group for non-essential bills like Netflix, a group for groceries, a group for eating out, a group for entertainment and hobby expenses, and a group for everything else.

Then, go through each of these groups and total up the receipts in that group.

Once you have those totals, you can spend some time asking yourself whether that spending level needs to stay in place (for example, with essential regular bills) or it can be cut a little bit (as with entertainment expenses or eating out).

What do you have after you’ve done that? A budget. That’s the end result of all of this work: a budget that actually matches how you spend your money and provides realistic guidance for your financial future.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

One of the biggest challenges I have when writing articles for The Simple Dollar is finding a balance of usefulness and audience.

What do I mean by that? Well, if I tried to write a personal finance article that would reach out to everyone who read it, it would be completely devoid of content. There’s no personal finance information that’s applicable to everyone in the entire world who might be reading this article.

On the other hand, if I write a personal finance article that’s just about my specific situation in incredible detail, it’s incredibly useful – but only to me. The more I dig into my own specific situation, the less applicable the entire thing becomes to anyone but me.

Instead, what I try to do is find a happy medium. I try to base the article on a few assumptions that I think a significant portion of my readers have and give advice based on those assumptions. Obviously, I can’t match every reader with every article – that’s an impossibility. What I can do is focus on areas that I know from my own life – like personal finance planning for parents, time management, building a career, escaping from debt, handling money issues and relationships, and so on – that match up with the information that others need.

So, how is that idea useful to you?

First of all, in order to find useful personal finance advice – here or anywhere else – you’ve got to discard some of what you read. Some of it is simply not going to be applicable to you because of the assumptions made by the person giving the advice. If you’re a retiree looking for frugality tips and you come across an article outlining ways to save money on a college campus, you’re probably not going to find too much that’s useful in that article. At the same time, for frugal college students, that article is very useful.

So, what can you do? Don’t be afraid to skip an article that doesn’t apply to you. Don’t be afraid to skip specific tips that don’t apply to you, either. Skip them, or better yet, pass them on to someone who might actually find value in that information.

Second, know how to identify what’s useful to you. Read the article – particularly the first paragraph – and ask yourself who exactly the article is being written for. If you’re still unsure, you can get clues from the rest of the website as well as the previous writings of the author of that article.

Also, use more than one source for your information. No writer is going to know everything – and that, most definitely, includes me. Writers are writing from different perspectives, have different sources for their own facts, and have different ideas about what’s important and what isn’t. Sometimes, writers are also flat-out wrong – and that certainly includes me, too.

There is no excuse for not getting multiple sources of input on any topic that you plan on investing your time and money into. Don’t base your retirement planning solely on The Simple Dollar or anything else. Major personal finance choices need to have some time spent understanding those options, and the best way to do that is to read multiple sources of advice on those topics.

Where do you go for this advice? Obviously, I hope that The Simple Dollar is one source, but I also hope that it’s far from the only source. Read other websites. Even better, read some books. Your local library is a giant treasure trove of great personal finance information.

There’s one final tactic, and it’s a big one. Always ask yourself if the person giving you the advice has a conflict of interest. I am very hesitant, for example, to trust advice given to me by a mutual fund company when it comes to buying mutual funds because they have a conflict of interest there. They make money by selling me mutual funds, not necessarily by giving good advice. I’m similarly hesitant to get my information about insurance from an insurance salesman.

You can’t always know whether someone has a conflict of interest when giving you information, but you can protect against it by eliminating the obvious ones and also by using multiple sources of information, as suggested above.

If you follow these tactics, you’re bound to find the information you need for your situation, validated by multiple sources. That’s the kind of rock-solid information upon which you can make personal finance decisions, career decisions, and other life decisions.

Good luck.

One of the most painful realizations I had when I started getting my financial life in order was that my job didn’t really earn me as much money as it seemed.

My salary at the time of this realization was about $40,000 a year, so let’s use that as a baseline.

Now, on the surface, that’s really good money. If I worked 40 hours a week for 50 weeks a year, I would be earning $20 an hour, right?

Well, that’s not entirely true.

First of all, we have taxes. Federal income taxes, state income taxes, and FICA taxes. Federal taxes would eat about 11% of my paycheck, state taxes would eat about 4% or so, and FICA would eat about 2%.

Second, I had to pay for my commute. This was about ten miles each way, and it was the primary reason I owned a vehicle. So, let’s tack on top of that a monthly car payment of about $200, about $40 a month in gas, about $30 a month (prorated) in maintenance expenses, and about $40 a month in insurance, just to keep that car on the road.

I also had to wear a nicer wardrobe. I spent $200 a year to make sure I dressed appropriately for meetings, conferences, and the like – and that’s a low-end estimation.

There were at least two meals eaten out a week, costing $10 each. There was travel about three times a year where many of the expenses would be challenged, meaning each of those trips set me back about $100 out of pocket.

Not only that, there were a lot of times where I would put in extra unbilled hours to meet a deadline. I easily averaged 50 hours a week there.

Plus, there’s the time spent traveling – another 50 hours spent places where I didn’t want to be per trip. There’s the time spent commuting – about 40 minutes per day. There were also work-related meals and other activities to attend, eating down another four hours per month.

When you start running the math on this, the equation starts to change.

After receiving my $40,000 salary, I’d pay out $6,400 in taxes each year. I’d pay out $3,720 in commuting costs each year. I’d pay out $200 in wardrobe costs each year. I’d pay out $1,000 in extra meals each year. I’d pay out $300 in extra travel expenses each year.

Suddenly, my $40,000 salary became $28,380, just like that.

Now, I’d work 40 hours a week, totaling 2,000 hours per year, right? On top of that, I’d add ten hours of unbilled work a week (over 50 weeks), three hours of commute a week (over 50 weeks), 150 extra travel hours a year, and 48 extra hours of activities a year. This would bring my total up to 2,848 hours, or an average of 57 hours a week spent devoted to my job.

My job is suddenly paying me less than $10 an hour.

Of course, there were other job benefits that had some significant value, but frankly, I wasn’t actually using them. My wife and I sat down and compared the health insurance offerings at our two jobs and her insurance was far better than my own, so we used her insurance. I had no use for their life insurance option, either, and their retirement plan wasn’t particularly strong. These things do have value when you’re comparing jobs in this way, but only if you’re using them.

Amazingly, I was actually earning more money that I could keep with my part-time job as an undergraduate. I earned $12 an hour. There was no travel costs, no wardrobe costs, no extra activities, no unpaid work (I kept a diligent timesheet), no commute (I worked really close to where I lived). I would be left with more than $10 per hour working at this job.

On a per-hour basis, my part-time job in college was more lucrative than my first “good” job after college. It was also certainly less stressful and far less intrusive on my time.

One of my closest friends at the time made $7.50 an hour working at the night shift at a local gas station right after college. The gas station was just down the block from his apartment, and he’d spend most of his time there reading or practicing his sketching, as he’d have a customer maybe once every fifteen minutes. He didn’t have a car and on the rare occasions where he needed to go somewhere, he would just take the bus for a quarter or two.

It often seemed that he had more money to spare than I did. At the time, I thought it was just an illusion, but when you start running the numbers this way, it’s not entirely surprising, particularly if he was paying lower rent and lower utilities than I was.

It was realizations like this one that convinced me to make a scary career leap and start working on my writing full time. Doing that meant that I no longer had a commute (saving on car maintenance and fuel and time), nor any wardrobe costs, nor any eating out costs. My time spent on work was actually spent on work. There was no more travel – I’ve only been tempted to travel related to it once, and that one time was cancelled due to a family illness.

On the surface, my salary dropped through the floor when I made this move, but when I started running the numbers like this, I began to realize that my hourly income really wasn’t going down that much.

Whenever you’re thinking about your next job or your next career move, you need to think through these kinds of things. Often, a job that looks like it earns you great pay or is a great opportunity really isn’t either, and a job that seems like you won’t be earning much actually leaves you with a lot of money in your pocket. When you take into account things like stress and schedule flexibility, sometimes the “low-end” job is just the job for you, particularly if you’re simply working to earn a paycheck and are focusing your energies on making a side business or another opportunity get off the ground.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Mess of debt and taxes
2. Renting out a room
3. Settling on retirement philosophy
4. Long games
5. Hotel disappointment
6. Future state retirement benefits
7. Lacking the “spark” for change
8. Taxes and online work
9. Renting for long road trip
10. Caucus thoughts

When I’m writing, sometimes I write in Microsoft Word and other times I write in a normal text editor. There are things about both that I do not like – Word often interferes too much, and the text editor interferes too little.

I’ve tried lots of writing programs over the years and they all fall on one side or the other of that fine line I’m always looking for. There are some online text editors that are very close, but there are a lot of things I write that I don’t feel good saving online.

One day, I’ll find the perfect program. Until then, I’ll just switch back and forth between the two options I have now, depending on my task.

Q1: Mess of debt and taxes
I’m a 29 year old woman. I was in a relationship for a number of years with someone who was horrible with finances. There are a few issues regarding some financial decisions that I made that will result in my tax bill being quite large. The first thing was, I let my desire to make him happy overshadow my common sense and acquired a large amount of credit card debt in my name. I broke things off and he, of course, left me high and dry to handle the large credit card bills alone. I just didn’t make enough money to pay off all of the debt on my own.

There were quite a few credit cards, so I made the decision to stop making payments to the larger cards and paid off the smaller balance cards one by one. Then I reached settlement agreements with the few larger cards. I’m going to have to pay taxes on the forgiven amount, around $17,500 in total, which is the first item that will affect my tax bill.

The second issue is I bought a house, ugh, if only I could go back. Anyway, I ended up doing a short sale and roughly $10K was forgiven by the lender. Also, I got the $8K tax credit and didn’t live in the house for 3 years, so I believe I will be required to pay that back as well. The last piece of the puzzle was a 401K loan. I took it out for the down payment on the house, because I thought my job was secure (I had worked for the same company for 7 years). Then in October my company decided that they no longer wanted me to work remotely and asked me to move back to San Diego, I live in Milwaukee. I respectfully declined, since the reason I moved was to reduce my living expenses and to be closer to family.

No longer working for the company meant I either had to pay back the 401K loan, which I didn’t have the savings to do after dealing with all of the credit card debt and the expenses associated with keeping my house and property in shape while I was trying to sell it. I transferred my 401K into a Fidelity account, the loan was paid back but I’ll still have to pay taxes on the $13K that I still owed on the loan.

In summary, I have to pay taxes on the $17,500 in credit card debt that was forgiven, the $10K that was forgiven by the mortgage lender, the $8K tax credit and the $13K 401K loan. Obviously, this is not a pretty picture but it’s the last financial hurdle leftover from my previous poor financial choices. I’m planning to hire a tax accountant to help me make sure I get every possible deduction, but I know it’s still going to be a hefty bill. I’m still unemployed, so paying it back won’t really be possible currently but I’m hopeful I’ll get a new job before I file my taxes.

My question is about whether you think I should use the money I rolled over into a Fidelity account to pay off as much of my tax bill as I can. I only have about $13K, so it would wipe out all of my retirement savings and I’d still owe more. Obviously, I won’t use the money in my 401K if I’m still unemployed, but assuming I’m employed and I’m able to get some savings together would you recommend I use my 401K money to pay down my tax bill? Or should I just set up a payment plan and not touch my 401K? I recently began a new relationship with someone who makes much smarter financial decisions, luckily, and I want to take care of my financial issues sooner rather than later so they don’t hinder the progress of our relationship (he’s aware of my pending tax issues and the past poor financial choices I made). I just want to make a smart decision in handling this last issue and would like some advice. What do you think I should do?
- Monica

If I were you, I would set up a payment plan as soon as possible so that you’re not paying anything late. The EFTPS program actually makes this pretty easy. You can get started with EFTPS here.

Believe it or not, even though they have a bad reputation, the IRS is often willing to work with taxpayers if they’re also willing to play ball.

It sounds like you’re trying to make this right and being proactive about it. You’ll be fine.

Q2: Renting out a room
I bought my home 2.5 years ago and have rented a room to a friend for most of that time. I anticipate that my friend/roommate may want her boyfriend to move in with her sometime soon. I’m not opposed to this as it would be another person to split bills with and he is a nice guy. What might be an appropriate way to think about how to charge them? The current deal is $500/m plus 1/2 utilities (up to about $120 per person in winter or summer, more like $60 per person the rest of the year). He would be living with her in the room she’s in now, so not really taking up more space in the house but it doesn’t feel right to have him live there for the same rent that just she pays. On the other hand double the rent to $1000 plus 2/3 of utilities seems overly harsh. What should I consider when trying to find a fair middle ground here?
- Jill

I am always uncomfortable with situations where there’s money and friendship involved, particularly when one person is the lender (you, here, in essence) and another the borrower (your friend, in essence). You always have to tread carefully in these situations.

If I were you, I would not double the rent. Are they going to be using any more real estate than they were using when it was just her? How much more? I’d think about that and raise the rent proportionately, if at all. You may also want to think about property taxes and such – if they’ve gone up a little, a slight bump in rent might be appropriate.

If you do raise the rent, I’d explain exactly why in very clear terms. If you’re clear about why you’re raising it, particularly when there’s now an additional renter in the equation, you should be fine.

As for the utilities, I think equal shares among all of you is fair. All of you are going to be using energy, heating, cooling and so forth. Those bills will go up.

Q3: Settling on retirement philosophy
I am having somewhat of a philosophical crisis with regard to saving for retirement in general as well as the specifics involved with being overseas.

First the general: In reading many of your mailbags, you often praise the tax-advantaged instruments (either tax-deferred or those with reduced or no tax on withdrawal) for retirement savings while at the same time pointing out the inherent problem with trying to guess future tax rates, future income and other conditions which would affect the choice. Also complicated the thought process are the various options for actually investing the retirement money: funds, bank accounts, pension plans incl. annuities etc. I was feeling confident with my choice but I feel like the fees are too high to justify the continued investment in front-load mutual funds, not to mention the fact that active funds rarely beat the market. Finding ETFs for retirement funding is next to impossible here. Maybe the correct path would be retirement insurance/pension plan, but they may be too conservative.

The path I am on now is investing in a fund-based “Riester-Rente”, which to summarize is a grant-aided annuity plan. The grant essentially acts as an alternate tax deferment mechanism, but is otherwise similar to a traditional IRA in most respects. The major problem, though, is that if one is not taxed in Germany during retirement, any grants and additional tax deductions provided must be paid back. Since I can’t even guarantee that my family will be in Germany much longer than another 5 years or so (gotta go where the work is ;-) ), I cannot see investing 30 years into a tax deferred instrument only to lose that significant advantage in the end. The other issue is that the invested capital is simply lost if I were to die after retirement, similar to many annuities in the US.

I think, in the end, the major problem is information. I try to approach things empirically and I think this may not be an empirical question, but rather an emotional question about motivation. I am just unsure of the correct way to go. What is the correct general philosophy when planning for the future?
- Carl

I agree with you that the major problem is information, both in the sense that we have imperfect information concerning the world around us and no information concerning what unexpected events will happen in the future.

For my own retirement, I’m hedging my bets. I have money both in pre-tax investments (401(k)s and the like) and post-tax investments (Roth IRAs).

We don’t know what the future holds, so I think that diversity is the best option. If you have retirement money in both pre- and post-tax investments, you’re doing the right thing, in my opinion.

Q4: Long games
Over Christmas break, one of my brothers brought home a board game called Twilight Imperium. We usually play a few games of Risk over break, but he told us that Twilight Imperium was way better. And he was right. It was awesome.

The only thing is that the games took about six or seven hours to play. Most of the time, I don’t have that much time to put aside for a game like that.

Have you played Twilight Imperium or any other game that long? How do you find time for it?
- Luke

I’m in a weekly gaming group that meets at the house of a close friend of mine. He has a spare table in one room of his home that he allows us to leave games on during idle weeks.

Thus, if we were to meet at 6:30 or 7 (which is our usual meeting time) and play Twilight Imperium (for example) for four hours, we could just leave the game on the table and return to it next week, finishing it up.

You could do this in your own home if you have an extra table to spare for a while. Set up a game, play it for a while, and leave it. Once upon a time, my roommate and I would do this with a chess board, leaving an ongoing game in the living room all the time and making moves after giving them sufficient thought.

Q5: Hotel disappointment
The recent new years eve my wife and I went to Disney World at the request of our son. I searched out a room online based on price, location, and reviews. When we got there the room turned out to be less than we had hoped for but served the purpose. We definitely would not recommend it to any of our friends. If we go again I will probably spend the $ and stay at one of Disney’s “value” resorts unless you or your readers have a better suggestion?
- Andrew

Any time you stay in a hotel without having actually visited it first, you’re taking your chances. A hotel might be beautiful in January, be sold in February, and be sort of run down by May if the new owners aren’t committed to it.

I generally give lower value to hotel reviews that are older than about three to six months. There is ownership turnover, staff turnover, and countless other things that can change a hotel’s standards and conditions in that timeframe.

How do you protect yourself against it? We usually chase price, but there have been times where we’ve either just refused to stay at a place or deeply regretted it.

Q6: Future state retirement benefits
I’m vested in the Florida Retirement System (FRS) for government employees. I no longer live in Florida, and am not contributing to the system or earning additional benefits.

I’m entitled to a small monthly pension. I intended to wait until age 62 before collecting it. At my current age (57), I could claim early retirement and receive a reduced pension. (The benefit amount is reduced 5% for each year my age at retirement is under normal retirement age, which is 62. Retiring at age 57 would reduce the benefit by 25% [5% multiplied by 5 years].)

I’m self-employed and don’t need the money for current living expenses. I’m in good health. However, FRS is not completely funded, and its website warns that the legislature may reduce future benefits.

I’ve asked friends in Florida (FRS retirees) whether they think this is likely to happen. One says she doesn’t believe so; the other urged me to file for retirement benefits now to lock them in. I’ve done some searching online but don’t have a good sense of the political climate in Florida.
- Marjorie

If I were you, I’d ask about the statements on that website in more detail. Their phrasing makes it unclear whether or not they would just deny new beneficiaries or they would cut benefits from applicants or both. I would clarify the possibilities of what they could do and then make a decision based on that.

One thing I’ve learned about government is that, if they think they can get away with it and be re-elected, they’ll tap any source of money they can find for their pork projects. I have found it best to never rely on something that is promised to me as a benefit by the government. If I get that benefit, great – it’s a wonderful perk. I plan as though it’s not happening, though.

You’re lucky enough to be in a situation where it won’t break you one way or another, but an awful lot of people aren’t that lucky. My advice is that if you’re older and reliant on such government services, live lean and get yourself in a situation so that you’re as independent from the money as you can be through savings. If you’re younger, fund your retirement.

Q7: Lacking the “spark” for change
I enjoyed your article this week on the motivation to improve one’s situation. In the article, you take the perspective of an individual who is attempting to help or motivate a third party. My question comes at this issue from the point of view of the individual being motivated.

Personally, I feel that I lack the ‘spark’ that you speak of, to instigate lasting change and yet there are changes that I wish to make in my life. I am seeking that spark.

How would you recommend capturing this energy for someone that does not come by it naturally, but wants to make changes?
- Nate

I think there’s a difference between something you’d really like to do and something that’s a life-changing situation.

I struggle with this myself. There are a lot of things that I’d love to be able to do with my life, but when the rubber hits the road, I can see clear separation between the goals that are just ones I’d like to do and the ones that I feel are really central to my life.

The ones that are life-changing don’t come along nearly as often as the others. I usually find that they burst into my life when I finally hit some sort of “bottom” related to that thing, where life grabs me by the chest and demands that I make a change.

Keep doing things and living life. Eventually, the important things will reveal themselves.

Q8: Taxes and online work
I’m trying to pay off my credit card debt and save a large chunk of money this year. I feel like I’ve cut all I realistically can at this point, so I’ve been searching online for ways to make extra money – even an extra $100-200 per month would help out immensely. I’ve come across options like MTurk and usability testing like usertesting.com which seem like they can provide the possibility for some additional income. My question is not around these two examples specifically, but online endeavors like this in general in relation to taxes. Most places put the burden on you to file your taxes, and I’m wondering if you think there is a specific threshold where it actually makes sense to invest the time into these things to make the extra money, or if the tax part of it is not worth the potential of a few extra bucks?
- Jeff

The tax part of it is pretty simple, especially if you use something like TurboTax. You usually enter one line on one form, your total taxes go up by some percentage of what you earned from the endeavor, and you either get a bit smaller refund or have to pay in a bit more.

The challenge with endeavors like MTurk is to recognize that you’re going to – at best – earn minimum wage for the time you invest. The advantage is that you can do it irregularly. You can do it during commercial breaks or when you have insomnia or when you’re using the restroom.

In some situations, I think things like MTurk can be a real help to people who need some extra income very quickly.

Q9: Renting for long road trip
Trent, just read a piece you wrote about renting a car for a long road trip a couple of years back. I liked the math, but how did you convince a rental car company to let you make that long trip? I am planning a trip from Missouri to Florida, where the car will set in a lot for a week while we take a cruise.
- Andy

It was fairly expensive, but the advantage was that it enabled us to take only one vehicle on the trip, whereas without the rental we would have had to take two vehicles. Once we did the math on the gas, maintenance, and wear on two cars, the single rental became the better option.

There really wasn’t much convincing with regards to the long-distance drive and the rental agency. They said “sure” and tacked on another fee.

In your situation, I would run the numbers and see if a flight wouldn’t be a comparable option. In our situation, we had a group of seven uf us traveling from Iowa to Texas, so flights from Des Moines to Dallas for seven would have been cost prohibitive. For two or even three people, the equation may be different.

Q10: Caucus thoughts
You’ve mentioned a few times that you attend the caucuses in Iowa. What is that experience even like? I know that the candidates campaign in Iowa for a long time before the caucus. What are your thoughts on that whole process?
- Will

It depends on whether you’re attending a Republican caucus or a Democratic caucus in Iowa. I’ve attended both.

With a Republican caucus, it’s pretty straightforward. All of the attendees sit in the same room. They announce the candidates, then volunteers are able to speak for five minutes on behalf of each candidate. After that, there’s just a ballot vote, followed by a very open counting of the ballots.

With a Democratic caucus, things are different – and much more entertaining. At a Democratic event, there are no chairs. Instead, everyone stands around while a representative from each candidate gets to speak for a few minutes. After that, you simply go stand beside the representative of your preferred candidate. Then, they dissolve all groups that have less than 15% of the people in the room and those people have to pick another candidate. During this process, there’s usually a lot of politicking and pleading and the room can get quite loud.

The process is really fun, though it does usually feel like the culmination of several months of craziness. If you’re registered for a party that is having a contested caucus, you’re absolutely inundated with political mailers, robo-calls, push polls, and other such things. That’s been our experience, anyway.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

If there is a single mantra of The Simple Dollar, it’s this one.

Spend less than you earn.

There’s a reason that it’s my first rule of personal finance.

If you can spend less than you earn consistently over various time frames (less this week, less this month, less this year all at the same time), you’re going to be in great financial shape.

Spend less…
It all starts with spending. Do you have your spending under control?

Spending less than you earn means one thing above all else: being in control of yourself.

Are you able to control yourself when there’s a temptation in front of you? Are you able to control yourself when a friend begs you to go out shopping and spending money you don’t really have? Are you able to control your desire to go on an expensive trip when you don’t have your financial house in order? Are you able to control your feelings of want when you see that nice shiny new car at the dealership with all of those great features?

Most importantly, are you able to control these feelings consistently? Can you do it over and over and over again?

Spending less is about self-control, nothing more, nothing less.

Of course, that’s not to say there aren’t tactics that can’t help you down that path.

Start by channeling your excess money into a small emergency fund. Set a goal of having $1,000 in your savings account and get there as fast as you can. Move money from your checking account into your savings with each and every good decision you make. That emergency fund will be there for you when things like a car breakdown or a job loss happens.

After that, get rid of the credit cards. Cutting them up is a pretty good first step to help ensure self-control. Make minimum payments on all of your debts, then try to make a double or triple payment on the debt that has the highest interest rate. Repeat that, month after month, and you’ll see your debts shrinking instead of growing.

If you can achieve those two steps, you’re going to be well on your way down the path to financial success. You will be debt free and be making far more than you bring in per month. Saving for retirement will be easy, as will saving for a house down payment.

Of course, there is another side to all of this.

… than you earn
When people hear the phrase “spend less than you earn,” the focus is almost always on the “reduce spending” side of the equation.

Equally important is the “increase earning” side of the equation. If you make more money and leave your spending unchanged, you’ll immediately move from living paycheck to paycheck to spending less than you earn. If you are struggling financially and can’t seem to find a way to get a grip on your situation, the best move is to find a burst of short-term income.

One easy first step is to clean out your closet and sell off the unwanted stuff. Sell your unwanted DVDs and Blurays on eBay. Have a giant yard sale. Take all of your still-in-good-shape clothes to a local consignment shop. Get rid of all of those old collections that you no longer look at. This will generate some short term cash that you can quickly apply to an emergency fund or to your highest interest debt, as described above.

Another step is to earn a bit of extra money when you’re idle. If you’re sitting on the couch watching television, fire up a computer and do things like Mechanical Turk to earn a few dollars. Put that money straight toward your debts. You can also try something more ambitious, like starting a small side business or even working a part-time job. Apply all of that money toward improving your financial situation.

The thing to remember is that self-control is the factor that underlines all of this. For any of this to work, you have to be willing to sometimes say no to temptations and to let go to some of the non-essential luxuries. If you’re not willing to do that, then you’re not going to turn your financial life around.

Spend less than you earn. It’s so hard, yet so simple.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.