Over the last few weeks (since the passing of my grandmother), I’ve spent a ton of time with my parents, who live about four hours away. Because of these regular visits, I’ve been able to see lots of little details about how they’ve come to live their life since my father has retired.

Here’s a recap: my parents have never earned a huge income. While I was growing up, they taught me a lot of lessons about how to live frugally and conserve one’s income (lessons that I didn’t pick up on as well as I should have at the time), particularly with children. Now that my father is retired, the two of them live on a fixed income, but they’re still creative with the ways they save money. Here are five nifty little ideas I’ve witnessed over the last month.

Every day is a swap meet. My parents are constantly giving things away: food, interesting little items they’ve collected, and so on. Giving things away? That seems like the opposite of being careful with your money.

The reason, though, is simple. If my parents have something they don’t really need for themselves, they’re willing to give it away without hesitation to friends. The friends see this generosity and know it, and are willing to be generous in return. Thus, quite often, when my parents need something – their recent need for a crib for the upstairs bedroom is a great example – they just ask the people they know instead of hitting the store.

Sure, most of the exchanges they do aren’t exact, perfect exchanges in value. I think they tend to give a lot more than they get. But when you consider that they have no real need for most of the things they give away, it all makes a lot more sense – they get something of real value to them in return when they need it.

These exchanges help fuel their social network and saves them a ton of money over time. It sounds like a good deal tome, and it’s one that I try to emulate in my own life when I find good opportunities to do so.

They always cook far more food than they need. Again, I wondered how this could possibly be frugal. They cook so much that I often wonder how it doesn’t go to waste.

It’s actually very simple. Almost every day for lunch and every other night or so for dinner, they simply have a leftover smorgasbord. They take the things they each like, make a plate out of them, and there’s the meal.

It goes further than that, though. Let’s say my parents are out and about in the middle of the day. Lunchtime arrives and they’re both hungry, but the temptation to eat out is much less because they always know there’s something to eat at home that’s very quick to prepare. So, the flexibility of their leftovers reduces their spending on eating out.

It also helps them to be flexible in impromptu social situations. If one of their grandchildren happens to be there for a meal, it’s never a problem – there’s always something on hand.

Often, they’ll “edit” the original food – turning leftover turkey or chicken or pork into salad for sandwiches, using a soup or stew as the basis for a simple casserole, or re-spicing a bland food to make it taste substantially different.

In the end, though, isn’t there still food that goes to waste? Very rarely. My mother does a very good job keeping leftovers appropriately rotated, sticking strongly to the “three days and out” rule. If the food starts to get close to this line, she essentially requires that it be eaten, at the expense of other leftovers.

In other words, they don’t fear the leftovers. They embrace them, over and over again, and by embracing them, they find all sorts of ways to make them tasty and interesting.

Who cares what others think? To put it simply, my parents have long passed the point where they worry very much about what others think of them. If someone looks down on them because of their life choices … to put it frankly, they just don’t care.

This isn’t an excuse for rudeness to others – that’s just not part of their nature. Instead, it’s a freedom to avoid keeping up with the Joneses in any way at all.

For example, every neighbor of theirs owns an ATV – and spends quite a bit of time driving them around, seeming to have quite a bit of fun. Many of their friends have ATVs as well. You might think that my father would be interested in having one so that he could drive around with them.

You’d be wrong. It doesn’t interest him that much (or my mother, for that matter), so, even though many of his friends and neighbors all have nice ATVs to drive around on, they don’t. And they don’t mind at all.

If everyone around me has a shiny new gadget, all I have to do is think about my parents shaking their head at the ATV usage around them, and then simply ask myself if I want one. In the end, when you’re falling asleep at night, it’s not the conscience of your peers that rattles around inside of you.

Invest the windfalls in your life. My grandmother left behind a life insurance policy with my mother as the beneficiary. Instead of looking at this windfall as an opportunity to spend, their thoughts immediately look towards investing it in the infrastructure in their life.

The first step is to replace their seriously ailing car with a newer model of the same type, giving them a stable vehicle for their purposes. Their second step is to pay off a bit of additional debt. The rest? Right in the bank to serve as an emergency fund.

There are no special purchases in the mix at all, aside from an already-scheduled summer vacation with us.

This is actually quite a bit different than how things were when I was growing up. When I was younger, my parents had a much stronger tendency to just spend any windfalls that came their way. We went on at least a couple vacations funded by windfalls, and I remember lots of video games and other things purchased by windfalls, too.

What changed? I think my parents realized at some point that a stable and healthy day-to-day financial state is better than having a rush of fun when a windfall comes in, followed by worries about personal finances. Perhaps it coincided with my father’s retirement, or maybe my perspective as a child was skewed.

Regardless, my parents have provided a living, breathing example of how to maturely use a windfall.

Prepare for the moments you care the most about. My mother seems to almost live for visits from her grandchildren. She plans all kinds of little things for my own kids, doing things like bringing out bowls of M&Ms (my son’s favorite little treat) and producing all kinds of little fun things to do.

My mom does this so well because she thinks about it in advance. She keeps her eyes open for big sales on specific items – M&Ms, bubble solution, and other such things – and picks them up whenever they’re on sale. Then she keeps them in her bedroom and waits for moments when the grandchildren are there, bringing them out for a great, enthusiastic surprise.

As busy as my wife and I are – as busy as we all seem to be – it’s often really easy to just go with the moment. Unfortunately, doing that often results in a lot of extra expense – and you’re often lacking the item you wish you had when you need it.

Instead, I’ve started to look for a handful of specific items myself when they’re on sale – drawing paper, washable crayons, my son’s favorite granola bars, V8 Fusion – and simply stock up when the price is really low on those items, without worrying whether or not we already have some on hand.

Why? So that on a lazy Saturday afternoon, I can get out a granola bar and a cup of my son’s favorite juice, spread drawing paper all over the kitchen table, and draw to our heart’s content. Those are the moments that I want to share with my children – and by knowing this and preparing in advance, I can save quite a bit of money and also make the moment itself easier.

Here’s the real message: your life provides you with plenty of great examples for how to live a stable, healthy, and happy financial life. Look around, keep your eyes open, and listen – and you may discover many, many great ways to live.

“Michael” writes in with a common question:

What do you do when you find your car is worth less than you owe on it?

This is a pretty common question, particularly given the current state of the economy. Some people are out of work. Others are looking to seriously cut back. Thus, there are a lot of people out there that would like to get rid of their current car loan – but they’ve found that their car is worth less than they owe on it. Often, there’s not enough cash laying around to make up the difference, either.

So what do you do? I see a handful of options.

Ask yourself if you really need to change cars. Many people who are underwater in their car loans are looking at upgrading their car. If you’re in this situation, spend some time asking yourself if you really need to make a change. Would this upgrade serve any purpose other than aesthetics? If there is a purpose beyond that, is it worth the huge amount of debt you would incur?

Delayed gratification is the key here. If you can put off the purchase for even a year or two, you’ll end up in substantially better financial shape than if you pushed things right now and wound up even further in the hole than you are now.

Trade down. If you still need the car for transportation, consider trading down – you’ll take a big loss on the value up front, but over the long run, it will definitely balance out.

Let’s say, for example, that you’re driving an almost-new 2009 Toyota Avalon that’s worth $6,000 less than you owe. You realize you can’t really swing the $500 a month car payments. So, you take it in and trade it for a $7,000 late model used low-end sedan. Some dealerships will accept this trade – others won’t – but what you’ll wind up with is an upside-down loan on this used car. However, the car payments will be significantly lower, as will the insurance rates.

Park it and remove insurance. If you don’t need to drive the car right now, consider parking it somewhere safe and eliminating insurance on it. This will reduce your monthly bills (no insurance), plus you’ll not actually have to give up the car – it’ll still be there for you if you return to work. It’s not accumulating miles or wear and tear, so you save on maintenance costs as well.

This strategy works well if you’re in a situation with a healthy emergency fund and are anticipating several months without work. I know of several people in this position – they’re currently staying at home, either looking for work or trying to get their own business started while living off of savings.

Get a different loan, then sell. If you have very strong credit, you might have the option to get a personal loan or perhaps add to a home equity line of credit in order to pay the car loan down enough so that you’re not upside down in the loan. When you’ve done that, actively seek to sell the car.

This is a great solution if you have strong credit (or at least access to a healthy credit line with low interest elsewhere). Essentially, you’re just eliminating the car (and its value) from the loan, leaving you with just a small debt that can be repaid over time. Plus, you get the additional savings of no insurance and no vehicle tags.

Are there any other good ideas that Michael might be able to try?

I’m thirty years old. Over the last ten years, my life has changed radically. I went from being a college student to being an office professional, then to being a writer. I went from being single to being married with children. I went from owning just enough stuff to fit in the trunk of someone else’s car to owning two cars and a home. I went from being debt free to being perilously in debt and part of the way back again.

Looking back, there are a lot of things I wish I could tell myself then (for one, avoid someone named Alison who lived in your apartment building during your senior year). I’ve often jotted down these thoughts in my personal writings, but I’ve realized that there are several very useful general things that are worth mentioning.

Here are ten things I wish I had done when I was twenty.

I wish I had saved just a bit. If I had just put away $5 every time I spent money on something frivolous, I would have barely missed it at all. I could have just stuck it into a savings account if nothing else and just let it ride until I needed it for something big like the down payment on our house. Even a few dollars saved here and there over my younger years would have made a big difference when we went to buy.

I wish I had connected better with many of my college classmates. There was a steady group of people that I saw time and time again in many of my classes, yet I never bothered to try to get to know many of them. I knew their names and their faces and that was about it – I was more content to just hurry home and go do something fun with my normal crowd. What I didn’t realize is that many of these people in my classes were people that wound up following career paths similar to mine – and having long-time friends in the same career as you’re in is incredibly helpful and quite fun.

I wish I had taken at least a class or two on writing. Writing was what I was passionate about, but I always found it difficult to squeeze in classes from the English department on the subject. Even during the semesters when my academic credit count was low, I never even seriously considered taking such a class. Looking back, I passed up a great opportunity to get some training and encouragement in an area I was personally passionate about. If you’re passionate about something, find time when you’re in college to dabble in it.

I wish I had learned the art of postponing purchases. It’s easy enough: if you’re in a store and see something non-essential that you’d like to have and weren’t originally intending to buy, put it down and leave the store. Give it some thought. Ask yourself in a few weeks if you still want the item. You might surprise yourself and find that you don’t actually want the item any more – and that saves you money. Instead, I bought strongly into instant gratification – and it cost me for a decade.

I wish I had engaged in overseas educational opportunities. I had an opportunity to spend most of a summer in Australia, an offer I turned down because of the limitations I put on my own perspectives. I even let that perspective spread to others, talking a person very close to me out of considering a semester in Scotland, because I didn’t want them to leave. I regret both choices – and many other opportunities that fell through. Be serious about your own fears – recognize them when they pop up and try hard to knock them down.

I wish I had been more entrepreneurial. I was around at the birth of at least two dot-com startups and could have easily been involved in them, but I avoided the opportunity. It seemed too risky. Looking back, I realize now that I had very little to actually risk by being involved except for my free time (which I had plenty of). There are opportunities all around you – don’t close your eyes to them, particularly when the only thing you really have to lose is some of your spare time.

I wish I had used credit cards more sensibly. I racked up hefty balances on my first credit card quite quickly. Looking back, most of this was because I really had no idea how to reasonably use a credit card. It’s easy. Just use it for things you would already buy and you can already afford and a credit card not only builds up a positive credit report for you, it also can help you get some free stuff via rewards. I didn’t follow that basic rule.

I wish I had listened to more of my mentors’ advice. I had three great mentors during the third decade of my life, all of whom were present in my life when I was twenty. They all offered me great advice over the years, but I was only willing to listen to some of it. When you find a good mentor that you can trust, they’re usually there to really help you – take everything they say with value.

I wish I had been more politically involved. I loved politics then and I love politics now. What I didn’t see then is that all politics is local. Sometimes it’s difficult to see at first glance, but even the most national of politics grows out of a foundation built in your own community. Today, I see a lot of issues in my community and state that I wish I had the political experience to affect, but I don’t – I was too focused on national issues where I had little impact. If you want change, start on your block.

I wish I had started saving for retirement during my first day on the job. Actually, I did do that, but I didn’t save nearly as much as I should have. The first day of your real job, contribute as much as you possibly can to retirement. Make it a habit right out of the chute. For one, doing it now before you’ve adjusted to your higher salary makes it much easier to do. For another, the earlier you start saving, the easier it is to reach big retirement goals.

I started this post as an email to a few college students I know. Instead, I’m going to send them the link to this post – and hope that they pass it on to their friends, too.

Several people have asked me about two things that have popped up on Amazon with me as an author, so I thought I’d mention them both here.

One is a “paperback” version of 31 Days to Fix Your Finances. Someone (I do not know who) downloaded the files that I give away for free, packaged them as a paperback through CreateSpace, and is selling them for $10.95 a pop. I don’t earn a penny from this, but I’m not wholeheartedly opposed to it, either, as it’s part of the equation when you write a lot of content and distribute it freely.

The other is more interesting. 1001 Ways to Make Money If You Dare is a fairly humorous book that I contributed a foreword to and helped edit a bit – I didn’t write it, though Amazon lists me as an author, but I’m mentioned on the cover as an editor. It’s intended to be a fun book – there are a lot of good ideas in there, but there are quite a few put in there for humor’s sake, too. It’s a good book for brainstorming ideas if you’re trying to earn a few dollars in your spare time, done with a very light tone. This is not my aforementioned second book – that’s still a work in progress, and I think most of you will find it quite compelling.

That being said, here are some interesting personal finance links.

A Guide to Beating the Fears That Are Holding You Back The biggest reason people are afraid to make real, lasting changes in their life is fear. Fear of the unknown, fear of change, fear of losing something. Quite often, all those fears do is hold you back. (@ zen habits)

I Have No Need or Desire to Be Wealthy I completely, totally agree with this sentiment. I don’t want to be wealthy. If I was suddenly given hundreds of millions of dollars, I’d focus on giving most of it away to charities. (@ my two dollars)

How to Save Money at Baseball Games I was actually about to write an article something like this one, since my family and I are likely to go to a few baseball games this summer. (@ lazy man and money)

33 Ways to Thwart Identity Theft Many of these techniques have other benefits beyond merely protecting you from identity theft. They can reduce your junk mail load, for one. (@ man vs. debt)

Are You an Over-Buyer or an Under-Buyer? What’s strange is that frugality is usually associated with under-buying, but I see elements of over-buying, too. Bulk buying is a great frugal strategy, after all. (@ happiness project)

If you live near a BJ’s Warehouse, here’s a 60 day free membership. This is a great way to find out if your local warehouse club is worthwhile.

When I graduated from high school – and again when I graduated from college – I received quite a few gifts from friends and family members. Most of them fell into two categories: money inserted into graduation cards, or items intended to help with my life in the near future (like a gas card or a laundry bag or a shower kit or a microwave oven).

Just a handful of gifts fell into a third category, and those were the most memorable. Great sentiments on handwritten notes. Long dinners with real conversations. Thoughtfully-given books with some suggested passages to start with. A nearly-invisible helping hand to get my career going on the right path.

To put it simply, the best graduation gifts for me were ones that were thoughtful, ones that were inspirational, and ones that actually opened doors for me.

For the most part, these gifts didn’t cost the giver very much at all in terms of money. Instead, the value of the gift was delivered via time and thoughtfulness, and that always means much more than a twenty dollar bill stuffed inside a forgettable card.

The best part is that most great graduation gifts won’t cost you much money at all. Instead, they require some thoughtfulness and some planning. Here are four things to think about as graduation season approaches.

A Thoughtful Conversation
The best way to understand what exactly a graduate is thinking about for the future is to sit down with that graduate and have a real conversation. A great way to do this is over dinner – invite that graduate to your home or take that graduate out to dinner. If that doesn’t work for you, a telephone call also works.

The key is not to bury them in advice and your own anecdotes. Instead, you should seek to get the person to talk about what they’re thinking about doing in the future. Some good questions:
+ What are you going to do after graduation?
+ Where are you going to college?
+ What are you thinking of majoring in?
+ What do you enjoy doing?
+ Do you have a job lined up, or any prospects?
+ What would you like to be doing?

Listen to what’s being said. Many students feel an urge to tell a particular story about their dreams, aspirations, and post-graduation plans that doesn’t really reflect their true story. Listen carefully and try to seek out the things that they really enjoy.

More important, give encouragement to the graduate. Tell them that they can do anything. Offer a few specific pointers, but don’t drown them in advice. Let them do most of the talking.

Don’t drown them in personal anecdotes, either. A few are fine, but the focus is on what they’re doing, not on what you did.

Your goal here should be to figure out where the graduate really wants to be going – and whether or not they’re on their way. Pay attention. Listen to what the graduate is saying. Be positive about the things they’re passionate about. Let the graduate do most of the talking. And, when you’re done, make sure you’ve taken away two or three things about the graduate’s dreams and future that are clearly true and that the graduate is clearly excited about.

A Telephone Call
Once you have that source material, look through your contacts. Do you know any people that are doing anything close to the area toward which the graduate is focusing? Call them up. Explain what’s going on. Ask for their thoughts.

If there are opportunities for the graduate, pass them along. Let the graduate know of any opportunities you discover for them. Even better, if you have the chance to make a positive case for that graduate, do so. Grease the rails for them so that those early, tentative career steps go quite easily.

Most likely, though, you’ll gather some useful insights about their direction and you might also gather an additional contact or two.

Take all of the information you discover and deliver it to the graduate. Tell them that you called an old friend of yours who’s doing that kind of work and here’s what he/she had to say. Pass along any useful contact information if you can.

In short, help the graduate (if you can) by getting their foot in the door. Every bit helps, and if you can help that graduate open a door, you’ve changed their life.

A Single Key Reflection
Taking together all you’ve learned about the graduate and where he/she is headed, spend some time thinking about the one piece of advice you’d like to give that student. Don’t just go with your first instinct – don’t be afraid, even, to jot down several ideas and think about them, but stick with just one – the real home run.

The graduate won’t remember the $20 bill you stuck in the card. But they might remember something insightful and useful that you wrote, especially if it clicks with them. That $20 will be lost in the mists of time, but a useful bit of knowledge pays dividends forever.

Surround that one piece of advice with some strong positive reinforcement. Let the graduate know that you see great potential in him/her and that you look forward to their great future.

Words like this can really have an impact. I still remember the advice and similar sentiments that people gave to me in graduation cards, but I don’t remember who gave me $10 and who didn’t a decade ago. The advice stuck with me and helped me to grow – a truly great graduation gift.

A Follow-Up
Most people limit their congratulations and help to the graduate to the days around the actual ceremony. When that graduate will probably need help, though, will come a while down the road.

Touch base with the graduate a few months after graduation and see how they’re doing. Are they still struggling with finding their place? Or have they found a happy home?

You may find that you can offer much more help early in their career than at their graduation. Encouragement can be key in the midst of early challenges. A little helping hand can be much more useful after the glow of graduation has come off and the realities of professional life are starting to appear.

If it seems potentially useful, get ahold of your contacts again and see if anything has changed. Are there any new opportunities? Pass these along to the graduate.

Here’s the big thing: graduation and entry into professional life is often a huge shock for people, but the support they get usually just comes in a burst at their graduation party. If you really want to give something with impact, give them time, both before and after graduation, and help pull a few strings for the graduate. It won’t cost you much at all – and it can make all the difference to a motivated graduate.

Good luck!

A recent Boston Globe article entitled “Ready, Aim… Fail” discusses the failure of setting a major goal at GM:

In the early years of this decade, General Motors had a goal, and it was 29. Determined to boost its flagging profits and reverse a long, steady fall from postwar dominance, the automotive giant did the natural thing: it set a goal. The company pledged to recapture 29 percent of the American market, the share it had ebbed past in 1999. The number 29 became a corporate mantra, and some GM executives took to wearing lapel pins with the number emblazoned on them.

It didn’t work. GM never did regain 29 percent of the market, and today, facing the possibility of bankruptcy, it looks even less likely to do so. The lapel pins are gone, and that number isn’t much heard from the company.

And while the causes of GM’s woes are many – from poor design to high labor costs to a prostrate economy – industry analysts argue that one of the most damaging things the company did was to set that goal.

In clawing toward its number, GM offered deep discounts and no-interest car loans. The energy and time that might have been applied to the longer-term problem of designing better cars went instead toward selling more of its generally unloved vehicles. As a result, GM was less prepared for the future, and made less money on the cars it did sell. In other words, the world’s largest car company – a title it lost to Toyota last year – fell victim to a goal.

In other words, GM set an audacious goal but they sacrificed too much to get there, which not only made it impossible to reach that goal, but undermined what they already had. They set a long term goal, but they used short term tactics to get there. Instead of long-term planning (designing better cars, streamlining their production models, offloading less-profitable business segments), they went short-term by doing things like drastically cutting prices, offering loans that undermined their financing business, and pushing forward with poorly-optimized manufacturing facilities.

It’s easy to apply this idea to personal finance. Let’s say, for example, that your goal is to be debt free. You need to ask yourself a very simple question: is your goal simply to reach a point of debt freedom at all costs, or do you want to be sustainably debt free?

If your goal is to just reach a point of debt freedom at all costs, then you’re likely to engage in things like cashing out your 401(k), emptying your emergency fund (and not building one at all), going hyper-frugal, delaying necessary repairs and maintenance, and so on. This plan is the quickest way to get to debt freedom if everything goes perfectly, but it is far from a guarantee. If something goes wrong, you’ve got very little protection against it and your only recourse is more debt.

On the other hand, if you seek sustainable debt freedom, it will take substantially longer to get there, but once you’re there, you’ll stay there. This plan involves building an emergency fund, saving now for retirement and other big future expenses (like future vehicles and education), keeping up with proper maintenance on your home and health and automobiles, adopting reasonable lifestyle changes that can be sustained and still leave you with a high quality of life, and so on. These moves won’t get those debt bills paid nearly as fast, but when you finally do reach debt freedom, you won’t be facing a devastated personal finance landscape.

I look at it much like climbing a tree. Sure, you can make it to the top much faster if you leap wildly from branch to branch, jumping and reaching out for your next position and quickly swinging upwards. However, doing that puts you at a big risk: you can easily fall right to the bottom of the tree and possibly break an arm or a leg. On the other hand, you can climb the tree a bit more slowly, choosing your holds carefully and positioning your feet strongly. Using that technique increases the likelihood that you’ll make it to the top, albeit not quite as fast.

A big, audacious goal is powerful and useful. It gives you something to strive for and it pushes you to do better than before. For example, my big, audacious goal is the country house I’ve often mentioned on here – a nice house on a piece of land in the country with a small barn and room for a big garden and a chicken pen. It pushes me to be frugal and to make good personal finance choices.

However, if you follow your big, audacious goal too blindly, you’ll fall from the tree. I might be able to get that big house a bit faster if I stripped my Roth IRA and my 403(b) and my emergency fund, stopped performing maintenance on our car and our home, and cut out all of the little things that make our life enjoyable. But what happens if an emergency occurs along the way? What about when I finally buy that house – and I realize I have no retirement savings and have missed many years of compound interest, I have no emergency fund, and I have two poorly maintained vehicles? I’m facing another mountain, with goals that I can’t entirely recover (those years of retirement savings and college savings are gone forever).

Reach for your big goal – but do it from a strong foundation. Get an emergency fund in place. Start saving appropriately for retirement. Take care of your requirements at work (before reaching for the big promotion or the second career). Maintain the things you own. Take care of yourself.

That foundation will make any big goal reachable. Without it … you might find yourself going the way of GM.

My biggest criteria for most of my purchases is simply price. What’s the best deal I can get on an ear of corn or on a book? The answer to that question usually pushes me towards the checkout line.

Yet, quite often, I find myself not always going for the rock-bottom price on specific items. I’ll pay a bit of a premium at a farmers’ market, for example. I’ll stop at the tiny market in my town for a few items quite regularly.

Why would I regularly abandon the lowest possible price? For me, there are a number of factors at work.

Is the location convenient? For the most part, this is the “time” factor. I’m willing to pay a small premium for an item if it’s convenient for me to buy it. If I need a loaf of bread or a dozen eggs in a pinch, I’m often willing to pay the premium prices at the local market just a couple blocks from my home, especially when the next closest market is ten miles away. If I need a book for research purposes, I’ll often get it from PaperBackSwap or from Amazon, simply because of the convenience of clicking a few times to get the item in the mail.

Is there a distinguishable quality difference between the items? I’ll often pay more for a produce item that’s exceptionally fresh versus one that’s been sitting on the grocer’s shelf for a number of days. They’re the same item, more or less, but one will taste better and have more nutritional value than the other, and that’s worth a premium to me.

Am I buying from a local business or local producer? Buying local means that the money stays in the local economy. Some portion of that money winds up in the local tax system, improving schools and other services that I use every day, and other portions of that money wind up getting spent again within the local system. Some fraction might be donated to local charities, and some amount may go towards providing jobs in the community. To me, this is worth a small premium on the price, particularly since the items are often freshly-made, which means there’s a quality difference at work here, too.

Is the business ethical? Does the business treat its employees well? Does the business treat the environment well? Does the business interact well with the community? Some businesses make a great effort to be ethical members of the local community – other businesses could care less and view the environment and their employees as cogs in the machine. To me, it’s worth it to spend a little more at businesses that are stewards of the environment and of their employees.

Does the business have good customer service? A great example of this (from my personal experience) is Apple and Dell. Some businesses go the extra mile to provide good customer service for their customers (Apple), while others make it very difficult to get appropriate help (Dell). To me, that makes me more likely to pay a premium for an Apple product when a comparable one is available from Dell. I apply a similar philosophy to almost any business where service is a useful component, like grocery stores, for example.

Does the business provide a good shopping experience? I like to call this the Aldi factor. If I feel uncomfortable going to a particular store, I won’t go there, even if there are great bargains to be had. On the other hand, if one store is much cleaner than another store, I’ll go to the cleaner store even if the prices are slightly higher. Are the salespeople pushy? That pushes me away. Can I find a salesperson if I need one, though? That’ll bring me in. Is there plenty of room, or are we pushed in there like rats in a maze?

In the race to always get the lowest price, many of the above factors are tossed out the window. The lowest prices often come from companies that don’t have the strongest ethical standards and don’t pay their employees well and don’t participate in the community.

In other words, there’s often an extra hidden cost in always seeking the lowest price. Is that an extra cost you’re happy paying?

I can’t give you an answer to that question, because this is one of those points where personal values and personal finance intersect. The things that you find to be “right” in your life are likely different than mine.

However, I can say that in my own life, I place a significant extra value on buying local produce and dairy products versus buying items that are shipped in. I place a slight premium on the ethics of the business, but I often find that companies with questionable practices often have many competitors and it’s trivial to simply use more ethical businesses. I have something of a minimal standard for customer service and shopping experience – if a company doesn’t meet that standard, I just don’t give them my business, regardless of price, but above that level, I view all competitors roughly equally.

Where do you stand? What additional factors are important to you when making a purchase?

Each Monday, The Simple Dollar opens up the reader mailbags and answers ten to twenty simple questions offered up by the readers on personal finance topics and many other things. Got a question? Ask it in the comments. You might also enjoy the archive of earlier reader mailbags.

As usual, we’ll start things off with a few links to older articles that directly answer questions I’ve heard recently. Readers regularly ask me for recommended frugality books. Here are three I like besides my own (links go to my review):
America’s Cheapest Family by Steve and Annette Economides
The Complete Tightwad Gazette by Amy Dacyczyn
The Ultimate Cheapskate’s Road Map to True Riches by Jeff Yeager

And now, some great reader questions!

I’ll need a set of wheels for after graduation to get to my job. I’m considering leasing a vehicle. Should I open up a new credit card before signing a lease, or wait until after? Does the timing even matter, and will it affect my ability to get a lease? I’m not too familiar with how car financing works, but I want to be in the best position I can.
- Liz

First of all, avoid leasing if you can. Leases leave you with no car at the end of the lease, meaning that if you’re not in a good financial state at the end of the lease, you’re going to be out of a car. Instead, if this is your first vehicle, start off looking at a late model used car, but with the current economic environment, don’t be afraid to compare the prices you see on those to the prices on a new car, because on many models, the price difference is relatively small.

Having said that, getting a credit card several months before purchasing a car can be of help, especially if you don’t already have a student loan that’s in repayment. A positive history of repaying your debts is the basis of good credit, and good credit is what you need to get a low-interest loan. My recommendation is to get a card, but use it minimally – use it just to buy a few things that you would normally purchase, like groceries, and pay off the balance in full at the end of the month.

Yes, dealerships will check your credit before giving you a lease or a car loan. The worse your credit is, the more likely you are to have to pay a higher interest rate, a larger down payment, or a security deposit, all of which are less-than-optimal ways to use your money. Thus, you’re better off, whichever way you go, to do what you can to improve your credit.

Two years ago, Santa put a gecko under the tree for our then 7 year old. Unfortunately, Santa didn’t consider the fact that a gecko costs between $12-15 a month to feed (and that feed – live crickets and meal worms – can only be purchased in a town 50 miles away). How would you go about convincing a now 9 year old that the gecko needs to find a new home because the cost of keeping him (and the headache of reminding said 9 year old to feed him) is driving Santa and Mrs Claus crazy?!
- Stacey

My solution would be to make the gecko solely the child’s responsibility. Give the child an allowance that more than covers the cost of the gecko, then turn the responsibility for gecko care over to the child entirely. Once the child begins to see that the expense of the gecko is really affecting his/her life, the child will either become more committed to the gecko or make the choice to sell the gecko back to the pet shop.

Another possibility is that your child may become interested in catching appropriate gecko food. Here’s some advice for catching crickets and for growing your own mealworms. These could be great garage/outdoor projects for your child.

The best way to make a child aware of responsibilities and costs is to put those responsibilities and costs onto their plate while you stand by for the support they’ll need.

Our son is turning 18 and will be attending college this fall. Right now he has a job with our school district, just a few hours a month and that will end in June. I say he needs to get a summer job (any job). He doesn’t want a summer job. His father/my husband says he should only get a summer job if it’s related to his future career plans, other wise he can just stay home and work on his hobby projects. We are NOT wealthy by any means and will need student loans for his education. I know this is a no-brainer but at least now it will be in print – what do you think?
- deb

I think it depends on his hobby and projects. Are they actually related to his potential career? Is he growing in any appreciable way because of them? Do they earn him any income?

If you go through that list and say “no, no, and no,” then it’s likely that he could be doing something more productive with his time, whether it be getting a job or investing himself in a worthwhile project of some kind.

The most important thing one can get from their college years is personal growth, and there are many better options for personal growth than a menial job that earns minimum wage.

I’m curious of your thoughts on the Watchmen movie. I saw on facebook you had seen it recently. I left a comment that my boyfriend had me read the graphic novel before I went, which I’m really glad I did. I thought they did a fantastic job.
- Ashleigh

It was good, not great. It was obviously intended to be as literal as possible, following the graphic novel very closely, but I feel that film is a very different medium than graphic novels and should use different techniques. There were some lines of dialogue that almost made me cringe, for example, and the choice of elements to keep and elements to toss changed the story in a number of ways.

Watchmen was written to be a critique on the tired cliches of superhero comics, from the often one-dimensional characters to the static storytelling, and it really helped push the entire genre of comics and graphic novels forward. Watchmen was great because it took a different angle on the familiar elements of the format.

The film really didn’t do that. It retained a very good story, but something was lost in the process. A great Watchmen movie would take a serious look at the cliches and techniques of other superhero movies and turn those on their ear.

Question(s): I was just curious, what did/will you do with the car you replaced? Since it is starting to have a lot of problems I didn’t know if you would sell it, junk it, trade it, etc? I plan to drive my current car as long as I safely can do so. What’s the best option for getting rid of a car that’s not in the best condition?
- Jessica

We seriously discussed trying to sell it. It was a 1999 Mercury Sable with 175,000 miles on it, bad struts, an intermittent “check engine” light that we hadn’t yet figured out, and a transmission that was on the verge of failure (something that was pretty obvious if you drove it for a few miles). We used the blue book and had people look at it and we were given honest appraisals that the car would be lucky to put more than $500 in our pocket. We were also given estimates for repairs on the car that totaled into the many thousands at the same time, so we decided to give up the ghost.

To put it frankly, it had reached a point where we no longer felt safe driving the car for any significant distance. My wife was hesitant to use it for her commute.

In the end, we decided to trade it. The dealership offered us $1,500 in trade value for it, which was obviously part of the negotiation process, but if you take that $1,000 difference and apply it to the price we actually paid, it brought the price of the new Prius south of $20K, which made it actually cheaper than some late model used cars we had looked at.

I live in Alabama. We have a Prepaid Affordable College Tuition program that in the poor economy has suffered. I am sure you are familiar with these programs, but basically you buy the plan for your child and when you enroll in college the tuition is guaranteed no matter the cost at a state school. You can cash out for the average tuition in the state if you choose to go to a private school. We are blessed that my grandparents purchased this for my 2 year old, but the state has decided not to allow anyone else to purchase the plan – in effect ending the program. I have a 6 month old and my grandparents had planned to purchase the PACT plan for her. That is not an option anymore and we are not sure how to proceed. They have $18,000 set aside right now. What would you suggest we do with the money?
- Summer

If I were you, I’d open up a more general 529 plan, something I talked about a few days ago.

Putting your money into such a plan lets you grow the money without any sort of tax penalty for the next eighteen years, and you can then use the money in the account for college education anywhere – again, without having to pay taxes in the gains.

While the effective return might not be as good as a prepayment plan like the one in Alabama, you get the huge advantage of not being restricted to only attending a specific school. With a savings-style 529, the possibilities are endless.

I have changed to a new job where the norm for my colleagues is to go out and purchase their lunch (and it seems, breakfast, morning tea and afternoon tea as well). While I bring my morning tea and lunch each day there is considerable pressure, at least once a fortnight, to go out for lunch at a restaurant in the interest of ‘team building’.

As I know you started on your frugal journey prior to leaving the workplace, do you have any suggestions arising from your work experiences for dealing with this kind of pressure?
- Sarah

Given that these events are roughly every fortnight, I think such “team building” events are worthwhile, even if there’s an individual expense with it. If they were daily or multiple times a week, it might come across as a bit excessive, but given the irregularity, such events are definitely worthwhile.

My suggestion is to just order a very light lunch that day – a salad, or something to that effect. If that’s not enough to sate your hunger for the day, bring along some healthy snacks with you to work and munch them throughout the day.

If you stick to a very light lunch, you’ll find that it isn’t too much more expensive than brown-bagging it yourself. The few dollars’ difference (comparing your brown bag and the salad) is well worth the value of building a better relationship with coworkers.

Is there a point in a job interview that it’s appropriate to mention a planned upcoming vacation (i.e. “I’ll need to take these days off if I get the job”) or should a person hold off mentioning anything until an offer is made?
- Helix

I’d only mention it if you’re directly asked. If you’re not, I wouldn’t bring it up.

If the job you’re applying for is going to really require you to be on-site during the first several months of work, the employer should ask you this question or they’re not doing due diligence.

You can, of course, ask about their vacation policies. You need to make sure that your vacation plans will fit within their policy. If it does not, then I would hold onto this as a bargaining chip once you’ve been offered a job and are negotiating.

I’m a graduating senior this year with a lot of student loans, but no credit card in my own name. So, my credit score is based almost solely on the amount of debt I’ve taken out to pay for school. Now that I’m graduating, I’d like to finally get a credit card and start building up good credit. Do you have any suggestions for good credit cards for students/graduates just getting into the credit world?
- Liz

The best credit card is one that matches your regular spending. Don’t sweat the interest rates too much, because if you’re using the credit card in a healthy fashion, you’re paying off the balance in full each month.

I’ll use myself as an example. One of our biggest expenses is our automobiles. My wife commutes to and from work and we also travel regularly, taking weekend trips to visit family (an eight hour round trip) multiple times a month. Thus, we get a lot of value out of using the Citi Driver’s Edge card, because we get 3% back on our gas purchases plus a one-cent rebate for each mile we drive.

We also use the Amazon.com Visa (for our Amazon purchases, which is where we buy many gift items and other staples) and a Target Visa (we shop there for prescriptions and household supplies). Those cards offer great rewards if used at that merchant specifically, so we just use the card for those merchants.

I realize baking items at home tastes better and also is comparatively more frugal..given the electricity consumption of an oven, wanted to see if you had done any analysis on what the effective savings would be..i.e will the increase in the cost of electricity make the effective savings of baking at home less attractive from purely a frugal perspective.thanks
- C

There are a lot of variables at work here. The average oven uses around 4.4 kilowatt-hours of energy, which means that if you use it for an hour of baking, it’ll cost you around fifty cents in energy use. However, that’s not an exact number – it varies quite a lot depending on how exactly you’re using the appliance and the energy rates in your area.

Most from-scratch items at our house requires quite a bit less time than that to cook. For example, I can finish off a loaf of bread in about forty minutes, meaning I’ve used roughly thirty cents’ worth of energy in the process. If I bake two loaves at the same time, the cost difference is negligible.

Another note: oven use heats your home, so the impact is somewhat greater in the summer (because you have to cool down your house to make up for the heat) as compared to the winter.

Got any questions? Ask them in the comments and I’ll use them in future mailbags.