Search results matching tag 'emergency fund'

A year of food for $800

Karen Datko — Tue, 29 Sep 2009 21:59:00 GMT

A whole year's worth of food for one person for only $799.99? And that's after a $200 discount. Is this too good to be true, or should we order?

Well, there is one small catch. The offer is for 78 one-gallon cans of dehydrated and freeze-dried food, plus a wheat grinder. Now, that's an emergency fund you can eat.

Actually, the ad exposed us to a movement we weren't very familiar with. Called "food storage," it's about amassing enough food on hand to survive common disasters like earthquakes and hurricanes, or "economic crisis" or for "religious reasons," according to a Web site called Food Storage Made Easy.

While most people would consider enough food for a few days or a few weeks to be a sufficient emergency supply, these folks think in terms of a complete year.

And no worries about this stuff going bad. The online ad at Costco for the Shelf Reliance THRIVE $799.99 offer says, "With over 4,700 servings and many foods with a shelf life of up to 20 years, this package will give you variety, nutrition, and peace of mind." Shelf Reliance is not the only company that sells packages like this.

Bing: More about food-storage supplies

We're not going to run out and buy a year's supply of food with a 10- to 20-year shelf life. But being prepared for a short-term emergency is always a good idea. So we've learned a few things from the food-storage advocates:

Don't forget water. Plus, food-storage cookbook author Vicki Tate writes at Backwoods Home Magazine, "Make sure you add cooking oil, shortening, baking powder, soda, yeast, and powdered eggs. You can't cook even the most basic recipes without these items." Spices help prevent food boredom.
Keep some fun foods like pudding or candy, Vicki says. Grains and beans can get really old.
If you don't buy the No. 10 cans, store your supplies in food-storage containers. "If you are using plastic buckets, make sure they are lined with a food-grade plastic liner available from companies that carry packaging supplies," Vicki advises.
Learn how to cook what you've stored. You don't want to wait until after the tornado hits to familiarize yourself with the wheat grinder.

Does having a year's worth of food sound a bit alarmist to you? Another company that sells large supplies of freeze-dried and dehydrated food warns at its Web site, YourFoodStorage.com, that up to 2 billion people might get swine flu worldwide.

It also says, "We will NEVER sell you food storage that is left over from the Y2K days!"

Related reading:

The emergency fund you can eat

10 bulk-buying bargains

Becoming a savvy shopper

15 ways to make freelancing/self-employment successful

Karen Datko — Thu, 02 Jul 2009 12:23:00 GMT

This post comes from Trent Hamm at partner blog The Simple Dollar:

An acquaintance from my previous career wrote to me recently asking about the steps I took when I made the switch to working at home:

It's official: I'm ready to get out of here. I'm tired of working here and I have a lot of people lined up to hire me for home catering and cooking. I'm sure you did a bunch of planning before you made the leap. What exactly did you plan?

I know at least one other former co-worker who is contemplating a similar move into a freelancing gig, though his plans are decidedly less clear at this point.

What exactly did I do during that transition period? I started making a list and soon realized that there were several things I wish I had done. Before I knew it, the e-mail had ballooned into a guide that I thought might be useful to other people.

Here are 15 things I did (or wish I had done) during the months leading up to my transition to working for myself.

Learn to live on less. One of the biggest challenges of freelancing/self-employment is the uneven pay. Gone are the steady paychecks of a typical job. Gone is the idea that you'll make roughly the same amount next month that you will this month. In some months this year I've earned 25% of what I earned in other months, and I anticipate a single month later in the year when several projects come to fruition and I'll have by far the best month of the year.

If you allow your spending to match your income, you're not going to be able to survive during the lean months. Instead, you need to adapt to a consistently lower level of spending. Start looking now for fat to trim from your life. Every expenditure you have that's not necessary for your basic living standards should come under very careful scrutiny.

Many people balk at this, but the truth is this: Your first several months as an independent worker are going to be a real shock in a lot of ways. The last thing you need is a bunch of unnecessary expenditures. If things go well, you can always add some expenses back into your life -- but you may find, surprisingly, that you're quite happy without most of them.

Create a budget, both personal and business. As I've written before, I'm not a believer in the "one-budget-fits-all" approach. Trying to make your budget or spending match an example provided by someone else is doomed for failure because that example doesn't match your life.

I argue that the real value provided by a budget is that it reveals, loud and clear, how you actually spend your money and it can provide some clear pointers to where you need to make changes. Prepare a budget by keeping careful track of what you spend for a month -- make a giant list of every dime you spend -- then organize all of that spending into categories that make sense to you. When you have that in place, look not only at the total amount you spend (you're going to need an income level that on average exceeds that by at least a little), but also at the various categories. Are there areas that you can cut?

A similar exercise for business expenses is also useful, though it can be more difficult. Seek advice on the expenses that people typically have freelancing in your area of interest and use that for a basis.

Build up a big emergency fund. If you've followed the first two steps and made serious cuts in your spending, you've now got a nice surplus of money coming in each month. Don't be tempted to spend it. Instead, sock it away into a savings account. In fact, do it automatically. Instruct your bank to automatically transfer a healthy amount each week into a savings account.

If you've done your budget, you have a good idea of what your monthly expenses are. I recommend having at least six months' worth of living expenses in your emergency fund before making the leap. This will help you survive the lean months, particularly those early on in your freelancing experience.

Now make it bigger. People often go light on the emergency fund before they make the leap. They have a bit of cash saved up, but they've convinced themselves that they're ready -- they have plenty of clients and opportunities lined up.

Don't make that mistake.

The big problem is that freelancers and self-employed folks, especially early on, can have a tendency to count their chickens before they hatch. No deal, no matter how good it is, is a sure thing until contracts are signed and products are delivered. You might have 10 potential clients who talk big about what they want to do, but when push comes to shove, all of them could vanish -- and many of them will.

Be prepared for that. Don't leave yourself in a desperate situation if a conversation doesn't pan out. Cover your bases -- and the best way to do that is with a healthy emergency fund. Build it now, build it later, and keep it nice and fat.

Start reaching out to your audience and client base now. There is no better time than right now to start digging for opportunities, even if your leap is far into the future. Get out there and start seeking out the people you want to know and the people you want to sell to.

In a nutshell, this is market research. You need to find out if there are people who will buy what you do and figure out how to connect with them. Obviously, the Internet and social media (like Twitter and Facebook) are good places to start, but they're just a start. You should also go where people who might be potential clients -- or potential competition -- congregate.

Start finding the people now. Join message boards. Start Twittering. Start a blog. Pound the pavement in your community. Dig through freelancing boards and other job boards. If you're passionate about the field you're leaping into -- and you must be if you want freelancing to work -- you have plenty to talk about. Let the passion flow.

Eliminate as many regular bills as you can. Back on the money side of the coin, start whacking your regular bills, particularly any related to entertainment. Ditch Netflix. If you want to watch a movie, use Redbox or a similar service. Ditch your cable bill entirely. Use a digital converter box and Hulu to get your television fix. Sell your car. If you can use public transportation or ride a bike to work, do you really need one?

For the ones you can't eliminate, trim. Make your living quarters as energy efficient as you can, with programmable thermostats and the like. Cut your cellular plan. Do you really need that much data, those minutes, or that many text messages? If you decided to keep cable or satellite, whack some premium channels you don't watch.

The more monthly bills you can eliminate or reduce, the more room you have to breathe when you make the transition.

Write a business plan. Don't worry about being too formal when you do this. The purpose of a business plan is to make you think about all of the details of what you're about to leap into. Have you really thought things through?

Areas to include:

Market analysis. Is there actually a need or a market for what you're doing?
Product or service development. What kind of service or product will you actually offer?
Marketing. How will you draw attention to what you're doing?
Financial organization -- the money.
Risk factors. What problems might crop up and how will you handle them?

Spend some time on this. Include everything that comes to mind, and flesh out details on every point. Don't sweat the formality -- just focus on ideas. The more effort you put in here, the easier it will be to make this all work when things get rolling.

Now rewrite that business plan. Many freelancers put only minimal effort into a business plan, if they bother at all. Big mistake.

I suggest using a self-imposed deadline of sorts. Arrange to show your business plan to someone you trust on a certain date to gather input. Putting that deadline in place will keep you focused on the project, as you'll want to present something reasonable.

Then, when you deliver it, ask for feedback of all kinds. What you're really asking for is advice on the work you intend to do. This is a double-check to make sure you've thought everything through.

When you get the suggestions, use them to rewrite your plan. Then repeat, perhaps with another person who might read it and offer suggestions. A few such repetitions will go a long way toward creating a plan that works.

A good business plan isn't a boring waste of your time. It's a great way to make sure all of your bases are covered, and often the revision process is the most powerful part.

Find a mentor. Who can you take that business plan to? A mentor, that's who.

Seek out someone who knows what he or she is talking about and who isn't a potential competitor. Look for someone experienced at freelancing in a tangential field. Be specific in your questions and don't take criticism personally. It's offered with the goal of making you better, not cutting you down.

Recognize that the person is probably busy and contribute some value to the relationship by promoting that person's work or offering something of value. For example, if you're a nascent blogger and would like to attract a professional blogger as a mentor, spend time promoting the blogger's best stuff. Write about it on your own blog and talk about it on Twitter. Buy the blogger's book and write a review. Participate in that person's comments and other conversations online.

Actions like these make a mentoring relationship a fair value exchange instead of a "gimme gimme gimme" relationship.

I wrote a detailed guide on finding a mentor that can be useful.

Make it easy for people to see the good stuff you can do. Create an online presence that makes it very easy for people to find your best work. Regardless of whether you're doing online work or not, have a Web site with an easy-to-remember URL that contains links to examples of the best stuff you've created. Join social-networking services (Facebook and LinkedIn) and make professional pages about yourself that clearly show off your best side.

If people hear about you, they're going to Google you. You want the first things they find to be good, positive and impressive. Never take the attitude that you can appear antisocial and that if they don't like it, they can walk. That attitude will push many potential clients away because you'll seem unreliable from the get-go. There is never a downside to appearing friendly and accessible.

Communicate, communicate, communicate. The more you talk, the more likely people are to discover you. Share your thoughts and ideas and comments as much as you can, as widely as you can.

Start a blog. Join social media sites (Twitter and Facebook, for starters). Most importantly, join conversations. Link to interesting people and ideas on your blog and offer your take. Follow interesting people on Twitter and respond to the things they say. Comment on interesting blogs (with a link back to your own, of course) and make worthwhile comments.

Most important, stick generally to your area of expertise, but don't be afraid to jump into topics that are at best tangentially related. The goal is to make people interested in what you're doing, and the best way to do that is to always speak from your heart and your mind. Be positive, put your voice out there, and good things will happen.

Build connections with local small business/entrepreneurship groups. Even if your work is outside of your community -- online work, for example, or freelancing work for remote enterprises -- it's worthwhile to engage with local small businesses and entrepreneurs. After all, that's what you are. Such groups are almost always sources of good ideas and leads for areas where you might improve, and they're also places where you can float new ideas and gauge them. Even better, leadership in such groups provides ways to connect with others via conferences, meetings and so forth.

Get involved in peer groups, both in your own physical community and in your professional community, and don't be afraid to dive right in and participate, even before you've made the leap. The number of valuable connections you'll make there will pay off time and time again.

Have a place where you can focus on work -- and only work. Many freelancers start off working at the desk in the corner of the living room, the same one that houses lots of personal material. What often happens is that the personal material begins to interfere with the professional work and the lines begin to blur. You find yourself working when you should be engaged in personal activity, and doing personal things when you need to be working.

Find a location that you can devote solely to your work. For example, a room in our home serves as my office. When I need to work, I go in there and close the door and I'm in work" mode. When I leave that room, I'm no longer in work mode (unless I'm headed out to do some research).

Without that barrier, it would be incredibly easy for me to constantly take my eye off the ball, and if I did that, I would constantly find myself falling behind on my work.

Build your current bridges as strong as you can -- and don't burn them when you leave. Many people, as they begin to transition mentally into freelancing, let their current work relationships slide, deciding that they don't matter. Actually, they matter more now than they did before.

Here's why: The strong connections you have now will continue to serve you well after your transition. The connections may provide you with new clients and interesting angles to pursue. Plus, if freelancing doesn't work out, you have a strong foot in the door for returning.

On the other hand, if you let those relationships burn out, you'll miss out on those opportunities -- and that safety net.

Practice, practice, practice. This is perhaps the most useful lesson of all. If you want to be a real standout in your area of expertise, keep practicing at it. Study it. Try new things, and work to get better at the things you already do. In short, practice every single day.

If you're a writer, write (and share it, via a blog). If you're a graphic designer, make designs and share them (via Flickr or other avenues). If you're a musician, practice daily and share demos with the world. Doing this not only makes you better, but it shows that you're a hard worker and helps you get a better grasp on what people like and what they don't like.

As time goes on, you'll get better and better at what you do, and you'll have a long track record that shows how diligent you are at your work.

A final tip: Dig into freelancing/self-employment resources and communities. Here are five Web sites I visit all the time for advice and thoughts on being self-employed and accepting freelance work.

FreelanceSwitch is my Web site of choice for thoughtful and insightful conversation on freelancing and self-employment issues. It's a daily read for me.
Elance is a clearinghouse of freelancing opportunities of all stripes. I like to keep an eye on freelancing opportunities in several areas.
Guru.com is a similar clearinghouse for freelancing opportunities.
Web Worker Daily is a must-read If you do computer-based freelancing. Again, I read this one almost daily.
Freelance Folder offers a ton of widely varied and interesting advice on freelancing topics.

Good luck!

Related reading at The Simple Dollar:

Everything you ever really needed to know about personal finance

The best money advice in 10 words or less

Blending work and family: How we do it

Lies, damn lies and personal finance

Karen Datko — Fri, 15 May 2009 14:41:00 GMT

This post comes from partner blog The Dough Roller.

A co-worker recently sent me an article written by Helaine Olen entitled, "The end of personal finance -- Decades of advice turn out to be so much garbage." Published at Slate's The Big Money site, the article received kudos from an unlikely source, BoingBoing.net, in a guest post by "Life, Inc." author Douglas Rushkoff.

The article begins with Olen recounting how, in 1997, a financial adviser she was working with to write a financial-makeover feature dismissed the notion that gold was a good investment. Gold was trading at $300 an ounce and now trades at about $900. As a result, she views her decision to leave gold off the table as a mistake. (It wasn't, but we'll come back to that in a moment.)

Olen than proceeds to argue that personal finance is, or at least should be, dead. She attacks stocks and the "efficacy" of the market because it was down 40% last year. She describes the personal-finance industry as a "self-help complex," and argues that the idea that people can manage their money on their own is a lie because prolonged unemployment can burn through six months of emergency savings.

Olen then quotes Nan Mooney, author of "(Not) Keeping Up With Our Parents: The Decline of the Professional Middle Class," as saying that "personal finance has come to substitute for the role government should play for people." Substitute the word "neighbor" for the word "government" in that sentence, and its absurdity stands out like a fart in church.

And then the article turns really dark:

Which leads to another question: What's next for personal finance? The past two years have demonstrated over and over again that bad things can happen to good savers and investors. Very few of us have the wherewithal to fund both retirement savings and a large enough emergency fund to sustain us through a bout of unemployment lasting, say, more than a year. No one, it turns out, really knows what an individual stock, mutual fund, or commodity like oil or precious resource like gold will be worth in six months, never mind six years.

Nonetheless, personal finance is unlikely to crawl away and die anytime soon for a simple reason: We think we need it. "We're kind of screwed but we don't have a choice but to take care of ourselves because no one else is helping," admits MSN's personal-finance columnist, Liz Weston.

And then Olen asks for an apology from personal-finance gurus (think Suze Orman or Dave Ramsey, but presumably not Liz):

Me, I'd settle for a few mea culpas from our finance gurus. After all, I am aware I owe my gold-loving dude an apology. Unfortunately, I know the planner assigned to the case won't be eating crow any time soon. I recently received a copy of his latest book in the mail. It's all about how if you can just identify your money archetype, financial success will be yours. Oh, and one other thing. The press release quotes him as advising, "Don't rush out to buy gold."

Here's a summary of Olen's article:

Personal-finance gurus advised us to eschew consumer debt, save an emergency fund, and invest in a diversified portfolio of low-cost mutual funds.
Americans followed this advice.
The advice was obviously wrong because over the last year or so the market is down, real estate is down, and unemployment is up.
Personal-finance gurus owe us an apology for the awful advice they gave us.
The government should step in and take care of us, because we are not capable of managing our own affairs.

Olen's article demands a response.

Gold is a crappy investment

Olen, you don't owe your "gold-loving dude" an apology. While it's easy to be swayed by the here and now, particularly when it comes to investing, the price of gold today does not make it a good investment. You've chosen to compare the price of gold in 2009 to its price in 1997. Why not pick 1980 when it was hovering at more than $600, which in inflation-adjusted terms exceeds the $900 price tag today. Remember, in hindsight we can pick dates to make any investment look good, even Enron.

And if you don't believe me, here is what Warren Buffett had to say about gold in 1998:

It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.

Will the price of gold enjoy a resurgence when investors are scared away from everything else? Sure. Does that make gold a good, long-term investment? Nope.

Personal finance is not God

In one sense, Olen's article hits on an important point. We shouldn't put our faith in money or personal finance. No amount of emergency fund can shield us from financial calamity with absolute certainty. A prolonged bout of unemployment will wreck just about everybody's finances. Add to that the falling stock market and housing market, and a lot of people are in real financial pain right now.

But just because sound money management is not a guarantee that life will go our way, does that mean it has no value and we should throw it away? If that's the standard, government would have been gone a long time ago.

Let's get real

Reading the article, one gets the sense that most Americans suffering financially had followed the advice of the personal-finance gurus Olen believes should apologize. But surely that's not true. Do most Americans have a six-month emergency fund and no consumer debt? How many followed Dave Ramsey's advice to buy a home only when they have a down payment of 20% or more, and can afford a 15-year fixed-rate mortgage that keeps monthly payments to 25% or less of monthly take-home pay?

There are undoubtedly examples of folks who did follow this advice, and are still suffering financially. But does that describe most of us? All the studies I've ever read say the answer is no. Americans are mired in consumer debt, studies show we overspend, and the recent housing bubble (fueled by the government) demonstrates our willingness to pay just about anything for a house in a hot market.

And it's here that we need to be honest with ourselves. We need to take an honest look at our finances and our money decisions. It may make some feel better to blame others, particularly personal-finance gurus, but is that the honest answer to the financial difficulties most of us now face?

Olen writes:

That our personal finances weren't fully ours to seize didn't seem to occur to many of us until recently, when the stock market plunged almost 40% in a mere year, housing went into free fall, and the unemployment rate began to climb perilously toward double digits.

But what exactly does this mean? If the point is that circumstances outside our control can affect our finances, certainly that's true. It's also true that when times are good, people tend to forget that it won't last forever. The same is true when times are bad.

The stock market is efficacious

Olen clearly views the market as defective because it lost 40% last year. And she writes, "No one, it turns out, really knows what an individual stock, mutual fund, or commodity like oil or precious resource like gold will be worth in six months, never mind six years."

It's the subtle phrase, "it turns out," that makes that sentence. Those three words suggest that until last year, everybody believed they could predict the market six months or six years from now. Really? Who?

Every good investing book I've ever read says the exact opposite. We can't predict the future price of the markets, and we shouldn't try. That's not a problem with the market, it's a reality of life. And by the way, you can't predict the future price of gold, either.

But what we can predict with reasonable assurance is that over a lifetime of investing, investors will enjoy really good years and really bad years. In that context, last year's 40% decline should not come as a shock or surprise to buy-and-hold long-term investors. Neither should the 35% gain we've enjoyed since March. That doesn't make last year any fun, but it should help us understand that the "problem," if there really is one, is not the market. If we don't come to that realization, we shouldn't have been in the market in the first place.

The choice is yours

Each of us has a choice to make. We can throw up our hands in frustration and give up. We can blame Wall Street, the government, or even personal-finance gurus if we want. But doing so won't improve our lives.

Or we can learn from the past year, and day by day make the best personal-finance decisions we can. Does this guarantee financial security? Of course not. And personal finance has never promised such a guarantee. But the fact is that we can, by and large, control our financial destiny.

Suze Orman has described the current recession as "the greatest thing that has ever happened to youth. It gave you a wakeup call that your parents were living in financial la-la land." She's right about that. It's given us all a wakeup call. And we shouldn't hit the snooze button.

Related reading at The Dough Roller:

Zecco online stock trading for free

Amazon launches Kindle DX

Guess what balance-transfer credit cards are ‘up to'

Suze’s new credit card advice makes sense

Karen Datko — Wed, 22 Apr 2009 14:52:00 GMT

This post comes from Paul Michael at partner blog Wise Bread.

Suze Orman is telling us to pay ONLY the minimum on credit cards. Wait! What?

You're not seeing things. No, this is Orman's latest advice and it is a complete 180 degrees from her usual advice. Why? Two words -- the economy.

I did a double take when I walked past the television while my wife was watching Oprah, and Suze was a guest on the show. I'm used to hearing the same advice from Suze -- pay off credit card debt -- so I thought I was hearing things when I heard her say "only pay the minimum" and build your emergency fund.

I sat down and started watching as the audience gasped and cheered.

The reason for this drastic turnaround is based on the rotten economy and the credit crunch. And you may have already noticed a few "changes" to your credit cards recently. This, from Suze Orman:

The sad reality is that the credit card industry is taking actions to protect themselves with no regard to your needs or how good you have been about paying your bills on time. The problem is that most credit card companies are either reducing your credit limits, raising your interest rates and are even paying you to close down your account.

Many of you are even finding that when you do finally pay off your credit card debt that the issuing credit card company of that card is closing that card down as fast as they can so you cannot ever charge on it again. You did everything right, and yet still you could have your credit limit reduced, which can have a negative impact on your credit score.

You can read the whole article here. In a nutshell, the credit card companies were more than happy to let us all borrow more than we could afford back in the good old days. But now that they're hurting for money, they're changing the rules on us. If you've been an ideal customer for them (carrying a high revolving balance and making only minimum payments) they could now see you as a potential risk. And if you do everything in your power to pay off your card, that avenue of credit could still be closed to you. Not so good if you need a fallback in times of crisis.

It's for this reason, and a few others, that Suze Orman is now telling all of us to be as selfish as the credit card companies are being; let them wait for their money, and instead channel every extra cent you can into your savings account to build up an eight-month emergency fund. That's the amount of money you'll need to survive for eight months without any other form of income. If the proverbial nastiness hits the fan, you can only count on yourself.

What's more, debt can be renegotiated (a lesson we're all learning right now). Interest rates and repayment terms can be renegotiated. Outstanding balances can be renegotiated. However, the contents of your savings account cannot. And in a credit crunch, the chance of accessing money that isn't yours is a lot tougher.

So, despite what everyone has been telling you for eons, you need to consider paying only the minimum on your cards. Use whatever money you can get hold of to build up a big, fat emergency fund. Oh, and of course, don't continue spending on those credit cards and buy only what you need. If you need to put it on a credit card, you can't afford it. These are tough times. Who knows what lies ahead? Be prepared and hope that you never have to use that cash you've been squirreling away.

Related reading at Wise Bread:

Debit or credit: Which one should you choose at the checkout?

Debit cards keep mystery spending to a minimum

Money-saving book: ‘10,001 Ways to Live Large on a Small Budget'

Bloggers critique Suze’s big about-face

Karen Datko — Tue, 21 Apr 2009 18:45:00 GMT

He's 68, has $280,000 or so in retirement savings, no debt, and wants to take his wife of 40 years on a $30,000 trip around the world. Denied, said Suze Orman. He can't go because he doesn't have an eight-month emergency fund.

We'll have to take the word of "Moneymonk" and one of her readers on this because we didn't see Suze's show. But the scenario she recalls and Suze's advice didn't sit well with Moneymonk.

"Suze, retirement is supposed to be enjoyed. This is their time. Let them have it," Moneymonk wrote. "Suze, whatever happened to PEOPLE FIRST?"

What's really taken personal-finance bloggers by surprise is Suze's about-face on paying off credit card debt, which until recently was her top priority. She used to say: "Your first step is you have to get out of credit card debt. After you're out of credit card debt, you need an eight-month emergency fund."

She now says people should pay only the minimum due each month on their cards until they have that emergency fund in place.

We can see the sense in this new advice. Sure, the interest will cause your credit card balances to grow if you're making only minimum payments. But at least you'd be able to pay for essentials with cash if you lost your job. As our partner blogger J.D. Roth at Get Rich Slowly has said, a credit card is not an emergency fund.

But bloggers found fault for the following reasons:

Her advice is too all or nothing. "JSteele" at Ask Mr. Credit Card, said, "Whatever I do, I am not planning on racking up interest on my credit cards now in order to stuff money underneath my mattress for a rainy day."

It's too much, too late. Trent Hamm at our partner blog The Simple Dollar said saving an eight-month supply of cash is a long-term goal that would have best been heard two years ago, rather than now, when he sees signs of an economic recovery.

Trent said that "an eight-month emergency fund, if you have high-interest outstanding debt, is overkill. However, in the current economic environment, there is reason for people to feel much less secure about their employment. So, in the short term, I'd bulk up my emergency fund a little -- but only in the short term."

Say what? replied Ginger at Girls Just Wanna Have Funds. "I don't know about you but my crystal ball is broken and I have no way of really knowing when the recession will cease and when/if the economy will rebound," she wrote. "... Eight months is nothing these days and frankly we should be aiming for one year of living expenses."

Suze's new advice makes sense to Paul Michael at our partner blog Wise Bread, As Suze did, Paul notes that credit card companies are changing the terms for and dropping even reliable cardholders, so "that avenue of credit could still be closed to you. Not so good if you need a fallback in times of crisis."

Overall, we think people need to look at their individual circumstances. Financial advice is not one-size-fits-all. If you don't have an emergency fund, stop spending as if you do and save up. But if you are 68 and have retirement savings, go on the trip of your life.

Michael Rubin at Beyond Paycheck to Paycheck was also irritated by Suze's advice to the retired man who wants to travel. Michael talked about the "the importance of balance and understanding both life's and one's financial ‘big picture.'"

"I hope he goes ahead and enjoys himself and ignores Suze. She is sounding like the grinch that stole Christmas," said "Tired of being broke."

Related reading:

Why Suze Orman is wrong -- again

Stop listening to Suze Orman

Is Suze Orman out of touch?

Stop picking on Suze Orman!

Weekday misery, weekend pleasure: When you hate your job

Karen Datko — Fri, 17 Apr 2009 14:50:00 GMT

This post comes from Trent Hamm at partner blog The Simple Dollar.

Since I started The Simple Dollar, friends, family and neighbors have come to me regularly to chat about money issues. Most of the time, the questions are pretty simple and the answers come quickly. What intrigues me about these conversations, though, are the little things that people say that reveal bigger truths about their experiences with money.

One refrain that always seems to come up is what I like to call "weekday misery, weekend pleasure." To put it simply, quite a few people who speak to me hate their job. They absolutely loathe it. Yet, because the job pays substantially better than anything else available to them, they stick with it.

This creates a lot of misery in their lives, and they find various ways to placate that misery. Quite often, this involves playing hard on the weekends -- going on entertaining day trips, engaging in expensive hobbies, and ending both days with a significant party. It also often means softening the blow of the day by doing things like going out for breakfast before work.

I'll take one person in particular -- I'll call him Ralph. Ralph's education ended with a high school diploma, so, to a degree, Ralph's opportunities were limited. Ralph had a slightly more than minimum wage job that he really enjoyed. The work was enjoyable and fulfilling, the workers were friends both on the job and off, there were plenty of overtime opportunities, and the employer was very flexible with time off when it was needed.

Yet Ralph eventually applied for a much higher paying job. He went from earning about $9 an hour to earning about $22 an hour. At the same time, though, Ralph gave up work that he loved and a lot of time spent with friends. He gave up a lot of schedule flexibility. He gave up overtime opportunities, too. Even worse, the new work was terrible. It left him feeling depressed and empty most of the time.

The only benefit? More income. Yet it wasn't as much of a boost as he had expected. During a normal week, his paycheck roughly doubled, but at his previous job, he would often spend his evenings working overtime with his friends, meaning his old paychecks were often not that much lower than his new paychecks.

Another problem came up: His new work environment was filled with people who were talking all the time about the stuff they were buying. At his old job, most of the people were happy just to make the bills and have a $20 bill in their pocket. At the new job, everyone had expensive cell phones. Many of the workers had ATVs that they rode around on during the weekends. They all had shiny new cars; at his old job, most of the people had rusty old trucks.

So he felt the need to upgrade so that he could "relate" better. Of course, this added greatly to the monthly bills.

At the same time, the new work made Ralph miserable, so he started doing expensive things on the weekends. He took up a handful of expensive hobbies -- that's what his new co-workers were doing -- and went out on the town regularly on weekend nights.

In the end, Ralph wound up with a job he was less happy with and less money in his pocket than before.

Where can Ralph go from here? Here are five suggestions for you if you're in a "weekday misery, weekend pleasure" situation like Ralph.

Get in touch with the work you would really enjoy. Ralph is lucky in that he already knows what he enjoys doing. Many people do not. They just know that their current job makes them unhappy. Invest the time to figure out what you're passionate about. What do you really enjoy? Seek it out. You might also need to work on how to turn that passion into income.

Communicate with those around you. Tell your spouse about your burgeoning change of heart about your work. If you're unmarried, talk to your closest friends or your parents. Talk through both sides of the equation with them -- making a change or staying where you're at. Quit often, the people you care the most about -- and who care the most about you -- will have powerful insights that you didn't consider.

Identify the places where you could cut spending. One big challenge with making a move like this is figuring out where you could actually reduce your spending. Look for the big things you can cut. Also, look for the spending you're doing that's directly tied to your job (like clothes, stopping for food each day, doing things with co-workers, or keeping up with the Joneses).

Build up an emergency fund. As the possibility of moving to a more fulfilling career position becomes more real to you, you need to build up an emergency fund to help you through the rough transition. Set up an automatic transfer from your checking account to your savings account every week, as much as you can muster. Doing this serves a secondary purpose, too: It convinces you to start making gentle cuts to your spending now.

Set a target date. This is the big one. It made my choice to downshift to a more personally meaningful job much easier. Select a date that you're going to walk away from your painful job and make the big switch. Put that date front and center in your life. Put up reminders all over the place. That date becomes a psychological lift. It makes you want to make the big push. Cutting back on things seems much easier than before. Building an emergency fund becomes fun rather than drudgery. Instead of burning your free time, you feel pushed toward using that time to pave the way for the transition, meaning you're finding ways to save money instead of spending it. A target date can really ignite the kind of change you want to make in your life.

Remember, a little more money isn't worth a lot more misery.

Related reading at The Simple Dollar:

Lifting your spirits for free

50 side businesses you can start on your own

Buying fresh, buying cheap

2 top bloggers on 'Personal Finance Hour' today

Karen Datko — Mon, 30 Mar 2009 20:06:00 GMT

This post comes from Jim Wang at partner blog Bargaineering.

I remind our fair readers that the second episode of the "Personal Finance Hour" will be on at 6 p.m. Eastern, 3 p.m. Pacific today. Please join J.D. Roth of Get Rich Slowly and me as we talk about emergency funds. (Get Rich Slowly and Bargaineering are both partners of MSN Money's Smart Spending.)

We will discuss how we've set up our emergency funds, answer reader questions, and take calls. If you have a question but don't feel like calling in (or can't), please e-mail me before the show and we'll try to answer it on the air.

To listen, you can call (347) 327-9144 or go to the show's page here and hit "play." To ask a question, you can go to the show page and ask in the chat box, or if you're on the phone, hit "1″ to light up the switchboard. There are other ways to get our attention, like Twitter (@jdroth, @bargainr, or @pfhour) and AOL instant messenger, but the phone is the best way and chat is second. (If you're on the phone and want to tweet one of us to get our attention, that's cool too.)

There's also a chat room on the show page where you can interact with other listeners and bloggers. There was a lot of activity in there during the last show and everyone had a great time, or so they said.

We hope to hear from you today.

Related reading:

Learning to love the emergency fund

Laddering your emergency fund

Why a credit card is not an emergency fund

Study: Many are 2 paychecks from disaster

Karen Datko — Tue, 17 Mar 2009 20:00:00 GMT

In years past, the MetLife Study of the American Dream found that people defined the dream as financial security plus a "never-ending chase" to have more and more stuff.

Perish that thought. It's a recession victim. It appears that our collective sense of entitlement has been replaced by a realization that we're just hanging on by the skin of our teeth. A press release about the study said:

A disturbing 50% of Americans say they are only one month -- or only two paychecks -- or less away from not being able to meet their financial obligations if they were to lose their job, and more than half of these, a startling 28% of the total respondents, couldn't survive financially for more than two weeks.

Even those making $100,000 or more aren't immune -- 29% of those folks could pay their bills for only a month if they were suddenly unemployed.

We all have reason to be concerned. The study found that:

Almost 20% said they've recently lost a job.
55% say they know someone who has lost a job.
56% are worried about losing their job, including 53% of those making $100,000 or more.

With 80% thinking about building a safety net, people have changed spending patterns in the last year:

66% are eating out less often. That figure rises to 71% among GenXers.
39% have switched to big-box stores.
50% are buying generics rather than brand names.

The study also found that attitudes toward consumerism have changed:

47% said they have all the stuff they need. Only 34% were satisfied in November 2006.
81% said vacations are luxuries, up from 73% in 2006.
40% regret buying so many things and wished they'd saved money.

There's some good news in those numbers. And consider this: About 72% still think they can achieve the American dream in their lifetime. For some, what constitutes success has changed:

In fact, 44% of Americans report that "the current economic situation in this country has caused [them] to re-evaluate [their] priorities in life and place greater importance on things like personal life and family rather than finances.

The online survey of 2,243 Americans was conducted for MetLife, an insurance company, Jan. 7-16.

Related reading:

Thrift takes hold, rich take cover

Has the economy changed your lifestyle?

What to do if the economy knocks you down

Why we should love the recession

A step-by-step guide to building an emergency fund

Karen Datko — Fri, 13 Mar 2009 14:02:00 GMT

This post comes from Trent Hamm at partner blog The Simple Dollar.

Lauren wrote to me, lamenting her difficulties with an emergency fund:

I want to have an emergency fund, but every time I think about the amount of money I would have to save, I talk myself out of starting. Instead, I find something else to spend the money on and then something happens and I regret not having that fund.

Over the last couple months, I've bought a big pile of DVDs to cure the winter blues. I've easily dropped hundreds of dollars on them. A few days ago, my car broke down and the bill was hundreds of dollars.

Can you help me get started with an emergency fund? I feel like I'm missing something.

At almost the same time, I spied an interesting comment over at Lifehacker:

My goal is the eight-month saving expense plan that Suze Orman always talks about. To have enough saved up to FULLY pay all expenses for eight months (is) really difficult to do, but as long as you keep the focus on it, once it's accomplished, it'll be such a good emergency buffer.

It seems that, in this economy, a lot of people are thinking seriously about their emergency funds. Frankly, I think that's a very good thing. An emergency fund is a key part of a healthy personal-finance situation. The biggest problem, though, is that it's intimidating -- eight months? That's a lot of savings.

Trust me, it's not as hard as it sounds. Three years ago, my wife and I were nearly bankrupt. Today, we have an emergency fund that's actually larger than Orman's recommendation. We'd be fine easily through the end of the year if things fell apart. You can do this. Here's how:

Why an emergency fund?
The first step is to understand what an emergency fund actually is. An emergency fund is cash you've saved up for the sole purpose of helping you maintain your normal life through the emergencies that life hands you. Most of the time, you shouldn't touch the emergency fund at all. It just sits there earning a bit of interest and waiting until you actually need it -- when you lose your job, when an appliance breaks down, when your car needs a repair.

People who don't have an emergency fund often see the idea of having to save money as some form of punishment. After all, money put in a savings account and locked away is money that can't be used to live, right?

Actually, it's the opposite: Having an emergency fund means that you have room to breathe. You don't have to panic if your car breaks down or if you lose your job or if you suddenly need to replace a water heater. Instead of having to squeeze those expenses onto a credit card or beg a friend for some money to help, you can pay the bill -- no worries.

Another problem is the temptation people have to spend the money on things that aren't emergencies. They see that they've built up several hundred dollars in savings and they start thinking about buying a flat-panel television or going on a trip -- and that's just what they do.

If you want to have a savings account for big splurges, that's great -- start a "splurge fund," too. It's important, though, to leave the emergency fund alone until you need it. Deposit money in there and don't even look at the balance until an actual emergency occurs.

Set your initial target low
Many people bite off a gigantic goal for their emergency fund right off the bat and then find that it's very hard to get there. Eight months of living expenses is an enormous goal, one that will take years to reach, and along the way you're bound to get disheartened.

Instead, a great way to start is to set a goal that's more reasonable. Make your initial goal an emergency fund of just $250 or $500. That's a goal you can reach in just a few months (or even less if you're in a good income situation) and yet it's an amount that can make a huge difference when you have an emergency.

Then, break that goal down into smaller pieces. Perhaps you can save $25 a week. If that's the case, you can have a $250 emergency fund in just 10 weeks. Maybe you can put away $40 a week, which would bring you to the $500 goal in three months.

My advice is to not set your savings plan too high at first, either in terms of the amount you can save each week or the overall amount. It should challenge you just a bit, but not be a number that's simply unreachable.

Find your breathing room
"That's great," you're thinking, "but where am I going to come up with $25 a week? I barely make ends meet now."

That's a pretty typical sentiment from people who are just beginning to turn their financial situation around. There are a lot of ways to come up with extra money throughout the month. Here are 10 big things you can do to get the ball rolling:

Request a rate reduction on your credit cards. If you're carrying a credit card balance, getting your interest rate reduced will save you money each month. Just flip over your credit card, call the number on the back, ask to speak to a supervisor, and ask that the rate be reduced. Suggest that you're considering transferring your balance to another card.
Shop around for better auto insurance and homeowners insurance. Try Progressive, Geico, American Family, State Farm and AIG, for starters. Visit their Web sites, get some quotes, and make a switch.
Install a programmable thermostat -- and program it. It takes 30 minutes or so and will cut your cooling and heating bill by 20% or 30%. Set it so that the air conditioner or furnace doesn't run as much while you're sleeping or at work.
Use a list for grocery shopping. Ten minutes of planning before you go will save you at least 10 minutes in the store, plus it will help you stay focused on the stuff you actually need, reducing your grocery bill because you're putting less unnecessary stuff in the cart.
Transform one splurge a month. Instead of going out for an expensive dinner once a month, turn that dinner into a meal prepared at home. You'll save quite a bit even if you prepare something fancy in your own kitchen.
Set up a carpool. Find a co-worker who lives fairly close to you and start carpooling. Even if you can do it only a few days a week, you'll still drastically cut down on commute costs, plus it will be a lot harder to stop for those impulse splurges.
Use public transportation. Even better, get in the habit of using public transportation for your commuting needs. Most metropolitan areas have surprisingly good public transportation options -- and they're far cheaper (and not all that much more time-consuming) than driving yourself.
Get on the bike. Want to start getting in better shape? Only live a mile or two from your job? That's a perfect situation to get a bike and start using it for the commute instead of wasting your dollars on gas and car maintenance.
Trim unnecessary monthly bills. Are you subscribing to Netflix but rarely using it? Cut it. Are you paying for premium cable channels that you never watch? Trim them.
Snowflake. When people come into a bit of unexpected money, they often tend to spend it without thinking about it. They decide not to stop for coffee, but then choose to spend it later on takeout, for example. Instead of spending that "found money," take some or all of it and immediately put it into your emergency fund. If you have online banking, that's pretty easy. Just transfer it out of your checking account.

The key thing here is to actually save the savings. Instead of spending the money on something else, put that money away toward your emergency fund. If you find that you're actually saving more than $50 a week with these tactics, then put more into the emergency fund or increase the amount you're putting into your retirement savings.

Make it automatic
So, you've trimmed $50 a week from your spending, but now you have this cash sitting there and it's tempting to spend it on something more exciting than an emergency fund. You're tempted, but you don't have to be.

Instead, you can set up an automatic savings plan to sweep that money straight out of your checking account and into the savings account that you're using for an emergency fund.

If you haven't already, I recommend setting up an online savings account at a bank separate from the one you normally do business with. Doing this not only lets you shop around for a bank with good service and good savings account rates, but it also causes you to put the money in a place that's not quite so easy to access. You can't just run to the ATM or stop by the teller window and withdraw cash from it. You have to go to your computer, order a transfer, and wait a day or two to access the cash, which is more than enough time for you to think carefully about what you're doing and not get sucked in by impulse.

Set reasonable milestones along the way
In a few months, you'll hit that first milestone -- and it'll feel good. That account will start earning a bit of interest on its own, and you'll start to feel in control of the situation.

Now's the time to keep going. Set another goal -- an emergency fund of $1,000. Keep that automatic savings plan in place.

Once you reach that goal, aim for a single month's worth of living expenses. Then two months. Then three. And just keep watching that emergency fund grow.

Obviously, when you do have an emergency, tap that fund. Don't put your car repair bill on the credit card. Don't start living on plastic while you're between jobs. Instead, keep living a financially stable life thanks to your planning ahead.

You might just find that this is a lot of fun and you might start seeking out more ways to save. Just keep setting goals for yourself and keep pushing yourself just a little to make it there.

Before you know it, your life won't be disrupted by real emergencies -- and you'll sleep a lot better at night knowing that.

Related reading at The Simple Dollar:

Frugality and feeling deprived

My worst job -- and what it taught me

Personal debts: Should they come first?

Fast cash: Best ways to sell used books

Karen Datko — Wed, 04 Mar 2009 19:22:00 GMT

People are selling their used books at unprecedented rates. For instance, used-book buyer Powell's Books says it hasn't experienced this amount of business before.

"The Portland, Ore.-based company has bought used books from customers for more than 30 years, but said Wednesday that it has never matched the volume it has seen in the past six months," The Associated Press reports. Its online business has been particularly brisk since it began offering cash for books through PayPal.

Cash is good, particularly if you're unemployed or don't have an emergency fund.

What's the best way to sell your old books? Pinyo at Moolanomy compared numerous online options. The best news for starving students: Compared with regular books, used textbooks go for a lot.

The best part about Pinyo's "Where to sell used books and textbooks" is that it contains a substantial list of book-buying sites. One of them, Amazon, doesn't buy your used books, but provides a venue for selling to others. The other sites buy directly from the sellers. (The comments at his post are also helpful.)

Amazon had the best prices for sellers when Pinyo checked. Note: The prices aren't etched in stone. He added, "Lastly, there are other factors not included in this study -- i.e., shipping costs (some offer free shipping), payment options and promptness, customer service, etc."

Other options to consider:

Visit your local used-book store to see what kind of price you'll get.
Trade for other books through one of the book-swap sites Pinyo mentions.
Donate them to libraries or thrift stores.

Related reading:

Simple ways to make college cheaper

10 ways to save money on books

Another alternative to pricy textbooks: Buy overseas

10 things you shouldn't buy new