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The Simple Dollar

US one-hundred dollar bills are seen in this photo illustration at a bank in Seoul. Hamm writes that listening your inner child can sometimes lead to impulsive financial decisions, and has to be considered with every choice. (Kim Hong-Ji/Reuters/File)

When to listen to your financial inner child

By Guest blogger / 01.10.14

My three year old son is picky about what he eats, like most three year olds are. He doesn’t like most of the things that we serve for supper and isn’t afraid to be vocal about it.

My six year old loves art projects. She draws and paints and cuts paper and glues things together. She doesn’t like the cleanup part, though, and will often get quite upset during that part.

My eight year old doesn’t like going to bed. He thinks he should stay up quite a bit later than he does and makes sure that we know about it through lots of grumbling and protestation before bedtime. ( Continue… )

Juliette Vartikar and Jasper Claessen share a pastry and coffee at Area Four in Cambridge, Massachusetts on Sunday January 29, 2012. Even little decisions, like grabbing a cup of coffee with a friend, represents a stack of financial choices. (Ann Hermes/The Christian Science Monitor/File)

The decision stack: how to make the right financial choices

By Guest blogger / 01.09.14

Let’s say I’m sitting at a coffee shop waiting on a friend to arrive. I have a warm cup of something delicious on the table in front of me and I’m reading a website on my phone.

It’s a simple story, right? However, it’s one built upon a stack of decisions with financial implications.

Why did we choose to go out at all?
Why did we choose this particular coffee shop?
How did I travel to this shop, and how will I travel home?
Why did I choose to get the beverage sitting in front of me?
Why did I choose (or not choose) to get a food item as well?
Why did I choose to have a cell phone at all?
Why did I choose to have this specific phone?
Why did I choose to have this cell phone provider?
Why did I choose to have the data plan that I’m using?

That simple little scene rests upon these nine financial decisions – and likely upon many more, as these just happened to be the more obvious ones. All of those decisions are adding – or subtracting – dollars from that simple moment. ( Continue… )

A gift card kiosk in New York. (Mark Lennihan/AP/File)

The best and worst ways to use gift cards

By Guest blogger / 01.07.14

Annika sent in this great idea that I wanted to discuss in a post of its own:

I agree that gift cards aren’t a good idea for gifts, but I do find them pretty useful. We have a membership at Sam’s Club and they sell gift cards at a discount. If I know I’m going to be going out to eat or using one of those services, I just go to Sam’s Club, buy the discounted gift card, and then use that to pay for the meal.

Annika’s idea is a very good one. This is a great way to tack a little additional discount onto quite a few purchases thanks to a warehouse membership. It’s worth noting that this works at both Costco and Sam’s Club, the two warehouse clubs reasonably near our home.

Annika sent this idea in a few months ago, and since then we’ve used this idea three times. We bought a four pack of iTunes cards at a roughly 8% discount off of face value, a Granite City Food and Brewery card for 20% off of face value, and a Starbucks card for about 12% off of face value.

Each time, we bought the card in advance of a planned purchase. We were already planning on spending money at the business represented by each card before we bought the gift card. In two of the three instances, we used the full value of the card in a single day; in the third instance, the iTunes cards, we had extra cards and the remaining value stuck around as credit on our Apple account. ( Continue… )

Babes Malan of Fort Lauderdale, Fla., who goes by the stage name of Ashley Blake, holds a handful of dollar bills given to her while performing during a shpw at the Palace South Beach restaurant and bar on Ocean Drive in Miami Beach. Hamm argues that the idea of the popular '52 week money challenge' can be appealing, but it doesn't mesh well with most people's financial realities. (Lynne Sladky/AP/File)

The '52 week money challenge': Should you do it?

By Guest blogger / 01.06.14

Several of my friends recently sent me copies of a “52 week money challenge” that several of them are doing to save up about $1,400 this year. The challenge is best described by this table.

Note that I don’t have an actual source for this table. It was merely sent to me by multiple friends. I’m sure there’s an original source somewhere for this, but I never found an original source, just a ton of visual variations on it. Still, the math behind it is really simple, so it would be very easy to replicate it.

Anyway, the idea is simple. During the first week of the year, you save $1. During the second week, you save $2. Keep adding a dollar each week so that during the last week of the year, you’re socking away $52. Even without interest, this adds up to $1,378 over the course of a year.

The appeal of the plan is obvious. When you first see it and look at the first week, you can’t help but reflect on the idea that it only requires you to save one dollar this week, yet by the end of the year, you’ll have more than a thousand. That seems like impressive growth. ( Continue… )

A shopper walks down an aisle in a Walmart Neighborhood Market in Chicago. Knowing how much your household spends on groceries each moth is an important step in getting your finances on track, Hamm says. (Jim Young/Reuters/File)

Four habits of good personal finance

By Guest blogger / 01.05.14

In 2006, my life was a financial mess. I had credit card debt, student loan debt, and a car loan, and Sarah was in the same exact boat. We lived in a tiny apartment with no real hope of moving elsewhere.

By the end of 2011, we owned our own home and were completely debt free.

Naturally, such a turnaround took a lot of work and a lot of hard choices, but I’ve found that the biggest difference came from lots of little skills and decisions that, over time, made a huge difference in my life.

These skills didn’t appear overnight. Instead, they were grown over a period of months – even years. Eventually, they led to what I would call a “new normal” – a new “default” way of doing things in my life that relied on these skills.

I could write about lots of these little skills or habits. Here are four of the most powerful ones.

I can estimate my grocery spending with frightening accuracy
When I first started paying attention to our food budget, I quickly realized that I had little sense abut what I was putting into my cart. I was usually completely surprised by the amount I owed at the checkout, but I’d forget about that bill almost as soon as I left the store. ( Continue… )

Joel Tippens piles compost in the Ridgedale Neighborhood Association's community garden in Chattanooga, Tenn. Building a compost bucket for the kitchen can save up to $40 throughout the year on potting soil and fertilizer. (Allison Love/Chattanooga Times Free Press/AP/File)

Four frugal projects to kick off 2014

By Guest blogger / 01.04.14

The first weekend of the year is coming up. If you live anywhere in the northern half of the United States – or north of there – you’re probably going to be focusing on indoor activities for the weekend.

Thankfully, there are a lot of frugal projects you can take on. Here are four of them, along with how much each project will save you over the course of the year. Incidentally, I’m planning on doing each of these this weekend.

Shorten Your Dryer Vent Hose
The hose that connects your dryer to the air vent is often one of the biggest sources of inefficiency for dryer use. Quite often, when professionals install the dryer, they use a flexible dryer vent hose that enables them to install the hose quite far away from the wall, then move the dryer close to the wall.

This means that, in some cases, that air vent is winding around behind your dryer, creating lots of elbows in the hose that can accumulate lint. The longer the hose, the harder the blower in your dryer is going to have to work to expel the damp air out of the dryer. Your dryer will have to work longer and harder.

Even if your hose doesn’t need shortened, getting back there and cleaning it out can help your dryer work more efficiently. All you have to do in most cases is pull your dryer out a few feet, reach back there and disconnect the hose from the back of your dryer and the wall, then vacuum out that hose and reinstall it. If there’s a ton of excess hose back there, you can trim one end of the hose. Here’s a guide for the process.

This Old House estimates that cleaning out and shortening your dryer vent hose will save you about $25 a year, on average.

Build a Frugal Calendar
This is something well worth doing more frequently than once a year, but it’s still a great project to sit down and tackle this weekend, particularly if you have a new wall calendar that you’re launching for the year. Time to fill it up! ( Continue… )

The HP Chromebook 11 is displayed at a Google event in New York. Hamm offers tips on how to avoid e-mail scams. (Mark Lennihan/AP/File)

How e-mail and phishing scams work – and how to avoid them

By Guest blogger / 01.03.14

In yesterday’s reader mailbag, I answered a question from a reader who asked for simple ways to avoid identity theft online. I told the reader that the best thing that a person can do is to simply avoid clicking on links within emails.

By the end of the day yesterday, I had several follow-up emails from readers asking quite a few different questions about that statement, so I thought I’d explain it all in detail.

First of all, you should never fully trust that an email is actually from whoever it says in the From: field. It is rather easy to fake such information and it’s because of the implicit trust that people have of the email recipient that many scammers are able to get away with it.

Second, URLs inside of an email can easily be faked as well. Fake links are incredibly easy to embed within emails.

For example, let’s say you receive an email from what appears to be your bank. Let’s say that your bank is Citibank. ( Continue… )

A worker counts US dollar bills inside a money changer in Manila. If you give business gifts wisely, you could be saving yourself tax money. (Romeo Ranoco/Reuters/File)

Three advantages to living off a single income

By Guest blogger / 01.02.14

In 2012, we invested more than 50% of our net household income. In 2013, according to the numbers I just ran, we’re going to repeat that success.

What that means, in essence, is that Sarah and I (and our children) are living off of one income and banking the other income streams.

Our financial efforts in the five years before this have made this much easier. We paid off all of our debts, including our mortgage, our cars, our student loans, and our credit cards. Along the way, we got used to living below our means as we channeled so much of our income toward debt repayment.

Still, the last two years have taught us several useful lessons when it comes to one’s finances.

It is very much worth it to have money in the bank. Having money in the bank is an incredible stress reliever that echoes through every aspect of your life.

If either Sarah or I were to lose employment, we would be fine for quite a while. If a major accident happened and we had to replace a vehicle, we could easily do it. Appliance failure or furnace failure? We could cover it without breaking a sweat.

This simply reduces the stress of everyday life. A strange noise in the car isn’t cause for panic. Rumors of a layoff in the workplace doesn’t cause stress-filled nights. A washing machine breakdown doesn’t leave us wondering how we’re going to pull this off.

To achieve that sensibility, you have to sacrifice some material pleasures. Again and again, though, I see how having less stress throughout your life is well worth letting go of some of the lesser desires and some of the more unnecessary luxuries. ( Continue… )

A runner jogs across an overpass crossing Storrow Drive in Boston. Hamm says small decisions, like going for a jog instead of playing a video game, are key to a successful year. (Ann Hermes/Staff/File)

How to accomplish your goals in 2014

By Guest blogger / 12.31.13

2013 has been a pretty good year for me. I lost about 25 pounds. I wrote a pretty good first draft of a novel that’s currently “resting” (meaning I intend to drag it out again in a few months to start editing it and figure out whether it’s worth trying to publish it). I launched a great writing relationship with U.S. News and World Report. I feel like my relationship with Sarah is really strong right now (and I’ve always felt good about my relationship with my children). Our family’s net worth went up significantly, as we largely lived on Sarah’s income and banked my own income.

It feels really good to be able to look back at the year and know that I accomplished some things, as did Sarah and I as a collective group. In quite a few ways, our lives are in a better place today than it was at the end of 2012.

Now, I turn that same question on you. What did you accomplish this year? Did you achieve anything that you’re proud of? (I certainly hope so.) Did you not really achieve anything of note? (I hope that’s not true.)

I’ve had years where I’ve not accomplished much. (2004 comes to mind, actually – if I had a “lost year” in my adult life, it was 2004.) Other years, I accomplished an amazing amount (2007 comes to mind here for me).

Those years filled with accomplishment feel good, even years and years later. Good years are ones that fill you with pride. ( Continue… )

A bird used by a Chinese man, unseen, to perform, holds a yuan collected from a tourist as it prepares to drop it into a piggy bank, in Houhai district, in Beijing. Hamm uses a weekly allowance and discussions about spending decisions to teach his children about personal finance. (Muhammed Muheisen/AP/File)

Teaching your children frugality

By Guest blogger / 12.28.13

One of the most rewarding aspects of being a parent is watching as your child’s mind grows.

An infant relies on you for virtually everything, but as time passes, that infant becomes a toddler, then a child. At each step – seemingly on a daily basis – that child’s ability to make decisions and think things out becomes stronger and stronger and stronger. At the same time, that child is starting to build habits that are going to stick around well into adulthood.

In other words, those middle childhood years, of which two of my children are progressing through right now, are prime years for teaching the ins and outs of frugality and smart use of money.

Parents – myself included – have the opportunity to burn these kinds of lessons into their child’s head on a daily basis. Here are some of the things I do to encourage my children to use frugality as part of a normal and healthy relationship with money.

We talk through their spending decisions. As I’ve mentioned before, we pay our children a small weekly allowance – just a few dollars a week. For most of the things that they wish to buy, they have to save for at least a few weeks.

When they finally decide to buy something or reach their savings goal, we talk about what they’re going to buy. Is this really the coolest thing they could use their money on? Does this thing just look cool or will it actually be fun to play with?

In other words, we try to get them to be discerning about what they spend their money on. ( Continue… )

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