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The Simple Dollar

Volunteer Lana Parker, 13, digs a post hole in this June 2012 file photo, while other volunteers, in background, work to remove a rotted post before installing a patio fence for William Strohmeier, who is disabled in Sedalia, Mo. Having your children volunteer and do charity work are some ways to make sure they do not develop a pattern of entitlement. (Sydney Brink/The Sedalia Democrat/AP)

Material world: Tips to help children grow up free of entitlement

By Guest blogger / 07.12.12

Our three kids are really blessed. They have involved parents that are in a solid enough financial state to provide for them without worry. They have two sets of grandparents and a great-grandparent that dote on them, and they are the first grandchildren of two of the grandparents, so they get a special helping of attention. They have a small army of doting aunts and uncles, great aunts and uncles, cousins, and family friends that care deeply for them.

With all of these relatives and friends that care for these kids, holidays and birthdays sometimes turn into an overwhelming cavalcade of gifts. Even outside of those events, people will sometimes pop in with gifts for the kids.

The challenge that we often face as parents through all of this is entitlement.

How do we keep all of this from rounding a corner into a sense of material entitlement, one that will cause them to spend their lives, on some level, feeling that material abundance is normal and worth spending a great deal of money for? It’s a challenging issue.

What I do know is that a large portion of my sense of right and wrong came from my childhood experiences. I was influenced greatly by what my parents told me and what actions they took themselves. I think that’s a typical result of a childhood with involved parents who showed love, kindness, and attention.

Because of that, Sarah and I are really mindful of how we can use our day-to-day actions and the things we discuss with our children to constantly nudge them away from a sense of material entitlement. Here are some of the things we’re actively doing.

Remind them to be thankful. When someone gives them a gift, we not only remind them to be thankful in the moment (encouraging them to say “thank you” and telling them that they’ve done well later if they remember to say thanks on their own), we also remind them to be thankful later. We encourage the writing of “thank you” notes for gifts or pleasant occasions.

Expose them to others in need. Right now, our children really don’t have a skill set where they can do much effective volunteer work with the disadvantaged, so our goal right now is to simply make them aware that they have more than most of the people in the world. The constant accumulation of “more” can seem less important when compared to the plight of others, and being aware of such situations makes an enormous difference.

Encourage them to give some of what they have to others. We give them an allowance, but a portion of that allowance must be given to a charity of their choice. Every so often, we do a “toy purge,” and out of the purged toys, we give many of them away at Goodwill, and during this purge we involve them in the choice of what to eliminate and also remind them of where these items are going.

Do enjoyable things without material items. Most of our evenings are spent out in the yard. They do a lot of things I did when I was a child – play in the sandbox, help in the garden, play tag, run through the lawn sprinkler, and so on. We go to free parks all the time. You don’t have to have a bunch of stuff to have fun.

Talk about the issues involved. What is a gift? A gift is not something that you should ever expect. A gift is something given to you by someone as a way of showing they care. What are possessions? They can be nice to have, but the fun comes from within you. You can have fun with anything. These are the types of discussions we have regularly.

These are the tactics we’re using to reduce a sense of material entitlement in our children. Will it work? Only time will tell, but I feel pretty good about things when I see our kids choosing to play in a state park instead of hoarding their toys or getting excited about giving some of their allowance to a good cause.

In this June 2012 file photo, an electronic price tag shows prices for groceries at the new commissary at Fort Campbell, Ky. While grocery shopping can be a good way to save money, make sure you always shop after eating, to cut down on impulse buys. (Kristin M. Hall/AP)

Eating before grocery shopping cuts down on impulse buys

By Guest blogger / 07.11.12

As I discussed before, one of the biggest unnecessary costs when it comes to the grocery store is impulse buying. You wander through the grocery store and mostly just get items that you need for meals, but you see a thing here and a thing here that looks good and they wind up in your cart.

These temptations are much, much more effective when you go into a grocery store hungry. Many items look good to you and some look incredibly delicious. When something is more tempting, then it’s more likely to find its way into your cart.

Because of this, I make sure to eat a good meal before visiting the grocery store. It drastically cuts down on my food impulse buys, thus saving me a lot of money.

Instead of drooling over every delicious-looking food in the store, I instead just stick to my grocery list. I don’t have a hunger for the items in my cart. I just know I’m going to need them for the week. The less impulse and desire I have, the less likely I am to buy unnecessary items.

Sometimes, this “good meal” strategy just doesn’t work for my schedule, though. For example, sometimes I pencil in a grocery store stop at the end of several errands in town so that the milk doesn’t get warm while I’m running other errands.

In those kinds of situations, I plan ahead by packing a filling snack. Often, I’ll eat a protein bar or something just before going into the store. I want something that will expand a bit in my stomach and fill me up so I’m not tempted by the foods that I see.

Of course, one problem for many people is that they hit an energy valley after they eat. Often, this means their mind isn’t clicking quite as fast as it is at other times during the day and this can often result in impulse buys.

My perspective has been that this can actually be a very bad thing in non-food stores. For example, if I drink a cup of coffee and eat a scone in a bookstore, I’m more likely to wind up purchasing a book simply because of my altered energy and focus levels. (I’m pretty sure that’s why bookstores often have coffee shops in them, Ikea has a cafeteria, etc.).

Thus, when I’m shopping for non-food items, I tend to shop when I’m not full at all and perhaps even slightly hungry. That’s when my mind is sharp and I’m quick to talk myself out of impulsive purchases.

You can use these two tactics in concert quite well. If you’re planning a shopping trip, do all of your non-food shopping at the start of the trip and don’t eat before you go. Just before you make the switch to shopping for food, eat a snack so that you feel at least a little full. Then, shop for food.

The purpose of both of these tactics is to keep yourself from impulsive purchases. Impulsive purchases are little more than a drain on your finances, and they can be particularly painful when you’re struggling to keep up with your monthly bills.

In this August 2010 file photo, patrons enjoy a meal at a Burger King in Springfield, Ill. The average American spends $232 per month eating meals prepared outside the home. Eating out less is another good way to save some dough. (Seth Perlman/AP)

Common dollars and sense: Eating less fast food does a body good

By Guest blogger / 07.10.12

The average American eats an average of 4.2 commercially prepared meals per week. In other words, as a nation, we eat out between four and five times a week, on average. This number equates to 18.2 meals in an average month eaten outside the home.

When I first heard that statistic, my initial reaction is that the number was high. I eat out perhaps once a week at this point in my life. However, when I reflected back on earlier stages in my life, that number seemed completely reasonable.

Take a young professional who eats out for lunch three times a week and follows that with a couple of dates on the weekend. Take an elderly couple who finds it much easier to order food that’s delivered that to work in the kitchen to make it themselves. Even many families like ours will order some pizza after a long day of outdoor activity.

What kind of money are we talking about here? The average American spends $232 per month eating meals prepared outside the home. Given that there’s 18.2 meals eaten outside the home in an average month by the average American, the average meal outside the home costs a person $12.75.

Again, that’s reasonable. You might eat an inexpensive lunch or two that’s below that number, then spend much more than that on a nicer dinner eaten outside the home.

However, when you start comparing that to the cost of preparing foods at home, it becomes pretty clear that there’s a lot of money involved here.

A couple summers ago, I did a food series where I prepared a wide variety of meals for my family at under $10 per meal. Those meals fed four (at the time) of us quite well and often left food for the following day’s lunch for some of us. Thus, the cost for these meals was well under $2 per person per meal.

Let’s say, though, that not all meals at home are going to be that inexpensive and assume you’re averaging $4 per meal per person prepared in the home.

If you were to simply prepare all meals at home, you’d move 4.2 meals from restaurants to your home. At an average cost of $12.75 per meal, you’d save yourself $8.75 for each of those meals. In other words, the average American would save $36.75 per person per week by moving all of their meals from restaurants to home-prepared meals.

Let’s look at a more realistic picture. Take a family of two adults and two teenagers, for example, and let’s say that they simply chose to eat one less meal out per week. On average, that family would save $35 from just that one meal change.

For me, I like it better when eating out is a pleasure and not a routine. Because I eat out much less often than I once did, it’s something of a treat to eat at a restaurant, whereas it was once completely the norm.

Try cutting back a bit on eating out. Brown bag it to work an extra time or two a week, or prepare a nice meal at home with your family instead of heading out on the town. Your wallet will thank you.

Children play with a ball near a television set equipped with a traditional "rabbit ears" antenna in this February 2009 file photo taken in Seattle. Watching less television is a good way to save money while opening up more time for playing outdoors or spending quality time with friends and family. (Ted S. Warren/AP/File)

Pull that plug: Watching TV is more expensive than many assume

By Guest blogger / 07.09.12

Right off the bat, let me make it clear that I don’t think television watching is an inherently bad hobby. My primary concern with it is that it’s an expensive hobby. Let me explain what I mean in detail.

For starters, the average American household has approximately three television sets. The average television set lasts around six years, and the average television set costs $400. That means television costs about $200 a year for the average American home just for the hardware, on average.

The average American household includes approximately four people, and the average American watches 2.8 hours of television per day. Thus, in the average house, the televisions are in use for 11.2 hours per day.

The average American television consumes about 120 watts while in use. Thus, the average household uses 1.3 kWh per day of electricity to power their televisions, or 475 kWh per year.

Also, somewhere between 75% and 90% of American homes have some sort of cable or satellite package. Assuming you have one HD cable box with a DVR and two normal cable boxes, you’re using somewhere around 550 kWh per year just to power the cable boxes.

Assuming an average cost of $0.15 per kWh for energy, the average American household is dropping $150 a year to power their televisions and cable/satellite equipment.

On top of that, the average monthly cable bill was $71 in 2009. While I was unable to find a more current exact number, I did find data that says cable bills rise an average of 5% per year, meaning that a family’s monthly cable or satellite bill this year would be $82. This would add up to $984 per year for the average American household.

Adding all of this up, the average American family is spending $1,334 per year to keep the televisions on and loaded with programming. That’s an expense, any way you slice it.

(Remember, this is the average family. Many families will have fewer televisions or a less expensive package, just as many families will have more televisions and a more expensive package.)

What are you getting for that $1,334 per year? Three hours of each day for the average American is spent watching television. Much of that time is spent selling you products. Even if you ignore the commercials (and they’re designed to not be ignored, even if people think they’re ignoring them), product placement within the programs is incredibly prevalent, with tens of thousands of instances of product placement found just within a few months of just primetime network programming. The shows themselves sell you things, even when they seem to have nothing to do with sales.

If the average American family tossed out their televisions, they would have three more hours per day for other activities per person, save $1,334 per year in energy and programming costs, and significantly reduce their exposure to marketing tactics, which would reduce their desire to buy products.

Even cutting back on television would help in those areas. Limiting television to one hour per day would free up two more hours for the average American, trim their energy bill back a bit, and reduce their exposure to marketing. Cutting one’s cable package would also significantly reduce spending, as can choosing not to replace the third set in your home.

Television seems inexpensive on the surface because the cost of it is stripped away from the everyday use. Most of the time, you go hit a button, the television is on, and it seems as if it comes into our homes for free. However, there is a lot of cost associated with television use, and you can greatly cut back on that cost with just a few simple choices.

Euro coins are seen next to US dollar bills in this 2007 file photo. Hamm recommends tracking even small payments to your student loans (even just a few dollars), to gain a helpful sense of accomplishment and progress. (Michael Probst/AP/File)

Student loans overwhelming? Make a chart to track your payment progress.

By Guest blogger / 07.09.12

In order to encourage everyone in our family to get outside and exercise as much as reasonably possible this summer, Sarah and I instituted a family program called “Mileage Club.” Here’s how it works.

At the start of the summer, Sarah and I made a giant pile of punch cards, each numbered one through twenty. Each person got a punch card of their own.

Near our house, there’s a park with a loop that measures almost exactly a quarter of a mile. Whenever anyone completes a lap in that park, they get a punch on their mileage club card. Twenty punches and you have a completed card.

Whenever members of the family reach certain milestones, they get particular rewards. For example, two completed cards means a special dessert treat, and four completed cards means a small (under $10) item from the store of the winner’s choice. There are a few family-oriented rewards and a few really big rewards, too.

The entire purpose of the system is to reinforce good behavior through microrewards. The rewards don’t matter too much in the big scheme of things. What matters is that everyone begins to develop a sense that the normal routine of a day involves getting some outdoor exercise.

Is it successful? Everyone in our family has completed quite a few cards. The family champion for the moment is our six year old son, who will happily spend hours over there walking in circles if we let him. The recent heat wave has slowed down the accumulation of completed cards a bit, but we’ve all hit at least a reward or two.

Why has it worked so well? How can it be used in other situations? Here are a few thoughts I’ve had on that subject.

First, a big part of the success here is the visual nature of the progress. A punch on a card is very clear, as is a completed card. There’s no ambiguity at all when it comes to the progress made. It’s extremely visual and clear.

How can you make it clear for other goals? A calendar page will do the trick, for one. A big “X” on each successful day on a calendar page is a pretty clear indication of success or failure. Another idea is a simple collection of items; for example, if you pick up a small rock on each long walk you do, then the collection of rocks represents your progress with walking.

The microrewards are relatively unimportant. All you need to ensure is that they’re relatively small and that they don’t undo a significant amount of the positive progress you’ve made.

In this case, most of the goals are unrelated to health or exercise. One of the rewards is a nice dessert, yes, but none of the rewards involve days off from exercise or anything like that. A long run of success isn’t an excuse to stop succeeding.

The social aspect of this is a strong one. Quite a lot of the fun is showing our progress to others within the family (and, to a small extent, outside the family).

There are a few ways to resolve this. One is to simply display a visual indication of the progress you’re making in your home, or perhaps create a Twitter account to share it. Another is to find a buddy who is aiming for similar goals as your own.

So, how could you apply this idea to finance? It really depends on what your goals are.

For example, let’s say your goal is to pay off $100,000 in student loans. One thing you can do is create a 100×100 grid and put it on your wall. Each square represents $10 toward paying off your loan. Whenever you make a payment, fill in a square for every $10 your debt goes down. If you can make an extra payment here or there, do so and mark it on the squares.

As the squares fill in, you’ll feel naturally pushed to keep going with it and find new ways to spare $10. If it’s displayed in your home, friends and family might ask about it, giving you a way to proudly show off your progress.

For microrewards, you could agree to treat yourself in some way whenever you fill in five rows of squares. A small reward, such as a new book or a trip to the movies, can be a great motivator for this. It could be something free, of course, but you’re likely rewarding yourself in free ways throughout this journey.

Every great journey involves a lot of little steps. Sometimes the trick is to keep focused on each little step. Do that enough, and you’ll find that you’ve reached your goal.

A man carries an air conditioner he purchased at a P.C. Richard & Son store, in New York last week. Keeping your air conditioner running like new takes regular maintenance, but not a lot of effort. (Richard Drew/AP/File)

Are you neglecting your air conditioner?

By Guest blogger / 07.08.12

Your furnace and air conditioning unit are designed to be quite sturdy, but they aren’t designed to run forever. Their biggest enemy? Dirt and dust.

Both your air conditioner and your furnace (along with your blower) are in the business of changing the temperature of air and moving this air throughout your home. With that much air, it’s unsurprising that dust and grime begin to build up over time. The more dust and grime you have, the harder your air conditioner, furnace, and blower will have to work to do their job. Too much dirt and they’ll stop working.

In other words, if you want your air conditioner and furnace to run for a long time, you need to do a little bit of maintenance work on them.

Take a look at that air conditioner. Some of the coils are blocked with gunk. It’s simply not running as efficiently as it should, which means the unit has to work harder to cool the home. If it’s overworked, it’s also more likely to break down.

How can you fix that? Cleaning your external air conditioning unit is actually pretty easy. Just stop by your local HVAC supply shop and buy some cleaning solution (one jug of it will be enough for quite a few cleanings).

Go home, cut the power to your AC unit using the breaker box, then wet down the coils on your unit with a garden hose. Using gloves and safety glasses, spray on some of the cleaning solution, let it sit for a while, then spray the coils down again with a garden hose to wash away both the grime and the cleaning solution.

Wait a bit longer, then flip the power back on. It’ll look like new and run more efficiently, too.

What other steps can you take? Make sure you change the filter in your blower on a regular basis. Go down to your basement (or wherever your blower is located) and check the filter in your blower unit. If you’re not sure when you last changed it, it’s probably time to change it. Mark down the size of your filter, then head to your local hardware store and pick up a replacement filter.

Swapping the filter is easy, but the important step is to note the lifetime of your new filter and mark on your calendar when you need to change the filter.

If you’re feeling adventurous, you can clean the blower as well. The blower is a giant fan usually found next to the filter. Turn off the breaker and remove the cover on the blower unit. Most of the time, these just unplug like a normal fan. Unplug it, then use a brush to clean off the blades and a vacuum cleaner to clean the area around the blower unit. Plug it back in, put it back in place, put the cover back on, and flip the breaker again. You’ll have more efficient air flow, which means a lower energy bill.

There are other regular maintenance steps well worth taking for your furnace and air conditioner, but they usually require additional equipment (like a high-powered vacuum) and can cause damage if done incorrectly, so you’re better off having an expert handle them.

The end result of these tasks is a more efficient heating and cooling system in your home. It will run less, which means a smaller energy bill for you, and it also extends the life of your air conditioner, furnace, and blower system, meaning you save long-term on replacement costs.

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.

With the wealth of free games available to play online, Hamm argues that you can easily avoid paying to play computer or video games ever again. (Gillian Wong/AP/File)

Never pay to game again: 5 great free online games

By Guest blogger / 07.07.12

I’ve been an electronic gamer most of my life. I was playing games on my older brother’s Atari when I was four. I mastered Super Mario Brothers when I was nine. I’ve owned at least one video game console from every console generation.

Yet, today, I spend more time playing free games than anything else.

The simple reason for that is that there are so many excellent free games out there that a person can play on their computer that I scarcely feel the need to pay for a game.

In order to prepare this post, I kept a list of all of the free games I’ve played on my computer over the last two months. Here’s some of that list, just so you can get a great sampling of the free computer games available.

League of Legends
 League of Legends is a fast-paced competitive online game that mixes fast-paced game play and careful planning in an interesting mix. In the game, you play as a champion who battles other champions in online matches. The gameplay is really straightforward – mostly, you’re competing on a large map (that’s extremely reminiscent of Warcraft III) where you move your character around with the mouse and order it into combat against the enemy. As you battle, your character grows stronger, learning new abilities, and it also picks up gold, which you can use to buy better weapons and armor within the match. Usually, you play in groups, where two teams of five players compete against each other. The game also includes a really smart matchmaking system which pairs you against people of a similar skill and experience level as you.

Desktop Tower Defense
 Desktop Tower Defense is a very simple game in which you place towers within a small rectangle while little critters run across the screen. The towers you place shoot the critters and, with each critter taken out, you earn a bit of gold. However, each wave of critters is a bit stronger than the next, so you have to use your gold to either upgrade your current towers or place new ones.

 MotherLoad is a game not unlike the classic video game Dig Dug. In this game, you’re a miner that’s landed on an alien planet and your job is to dig deep into the ground for valuable ore and jewels. Of course, you need to return to the surface regularly to re-fuel and sell your goods, and if you can’t make it… you get the idea.

 I love playing the card game bridge, but I don’t really have any opponents in my area. Thus, I play online, and this is my favorite place to play. However, if you go here and don’t know how to play, you’ll be in trouble. I suggest learning using the American Contract Bridge League’s learning software, which is also free.

The Kingdom of Loathing
 The Kingdom of Loathing is a free comical RPG (think games like Final Fantasy, but with humor and stick figures). It’s completely free, can be played in your browser, and has loads of things to do. It’s fairly hard to describe; thankfully, they offer a pretty clear description of the game.

On top of these, there are a ton of games to play for free on social media sites such as Facebook and Google+. I confess to having not explored these much, but I do know there are many, many options available, both for casual gamers and for in-depth gamers, too.

The thing to remember is that many of these games finance themselves either through advertisements, donations, or micropurchases (where you spend a dollar or two to buy additional items). Be very careful with the micropurchases. Often, there’s plenty of games to play without diving into them.

Regardless, if you enjoy playing games, there are a lot of great games out there to play without spending your hard-earned money.

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.

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In this June 2012 file photo, books on the shelf of Zachary Jones, general manager of the Twodot Land and Livestock Company, in his home office on near Harlowton, Montana. Reading offers benefits for everyone, from the loneliest rancher to the busiest Wall Street broker. And, even better, it's practically free to do. (Ann Hermes/The Christian Science Monitor )

The perfect hobby? Reading books is fun, cheap and good for you

By Guest blogger / 07.06.12

Reading is an incredibly inexpensive hobby that provides so many benefits.

Most of the time, it requires little or no electricity to engage in reading, so you’re not burning up watts and adding to your energy bill. If you read outside or in a well-lit house, there’s no cost at all during daytime hours. At night, a tiny LED light eating less than a watt will provide adequate light for you to read by. 1,000 hours of usage of such a light costs about $0.15.

A single good-sized book will provide you with many hours of entertainment. Depending on the size of the book, a book will take me between two and twenty hours to read. A larger book, naturally, is at the higher end of that scale. It’s something that will involve me over a period of time.

Alternately, a single good-sized book will provide you with knowledge or enlightenment (and, sometimes, entertainment as well). A good book will make you think about some aspect of the world around you and make you reconsider that aspect a little, whether it’s human relationships, some aspect of the physical world, or an intriguing new idea.

Even better, that single good-sized book can be acquired for practically nothing at your local library or used bookstore. Your local library has thousands of books that you can borrow for free. Your local used bookstore has thousands of books you can keep for just a pittance. The acquisition of a book is very inexpensive, particularly when you look at it per hour spent reading the book.

A book can be read in small pieces when you have a five minute gap or in large chunks when you have a lazy afternoon. If you’re waiting for a few minutes until the water’s boiling for supper, you can read a page or two. When you have hours to burn on a cold winter’s day, a book can be your company then, too.

Most books are incredibly portable. I can’t tell you the number of times I’ve gone somewhere with a paperback shoved in my back pocket. If you carry a purse or a backpack, you have plenty of room for virtually any book you might want to carry.

There is a nearly infinite variety of books out there, so you can surely find one or two that match your interests. There’s a book out there for almost anything you can imagine. Whatever it is that you enjoy, there’s a book somewhere that’s going to be somewhat close to your exact interest.

The act of reading improves your ability to absorb and comprehend written information, helping you in virtually any career path. There are very few jobs today that don’t incorporate written information or instructions, and the more you read, the easier it is for you to absorb that information and execute your job better.

Reading also improves your cultural literacy, making it easier to find shared conversation points with others. The more you read, the more ideas you have in your head and the more ways you can find to connect with the people around you.

Reading can be surprisingly social, too. I love discussing books with my friends, particularly ones we’ve both read. Often, we’ll choose to read the same books for the discussion opportunities. Book clubs take that idea to another level, turning books into a true social event.

Reading is a wonderful hobby, and it would be even if it didn’t happen to be incredibly frugal as well.

Bleecker Street Records in New York, NY, holds a collection of new and used vinyl records from various artists in this June 2008 file photo. The shop managed to stay in business selling CDs and DVDs, but for those who would prefer not to spend any money, some websites now facilitate the swapping of CDs and DVDs for free. (Ann Hermes/The Christian Science Monitor)

High-tech swap meet: Exchange CDs, DVDs and books online

By Guest blogger / 07.03.12

For years, I’ve been trading books online using PaperBackSwap. It’s such a wonderful service that’s fueled a lot of my reading over the past five years or so.

When I first signed up for the service, I swapped a ton of books. I went through my shelves, packaged up several dozen books that I knew I wouldn’t read again, and shipped them out (it really didn’t cost much to ship them).

In exchange, a trickle of books started arriving in my mailbox. Books that I actually wanted to read. Books I’d wanted to read for a long time, like A Summons to Memphis and American Pastoral. Books I wanted to read to my children.

In other words, it was a great deal.

Here’s how it works.

You sign up for an account on PaperBackSwap. When you sign up, you’re asked to list ten books that you own that you’d be willing to trade by mail. When you do that, you get two “credits.” You can use a single “credit” to request that any of the five million (or so) books listed on PaperBackSwap by other members of the site be sent to you.

So, how do you get more credits? You list more books. If someone on the site requests one of the books you’ve listed, you just print out a mailing form (provided to you by the site), wrap that form around the book (perhaps with a bit of additional wrapping), tape it up, and mail it. When the other person receives your book, you get another credit.

Shipping the book (via media mail) costs about $2. So, in essence, for $2, you get a book of your choice mailed to you (and also pass on one of your unread books to someone who will enjoy it).

In my eyes, that’s an exceptional deal. Of course, I’m a heavy reader, so having a flow of fresh books is a very good thing.

Let’s say you don’t enjoy reading, though. SwapACD does essentially the same thing for music CDs. SwapADVD (which I’ve used a fair amount) does essentially the same thing for films.

In each case, you mail out your own items using media mail for about $2 apiece and then eventually receive replacements (things you want to read or watch or listen to) in the mail for free.

Trading media by mail is a great convenient way to refresh your book, DVD, or CD collection at a very low price. Give it a try!

Kansas state Sens. Susan Wagle, of Wichita, and Mark Taddiken, of Clifton confer during a Senate debate in this May 2012 file photo at the Statehouse in Topeka, Kan. Both support creating a 401(k)-style retirement plan for new teachers and government workers. Navigating the many options of a 401(k) plan can be a tricky and confusing process in itself. (John Hanna/AP)

401(k) strategies: Should money be taken out before or after taxes?

By Guest blogger / 07.02.12

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. Cell phone life expectancy
 2. MLM question
 3. Discovering new music
 4. Asking for money at wedding
 5. Cold homemade laundry detergent
 6. Prayer
 7. 401(k) withdrawals: before or after taxes?
 8. Pennies
 9. Interest rate versus APR
 10. Interest rate increase

Everyone in my family has brown hair except for our youngest child. I’ve never noticed any effects on my hair from the swimming other than it feels soft after swimming and loses a bit of shine.

Recently, after one of our regular swim sessions at a local pool, a person asked us if our youngest had ever had green hair from swimming (as his hair is very light colored). She suggested (from experience) that we should use conditioner in his hair just before getting in the pool.

Given that her hair looked great, I thought this was a tactic I’d pass on to any readers who were spending a lot of time in the pool this summer.

Q1: Cell phone life expectancy
 I’ve just spent several weeks, several hours trying to fix my cell phone through the store (they replaced my SIM card because the old SIM cards weren’t working on the new 4g network). Through their tech support. Their final solution was a hard reset (wiping my phone clean and starting over again). So far so good, except I still have the same original problem. The phone wasn’t synching with my email accounts, calendar or contacts.

In the setting back up phase, I have just found out that my Windows Mobile 6.x operating system is no longer supported by Microsoft. They are forcing everyone to move to Mobile 7, i.e., new phone. The apps store is no longer available, including the software to sync to my PC.
 I just tried an alternative way of syncing through my gmail account. It’s not working either.

Apparently, my 2 year old phone is obsolete. I feel like I’m being forced to migrate to a new phone.

I don’t do games, internet or need apps.
 I just want text, email, calendar and contacts on my phone. Right now, I get 25% of what I want and what I had.
 I use Wi-Fi, no data service needed.
 The big thing, I want something that’s going to last 4-5 years.

SO NOW, I’m researching a new cell service and phones. Decided to check which might have the longest life expectancy. Of course, there’s no such research, except some antecdotal information. Looks like the average life expectancy on a cell phone is 12-18 months.

I am willing to give up email, meaning give up the smart phone for something simplier, if it means I can keep the same phone for 4-5 years.
 Is that so unrealistic?
 What are the cell phone companies intentions? Are they going to push everyone to smart phones?
 What’s the average life expectancy of the simpler phones? Is it better than the smart phones?

Do I go with the newest operating systems and the newest device? With the assumption that they all have about the same life expectancy and just leapfrog the timing. And lower my expectation of longevity to a maximum of 2 years? I hate that idea. That goes against every frugal fiber of my being.
 - Cal

Your biggest concern seems to be software obsolescence on your cell phone, and that’s a tough situation. The cell phone market moves pretty quickly through software on the major smartphone operating systems (Windows, Android, and iOS).

The reason for that is that most cell service providers operate contracts on a two year basis and then offer heavily discounted phones for new contract signings, meaning most people do replace their phones at around the two year mark. The entire market basically revolves around the idea that everyone’s switching their phones in two years.

If I were you, I’d just get the best “free” phone from your provider of choice and hop on the two year rotating bandwagon. It’s what I’ve been doing for more than a decade now and it’s worked fine. Even the low-end phones have most of the features you describe. For example, U.S. Cellular – my provider – offers two phones for free with a new contract that do everything you describe. Other providers have similar low-end offerings.

Q2: MLM question
 I have a question about MLMs if you have time. A friend of mine is doing zeekler and says she is able to make a lot of money with almost no work. This always is a red light to me because I believe it almost always takes work to make a lot of money. Do you have any opinion on zeekler? Thanks in advance!
 - Andy

Zeekler in essence works like nearly every other MLM/network marketing business out there. Essentially, anyone can sign up to sell the product for a commission, which in this instance is auction bids, but it takes a lot of effort to sell these bids. So how do people make money? They convince other people to sign up to sell the product, using the original person as a referral, and the referrer gets a cut of the sales commission.

All of these systems work using more or less that same model. You only make a lot of money if you’re near the top, meaning you have a lot of people you’ve referred who are out there making sales.

Your friend might be in this position with zeekler, but it’s also very likely that your friend is mostly just seeking another rep that used them as a referral – in this case, you.

I don’t like this business model very well. While there is nothing inherently dishonest about it, the nature of the system tends to draw in people who use really shady practices, plus it’s often hard for people just starting out to build a big empire of referrals as the market is already saturated with them.

Q3: Discovering new music
 How do you go about discovering new music? All of the radio stations around here seem to play the same eight songs over and over again. I like some of the music my kids listen to but a lot of it is awful. There’s got to be a better way of finding interesting new stuff.
 - Jerry

I usually either use Youtube or Pandora.

With Youtube, I just look up videos of songs I know I like, then follow the “recommended videos” links a few times until I start seeing videos for music I’m unfamiliar with. As long as I stick with music that I know I like, I’ll usually end up finding stuff that’s at least tolerable. For example, last week I spent a lot of time discovering Shirley Bassey on Youtube.

With Pandora, you can set up a radio station based on an artist that you like. That station will mix in songs from other artists, and you can vote these new songs up or down to help Pandora figure out what you like and don’t like. I’ve found a lot of music this way.

Q4: Asking for money at wedding
 I am a recent law school graduate who is getting married in October. Currently jobless, although there is part time work waiting for me in August after the bar. My fiancee is a PhD candidate on a stipend. Needless to say, we both have some sizable student debt.

As we were getting our wedding registry together, it occurred to me that we really don’t need much at all. “Need” is even too strong a word for our situation. We’ve either thrifted everything or got it second hand through family. It all works, and I can’t imagine why we need new items that serve the same function at this juncture in life. They’d be nice, true, but they aren’t necessary.

And so, I thought, what are some things that are holding back the next stage of our lives? What could people really help us with, as generous family and friends are prone to do for weddings?

My answer: our student loans. Realizing, of course, that the social sentiment of gifts is important, and that my idea is a bit weird for the circumstances, I’m wondering whether we should just be asking for money to help us start our lives. On one hand, I don’t want people to feel offended by that request; it could be viewed as too forward. On the other, our loans are truly the biggest impediments to getting to that next phase of our lives together. My friends and family are generally very understanding people; but there is a bit of tradition and practice involved in a wedding.

So, if you have any input on that, I’d really appreciate it. Do we forego the wedding registry and ask for money, in lieu? Or do we not do the registry and say nothing? Or is this just a bad idea?
 - Geoff

This would be something to discuss with the people closest to you (parents and perhaps grandparents and siblings), but I wouldn’t broach the subject with the wider group of people attending your wedding.

The important thing to remember is that a wedding gift is just that, a gift. People are choosing to give you something. The only reason registries exist is so that people who choose to can use it as a hint as to what gift to get for you. Telling someone what gift to give you is rather tactless.

If you receive a gift that you won’t use, you can usually return that item, of course, which quietly solves the problem.

Q5: Cold homemade laundry detergent
 I’ve been using your homemade powdered laundry detergent in my front loader, and I just noticed today when I pulled my clothes out that there were goopy lumps of detergent on them. I only use the cold cycle, and I use about 2 tablespoons per load. Have you ever had this problem? If so, how did you correct it? I am assuming that the cold water didn’t do a good enough job dissolving the grated soap in my detergent.
 - Kelly

I haven’t personally experienced this problem. We have a top-loading washer and I wash most clothes on warm-cold or cold-cold and I haven’t seen “globs” in my clothes that I can recall.

Typically, I add some water to the basin before adding detergent, and then I let a bit more water run in before putting my clothes in. That’s likely a big part of the difference.

My suggestion would be the same whether you’re using homemade powdered detergent or store-purchased powdered detergent: spread out the detergent when you add it. Don’t just add it all in one spot. Distribute it around the machine yourself.

Q6: Prayer
 Did you find prayer to be a useful tool during your financial recovery?
 - Alvin

Absolutely. I find that prayer is incredibly powerful for putting my mind at ease and helping me to focus on what I need to do.

Of course, I never prayed for any sort of direct intervention from God to solve my money problems. I didn’t pray for, nor did I expect, money to start falling from the sky. Instead, all I asked for was guidance and resolve to do what I needed to do.

Whether or not the guidance and resolve I needed came from a higher power or not is a theological question that is beyond my skill level to debate, but I can certainly say that the act of prayer helped me toward finding the answers I needed and the toughness to follow a new path.

Q7: Before or after taxes?
 The company that my husband works for will match his 401k contribution up to 5%, we are getting ready to up the 2% he currently contributes to the 5% max. My question is they give the option of having the money taken out either before taxes or post taxes, which is the better option? Is there a difference in the amount of taxes we would have to pay when he retires?
 - Denise

I’m not 100% sure what options are available to you from your description, but it sounds like you have the choice between a regular 401(k) (where the money is taken out before taxes) or a Roth 401(k) (where the money is taken out after taxes).

If that is the case, a Roth 401(k) – where the money is taken out after taxes right now – will result in you paying less taxes when he retires. Any money that comes out of a Roth 401(k) once you reach retirement age is tax free.

If you have the option to get a Roth 401(k) for your contributions, you should do so. Your employer match will be contributed to a regular 401(k), so you’ll have some of your money in retirement (the money you contributed to the Roth) being tax free and some (the money your employer contributed to the regular 401(k)) being taxed.

Q8: Pennies
 A friend of mine just told me that the government is strongly considering stopping production of the penny and probably the nickel, too. How exactly will that work? How will they give change?
 - Aaron

There are a lot of possible plans out there floating around.

The one I’ve heard a lot about lately – and the one I’m probably most in favor of – is simply stripping away the last digit from our prices. For example, if something costs $1.54 today, they’d just round it to $1.5. If something costs $2.49, they’d just round it to $2.5. There would be no need for the nickel or dime. Sales taxes would be rounded, too, just as they are today. Nickels and pennies remaining in circulation would just be deposited in banks and eventually the metal would be used in other manufacturing processes.

Why am I in favor of this? It currently costs the government 2.5 cents to make a penny and 11.1 cents to make a nickel, according to this report. That seems outrageously wasteful to me.

The change would take some getting used to, but it would be a pretty nice money saver over the long term.

Q9: Interest rate versus APR
 Could you explain the difference between an interest rate and an APR? I bought my first place a few years ago and never understood it. Now my brother just closed on his first place and we are both thoroughly confused!
 - Lois

The APR you’re quoted is a combination of the loan’s interest rate with other expenses associated with your loan such as the origination fee.

APR is a better reflection of the true value of your loan than the straight interest rate, because some lenders will quote you a low interest rate and then tack on a bunch of fees. The APR would include those fees.

Truth in lending laws require banks and lenders to post the APR right along with the interest rate they’re charging. Of course, they don’t require institutions to explain what the APR actually is.

Q10: Interest rate increase
 Will the interest rates on savings accounts ever go back up? I used to get 5-6% on my savings back in 2005 and 2006, but today I can barely get 1%.
 - Ellen

The interest rates on savings accounts roughly follow the Federal Funds Rate, an official interest rate that’s set by the Federal Reserve Board that says how much interest is charged when banks make short-term loans to each other. Banks are free to give out whatever savings account rates they want, but it would be poor business for them to stray very far from the Federal Funds Rate.

From the middle of 2005 to early 2008, we went through a period where the Federal Funds Rate was relatively high, often above 5%. That was reflected on the high interest rates that banks were giving out on their savings accounts. When the economy started struggling in 2008, the Federal Reserve dropped the Federal Funds Rate pretty quickly and savings accounts follow suit.

The real question is whether or not the Federal Funds Rate will ever go up again. Usually, the rate goes up whenever the economy is doing really well and it goes down when the economy is doing poorly. The long-term economic forecasts I’ve seen seem to indicate that the rate will stay low until sometime in 2014, but, just like weather forecasts, that may very well change in the coming months or years.

My gut feeling is that we’ll see an economic recovery and a rise in the Fed Funds Rate (followed by a rise in savings account interest rates) in the next five years or so.

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