Stepcase Lifehack » Money

Six Tips for Long-term Investment Success

Paul Sloane — Thu, 18 Mar 2010 13:00:23 +0000

Bank savings accounts currently offer paltry rates of interest. If you put leave all your money in banks it should be safe but will not grow much. The stock market offers much more interesting returns but because of the element of risk many people avoid it. Worse still they might enter the market at the top and then sell out later at the bottom. Here are some simple rules to help you navigate the market and build a large stock portfolio over a long period.

1. Diversify. Spread your risks by investing in a number of stocks in different markets and in mutual funds, bonds and other instruments. A good rule is that no one stock or other investment should be more than 10% of your total portfolio. Invest in different geographic areas such as US, Europe, Asia and emerging markets. Diversify into property funds, commodity funds and hedge funds. This should give you protection against a collapse in any one particular sector.

2. Do your research. Take advice from various sources. Invest in some companies whose products and strategies you like. There are a multitude of comparison sites and other resources on the internet to help you to analyse and understand investments. Past performance is no guarantee of future performance but I would generally prefer to choose a mutual fund or unit trust that had been a strong performer over the last two years and which offers low management fees.

3. Run the stars and sell the dogs. Monitor your investments and compare their performances against the market index. If some of your holdings do well then the temptation is to cash in and take a profit. It seems natural but if you are in this game for the long term then you want investments that grow over the long term so when you find winners cherish and retain them. On the other hand you should ditch the dogs that significantly under perform the market. The temptation is to hold onto them in the hope of a rebound or worse still to increase your holding at the lower price. This is generally a poor strategy and it is safer to take a small early loss rather than a large one later on. Do not cling onto stocks for emotional reasons. Sell the dogs and run with the stars.

4. Reinvest dividends. A surprisingly large part of the overall growth in most portfolios comes from reinvested dividends rather than in appreciation of the stock prices. A yield of 3% may appear small but over a period it makes a big difference. Choose some investments with a solid history of dividends and use them as the ballast in your ship.

5. Be contrarian. This advice is much easier to give than to observe. When the stock market is low buy stocks. When the stock market is high sell your worst performing stocks and buy other investments such as property or bonds.

6. Take the long view. You are in this for the long term so do not make frequent trades – the commission will eat into your funds. Do not follow fads and fashions. Diversify in a sensible way. Do not panic when markets occasionally crash – these are buying opportunities for the brave.

Finally be prepared to sell when you eventually need the money. You invested it to build financial security for you and your family so it is better to use it when needed rather than to scrimp along in order to become the richest man in the cemetery.

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Paul Sloane is an author and speaker on leadership, innovation and lateral thinking. His most recent book is The Innovative Leader. He helps organizations improve innovation, creativity and leadership. He is the founder of Destination Innovation. He has written 15 books of lateral thinking puzzles and hosts the lateral puzzles forum.Follow him on Twitter at twitter.com/PaulSloane.

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What’s Your Best Tax Prep Tip?

Lifehack Editors — Sat, 13 Mar 2010 03:31:53 +0000

Are you a wiz at getting your tax forms filled out accurately on time or early without much stress? Do you have any specific tips or preferred software you use to make your tax magic happen?

Tax time is in full swing for most American readers. While your tips and tricks for stress-free filing of American taxes are much-needed and appreciated, how cool would it be if we could get some tips from across the world? Do you have an odd tax tip that applies only where you live? We’d like to learn it!

Make sure to include a link and name with your tip so we can give you proper credit if we use your tip in a future post!

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How to Become an Outrageous Giver

SuccessProfessor — Mon, 10 Aug 2009 13:00:25 +0000

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You should become an outrageous giver. An outrageous giver is someone who gives beyond expectations. If you are going to give more than others expect, you should also raise your own personal expectations. Lift your expectations about how much you are going to give both now and into the future. Set your goal to become an outrageous giver.

WHY GIVE?

There are many reasons why you should give money away. The first is that you will make a difference. Giving money away allows you to contribute to the lives of others in a special way. This might be other people, or other organizations. Often you are able to make your money work in a way that is bigger than yourself; to multiply the effort of your money.

Secondly, giving is fun. It is fun to hand money to someone or some organization and to see the joy that you are giving. It is fun to see the smile on faces, or to hear stories of what your money is allowing others to do and achieve. It is satisfying to be making a difference in people’s lives.

Thirdly giving helps you to be more thankful. As you give money away you are doing so in recognition that you have received good things. You can be thankful for those good things by giving them away. Being thankful is an important step in being happy in life.

Giving also helps you to create an abundance mentality. The act of giving is an acknowledgment that you are ok without the money. If you are giving abundantly, that means that you are confident that you have enough money without it. You are portraying the mindset that money is in abundance. Note that this happens even if you don’t have a lot of money. The act of giving sets your mind to believing that you do; that money is abundant. And if you believe money is abundant you will more likely act in ways that create that abundance.

There is a clear connection that occurs between giving in receiving. The people that give money away tend to receive more back. I don’t think there is some magic reason for this happening, but I do think it works in our psychology. The combination of an abundance mentality and thankfulness puts you in a better attitude and state to attract money and opportunity to yourself.

HOW TO GIVE?

Get started - No matter whether you earn a lot of money, or very little, you should start giving now. Some people decide to wait until they are making a certain amount of money, or reach a certain age. Almost every time they express regret that they didn’t start giving early. You can make a difference by starting to give money away now. Even students living on very limited incomes benefit by giving money away.

Pick an amount - You should pick an amount that you want to give away. You may want to do this on a weekly basis, or monthly basis. You may choose an annual goal, but if you do be sure to break it down into monthly targets. It is often easiest to start with a percentage of your income. A good place to start is by giving 10% of your income. For some, this may seem like a lot, and yet if you set it up as an automatic gift each month you will hardly notice it. And yet, it will be able to make a significant difference in the lives of others.

Set goals to increase the amount – Once you have chosen how much you will give away to start with, set goals to increase that over time. You may be giving away 10% now, but you may have a goal to increase to 20%, 30% or even more over time. This increase may take many years to meet, but it can be an important motivator as you work towards bigger life goals.

Be anonymous – In your giving there are really two types of anonymity and both are valuable. One type is where no one knows who it was that gave the money. There is no record of the person giving the money. The only person that knows is you. The other type of anonymity is where you know and it is registered that you gave the money, however it is not made public. The benefit of this is that you receive a tax receipt. For example when I give to my church, they gift is recorded and a tax receipt is issued. Only a couple of people involved in the accounting process know about my gift. It is never announced or acknowledged otherwise. The government offers tax deductions for charitable donations because it is a practice that they want to encourage, and it is good stewardship to take advantage of those tax breaks. If you want, you can turn around and give your tax return away also!

More than money – you don’t need to give just money. You can give away possessions. This might be giving away used clothes to the Salvation Army or Goodwill. It might mean donating something around the house that you don’t use anymore. Someone I know recently donated a drum set that their kids didn’t use any more to a church. You can also donate your time by volunteering. Look for places to contribute with an investment of your time. This can often be extra rewarding as you are connected directly to the work that is taking place.

WHERE TO GIVE?

Support a meaningful cause – you may have a cause that is meaningful to you and that would be a great place to start with giving. Perhaps you lost a family member to diabetes and so supporting diabetes research would be a great place to start. Look for ways to give to that cause. Be sure to find something that is meaningful or passionate.

Support your local church, synagogue or worship community – if you attend a church, synagogue or similar community you should be involved in supporting it. Not only does it support the ongoing functions of the group itself, but faith organizations often provide an opportunity to pool funds and use them to accomplish things that individual donors would not have been able to do.

Support a microcredit entrepreneur – Microcredit is the issuing of small loans to people in poverty. They then use those loans to create businesses called income generating activities. It may mean purchasing a cow, or buying a sewing machine. This kind of entrepreneurship can play an important roll in poverty alleviation. While this is often done by large organizations, you can contribute as well. Kiva.org partners individual lenders with entrepreneurs in developing countries. You loan a small amount to them, and it is repaid back over the next year. You are then able to take the same money and loan it to another person.

Sponsor a child – There are many organizations that allow you to sponsor a child in a developing country. This can be a very rewarding form of giving. Your funds go to help pay for food, clothing and education for that child. You are able to send and receive letters from your sponsor child providing a hands-on connection to your giving.

Random acts – Look for opportunities to give as part of a random act. This might be giving a gift card for groceries to a neighbor who lost her job or box of diapers to new parents in your community. It might be buying flowers for someone or just giving money when needed. There are lots of opportunities to give as part of a random act.

You now know the why, the how and the where of giving. The next step is up to you. Just get started and you can become and abundant giver.

Danny Gamache, the Success Professor, is committed to teaching others principles of success for life and business. Danny is a business professor at a private college where he equips students for careers in business and success in all areas of life. He can be found at www.successprofessor.ca

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Can’t-Miss Marketing: Just Ask

David Pierce — Wed, 24 Jun 2009 13:00:58 +0000

In the year since I started blogging, I’ve gotten a bunch of freelance writing gigs and regular jobs writing all over the Web. But, initially, no one offered them to me. I had this blog I was proud of, a super-cool design, and yet the offers didn’t flood in. Crazy, right? Tell me about it.

I finally decided that if I wanted something to happen, I had to go and get it. So I did the simplest thing I could think of: I just asked for it. I wrote to a bunch of different sites, and asked if they needed writers. I pitched a few ideas, used my blog as a resume, and offered my services.

I couldn’t give you an exact number, but the response rate to my emails was extraordinarily low. Let’s just say that if I were a baseball player with that batting average, I wouldn’t be a baseball player much longer. Only a couple of people responded at all, and a few of those turned into the jobs I got initially as a freelance blogger. But my batting average wasn’t high.

And it didn’t matter. For the opportunities that didn’t come my way, all it cost me was a few minutes of my time to send an email. The hour it took to write ten emails, even if it only generated one response, was well worth it just for that one response.

I got my dream job this summer from exactly the same thing: I sent an email. I can’t explain why it worked, or why I got a response instead of the hundred or so other people my boss got applications from. It worked, though, and for one reason: I asked. If I never heard back, so be it; it’s a wasted ten minutes. But I did, and it became a fantastic experience for me.

Simply asking is the most useful marketing tool I’ve ever discovered. You can have a spectacular resume, the most polished skill set, and the perfect passions for a job or opportunity, but if you don’t ask for it, who’s going to know you want it? Asking, handled the right way, leads to nothing but positive results.

If you’re anything like me, you’re afraid of asking for things – especially things you really want. I think the problem is that we so fear getting turned down that we run away, in order to be able to somehow hold out hope that we’re good enough for it. Asking, and getting rejected, would somehow only prove our failure and our ineptness for what we really want.

The reality, though, is that there are a ton of reasons why an opportunity didn’t come along, most of which have nothing to do with you being a failure: there’s timing, restrictions, personality issues, and a whole litany of other reasons why the opportunity’s not right for you at the moment. Maybe your email just got lost, or maybe the person doesn’t like people with your name – whatever it is, not winning mean doesn’t mean you’re a loser. That can be hard to understand, but not getting down because your batting average isn’t perfect is key to success.

The more opportunities you put yourself out for, the more you’ll get. Do you want something, whether it’s a job, a cookie, or something else? Ask for it. Do it in a respectful, productive way, and you’ll get a response in kind – even if it’s no. Don’t let the no’s bog you down, and remember: the second “Yes!” is always easier than the first.

Thanks to simply asking, I’m now writing for ten or so websites I never dreamed would care what I had to say, working for the man with the career I want, and loving every minute of it. All because I asked for it.

What can you ask for? A better job, more responsibility, more fun, more money, something else? What is there to lose?

David Pierce is a college student, freelance writer, and lover of all things Web-based. He blogs about the digital world at The 2.0 Life, and can frequently be found on Twitter .

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Improve Your Charitable Giving: Let Not Your Left Hand Know What Your Right Is Doing

Art Carden — Tue, 02 Jun 2009 13:00:05 +0000

According to virtually every religious and ethical tradition, meaningful charity does not draw attention to the giver, and dignified charity does not draw attention to the recipient. Here I will offer an economist’s perspective on the Biblical injunction to “let not the right hand know what the left is doing” in charitable giving and will argue that this results in more efficient charity (meaning that it increases the bang we get from every charitable dollar) in addition to strengthening the moral community.

One reason economics is a dismal science is that it shows us how the best of intentions executed with the greatest fidelity and sincerity can nonetheless worsen the problems people are trying to solve because they change incentives. Some of the most basic ideas in economics concern the fact that people respond to incentives, people make decisions at the margin, and there is no free lunch. The hidden wisdom in Biblical teachings about charity embody recognition of and respect for these principles. I don’t know whether this is intentional or not; I’m not a theologian. Regardless, this verse teaches an important economic lesson.

Let me be absolutely clear, here. I am not arguing against benevolence. Far from it. I agree that we should help people who are less fortunate than we are. My argument here is that there are effective ways to do this and uneffective ways to do this. Letting not our right hand know what our left hand is doing makes our charity more effective.

This follows readily from the idea that people respond to incentives. When charity is predictable and well-known, people will expend resources trying to become the beneficiaries of others’ charitable endeavors. This is socially wasteful, and the entire value of the prospective transfer will be competed away as people fight over the most lucrative begging positions in town, rent children, or pay to have limbs amputated to increase their begging take (Tyler Cowen discusses this in his book Discover Your Inner Economist).

It also follows readily from the proposition that there is no such thing as a free lunch. The money we are giving to charity has to come from somewhere, and it isn’t always clear that it will do more good, socially, if it is given to someone than it would if it were left in a bank account and lent to an entrepreneur. That isn’t for me to decide, of course, but it is worth considering.

There are, of course, good reasons to be totally open about your giving–when you are trying to honor someone, for example, by naming a building or lecture series or something after them, or when you explicitly want to change people’s incentives. If you just want to give people stuff, though, then your charity is most effective when it is given in secret.

So when you are giving, don’t let your right hand know what your left is doing. And don’t let anyone else know, either. Unless you’re explicitly trying to change people’s incentives, you do the most good when your charity is kept quiet.

Art Carden is Assistant Professor of Economics and Business at Rhodes College in Memphis, Tennessee and an Adjunct Fellow with the Oakland, California-based Independent Institute and the Auburn, Alabama-based Ludwig von Mises Institute. His research papers are available on his SSRN Author Page and at ArtCarden.com. His commentaries appear regularly at Mises.org and Forbes.com, and he is a regular contributor to Division of Labour. His wife Shannon blogs about healthy eating for a young family at No More Nuggets. Their son Jacob is a source of constant joy, and they look forward to the birth of their daughter Taylor Grace in July.

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Low-Hanging Financial Fruit And What Comes Next

Thursday Bram — Thu, 28 May 2009 13:30:29 +0000

When it comes to making major changes in your financial situation, you’ll probably get some pretty standard advice for saving money: stop buying coffee every day, brown bag your lunch and start clipping coupons. That’s because these sorts of changes are low-hanging fruit. For most people, making these sorts of changes in their spending is not too difficult — and because they’re everyday habits, it’s possible to save quite a bit of money over the course of a year.

Finding Low-Hanging Fruit

Most financial gurus have a few favorite recommendations when it comes to the low-hanging fruit of your finances. Coffee, in particular, gets singled out for attention, over and over again. The fairly common habit of picking up coffee each morning has even been vilified as the ‘Latte Factor.’

But what happens after you’ve cut out coffee — or if you don’t drink coffee in the first place? The standard suggestions may not be so useful for you. Instead, it’s worth taking a look around for some low-hanging fruit of your own. There’s no automatic identifier for such an expense, but a simple way to look for savings opportunities is to look at your daily habits. That’s because anything you do day after day can yield more savings because even a small expense can add up quickly over 365 days.

That’s the real definition of low-hanging fruit: with relatively small amounts of effort, you can get big results. Of course, just how much effort is required for a particular project can differ with something as simple as whether or not you have a coffee pot at home. When you see a financial tip that seems like it would be fairly simple, it’s worthwhile to take a look at the effort and money involved. If the effort isn’t worth the money, it’s okay to keep walking — what is low-hanging fruit for one person is the hardest apple to reach in the tree for another.

But not all simple changes are the same. Just as there are some relatively simple steps you can take to modify your spending, there are often a few basic options for bringing in more income — such as selling off a few collectibles on eBay. You may even find low-hanging fruit when it comes to saving and investing your money: any time you can automate your savings, you can generally see a better return than if you try to handle the process manually.

When You Run Out Of Low-Hanging Fruit

It can take a little while to change even small habits and work your way through all the suggestions you find from various financial advisers — but sooner or later, you’ll run out of the low-hanging fruit available in your personal situation. That point can be an ideal opportunity to stop and reassess your finances.

For some people, the easy fixes are enough to move them to where they want to be, financially speaking. Just by cutting down on habitual spending or automating savings, some people will be able to accomplish their financial goals. For other people, though, it can take a little more to move into a financial situation where they feel comfortable. If you find yourself in that second group, it may be time to start looking at some harder steps.

A starting point is any financial tips you passed by when focusing on simple steps. If you initially considered something not worth the effort it would require — a programmable thermostat might have tripped up one person, while calling a service provider and negotiating a lower rate would be problematic for another one.

Another option is aiming for some more significant changes in your lifestyle. A raise would probably make a big difference in your finances, but it may take further education or extra hours at work — it’s the opposite of low-hanging fruit. But it is probably worth working towards if you need to make a bigger difference in your finances in order to meet your goals.

Small Changes First, Then Big Changes

Making the easy changes first may seem like a system that won’t pay off as well as chasing a few bigger changes — even if those bigger changes are harder to arrange. But the fact of the matter is that when you’re doing something like changing your morning coffee routine, you’re likely changing an ingrained habit. It’s not going to be the easiest thing to do, but after you’ve changed one or two habits, the rest get a little easier to handle.

That practice at changing habits can pay off when you start focusing on bigger fish. Something like going back to school to improve your paycheck is going to require a whole new set of habits, in a stressful environment. Having a little practice with the process of changing habits can come in handy in such a situation. The process, as a whole, may take longer, but it will be more likely to pay off.

It doesn’t hurt, either that even a couple of the simpler changes you can make to your personal finance can translate into a good amount of cash. If you can stack several smaller steps with a couple of bigger changes, you can wind up with a significant difference in your financial situation. Do the numbers yourself: look at what you can save by changing one small thing in your daily routine and then build from there.

Thursday Bram blogs about a variety of topics, from personal finance to small business. She is the author of an upcoming book on the tools and tricks you need to build a career you can take with you during long-term travel. More information about Thursday and her book, Working Your Way Around the World, is available on her personal site, ThursdayBram.com.

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Sell Your Knowledge on the Side

Thursday Bram — Tue, 26 May 2009 13:30:00 +0000

Having a side line of income can come in handy — but not everyone is in a position to set up a full-fledged business or even take on freelance projects. That doesn’t mean that there aren’t any opportunities to make some money on the side. If you’re knowledgeable about a specific area, you can sell your know-how, rather than selling your time. You’ll still need a little time, of course, but there are several ways to come up with ways to make a little money within your time constraints.

1. Write an ebook or white paper

You can turn your knowledge and experiences into a document on your own schedule. While it does take an investment of some serious time to translate an ebook into serious earnings, you can start selling your work through sites like Scribd almost immediately. Your vendor will certainly take a cut, but the publication process is easier and faster than for print. There are also simple ways to up the likelihood of earning some good money: even something as basic as laying your document out in something besides Microsoft Word can give you an immediate boost. As far as topics go, how-to guides tend to do well, as do papers that address current issues in most fields.

2. Offer a seminar or class

While seminars and classes are generally a little more time-sensitive than projects that don’t require you to interact with other people, there are a long list of ways to make them a little more flexible. One of the most basic is picking a time and date for the class that works with your schedule and then taking care of planning and other details when ever it’s more convenient for you. Another option is offering a class online, even by email if that’s what it takes. The biggest difficulty with selling slots in a class is that you have to have a good reason for prospective students to buy from you. If you aren’t a well-known expert in your field, you’re going to have to do some marketing to make sure that your class is full.

3. Tutor on your topic

If you specialize in a topic that is taught in school — from kindergarten through grad school — tutoring is an option. You don’t even need to worry about trying to find local students: you can tutor online. That can make managing time easier, because you can work with students in different time zones so that you can better take advantage of your time. Sites like Tutorz, offer an opportunity to list yourself for a variety of subjects.

4. Write for websites

There are many websites that allow writers to post any number of articles and take a cut of the profits. You’re not going to get rich off of such articles, but there’s no problem if you need to write on an odd schedule — or even stop writing suddenly. You can write about pretty much any topic, although you’ll probably be able to write more often if you focus on a topic you already know well. There are thousands of such sites. HubPages and Triond are just two examples.

5. Provide advice or consulting

You can offer your consulting services on your own online, but if you don’t have a lot of time to devote to the project, it may be better to offer your services through a site that connects experts with individuals looking for advice. There are quite a few out there: one example is LivePerson.com. It’s a pretty typical site. You post your information and then clients can hire you through the site. You decide on the time and date you’ll actually talk to clients.

6. Answer questions

The number of websites offering payment for answers to specialized questions seem to grow every day. SmallBizAdvice, for instance, offers payment for answers to questions about small businesses, for example. There are also plenty of sites with multiple topics, as well as sites specially for students to post questions they have with (or, more often, from) their homework, like Student of Fortune.

Selling your knowledge

It’s worth noting that none of these approaches are exactly get rich quick schemes. In some cases, they may not even be get rich quick schemes. You have to have some knowledge worth sharing, although that list can be pretty long — you’d be surprised what some people are willing to pay for video game tips or basic technical support — and you have to be able to share it in a fashion that other people can understand relatively easily. If you can handle those requirements, though, selling your knowledge can be a good way to bring in a little extra money. It doesn’t hurt that there are plenty of websites and online services ready to handle much of the marketing and promotion, and let you focus on your own expertise. The pay goes down when you work through these sites, of course, but the amount of time you need to devote to finding clients and related aspects of being in business also goes down. It doesn’t hurt that being associated with a larger site also establishes your credentials a lot faster than you can if you aren’t already particularly well known.

If you’ve worked with a website beyond the ones I’ve mentioned here, please note them in the comments — there really are thousands of websites providing similar options out there, and I only discussed a handful here.

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Review (and a Contest!): “10,001 Ways to Live Large on a Small Budget” by the Writers at Wisebread

Dustin Wax — Mon, 18 May 2009 14:00:00 +0000

For years now, the folks at Wisebread have been giving out great advice on living well for less. Now they’ve gathered all their wisdom together between two covers in 10,001 Ways to Live Large on a Small Budget, a new book featuring hundreds of great ideas from all their talented writers. Beautifully designed and engagingly written, 10,001 Ways… is a fun read straight through, and a great reference you’ll return to again and again.

The book is divided into two big parts. The first, “Frugal Living”, is a guide to cutting costs while maintaining – and even improving – your quality of life. With sections on food and drink, travel, health and beauty, shopping and bargain hunting, green living, and education and self-improvement, Part 1 offers plenty of tips you can put into action immediately.

The second major part, “Personal Finance”, is about managing your money and, hopefully, increasing your individual wealth. The basics of budgeting, financial planning, and investing are covered, accompanied by a section on handling credit cards and debt and another with tips on advancing your career and making more money.

Although the book doesn’t get much into philosophy, the Wisebread approach has always been living well without living above your means. In the wake of global economic problems, massive job losses, unstable gas prices, and general uncertainty on a day-to-day basis, this message has never been more welcome. What 10,001 Ways… offers is a practical, grounded, and sensible approach to living and enjoying life – something a lot of us have been missing in the consumption-driven lifestyles that have become almost inescapable over the last couple of decades.

Don’t worry, though – the tips in 10,001 Ways… are practical but they’re not boring. This isn’t a book about living in monastic simplicity or puritanical self-deprivation. The very first chapter is a quite thorough guide to picking affordable wines! (Tip: Seek spin-off labels from big-name wineries for top-quality wine at bargain-bin prices.) Some of the other topics covered in the book include:

7 Ways to Lower Water Heater Costs (Try dropping the thermostat to 120°F to cut your energy cost for hot water by up to 10%)
10 Killer Ways to Feel Like a Million Bucks (Strengthen your hamstrings. Sitting all the time leads to weakened hamstrings, which can lead to aches in your lower back, knees, and hips.)
The Best and Worst places to Stash Cash in Your Home (Tampon boxes are in; toilet tanks are out.)
12 Ways to Become Rent- or Mortgage-Free (Have you thought about living in a yurt? They’re affordable, comfortable, and you get to say “yurt” all the time – what more could you possibly need or want?)
20 Signs That a Pink Slip Is Coming (Have you started getting a lot of requests by email or memo that could just as easily have been given in person? Your boss might be building up a paper trail to justify letting you go to HR…)
And plenty more – the title promises 10,001 tips, after all.

All in all, I highly recommend 10,001 Ways to Live Large on a Small Budget. For more information, check out the book’s homepage at Wisebread, or order it directly. Better yet, talk to your local public library librarian about ordering a case for their library, and check it out when it comes in – not only is that incredibly frugal, but you’ll be helping out your community as well! Or here’s another idea: keep reading for a chance to win your own copy, courtesy of Wisebread, absolutely free!

Contest: How Do You Live Large on a Small Budget?

That’s right, the editors of 10,001 Ways to Live Large on a Small Budget have offered a free copy of the book to a lucky Lifehack reader. To enter, all you have to do is leave a comment on this post telling your fellow Lifehack readers about your tip for living well without spending lots of cash. Tell us about your affordable luxuries, cheap thrills, and low-price high life.

All entries must be received by 11:59 pm PDT, Saturday May 30, 2009 (limit: one entry per person) and you must leave an email address so that I can contact you if you win (don’t worry, email addresses aren’t published on the site). After the entries have been . received, I will select one winner at random using a random number generator. Entries will not be judged, but try to come up with something good, anyway – consider it a public service!

Dustin M. Wax is a freelance writer and project manager at Stepcase Lifehack. He can be reached though his freelancing site at DustinWax.comDon't Be Stupid: A Guide to Learning, Studying, and Succeeding at College.

Follow him on Twitter: @dwax.

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3 Areas You Must Invest in During an Economic Recession

Dan Schawbel — Fri, 01 May 2009 13:00:19 +0000

The global economy is plummeting and people are starting to lose hope, faith in our government practices and in their ability to be successful during these challenging times. With millions of job losses and the media poisoning our minds with information that may be only half accurate, we need to start taking the time to invest in three main areas: our financial education, our personal brands and building strong relationships that will last through the recession. It’s really easy to lose hope now, but you must remain calm, cool and collected or else you’ll lose focus, money and you won’t get a job anytime soon if you’re currently unemployed. Many people who are getting laid off are taking a risk to start their own businesses because they feel like they have nothing to lose. One in four workers who have not found jobs is considering launching a business, according to a CareerBuilder.com survey. For the rest of workers, who feel like they could be unemployed today, tomorrow or in two weeks, please read this post so that they can at least start protecting yourself against a future tragedy.

1. Having a financial education

We don’t really learn how to manage money in College, so we have to figure out how to on our own. Of course, school teaches us the basics, such as balancing our check books, but we aren’t prepared for a financial crisis and we don’t have enough of an understanding of “cash flow.” I recently started reading Robert Kiyosaki’s new book, which is being published free online for the time being, called “Conspiracy of the Rich.” So far, I’ve read to Chapter 6, patiently waiting for the next few chapters to be complete and uploaded to the site. Robert, who also wrote the bestseller Rich Dad Poor Dad, is convinced that we’re headed into a depression (worse than a recession) because of bad debt, a corrupt banking system and the reality that the our paper money isn’t backed by anything anymore (our money will be worth nothing at some point). Understanding our history, as well as new trends (the internet), and how money is changing, will benefit you greatly during this time period. I recommend reading this book, finding someone whose rich (that has money coming in even if they stop working) and getting advice.

2. Your personal brand

Investing in your personal brand is going to be critical to surviving in the future because of the popularity of the internet, the fact that more business is being taken place each day on the internet and because, competitive, you have to. There are two main things you need to know. First, protecting your personal brand is something that you can’t neglect now because other people may share your own name and claim your digital real estate first and then charge you later (possibly). Second, promoting your brand is how you’re going to find work during these tough times because visibility creates opportunities and because you need endorsements from other people in order to secure a job without much effort. Obtaining digital assets in your name, such as your domain name and profiles on social networks, is what’s going to get your name out there, at the cost of your time. During this recession, you’ll need to spend more of your time on building your brand because you’ll need to invest your money to be financial stable.

3. Building strong relationships

It’s not just about forming any type of relationship. During this economic crisis, strong ties are going to count and weak ties are going to break. The key is figuring out who you want to be extra close with and being honest with yourself as to who you think will actually take care of you and become your “safe haven.” Your family and closest friends will hopefully be there for you, but, depending on their own interests and financial situation, things may change a bit. Relationships are more valuable than money because they can help you become more productive, allow you to scale your personal brand so you can service more people (clients/management), and because they can help you stay employed or find a new job. Aside from investing in your financial education and your personal brand, spend at least 10 hours a week forging stronger relationships with other people.

Dan Schawbel is the leading personal branding expert for Gen-Y. He is the author of Me 2.0: Build a Powerful Brand to Achieve Career Success (Kaplan, 09), as well as the publisher of both the award winning Personal Branding Blog and Personal Branding Magazine.

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5 Reasons to Pay Good Money for a Moleskine

Dustin Wax — Thu, 30 Apr 2009 14:00:02 +0000

After posting twice last week about Moleskine notebooks, I got several comments complaining about the high price of the notebooks and their perceived pretentiousness, with one person even asking somewhat accusingly if we’d made some sort of business partnership with the notebook company (we did — we’re promoting their contest and exhibition, which is why I thought it would be neat to write some posts about Moleskines).

They’re fair questions: a pocket-sized Moleskine notebook runs about $12 US and the larger ones approach $20 US. Why would you pay that kind of money for a pad of paper, when a spiral-bound pocket notebook can be had for less than a buck at most stores?

Before I give my reasons, I should say that there are plenty of worthwhile alternatives to Moleskines (but a spiral-bound notebook isn’t one of them — sorry, Charlie!), some accurate-enough knock-offs and others taking a different approach to notebook design. I’m not as much wed to the brand as I am to the design — but the Moleskine brand is the one consistent supplier of that design. Most of what I say about Moleskies, though, can be applied to any other “luxury” notebook of similar style.

So, here are 5 good reasons to shell out your hard-earned dough on a double-digit priced notebooks:

Moleskines are durable. With their semi-hard, vinyl covers, Moleskine notebooks stand up to the rigors of back pockets and overstuffed bags better than most other notebooks — and far better than anything spiral-bound. Though there is a limit to how many times you can sit on your Moleskine before it permanently assumes the curve of your backside, it is generally quite easy to keep a Moleskine functioning for six months or longer. Spiral-bound notebooks unravel (and the wire gets caught on everything); paper-bound notebooks fall apart from moisture, friction, and general wear.
Moleskines are book-bound. Because Moleskines are bound like books, they are easy to store on a bookshelf for easy reference, or to stack for storage. Plus the rigid covers give a strong supoprt against which to write, no matter where you are.
Moleskines are expensive. That might not seem like a plus to you, but hear me out. Because Moleskines have a large-ish pricetag, compared with cheap spiral notebooks or staples notepads, they tend to be taken care of more — which means that when you need it, it’s not under the sofa, out in the car, or lost who-knows-where. Instead, it’s right there in your bag or pocket, where it belongs. The perceived value of Moleskines makes it easy to integrate them into a daily routine that keeps them handy. Plus, some of that perceived value spills over onto whatever you’re capturing in your notebook — it must be important if you’re willing to spend so much on it!
Moleskines feel good. Moleskines just feel good to use. The paper takes ink nicely, and is a pleasant cream-color that’s easy on the eyes and lends a richness to yourwriting. The covers are smooth and just soft enough. All these things are important, if not purely essential — just like the heft of a good hammer is worth good money to a master carpenter who could build a bench just as easily with a cheaper one.
Moleskines are actually kind of affordable. Don’t forget that Moleskines come in all different styles, including specialized notebooks for sketchinig, watercolor painting, and otehr specialties. A small pad of watercolor paper can easily exceed the price of a decent-sized Moleskine Watercolor book! Moleskine’s storyboard pads and pocket accordions are virtually unique — I don’t even know where you’d find them if Moleskine didn’t make them!

Like any product, Moleskine or similar notebooks are not necessarily for everyone. But for many, they fill a pressing need with style and functionality, and that’s no little thing, no little thing at all!

Photo courtesy of Paul Posadas

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Receipts: Which to Keep and Which to Pitch

Thursday Bram — Thu, 30 Apr 2009 13:30:00 +0000

A shoebox full of receipts seem to be the norm for most of us, whether or not we manage our money online. Every time we make a purchase, we shove receipts in wallets, pockets or purses. We bring them home, sometimes sort them and drop them into a shoebox. From there, we ignore them until tax time — often even longer. But we don’t actually need most receipts. While some we may need to hold on to for taxes or records, the grand majority can be out of your house within a week.

Short-Term Keepers

Receipts tend to fall into two categories: those you need to keep at least long enough to double check them against your purchases when you get home and those you need to hold on to for a bit longer. The short-term keepers can be thrown away as soon as you’ve taken care of checking them — I tend to shred these sorts of receipts, but many don’t have any sort of information you really need to worry about.

Cash Receipts: If you keep track of where you spend your cash (as opposed to using a debit or credit card), you may need to note any receipts for cash spending on your money management software. After that, you can get rid of it.
Clothing Receipts: Once you’ve put on an outfit and taken off the tags, you can generally get rid of the receipt.
Restaurant Receipts: It’s generally worth keeping receipts from restaurants at least long enough to check them against your card statement if you left a tip on your card. There is a chance that the tip can be altered or misread, and you’ll need your receipt to dispute it. If everything checks out, and your meal wasn’t a business expense, you can trash the receipt.

There is a school of thought that you should keep a receipt until you get rid off whatever you purchased — for instance, you should hold on to a receipt from the grocery store until you finish off your gallon of milk. That’s because you can get reimbursements in many situations (like recalls) or may need to take the item back. It comes down to your personal choice just how long you want to keep receipts for things like groceries and gas, but generally, less than a month seems like a good choice. Otherwise, though, most personal expenses aren’t even short-term keepers. Your grocery receipt may not even need to make it out of the store’s door with you.

Long-Term Keepers

There are some receipts you may need to hold on to significantly longer than the month it takes for your card statement to arrive. Receipts can be used as proof of a whole list of different things, from tax deductions to warranties, so you’ll need to hold on to a few receipts. I know many people that scan these important receipts to make sure that they have them handy. The IRS does accept scanned receipts, but if you’re trying to work with a credit card company or insurer, you may need to hang on to the original.

Business Expenses: If you own your own business, most expenses are tax deductible. Hold on to those receipts, though — in the event of an audit, they come in handy. That includes some receipts you might otherwise get rid of, like gas or meals, as long as they are business expenses.
Job Search Expenses: You can deduct many of the expenses associated with a job search, so hold on to those receipts.
Employer Reimbursement: With most companies, you’ll need the receipt for any expense you’re reimbursed for. It’s generally worth making a copy to hold on to until you actually get a check — you’ll likely have to turn the original over to your employer.
Medical Expenses: Between tax deductions and insurance, holding on to any receipts for medication, doctors’ visits and procedures is a must.
Big Purchases: Hold on to the receipts for big purchases, like appliances and electronics. Defining how big can be tricky, but consider how you paid for it — if you used a credit card, you may have a warranty beyond what the store offered you, as long as you have the original receipt. You may also need receipts for big ticket items in order to make an insurance claim.
Warranties: If you purchase any product with a warranty, you’ll want to keep the receipt — you may need it to claim the warranty or even prove that you have it. When possible, it makes sense to keep warranty receipts together with the product that they came with. Taping them inside owners’ manuals can be an easy way to keep track of them.
Donations: It often takes an extra step to get a receipt for a donation — but it’s worth it. You’ll need it if you want to write your donation off on your taxes.

Just how long you need to keep receipts for depends on just who might ask to see them. A good rule of thumb is that anything related to insurance or warranties can be thrown away once you get rid of the item in question — if you replace your stove, for instance, you’ll want to keep the new receipt, but you can throw away the receipt for the old appliance. For the IRS, how long you need to keep receipts can vary significantly: the very longest you might need a set of receipts is seven years.

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Watching Every Cent

Thursday Bram — Thu, 23 Apr 2009 13:30:00 +0000

If you’ve been working on getting your personal budget balanced, going offline can make some sense. There are plenty of web applications and other tools that really do well at interpreting your spending patterns and other information just by taking a look at your monthly bank statement. But there’s really no substitute for doing some financial tracking on your own.

Every Little Cent

One reason many people seem to struggle with building a budget that actually works for them is a lack of understanding when it comes to telling where their money really is going. Between cash, debit cards, credit cards, automated payments, one-click purchases and all the other myriad ways we can pass our money along to someone else, is it really any surprise that creating a spending plan that works longer than a week is a difficult proposition?

Building a budget that is truly effective requires a very thorough understanding of your own spending. There is a relatively simple approach to getting the necessary grasp on your typical spending — tracking every cent you spend.

It isn’t a long term approach, of course, but if you’re working on getting your finances under control, a good first step is to spend a week or a month simply observing where you’re actually spending your money. It’s a matter of making a note every time you pull out your wallet, whether you’re spending cash or using plastic. At the end of your observation period, you’ll have a list of transactions that will give you a much clearer view of your expenses than a bank statement can. At a bare minimum, you’ll have an idea of where the cash you pull out of the ATM goes.

Keep It Simple

For most people, tracking spending for a full month will give you the best picture of finances: how you spend right after your paycheck comes in can be quite different from how you spend during other parts of the month, for instance. However, it is difficult to keep up with tracking your spending for that long. There are a few ways to make the process easier:

Keep a notebook with your wallet, so that you have to pull it out whenever you’re making a purchase.
Write down every transaction, even if you get a receipt. It helps turn the process into a habit — and you’ll have one document with all your information.
Go with the paper route. Messing with texting your expense to yourself or shooting off an email just adds more hassle than a simple note.

The important part of keeping this sort of ‘every cent counts’ record is to get the best data possible to work with. While some people can build a budget that they can stick to without such specific records, the fact of the matter is that most of us struggle to stick to a budget if we have spend without accountability. For those of us who fall into that category, budgeting becomes much easier when we already know how much we spend in a given category over the month. We know where we should cut back — and where we can cut back.

Processing Data

At the end of the observational period, you’re likely to have at least a few pages worth of records that you’ll need to interpret into a usable format. You may be able to spot patterns without doing anything in the way of processing, but it’s probably worth investing some time in the project and creating a spreadsheet with each of your expenses. Categorizing your expenses can make spotting patterns much easier — like picking up a candy bar every afternoon for a snack. These sorts of patterns are the starting point for changing your finances for the better. There are both good and bad spending patterns, and being able to see them can make a major difference in your ability to budget.

Once you’ve gone through all the data you’ve collected, it’s time to compare it to what you’d like your budget to actually be. There may be a large discrepancy between your plan and reality — the typical reason that so many budgets fail — so make note of where those big differences are. Breaking just one or two patterns may make all the difference in bringing your actual spending in to line with a budget: if something like a daily candy bar is driving up your budget, taking a step to eliminate the need for that candy bar (like bringing a snack to work along with your lunch) can make a dramatic difference. It’s worth noting that breaking a habit is often difficult — replacing it is usually easier. That fact applies to spending as much as any other habit.

After an observational period, it almost always makes sense to end your financial tracking. It’s useful to get the sort of data you need to form a lasting budget, but it can be a fairly time-consuming process. Furthermore, you probably don’t need a cent-by-cent accounting of your finances beyond the planning stage. You may need to occasionally revisit your daily spending habits to make sure you’re still on track, but otherwise, reviewing your bank statements and receipts will more than suffice. It’s also worth looking into some sort of financial tracking application: while they may not be so useful in understanding the details of your spending, they can provide you with a broad overview that can be enough to guide you if you’re already on track.

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Where to After College? A Review of “How’d You Score THAT Gig?” by Alexandra Levit

Dustin Wax — Fri, 17 Apr 2009 14:00:00 +0000

One of the few things scarier than going to college is graduating from college. Once you toss that mortarboard in the air, “real life” sets in: it’s time to get a job. Or better yet, to start a career.

Therein lies the rub. For most college students, not only has there been little instruction about how to start building a career, there’s also been little guidance about how to choose a career. Universities offer little in the way of self-examination with an eye towards what a student might want to do for the rest of his or her life — let alone whether he or she might actually be well-suited to it.

That’s a shame, because it creates a kind of discontinuity between college and career that most students never bridge — leading to a rather detached attitude towards both. Into that gap steps career expert Alexandra Levit, author of How’d You Score That Gig: A Guide to the Coolest Jobs [And How To Get Them]. Levit has worked for years as a career consultant as the founder and president of Inspiration@Work, and Score That Gig brings that experience to bear on the question of how to find a career that best matches both your aptitudes and your personality.

Levit works from the core idea that different jobs are best suited to different personality types. She outlines 7 broad character types in the book: Adventurers, Creators, Data Heads, Entrepreneurs, Investigators, Networkers, and Nurturers. What suits the detail-oriented Data Head, for example, might bore to death the fast-and-loose-playing Adventurer, while the Nurturer’s concern for others might not suit him or her to jobs that stress self-expression over attention to other people’s needs.

The book opens with a simple 20-question self-assessment quiz; at the end, categories that receive the most answer “points” are likely to be the ones you’d feel most comfortable in. Many people will fall into two or more categories; others, like myself, will strongly and clearly favor just one. Each personality type has its own chapter, with around 8 or so suggested careers, each featuring interviews with people who already have “that gig” — as well as a description of the background needed, resources both on and off the Web for finding more information and getting started, and information on how to start building a career in that area.

Classify Me: What Gig Should Dustin Get?

This is a book that’s meant to be used more than read, so use it I did. After taking the assessment exam, I discovered I am “The Investigator”.

Investigators place a high value on learning (ok, I’m a college professor. Check!) and excel at research (yeah, I had to do a lot of research in grad school and was top of my Master’s class. Check!). According to Levit, Investigators are “happiest when they’re using their significant brain power [her words, not mine - but really, I am super-smart...] to pursue what they deem to be a worth endeavor” and therefore prefer work that makes a difference in other’s lives — which seem borne out by my choice of a career in education rather than, you know, something that pays.

Investigators aren’t fans of overly structured environments (I used to have panic attacks every Sunday night at the prospect of returning to work the next morning when I had a 9-5 job) and like to do things their own way. Finally, Levit says, Investigators are vigilant about keeping up with the latest developments in their fields — a demand well-suited to both my academic career and my other career as a Web worker.

Of course, these kind of personality tests can be like horoscope signs — written broadly enough, everyone sees themselves in them. But in this case, Levit seems to be pretty close to the mark, at least so far as sussing out my personality is concerned. For further confirmation, let’s look at the kinds of careers she recommends for Investigators like me:

Antiques Dealer
Art Curator
Classic Car Restorer
Criminologist
Field Archaeologist
Forensic Scientist
Futurist
Historian
Psychology Lab Assistant

Levit isn’t trying to be exhaustive here — instead, she’s presenting readers with a set of examples of cool jobs they might be comfortable doing. That said, it’s striking how closely this list matches up to my own work and academic history.
True, I don’t have much interest in classic cars or antiques. But everything else here is pretty close. I’m a trained anthropologist, which in the US encompasses human biology (which is why a lot of criminologists and forensic specialists study anthropology — and a lot of anthropologists become forensic scientists), archaeology, human culture and history, and linguistics. My particular specialty is history of anthropology, particularly the career of an anthropologist who, among other things, organized a huge futurist conference in the mid-70s.

OK, how weird is all that?

In short, if I had read How’d You Score That Gig? as a college student, the recommendation would have been pretty much spot-on — Levit would have told me to do basically what I’m doing today. This bodes pretty well for college-age readers looking for some kind of direction in their lives — and for other adults who might have lost their direction for one reason or another.

Final verdict: This is a quite helpful guide to careers for the undecided or faltering. Keep in mind that unless you’re intensely curious, or maybe you’re a nurturer who wants to share Levit’s insight with everyone, you probably won’t be reading it straight through — this isn’t a book you have to finish to get your money’s worth! The self-assessment test is well-designed — a lot of tests like this make it clear what the answer “should” be to create a particular outcome, and Levit’s avoided most of those pitfalls. If you or someone you know is trying to figure out what to do with the rest of their life, pick up a copy of How’d You Score That Gig — you’re bound to find something you might have never thought of!

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An Interview with Patrick Ritchie, Author of “The Credit Roadmap”

Art Carden — Mon, 13 Apr 2009 13:00:15 +0000

Patrick Ritchie is the author of The Credit Road Map, an in-depth look into how the credit world works. He is a certified instructor with the Arizona Department of Real Estate. Patrick is a guest lecturer for The Ohio State University and Arizona State University MBA programs. His book is approved by the National Association of REALTORS^® and is required reading in finance and real estate classes at major universities. He and the author worked together at Winding Hollow Country Club in New Albany, Ohio in the mid-1990s.

On Credit

1. Why is a good credit rating so important, and how can people improve their credit ratings?

The main reasons are to borrow money or to seek employment. Obviously lenders look at credit reports and scores in making lending decisions. Employers, more and more, are looking at credit reports as a judge of character in the hiring process. There was a student in the Personal Finance class I guest lecture in at Ohio State who was offered a job and then had it rescinded when HR ran a credit report on him. In a tighter job market it literally can pay to have a better credit report than the next applicant.

As far as improving one’s credit, the single most important aspect is to understand what is going on in the credit report. Having an understanding of what is contained in the credit report and what is not, FICO^® scores consider five factors in calculating a score:

Payment History: 35%
Balances 30%
Inquiries and New Debt: 10%
Types of Credit: 10%
Length of History: 15%

With these set of factors the ideal account would be a credit card that I have always paid on-time (Payment 35%), with a balance under 50% of my available limit (Balances 30%), it is a major credit card (Types of Credit 10%) and I have had it open for over seven years (Length of History 15%). This is just an example of how the factors apply. There are many things that do not have a role in credit, such as income, assets, down payment amount, interest rates; these items do not influence our credit. Since income and assets play no role, we are all essentially on a level playing field from the standpoint that our credit will be based on our management of our given resources rather than the amount or lack of resources.

The best example of this would be two past clients of mine. I like this example because the two clients were the same age, but were in two entirely different worlds when it came to career and finances. The first client played for an NFL team, his income was $2,000,000 annually. The second client was a school teacher; her income was $40,000 annually. Obviously there is no comparison in regards to their resources. However, the credit playing field was completely level and the school teacher excelled, she had close to an 800 score, a fantastic credit score. The wealthy athlete did not manage his financial affairs well; his score was less than 580, an awful credit score. Where did he go wrong? His first mistake was co-signing with friends and family on vehicles, the payments were not made on-time and his credit suffered. Co-signing gives you equal responsibility, and equal demise when the payments are not made on-time, my advice is to never co-sign, ever ( I had a client who co-signed for her son on a house, he stopped making payments and ultimately forced his own mother into bankruptcy, if you can’t trust your own kid who can you trust)? His other issue was the accumulation of about 5 to 8 small collections, most under $200. He had the money to take care of them, but he never knew they existed. Overall, poor management and attention is what caused the low credit scores; it was not for a lack of money.

What did the school teacher do right to achieve high credit scores? She paid things on-time, never compromised her good record by co-signing with people (Why do people ask you to co-sing? Because they don’t qualify, keep that in mind the next time someone asks you to co-sign), had no collections, had well aged credit cards, did not let mistakes linger on her credit report. She just practiced good management of her credit affairs, and gave her credit some attention to make sure it was in line.

The first step in making achieving the best credit scores is to give the report an assessment to make sure everything is correct. This is the starting point. Make sure you understand what is on there, why it is on there, and most importantly should it be on there?

2. What rules do people need to know in the world of credit?

What people need to know is that there are two main rules, the first being the credit scores and how they are calculated, the second being the Fair Credit Reporting Act, which gives us our rights as consumers in relation to credit reports. These two separate sets of parameters are what shape our credit lives. The Fair Credit Reporting Act, like most statutes is boring to read, so I dissected it into easy to understand language any consumer will understand. I tried to only focus on the points that pertain to consumer rights, the actual aspects that impact credit. If there is one thing that everyone should know about the Fair Credit Reporting Act it is that the consumer must initiate their protections under the Act. If there is something incorrect on my credit report it will not magically fix itself, I must discover it, dispute it, and follow-up to make sure it does not reappear.

The FICO^® credit scoring factors are fairly straight forward. In the book I apply them to numerous examples, similar to how a law book would apply a legal concept to a real court case. By showing how the factors impact people in real life and displaying the potential pitfalls it gives readers a better grasp of how the factors apply to various circumstances. In my classes I always say “there is never a blanket answer to an individual’s credit scenario.” The reason for this is that there are numerous variables in each of our individual credit reports; the same event will impact our credit scores to a different degree. For example, if we have two people who both incur a 30 day late payment in the same month will they be equally impacted? If person A has 10 positive accounts, and person B has only 2 positive accounts, who do you think will suffer a greater drop on their credit scores?

If I have 10 positives to outweigh a negative versus 2 positives it is apparent the person with more positive accounts is likely to suffer less of a drop to their credit score from a 30 day late payment. Based on this knowledge it shows us that having more, well managed accounts, is better than fewer accounts because in the face of adversity we will have greater protection by being surrounded with positive accounts. However, we always hear that having too many accounts is a bad thing. Based on what? There has to be a test to measure this, so how would I measure if I have too many accounts, or let’s say too many credit cards specifically? Wouldn’t it be based on my income or assets, my ability to repay what I borrow or could potentially borrow? That sounds like the test, but our income and assets play no part in our credit, so it is impossible to test how much is too much. The exception to this is that in applying for a loan the lender would know my income and it would play a role in the decision, but it still plays no role in my credit, since income and assets are absent.

In the absence of income, the credit relies on management, how am I managing my obligations? This is the critical item many people miss, it doesn’t matter how much or little income you have, credit is formed by your actions, not your checkbook. Obviously the size of the checkbook can make this easier or more difficult. Reflecting whether or not someone is living above their means and having trouble making payments on-time, or the flip side to that, the person has the funds, but just doesn’t make a great effort to pay debts on-time.

What if my credit report tells me I have too many open active unsecured lines of credit (i.e. credit cards)? Reason codes tell you why your credit is not perfect, the important thing to realize is that your credit will never be perfect, if you are 740 or higher you have reached the upper echelon, getting to 800 is great, you will never hit 850 on the Classic FICO^® model used by banks. Keep in mind there are knockoff credit scores out there being sold to consumers that may give you a higher credit score, but if banks don’t use those credit scores then neither should consumers. I hear all the time about consumers getting a “DisadVantage Score” online and thinking they have a great score, only to find out their FICO^® Score is 100 points lower when they go to a lender to apply for a loan. If the real-world uses FICO^® so should consumers. Whenever I say credit scores I am referring to FICO^®. Back to the reason codes, if you have good credit already, ignore the reason codes. If the reason codes tell me I am not perfect because I have too many credit cards, then I close the credit cards (which I really should never do if I care about my credit scores being the highest they can be), the next time I check my credit report guess what the reason codes are going to tell me? “Too few open active unsecured lines of credit” or “Too many new accounts”, closing the well established accounts results in a lower credit score, ignore the reason codes, they are like the GPS system that tells you driving over the cliff is the quickest route to your destination.

3. What is the highest credit score you’ve ever seen, and how was it attained?

The highest I have seen was 841 on the max 850 scale. This score was attained by someone who was 70+ years old, the he had credit cards dating back to the 1960’s that were still open and active. What this illustrates is the importance of keeping credit cards open and active in order to constantly feed positive information into the credit report. Do I need accounts that are 50 years old? No, once a credit card has become 7 years or older it is a well established account. It is common to see people with 800 credit scores when they have credit card accounts over 7 years old. How could an 18 year old accomplish this? Ask mom and dad to add you on as an “authorized user” to their credit cards. In my book it talks about a 22 year who did this, he had no score because he had no credit, nothing good, and nothing bad. His mom added him as an authorized user to an ideal account she had (open for 10 years, balance was 5% of the available credit line, and it had always been paid on-time). Sixty days later when the account appeared on his credit report it generated an 817 credit score, simply because of the positive nature of that account. If he had opened his own account he probably would have a 620-range score for the first 12 months of the account existence. The authorized user account is a very powerful method to boost a credit score, and a great way for relatives to help each other. This came under major scrutiny and public outcry in the summer of 2007, so much so that Fair Isaac, Co. was going to remove it from the scoring model. The outrage has tempered and as it stands, the authorized user account cannot be excluded from the scoring model under the Equal Credit Opportunity Act, so it is a here to stay.

4. Can you hire someone to fix your credit?

You can, however, the purpose of my book is to give the reader an overall education about credit so they can fix their credit on their own, if it needs correcting. As far as hiring someone to do it for you, it is like hiring someone to clean your house, you could do it yourself, but maybe you want to have someone else to do it because you think they can do a better job. Consumers just need to keep in mind there really isn’t anything they can’t do themselves, although they may procrastinate and never get around to doing it. There are a lot of rip-offs out there, the Federal Trade Commission warns consumers about this. The best way to test a credit repair service is to ask what it is they will correct. If the service states they can remove everything negative regardless of whether it is correct or not, this is a red flag and they are likely to just take the money and run. Accurate negative information cannot be legally removed. It would compare to a tax preparer telling me they can get me out of paying any taxes whether I owe them or not.

For people with extremely complex issues they may want to consult a consumer law attorney.

5. How badly do late payments hurt?

Payments account for 35% of the score, so a late payment can be a considerable blow to the credit scores. One late payment is not going to completely wreck the credit score. The impact will be based on how much positive credit the person already has. In my book I wrote about a method called “re-aging” which can remove late payments. It exists in the Uniform Policy manual which is put out by the Federal Financial Institutions Examination Council. “Re-aging” can be a great tool, but its use is at the discretion of the lender.

6. What about bankruptcies?

I would call bankruptcy the worst case scenario for credit, but it is necessary sometimes. It is better to get closure and recover than to let a bad situation continue. Many people who go through a bankruptcy will recover in 2 to 3 years. A bankruptcy comes off the credit report entirely after 10 years based on the Fair Credit Reporting Act. The more time that passes the less impact a bankruptcy will have. Bankruptcy is not the end of the world, it is actually a means to get a new start and for some people is their best option. It provides the best closure other than just paying the debt back. If someone doesn’t have the money to repay debt they should consult a bankruptcy attorney.

7. How can we avoid identity theft?

For someone who fears identity theft I suggest “freezing” the credit report. To do this, go to each of the three credit bureaus websites (www.experian.com, www.transunion.com, and www.equifax.com) and search for “security freeze”. The instructions are on each site, the cost is minimal, no more than a one-time $10 fee, for victims with a police report it is free. By freezing the credit report it makes the credit report inaccessible and therefore a thief could not gain fraudulent credit from a lender if the lender cannot access the credit report. This is the best method of prevention. Simply monitoring the credit report puts a consumer in the position of responding to the act not preventing it. A fraud alert can be added to the credit report at no cost; however, it is not as efficient as freezing the credit report. With a frozen credit report a consumer can still apply for credit by requesting a pin code so that a specific lender can access the credit report. Identity theft is a lengthy subject and certainly pertains to credit, so I have an entire chapter dedicated to it.

8. A lot of people are facing foreclosure. Is there an alternative to foreclosure that would be better for credit?

A short sale (the lender accepts less than what is owed) may be a better means for some people if the lender is willing to do it. The benefit to a short sale is to reduce the number of months of delinquency versus a foreclosure. If someone wants to keep their home they should request a loan modification from the mortgage company or a temporary forbearance if they are searching for employment. This is a complex issue; I have a three hour class about this specific topic. Individual circumstances vary, but the starting point is to always ask “do you want to stay in this house?” If the answer is no then a short sale, deed-in-lieu of foreclosure, or foreclosure are the likely companions to this. If the answer is yes, they would like to stay, then a loan modification, forbearance, among other options are worth pursuing. A homeowner should call the lender first to see what options are available to them. Any organization approaching them and asking for money to assist in preventing foreclosure is likely to do nothing and just take the money. To find a local HUD approved counseling agency go to www.hud.gov and find your state page, most of the HUD approved housing counseling agencies are top notch people. Like with anything, if you have a gut feeling someone is not looking out for your best interests then walk away.

Productivity

1. Describe an average day in the life of Patrick Ritchie.

My day goes from 7 am until I go to bed, which is generally 11 pm. I am still actively doing loans (mortgages), always writing about something, outlining a new book (just finished the second one), creating a new CE class for professional license renewal, teaching my classes, or consulting with someone about their credit. I teach my classes around Arizona, but I also travel the country when someone wants to bring me in to teach about credit. Some days I may be in Lincoln, NE, other times I might be in Maui, HI, wherever I am hired to speak. Currently I am promoting The Credit Road Map as a useful supplemental text for Personal Finance and Real Estate Finance classes at colleges. In between all of this I am attending Law School at Arizona State University, only 2 more semesters to go. I have a wonderful son who is about to turn 5 years old, so all of my non-work time is spent with him.

2. How do you keep it all together?

I have no clue how I keep my sanity, but it involves a lot of coffee, lists of everything I need to complete, and simply moving forward constantly. The speaking and travel schedule requires a carefully planned calendar. My laptop is my most important business tool, it goes almost everywhere I go because then I can work from anywhere. Some of my best writing happens on airplanes.

3. What are the most important things you’ve learned about productivity in the last few years?

Write everything down and cross it off when completed. Try not to do the same thing twice, think about your procedures so there is uniformity, like a franchise. Never be afraid to take a 15 minute nap to recharge the brain. Most importantly, enjoy what you do and it won’t seem like work. I truly enjoy what I do, educating people about credit is a worthwhile pursuit.

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5 Things I’ve Learned About the Financial Crisis

Thursday Bram — Thu, 09 Apr 2009 13:30:00 +0000

When it comes to the current recession, just about everybody has a plan to fix it. Some people are in favor of using the government to support failing businesses. Others support letting the market move us past the current economic crisis. But if you want to sit down and have a serious discussion about some of the related details — how did we get here? what can we as individuals do to make it through this recession without major problems? — there are fewer answers available.

My search for such answers led me to take a look at How We Got Here: The Complete Idiot’s Guide to the Financial Crisis, Part One, by Tom Gorman. The Complete Idiot’s series isn’t usually my first stop for research. I’m more likely to hunt around online until I find a couple of articles that seem to come from an authoritative sources and start there. But The Complete Idiot’s Guide to the Financial Crisis has some features that make it an ideal resource for this topic. For one thing, this particular Complete Idiot’s Guide is available only as an e-book — and it will be updated every 8 to 10 weeks with new information about the financial crisis. Beyond that, the series is known to be well researched and written in easy-to-understand language.

5 Things I Learned from The Complete Idiot’s Guide to the Financial Crisis

There is plenty of pat advice and opinions available on every blog and in every newspaper. In this particular ebook, however, I was pleasantly surprised to find real facts, as well as explanations of why particular approaches may help you. I’ve outlined just five things that I learned from just the first chapter Part 1 of The Complete Idiot’s Guide to the Financial Crisis — there are many more useful pieces of information in the ebook, and I’m confidant that the sections due out later will be equally helpful.

There are times to use debt: A common reaction to the current financial situation has been to declare all debt anathema. But the decision to use debt is not so simple. Instead, this book outlines how debt can still be useful. In particular, I found the comparison Gorman draws between using debt as way to come up with the cash to speculate to what caused banks to go under especially useful. It gets that important point across in a way that everyone can understand — and it’s a point that a lot of people have struggled with.
Get creditors’ names: It may seem like an incredibly simple tip, but Gorman suggests getting the name of each person you spek with when talking to your creditors (as well as the correct spelling and pronunciation). Such an approach gives you a basis for building a relationship with a creditor — for giving them a reason to want to help you find a solution for any credit issues you may have. Most people treat creditors aggressively (and there is, admittedly, a reason for that), but this tip may let you handle creditors with a smoother approach.
The basics of loan modification: If you search for information on modifying your mortgage (or another loan), you wind up with all sorts of conflicting information, making it incredibly difficult to navigate the process. Considering that The Complete Idiot’s Guide to the Financial Crisis goes through a far more rigorous fact-checking process than the average website, I’m happy to rely on the information in the book. It doesn’t hurt that Gorman clearly points to further resources — most of which are government agencies which can actually help you.
You can profit from the recession: I don’t think any of us want to profit from the misfortune of others — but the fact is that there are several ways to make money off the housing crisis and other effects of the recession. There are still ways to invest in real estate, from purchasing foreclosures to investing in tax lien certificates, for instance. Gorman goes over these options and talks about how they can help you get ahead during a down economy.
Interpret the economy on your own: Part of the difficulty most people have in deciding what to do next is that it seems impossible to tell what way the economy will jump next. Sure, numbers like the Fed Funds Rate are thrown around as indicators — but those of use without an economics degree may not know haw to interpret those numbers. Gorman has put together a guide to what economic indicators mean to us folks down on the ground. He even adds in some advice on what we can do to secure our individual economic positions for whichever way a particular indicator is moving.

Getting The Complete Idiot’s Guide to the Financial Crisis

The Complete Idiot’s Guide to the Financial Crisis is available in several e-book formats, including for the Amazon Kindle and a no frills PDF. Future sections will be available every eight to ten weeks. The first section is made up of five chapters. Later sections each include three chapters.

Tom Gorman is the author of The Complete Idiot’s Guide to the Financial Crisis. He’s written and edited publications relating to economics, as well as banking and business information for over 20 years. Gorman is also the author of The Complete Idiot’s Guide to Economics, The Complete Idiot’s Guide to MBA Basics and The Complete Idiot’s Almanac of Business Letters and Memos.

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3 Scary Misconceptions About Money

Joel Falconer — Wed, 08 Apr 2009 13:38:19 +0000

It’s strange that for a society that’s so focused on making money and owning assets, we have some pretty unusual and downright scary approaches to the stuff and how it comes into our possession. Money doesn’t grow on trees, but we give our children and ourselves the idea that it’s nearly unattainable to make enough of it to live the way we want. Here are three of the common misconceptions that our society taught me that my own experiences in business have shattered.

It Takes Money to Make Money

Having money can make it easier to make more money, properly utilized. If not for that fact, venture capital wouldn’t be a big industry. However, if you don’t have money, it doesn’t mean you can’t make any. Plenty of big earners today started off bootstrapping. I bootstrapped my business and it worked.

Perhaps it’s more convenient to make money when you’ve got money but in no way is it a prerequisite. You just need to put in some effort, some brains and be good at what you do.

Personally, I’m of the opposite opinion: if you can acquire funding that you need to pay back later, you’re not in the best position. The best position is to bootstrap your operation and build it up from small but affordable beginnings. You don’t want to be owing anything to anyone at any point; perhaps the “it’s cool to get into debt even if you don’t really have to” myth should be shattered in another article!

Evidently if you want to open a retail business you’ll need funding, but there are plenty of business plans that can be thought up and executed without the need for capital or loans, which means the old saying that it takes money to make money is not true.

Time and Money are Proportionally Related

This is a very common one. Because the industrial age and the model of employment it brought about is based on a proportional relationship between time and money we tend to associate that relationship with money, rather than with employment.

So let’s get that clear: the relationship between time and money is imposed by employment, not the idea of money itself.

If you’re clever with your business plan, you can create something that makes money based on other things, like product sales. Look at online membership training sites as an example — if you can find 100 customers for a $100 a month program you’ve made $10,000 (from which you subtract your marketing and hosting expenses, among any others). I’m not insinuating it is easy to make $10,000 a month but I am saying that your income doesn’t have to be proportional to your time investment.

Money is the Root of Evil

This old proverb is a pet peeve of mine because it and the attitudes it engenders are the seeds of what make people averse to making money. Seeing money as some kind of enemy, or something that is difficult to work with, is like setting yourself up not to make any. Money is a tool like any other and these emotional connotations do not assist in the acquisition or use of that tool.

Once you begin to see it for what it is, your business decisions can be based in reality and have a level of objectivity associated with them. Many people make stupid business decisions because they have developed certain mindsets regarding cash and these need to be put to the back of your mind. Fears about losing money, or the idea that money is evil, simply don’t help anyone.

Change Your Mind

If you’ve fallen prey to these misconceptions, it isn’t too late to change your mind. It can be hard to escape from old mindsets and habits imposed on you by the culture you live in, but that doesn’t make it impossible. I don’t subscribe to the “it’s only worth doing if it’s difficult” mindset but in this case, the difficult is certainly worth doing!

Offering a unique perspective and insight on productivity based on his experience as a writer, musician, family man and manager, Joel Falconer has been published online and off, and brings to Lifehack's readers practical advice you can use to be more efficient and effective.

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Review: Undress for Success

Thursday Bram — Thu, 02 Apr 2009 13:30:19 +0000

Kate Lister and Tom Harnish have been working at home for years. For sixteen years, they operated a home business. They’ve codified the advice they’ve generated in a ll those years of working at home in a new book, Undress for Success. The book covers an introduction to moving towards a home office, with a heavy emphasis on teleworking.

Telecommuting And You

Section titles like ‘Expose Yourself — Are Your Right for E-work?’ or ‘Dirty Underwear — Uncovering the Scams’ do add an element of fun to what is essentially a book on changing your career. It is easy to read — the writing style reminds me of a blog. Each section is broken down into chapters, which are then subdivided into bite-sized pieces of information on specific topics. Even though the book is 262 pages, I was able to breeze through it, bookmarking sections I wanted to come back to later.

The five primary sections of Undress for Success cover the basics of e-work (meaning work you can do from home over your computer), telecommuting, freelancing, running your own home business, and the appropriate technology. Far and away, the emphasis of the book is on telecommuting: that section racks up 114 pages. In comparison, freelancing gets just 38 pages. I wouldn’t really recommend the book as the introduction to all things freelance or entrepreneurial — but its coverage of telecommuting and teleworking is solid.

The Bare Bones of Working At Home

Lister and Harnish are careful to point out that working from home is not for everyone. They interviewed scores of folks who work at home, talking about the challenges they face and how they cope with them. My favorite was easily the approach one programmer named Madison takes to make sure her family knows when she’s on the job and has to focus on her work: “To make sure everyone knows when she isn’t available, she wears a tiara when she’s ‘at work.’”

It’s hard to guess the coping mechanisms you’ll come up with when you’re working at home yourself, but the fact that Undress for Success actually gets its hands dirty with the various problems someone working at home faces certainly makes it a better resource.

The book also includes several chapters on convincing an employer to let you make the switch to working at home — up to and including helping you outline the benefits that making the switch to telecommuting will bring to your employer. While we’ve discussed talking to your boss about telecommuting here recently, Lister and Harnish have the room to go into depth in covering that topic thoroughly.

Another useful portion of the telecommuting section is the focused look at a number of careers that Undress for Success offers. Those include:

Call Center Agent
Virtual Assistant
Medical Transcriptionist
Teacher or Tutor
Remote Tech
Writer
Telemedicine

For each of those careers, there is a chapter covering what you can expect, training, scheduling, compensation and even stories from workers in the trenches. There’s even information on the scams in each career, equipping you to avoid them.

The Drawbacks to ‘Undress for Success’

While Lister and Harnish provide a solid reference on telecommuting, along information on handling issues like convincing your family that you’re actually at work even if you are still in your pajamas, I think that Undress for Success is missing something. That something is a discussion of other work-at-home options beyond telecommuting. The sections on freelancing and starting a home business are fairly bare bones — and since moving into freelancing is essentially creating a business, I don’t think that dividing the two into separate sections really helped.

At best, Undress for Success offers just enough information on creating your own business to get you thinking, “Hm, I could do that.” If you were to decide to go that route based on this particular book, though, you’ll still find yourself looking for a lot of introductory level material. It is important to do plenty of research before embarking on any entrepreneurial venture, but I can’t help feeling that the book could have included a little more information on getting started. I know that Lister and Harnish have written about small business topics before — their first book was Finding Money: The Small Business Guide to Financing — perhaps they were able to go more in-depth on business topics there.

Readability and Moving Forward

Overall, I found Undress for Success very readable — and very interesting. It does overreach a bit, but if you’re looking for information on moving into telecommuting, this book is an ideal starting point. Furthermore, if you don’t have a lot of time to devote to sitting down and plowing through a book, the format works well: each section is just short enough that you can read one whenever you actually have a minute. In Undress for Success, Kate Lister and Tom Harnish have brought together an introductory guide to working at home that provides a starting point for readers to explore telecommuting and teleworking. You can find more information at their website, also named Undress for Success.

If you’ve been considering making the switch to working at home, I’m interested in hearing what books, websites and other resources have helped you in the decision making process — no matter what option you wound up going with. I know that books like Tim Ferriss’ The 4-Hour Work Week have inspired more than a few people to explore telecommuting, but what else is out there. Please share your resources in the comments.

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9 Questions to Ask Before Going Freelance

Thursday Bram — Thu, 26 Mar 2009 13:30:00 +0000

I’ve lost count of the number of articles I’ve seen recommending that folks take on freelance work to make ends meet during the current economic crisis. From keeping the wolf away from the door to working on top of a full-time job, I’ve seen freelancing cited as a panacea. It’s especially promoted to anyone working in a relatively creative field — not just writers and designers, but videographers and coders are being told that freelance is the way to go. I even spotted at article last month suggesting that sales reps should see if they could pick up a few bucks on a freelance basis.

In general, I think freelancing is a great option — but I also know that it isn’t for everyone. If you’re considering taking the freelance route, there are a few questions you need to be able to answer in the affirmative.

1. Can you meet those deadlines?

Freelancing is very deadline-oriented. A client can’t tell you when or where to work, but he can certainly tell you when your project needs to be done. That sounds like it wouldn’t be such a big deal, but think of it this way: if you’re taking on freelance projects just to keep money coming in while you hunt for something permanent, you can get into a little trouble if you actually find a new job. Will you actually have enough time to complete your projects after you’ve put in your time at your brand new day job?

2. Are you willing to give up your free time?

If your freelancing hours are limited to after work, you may find yourself devoting all of your free time to your new projects. While that may not sound all bad, it can be a one way ticket to burnout unless you are very careful about your time management. After all, at least a little social interaction is necessary to keep most people happy.

3. Can you find enough work?

Don’t get me wrong — there’s plenty of freelance work out there these days, especially since many companies are turning to freelancers to cover their staffing needs after layoffs. But finding that work is a whole different matter. How much time can you afford to spend on checking job boards? Assuming you’re planning to freelance for more than just a few projects, you’ll want to put some marketing in place — a website with your portfolio and that sort of thing — but even basic marketing and job hunting can take up a lot of time.

4. Do you have a portfolio in place?

Most freelancers rely on their portfolios, rather than resumes to get them hired. A prospective client wants to be able to take a quick look at your work — whether it’s a press release, a web application or a video — and decide on the spot whether he wants to work with you. That means you need to have a solid portfolio in place. True, you can find freelancing opportunities without a portfolio, but you’re pretty much guaranteed to make only a fraction of what you might otherwise.

5. Are you going to make enough to meet your needs?

Freelancing isn’t exactly a fast route to riches. In order to make enough to cover your needs, whether replacing a full-time job or covering unexpected expenses, you probably have an exact amount you need to be making in mind. When you consider the hours you have available to work, that number may not translate into a practical hourly rate — at least for a starting freelancer.

6. Can you wait for your money?

The grand majority of clients do not pay their freelancers upon completion of a project. Instead, you’ll be looking at payment within a month of an arbitrary date (assuming you aren’t working with a big company that requires 60 or 90 days to pay invoices). That arbitrary date can be from the point of invoicing to the point of publication, depending on who you’re working with. Freelancing isn’t really the ideal option if you need the money by this weekend.

7. Are you able to go to bat for yourself?

If you’re used to working with a manager or supervisor, freelancing can come as a bit of a shock. Not only do you need to go out looking for your own work, but you also have to set timelines on your own and take care of invoicing and other paperwork. You can learn how to do all of these things, of course, but the learning curve isn’t exactly shallow.

8. Is freelancing going to interfere with your commitments?

Most clients expect to be able to communicate with freelancers during normal business hours. That can mean taking a call at your day job: that sort of situation is practically begging for an eventual problem. With some effort, you can work around these issues, but it can mean trouble that isn’t really worth it for the amount of money you’re bringing in.

9. Can you be flexible?

You might get a rush project that has to be done by the end of the day tomorrow — which means pulling an all-nighter tonight. You might go a week without getting a new project in. Freelancing requires a lot of flexibility, especially when you’re first starting out and are still working on building a name for yourself.

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Review: I Will Teach You To Be Rich

Thursday Bram — Tue, 24 Mar 2009 13:30:00 +0000

As far as personal finance blogs go, Ramit Sethi’s I Will Teach You to Be Rich can’t help but stand out. Most of the personal finance blogs out there stick to calm explanations of what the writers are doing to improve their own finances, along with some tips meant to get readers interested in doing things the same way. In contrast, Sethi’s blog is loud, full of concrete examples on how to do things and aggressively effective. It makes Sethi stand out among the rest of the personal finance bloggers out there — and it’s made for a very interesting book. Sethi’s book, also titled I Will Teach You to Be Rich, came out yesterday and it’s already making some waves.

A Targeted Guide

Sethi know his audience. I Will Teach You to Be Rich is aimed at 20-to-35 year olds, and it’s essentially a guide to getting your finances on track. The book covers a six-week program that automates saving and jump-starts investing — with more than a little information on banking, budgeting and entrepreneurship along the way. The information is very targeted: heavy hitting chapters on banking, for instance, are aimed towards readers who aren’t quite up to speed on all the ways banks make money off of account holders. That may seem to guarantee that the book will only offer introductory level material on personal finance, but I was surprised to see that it actually goes pretty in-depth. On the topic of banking, for instance, Sethi dives into the complexities of overdraft fees to the extent of providing guides to negotiating your way out of that first overdraft fee.

I won’t claim that it’s an exhaustive volume — at just over 250 pages there just isn’t room for even half the material Sethi has covered on his blog. But I Will Teach You to Be Rich will definitely give the average twenty-something the tools necessary to get his or her financial house in order, along with some ideas on why to bother. The introduction asks, “Would you rather be sexy or rich?” With that question, Sethi embarks on an analogy that can’t help but make sense: money is like food. Most of us have stressed over our weight at some point or another and tried at least one ridiculous diet. But the fact of the matter is that the only thing we really need to know about food is that we should eat less and exercise more. Sethi makes the argument that the same level of simplicity is all it takes to keep our finances under control. It’s not a sexy approach — but it is an approach that can make you rich in the long run.

The language, anecdotes and overall style does make it very clear that you’re reading a book for the college-to-mid-thirties crowd. There are a few colorful metaphors, accompanied by shout-outs to Sethi’s mom. I Will Teach You to Be Rich is certainly one of the funnest books I’ve read on personal finance, and you shouldn’t think for a moment that the style detracts from the quality of information that Sethi shares. But it does certainly make it an easier read than most ‘must-read’ personal finance guides.

The Emphasis on Entrepreneurship

Where I think Sethi knocks it out of the park, both in his blog and in his book, is his emphasis on entrepreneurship. While most personal finance resources talk about topics like automating your finances or long-term investment strategies (albeit with less style), surprisingly few really promote entrepreneurship. In I Will Teach You to Be Rich, Sethi doesn’t go overboard with entrepreneurial concepts — after all, the book is first and foremost about achieving financial independence. But there are little discussions, here and there, that make it clear that Sethi doesn’t really expect anyone who has their finances taken care of to stick with an employer for the long-term.

It’s easy to attribute Sethi’s support for entrepreneurship as a part of personal finance to his own life: Sethi co-founded PBwiki and has turned his personal finance blog into a site with over 200,000 readers each month. But I think there’s more to it than that. I think that entrepreneurship is becoming more important, especially as people feel less secure in their jobs and have more options.

Sethi tackles it from the point of view that most personal finance bloggers are focused on frugality — which seems like a pretty fair statement. In contrast, Sethi has focused on making money, whether through asking for a raise, investing and starting a money-making enterprise of one’s own. Don’t get me wrong — Sethi has devoted entire months to saving money. He just goes for the big savings, rather than frugal tips like making your own soap. But overall, Sethi focuses on helping readers to figure out how they can grow their earnings over time — and that is an approach that will really pay off. It makes both Sethi’s book and blog worth reading in my mind.

The Book

If you’re interested in picking up a copy of I Will Teach You to Be Rich, Amazon lists it as in stock on March 27. I did see copies on the shelf of my local major bookseller last night, however, so they are out there. I’m interested in seeing what you think of the book — personally, this is one book I think I’ll be referring back to.

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You Don’t Have to Worry: Tax Answers from Jeff Schnepper

Thursday Bram — Thu, 19 Mar 2009 13:30:00 +0000

No matter how prepared you are for tax season, you probably worry at least a little whenever April 15th is getting close. We’ve covered your last-minute tax options in the past, but no matter how close that deadline is getting, we want to reduce your worry. Jeff Schnepper, MSN’s tax expert, agreed to answer a few questions for us, and offered a little reassurance.

Tax Misconceptions — and Problems

One of the major reasons that our taxes keep us up at night, according to Jeff, is that there are so many myths and misconceptions about taxes: topics like who you can claim as a dependent and what you can take as a deduction involve as many urban legends as a bad horror movie. And it doesn’t stop there. Jeff says: “The most common misconception people have about taxes is that everybody else is cheating and getting away with something….giving them the “right” to fudge. Cheating is wrong and I’ve found that the taxpayers I work with understand, and want to do the right thing. The problem is that the law changes every year, and sometimes three and four times in a single year. The professionals are overwhelmed and the average taxpayer completely lost. It’s not that people are cheating – they’re making errors because they don’t know the rules.”

The past few months have shown the truth of that statement. If you consider just the appointments that President Obama has made (or attempted to make), it becomes obvious very quickly that even politicians who can afford the best tax preparers in the country can’t get their taxes done correctly.

What We Can Do to Reduce the Worry

Just because the tax system is complicated doesn’t mean that the average taxpayer needs to spend the time between now and April 15th cringing, however. Even the biggest tax bogeyman of them all — an audit by the IRS — isn’t something you should spend too much time worrying about. While you can minimize your overall chances of being audited by following the rules as closely as you can, and by having the right documentation, there’s a certain element of chance.

“You can’t avoid an audit. Returns are selected randomly as well as based on the IRS DIF computer program,” says Jeff. If there’s nothing left that you can do to make sure that your tax return is filled out accurately, you can stop worrying. If the computer picks your number, you may have to sit down with an auditor, but there’s nothing else you can do to affect the process.

A Few Last Minute Options

Even though you’ll get the best results for preparing your tax return by starting as early as possible, Jeff was able to point out a few last minute deductions that you can pick up after December 31st: “Do you qualify for a deductible IRA or would a Roth be better. Can you contribute to a SEP?” He suggests looking into your IRA options if you’re still searching for deductions.

Jeff also notes that there are a few extra things to consider this year, if you’ve been affected by the current economic situation. Jeff says, “Sit down with a tax pro if you may lose your house. Congress passed a law that wipes out any taxes on debt discharge income on a principal home. But, you have to do it right and file the appropriate forms.” He also pointed out that if you’ve refinanced your mortgage, you can deduct any points you pay over the life of the refinance. You can even deduct any unamortized points on your original refinance if you refinance a second time.

“The laws are in flux and are changing as you read this. For example, now the first $2,400 received in unemployment benefits escapes tax. You can get a $1,000 deduction for real estate taxes even if you take the standard deduction. For 2009, you can deduct sales tax on a new car even if you don’t itemize. If you don’t know the rules, you’re going to have a hard time playing the game,” says Jeff. He makes it clear that if you aren’t staying up to date on the changes in tax laws, you’re going to have a hard figuring out your taxes.

Getting Ready for Next Year

You can make your 2009 tax return easier by starting now. The secret to making tax season simple is setting up a system to document both your income and your deductible expenses throughout the year and keep it up to date. Jeff described one system his clients have been known to use: “For substantiation, I have clients who throw all their checks and receipts in a box. Once every month or so they sit down and put those checks and receipts into envelopes with tax classification. So, there’d be an envelope for contributions, investment expenses etc. At the end of the year, they add them up, don’t double count, and put the number outside the envelope. Those are the numbers they give me for their tax returns. And, they never have to fear an audit. An audit can only ask them to substantiate the numbers on the return. They already have the backup available in each envelope!” It doesn’t matter exactly what system you use, though, as long as you have one in place — and you keep it up to date throughout the year.

If you have a question about your taxes, Jeff Schnepper is MSN.com’s Tax Expert. You can find him at money.msn.com, where he answers questions every day. In addition to his MSN columns, Jeff is the author of How to Pay Zero Taxes, which is now in its 16th edition, as well as several other finance and tax-related books.

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