Recently, a young child that lives nearby (age six or so) had a large birthday party at his home for all the children on the block that were approximately the same age (four year olds to eight year olds, roughly). The party was in the family’s fenced-in backyard and included a magician, two horses, and a barbecue with a folk music band for all of the adults. To top it all off, there was a giant tarp over something in the backyard, and when the tarp was lifted (after the birthday cake), it revealed a play/tree house that must have easily cost $5,000.

As a parent, I can understand the superficial appeal of having a massively over-the-top birthday party like this for my children. It would be incredibly fun to load up house and home with parents and children, make it a very fun day for everyone with little eye toward expense, and have an amazing present at the end that all of the kids would enjoy. The sheer joy of all of those children would be quite wonderful.

But it comes with a few steep prices.

First, it sets unrealistic expectations for your children. Unless you’re equipped to spend obscene amounts of money regularly, you’ve set them up to be disappointed on some level by future birthdays. It’s fun to have a birthday party, but when it stretches the limits of what’s reasonable (and what you can reasonably afford), then it begins to stretch their expectations, often to a threshold that you won’t be able to afford in the future.

Second, it encourages consumerism. A giant birthday party with a mountain of presents is a rush of acquisition of “stuff.” No matter how well thought out the gifts are, a huge pile of gifts translates to a huge pile of stuff, and a huge pile of stuff translates into an expectation of more stuff.

Third, a big investment in a birthday party is a big investment that’s not going towards college or other long term savings. This isn’t a big deal if you’re a multimillionaire that already has college in the bag, but it’s a huge deal if you’re not there. If you drop thousands of dollars now on a party or a toy that they’ll only play with for a little while and at the same time haven’t adequately covered that child’s future, you’re making a choice that puts their future at risk for a birthday party.

With those ideas in mind, here are some suggestions for planning a memorable (but reasonable) birthday party for your child without it transforming into an incredibly expensive spectacle.

Keep the invitation list reasonable. While it’s fun to have a lot of kids in your yard, keep the list short enough so that all of the children are comfortable with and familiar with each other. This makes the party more fun for everyone and also keeps the expenses under control, as it’s easier to feed and entertain eight children than thirty.

Put a strict cap on gifts from guests - or request no gifts at all. This helps fight the “mountain of gifts” that is prevalent at large birthday parties, which just gives a home a plethora of toys and clutter that’s not necessary. Tell the guests not to bring presents at all - or, if you feel that they should, ask that the presents be very small.

Children can entertain themselves. Just come up with a few games that require minimal equipment and everything will go great. No need for an entertainer or any sort of expensive entertainment spectacle.

Cut back on the food - only serve cake. I’ve been to many birthday parties where there was a meal served, and as a guest I thought it was overkill. Keep it simple - just have a small, homemade birthday cake and a big bucket of ice cream. Total cost: less than $10.

Consider a slumber party. This enables you to dramatically reduce the guest list and at the same time create a memorable party for the child. Just invite three or four of the child’s closest friends and have them spend the night as the party.

Consider a private party. In other words, the only people invited are the people who live in the house. This keeps the party extremely simple, but also quite intimate. Many of my birthday parties as a child were like this and I remember them quite fondly.

Utilize public resources. Have a birthday party at the park, using the shelter house as a place to manage the party. This makes cleanup easy and the park is natural entertainment for the children.

Ask your child what they want - and don’t plant any ideas. You’ll often be surprised at what your child comes up with for what they want to do on their birthday. One of my nephews only wanted one thing for one of their early birthdays: to ride on their cousin’s four wheeler. Another one wanted to pull weeds out of the flower patch in the front yard and redecorate it (seriously). You might be shocked at what they want to do for their birthday, and if it’s reasonable at all, let them do it.

Remember that this party isn’t for you, it’s for the child. The party should revolve around what your child wants, not what you want. If your child wants to just have his best friend over for a sleepover and have hot dogs for supper, go for it even if it’s not what you’d envision for a birthday celebration. Let it be your child’s day, but just keep it within reason.

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.
How much money does turning off the lights really save?
Ten books that changed my life
My thoughts on The 48 Laws of Power and how to ethically treat your friends and associates

And now for some great reader questions!

You mention doing research for some of your posts. How do you go about researching? The internet? The Library? Experimentation?
- Carrie

I usually spend an afternoon a week at the library researching material for posts and other written pieces, and significant additional time online doing research. To understand it, I should probably put into context my writing flow for a week’s worth of posts.

I usually spend some time Monday morning defining what I intend to get written over the next week. That’s usually about a week and a half’s worth of posts, a few guest posts, some freelance articles, and a good chunk of a book. Seriously, I write about 20-30K words per week.

Once I’ve decided the general idea of all of these articles, I usually spend some time outlining them a bit with several sentences worth of notes. This helps me identify which posts need significant research and which ones focus more on anecdotal ideas.

This usually gives me the framework I need to go to the library later on Monday and do what research I need for the week. I’ll check out books, photocopy a few things, and take notes on my laptop.

Most of the rest of a normal week is spent just filling out the facts and ideas with prose to support them so that they’re readable. If I’m lucky, I get everything done with some time to spare, during which I follow my muse and work on things that are completely unrelated, like short stories and video production and things like that.

My credit card bill says “Save a stamp, use online bill payment.” When I went online to pay, I read that if I used online payment it would charge a $9.95 online service fee per payment. Do you have an idea of how to find a card that charges no fee?
- arlen

If your credit card company is charging you $9.95 to pay online, don’t do it. It’s a scam. Use your bank’s online bill pay to do the same thing - it’s likely free (and if it’s not, you should be switching to a different bank that has the service).

If you have a service that charges you a “fee” to pay your bill, they’re just trying to make an easy buck from the gullible. I recommend always using your online banking service to pay your bills that way. It helps with budgeting and makes the whole process much easier over the long run.

You seem to have a fairly solid routine. I’m currently wanting to establish such a routine which allows for maintenance of all those steady to dos like cleaning the house, laundry, finances, etc. as well as cooking at home, a reasonable amount of exercise and time with my loved ones. I get frustrated, though, as there still doesn’t seem to be enough time. Were you ever in always-behind-mode and, if so, how did you get out?
- Joanna

I used to constantly feel behind on everything. I realized, in the end, that there were two root causes of it, and once I tackled those, things got easier.

Too many distractions Cell phone on? That’s a regular distraction, with calls and text messages. Email program open? Distraction. Door open? You’re begging for people to come in and distract you. Web browser open? Tons of distractions. Focus in on one task and cut out those distractions.

Figuring out what’s actually important How much time each day do you spend watching television? What would happen to your time if you ditched House and spent that hour cleaning or doing laundry each week? You’d have another hour to spend with your family or doing the core things important to you. Spend some time figuring out priorities, and ditch the ones that are at the bottom of the list.

Do these two things and stick to them tightly, and things will get easier.

How do you handle the quality versus cost issue with basic foods like orange juice? At the store, there’s usually a ton of different kinds of orange juice. The more expensive ones are delicious but the cheap ones taste like battery acid. How do you decide what’s worth buying?
- Ronald

I usually start with the cheapest and work my way up from there. The cheapest orange juice is foul, so what’s next up the line. When I find something I like, that’s my baseline. Then, I watch for sales. Are there more expensive brands that are on sale right now or that I have a coupon for? If so, I get the better kind.

I do this with almost every consumer product, from soap to dishwasher detergent. Take soap - my baseline is Ivory or Pure and Natural (whichever is cheaper), but there’s almost always a better soap on sale (or with coupon) that’s cheaper, and that’s why I’m using Old Spice Body Wash right now. The same with shampoo - my baseline is Pert, but I’m currently using giant containers of almost-free Herbal Essences. It’s sometimes good to try the cheap generic, but sometimes the quality of the generic is significantly lower than the name brand item, and that means you should try things out for yourself.

What sports do you follow?
- Philbert

Baseball, golf, and college basketball. That’s about it. Baseball is probably my top sport, with golf very closely behind. I am a Chicago Cubs fan nearly from birth.

I used to follow pro basketball, but with each passing year the NBA seems more and more rigged, with the referees outright controlling the outcome some of the games, and now with the recent revelations about Tim Donaghy and Dick Bavetta, that seems pretty much true. Yep, David Stern, your cheap attempts to control series lost me as a fan, especially starting with that absolutely horrendous series in 2002 between the Lakers and the Kings. The Kings were a better team by miles, but the refs handed both games six and seven to the Lakers, calling constant invisible fouls and other things.

Can cosmetic surgery ever be considered an investment? Or are the studies/rumors that ‘beautiful people make more money’ not stable enough to rely on recouping the surgery costs?
- leslie

I wrote about this topic a while back, but I think it’s fair to clarify my thoughts.

I think that, although cosmetic surgery does affect how others perceive you, it’s not nearly as important as who you are. You can be the most beautiful person in the world and that might help you get your foot in the door, but if you are a cancer, you will be ousted and disgraced. Your face might open the door, but your attitude and who you are inside will be the part that keeps it open - or slams it in your face.

That being said, cosmetic surgery can be a big benefit in some ways. It can improve your self-confidence and help you get your foot in the door in the first place. The only catch is that once you’re in the door, what really matters is who you are on the inside.

Have you had any experience with time tracking tools that measure productivity and the sort? I’ve recently downloaded Rescue Time and I think seeing my usage patterns has created a better awareness for me. I’d love to hear your thoughts on the subject. Thanks.
- Marcus

I used Rescue Time for a while and all it seemed to do for me was point out what was obvious. I have a small handful of time sucking websites - other than those, I’m pretty productive. So what I often do is just completely block those websites. From the Lifehacker book:

My biggest weaknesses when I should be working on The Simple Dollar are looking at my site stats, reading reddit, and playing Desktop Tower Defense. What’s my solution? When I sit down to work on The Simple Dollar, the first thing I do is open the file C:\WINDOWS\SYSTEM32\DRIVERS\ETC\hosts with Notepad and add the line

127.0.0.1 reddit.com kongregate.com sitemeter.com mybloglog.com

Then I save the file and close it. When I’m done, I just open the file again and delete the line. What does it do? Whenever I try to visit the distracting web site, I just get a blank page. This keeps me from burning a few minutes here reading reddit or a few minutes there playing a game. Note that this only works on Windows XP and Vista, though - the book provides other ways to do it with other operating systems.

That file name works on PCs. On Macs, you’d want to open /private/etc/hosts and edit that file the same way. I’ve actually set up a cron job (a scheduled and automated task) to swap that file in and out at certain times each day, and then I can undo it myself if I want to.

The key is to block yourself from the time sucks. Make sure you can’t go near them, or at least make it difficult for yourself.

My son is a huge organic fan. I know it’s health benefits. I also know it is expensive too. How would you determine to eat organically or not if you lived in the city? Any thoughts you have on organic food would be appreciated.
- Joel

My philosophy with food is that the important part is to just eat better. The real key is to get on a diet with more vegetables in it. Organics are just icing on the cake. In fact, organic labeling actually doesn’t mean all that much.

If you’re really concerned about higher quality foods with lower environmental impact, your best bet is to buy local, not organic. Hit the local farmer’s market, especially local farmers that do small scale farming. Your purchase from these folks will do far more for the environment than buying produce that’s been shipped in from Chile.

Do you agree with this view : Nobody has actually figured out how the markets work, everyone is still studying heavily but has not actually figured how the machine works and much of the talk about the predictions about markets is just vain talk, and what turns out to be true is only by fluke or chance?
- WhirlMind

I think people figure out how the markets work in the short term, but then the landscape changes and all bets are off. New investors come in, with different perspectives. Old investors leave. Different sectors, based on different fundamentals, become hot and get a big market capitalization.

That’s why I think, over the long haul, the best bet for almost everyone - meaning everyone who doesn’t have the time to incessantly study the markets - is to diversify widely or only buy specific companies that you know very well. If you don’t have a reason for buying an individual stock - a clear, concrete reason - then don’t buy it.

What motivates you every day?
- j

My children. My wife. My incessant desire to write and the cool, calm feeling I get after a good day of writing. My desire to help the community, both locally and in a larger sense.

That’s pretty much my motivation every day when I wake up. In roughly that order, actually.

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

Each Sunday, The Simple Dollar reviews a personal productivity, personal development, or business/entrepreneurship book of interest.

One topic that doesn’t get nearly enough coverage on The Simple Dollar (or on other blogs as well) is entrepreneurship - the transformation of an idea and a passion into a full-fledged business. It can be a splendid way to make money, either as an individual or as a larger enterprise, but it comes with a lot of risk.

Because I’m now effectively self-employed, I’m becoming more interested in entrepreneurship as a topic, and so I’ve decided to start absorbing some books on the topic. I decided to start with this one, Ready, Fire, Aim, because I’ve read two other books (Automatic Wealth and Automatic Wealth for Grads) by Michael Masterson and found them both to be compelling reads.

This book is a relatively large volume, weighing in at just under 400 pages, and it covers each stage of the development of a business from an individual idea or passion into a large organization. Quite honestly, my interest is centered around the early stages - the place where people try to make side businesses work and eventually build that into self-employment or a very small business with just an employee or two. While the resulting path is worth looking at, my primary interest - both personally and as a personal finance blogger - is in those nascent steps.

Does this book have enough compelling meat on the bone to make it a worthwhile read? Or is it just overblown common sense fluff? Let’s take a look.

Digging Into Ready, Fire, Aim

As I mentioned above, the book is broken down into pieces that describe the growth of an idea into a side business, then into a small business, then into a large one. Masterson handles this progression chronologically, starting with the idea.

Part One - Being All That You Can Be

Introduction - The Very Best Job in the World
Masterson defines the best job in the world in very clear terms on page six: “I work when I want, where I want, and with whom I want, doing only what I want to do.” That’s why entrepreneurship is such a strong carrot to so many people - it really is a great job … if you can get there. That’s a mighty big if, however, and it’s a climb that many people fail to accomplish because they don’t put all of the pieces together. The purpose of Masterson’s book is to lay out most of the potential traps people fall into along the way and provide some advice on how to chart a path around them.

Ch. 1 - Getting to the Next Level
Masterson’s main idea for the book is that there are four levels in building a business. For me, the first level is the most fascinating - he calls it infancy, and it mostly revolves around making the first cost-effective sale, and the big challenge is that you really have no idea what you’re doing. I strongly identify with that feeling - I’ve felt that way about most of the endeavors I’ve been involved with. The other stages are business growth stages: childhood (developing more products quickly and becoming profitable - in other words, replicating the success that pushed you out of the first stage), adolescence (turning the chaotic growth into an orderly system - in other words, taking that replication process and making it orderly and refined so that it’s easier to do), and adulthood (continuing the growth and encouraging the business to run itself).

Ch. 2 - Why Employee Size Matters: A Different Way of Measuring the Four Stages
Another way to look at the growth of your business is in terms of the employee count, though this one has much blurrier lines. He uses the idea that you can only effectively delegate to and communicate with seven people at once, so he identifies the first stage as being you and up to seven employees, the second stage as being eight to forty nine employees (in other words, a maximum of two layers of delegation between you and any employee), the third stage as being between fifty and three hundred forty three employees (in other words, a maximum of three layers of delegation between you and any employee), and the fourth stage being anything larger than that. This also makes quite a bit of sense, in a sad way, because the more layers there are, the bigger your organization is, but the less control you have over it - it begins to run itself.

Ch. 3 - Becoming a Five-Star Business Genius
Masterson argues that to start a business and keep it going, a person must have five key skills: the ability to come up with new ideas, the ability to sell products, the ability to manage systems, the ability to develop superstar employees, and the ability to take action. Different skills matter at different levels of growth - early on, for example, the idea and the salesmanship are the central skills, while later on the ability to manage systems and develop quality employees is the difference maker.

Part Two - Stage One: Infancy

This is the area where most of my interest is, as I’m self-employed - effectively, a business with one employee.

Ch. 4 - The Supremacy of Selling
Without sales, it is very hard to sustain an ongoing business. This is the principal concept behind this chapter, and he’s right - if you can’t sell anything, you’re not going to make it. It’s true for any method a person might try to use to earn money. Take writing, for example. If I’m not able to sell pieces of writing to publications, I don’t earn anything. If I can’t “sell” what I’m writing for The Simple Dollar, readers will go away (in other words, if I start writing garbage, you’ll stop reading). It’s true for almost every business I can conceive of, from running a restaurant to repairing computers - if you can’t sell it, then it probably won’t function as a business.

Ch. 5 - Your Optimum Selling Strategy and the Four Fundamental Secrets of Selling Your First Product
Masterson argues here that there are four big questions you need to ask yourself to determine the optimum selling strategy for your business:

1. Where are you going to find your customers?
2. What product will you sell them first?
3. How much will you charge for it?
4. How will you convince them to buy it?

Obviously, different businesses have different strategies for answering these questions. For writers (like me), the goal really is to find an audience that’s willing to read what you write - the infamous “1,000 true fans” concept. In other words, the success of creative types is often entirely based on their audience. I truly have you guys to thank for making The Simple Dollar possible - thank you, truly, from the bottom of my heart. (Along the same lines, I’m genuinely not impressed by artists and entertainers and educators who take their fan base for granted or actively work to alienate them.) The chapter goes on from there to discuss pricing strategies and other basics of how to make the sale of a product work - solid information for the beginning entrepreneur, all around.

Ch. 6 - Mastering the Copy Side of Selling
In order to sell something, you have to be able to describe it and pitch it in such a way that others will be intrigued enough to spend their money on the product. Masterson offers some solid advice here (focus on benefits instead of features, make the product seem like it fills a need and not a want, and make it better than - or at least seem better than the competition), but I found this chapter to be a mere faint echo of the truly excellent Ogilvy on Advertising, which I glowingly reviewed a while back. If you’re trying to sell something (which basically means if you’re trying to start a small business), read the Ogilvy book.

Ch. 7 - Secondary - Yet Important - Priorities for Stage One Businesses
There are really three tips in this chapter, all of which are useful in areas of life outside of a business. The first, have a mentor, means to find someone experienced in your area of interest and ask them routinely for advice and suggestions, so that you can learn from their world lessons. The second, be a mentor, means to pass on what you’ve learned to others who might follow in your footsteps. The last, set clearly defined goals, merely gives you a goal to reach for as you yearn to grow what you have.

Ch. 8 - The Problems, Challenges, and Opportunities Faced by the Stage One Entrepreneurship
This chapter largely reiterates the key points of the previous chapters in the section: go cheap on everything but directly selling the product, get a mentor or two and learn from them, and don’t overprice your product right off the bat (because right now you need sales and loyal customers). Solid material, but just several pages of reiterated filler.

Part Three - Stage Two: Childhood

There may perhaps be a point in the future where I’m able to develop a business that grows to this point, but as of yet, I’m not there. Still, it’s interesting to know what lies ahead.

Ch. 9 - From $1 Million to $10 Million and Beyond
The second stage occurs when you’ve figured out how to successfully sell one product. Now that you’ve achieved that one successful product, the time has come to start brainstorming and either add more products to the mix or significantly improve (and thus diversify) the existing product. Not only that, the strategy you came up with to sell the original product will eventually stop working, so you need to be ready to tweak your selling strategy and perhaps even devise a new one. That’s a lot of effort - why do it? With a stage one business, you’ll probably make enough money each year to match a good salaried position, but your business likely doesn’t have much equity in it yet - not much value for the long haul. Stage two is about building that equity value that will add up over the long haul - making your business actually worth something significant to others.

Ch. 10 - Innovation - the Key to Second Stage Growth
The key to stage two growth is innovation, period. You need ideas to develop new products and update old ones. What can you do that’s interesting, useful, and sellable? Stage two growth is all about the creativity, and that means you’ll likely benefit from getting some highly creative types involved with your business at this point. In fact, I actually know one business that has an individual whose chief job is to just come up with potential ideas and do the first level of massaging them. He basically pitches a new idea every week - most of them are failures, but a few are being grown into products as I type this.

Ch. 11 - Speed: Putting Ready, Fire, Aim into Your Business
The growth of your business in this stage is directly related to the speed of your ideas. The quicker you can come up with good ideas that can be developed into products you can sell, the faster your business will grow. Masterson’s big suggesting is testing the product - if it seems like a solid idea, make a simple version of it (or a small number of complete versions) and let your trusted customers test it and tell you what’s wrong. They’re loyal and will give you good feedback, which will allow you to fix any problems and improve the product for final release. So, let’s say you’re a writer of a personal finance blog, and you’re thinking of writing on a different topic (say, cooking). The best way to launch that cooking blog would be to mention it to the readers of your already-existing personal finance blog and let them help you hone the exact direction it should go in, making it much higher in quality.

Ch. 12 - Getting Ready
This is the ready portion of the title of the book, and it basically entails just getting a product up and ready to be launched as quickly as possible. Don’t worry about finding potential customers or anything like that, just get a new quality product ready to go and get it out there. Your initial sales of the product will come from your existing customers anyway, who don’t need a strong marketing push in order to be interested. The key isn’t developing some great marketing plan at this stage - the key is getting the product done and ready to go.

Ch. 13 - What Are You Waiting For? Start Firing Already!
Again, if you haven’t gotten the memo yet, get it done and get it out there. Don’t worry about developing the marketing initially. The key is speed - don’t worry about perfection and don’t let the little tasks bog you down. The absolute focus is getting the product itself ready to go and out the door, not with periphery issues.

Ch. 14 - Aiming the Product
Once the product is out the door, however, then you can worry about sharpening the product. Pay careful attention as to who likes the new product and see if you can identify any patterns in that. See if you can eliminate specific aspects of a product - like ingredients in a food product - to reduce cost without reducing quality. For example, one of my closest friends claims that his “secret barbecue” sauce went down from having originally eleven ingredients to currently having four (and I don’t know what they are). See if you can improve the little details, too - sharpen the packaging and the presentation.

Ch. 15 - Aiming the Marketing, Part 1: A Quick Crash Course
My favorite quote from the entire book comes from this section:

Despite your success at creating a million dollars’ worth of revenues so far, you may be harboring bad feelings about the selling process. You may still harbor negative ideas about the ethical validity of business. You may also be afraid of selling.

Don’t worry. These are the thoughts and feelings that anyone who has been educated in the United States is likely to have. Having them simply means you’re smart and sensitive.

Most of this chapter is devoted to the idea of whether or not marketing is needed at all, and if it is, what parts are ethical and which ones aren’t. For the most part, Masterson seems to encourage people to make up their own minds about things and not cross any personal ethical boundaries, almost implying that companies that do cross boundaries that you’re uncomfortable with might be companies you don’t want to buy products from. His advice: treat the customers the way you would like to be treated. That’s an ethical standard I wish all companies lived by.

Ch. 16 - Aiming the Marketing, Part 2: Understanding the Buying Frenzy
If you read nothing else in this book, read this chapter. If you’re at the library and browsing for books, grab Ready, Fire, Aim and just flip to this chapter, no matter whether you’re interested in being an entrepreneur or not. Over about thirty pages, Masterson provides the best description of consumerism and the ethics of the seller that I’ve ever read. Is it ethical for a person to sell a luxury item, and if it is, what’s an ethical way to market that item? Masterson’s argument is basically that a seller has only responsibility to the product. In other words, a seller should only be concerned about selling a quality product that does exactly what is promised, not in the financial situation of the customer. The customer should have the wisdom to decide whether they actually can reasonably afford the item. I agree with this perspective in a bubble, but I start to have a harder time with it when advertising and marketing intentionally manipulate people’s self-image and feelings, causing them to associate positive feelings with a product that aren’t based in reality. That makes me uncomfortable, and as a consumer and a writer about consumer issues, it’s something I write about a lot and try to combat effectively. Does that make the seller unethical? I generally don’t think the salespeople on the floor (unless they’re using cheesy high-pressure tactics - and those are doomed to failure over the long haul) are unethical - I usually blame the large-scale marketers who carefully plot how ads can tweak people’s emotions. Whew! Good stuff here.

Ch. 17 - Ready, Fire, Aim in Action
Here, Masterson just gives some specific examples of the whole “ready, fire, aim” idea in action, showing how businesses execute the entire plan from having one successful product to having another one. Masterson picks some compelling success stories that really show how this can work in vastly different genres (side businesses that grow up, producing an album, and making a movie, for starters), but it’s missing what I always like to see from examples - how people work through problems in the process.

Ch. 18 - The Problems, Challenges, and Opportunities Faced by the Stage Two Entrepreneur
As with the previous section, this is just a summary of the key points from the second stage of business growth. The key point here really is that ideas are paramount and ethics are starting to become important, too. In effect, this is a Cliff’s Notes for the whole section, so if you just want to grab this at the library and get the high points, go to these chapters.

Part Four - Stage Three: Adolescence

Similar to the previous section, this is a “look ahead” at some of the things to think about when it comes to the long term.

Ch. 19 - Making the Stage Three Transformation
The third stage is really all about structure. The second stage was about rapidly developing products and getting them out the door, but if multiple products become successful, then you have a major enterprise on your hands without a whole lot of structure around it. Your focus as an entrepreneur when your business begins to have multiple layers of leadership and more going on than you can keep track of is to build a reasonable structure to contain all of this growth. In effect, you have a locomotive flying down the tracks and not enough rails to run on - you need to get those rails laid, pronto.

Ch. 20 - Changing into a Corporate Leader
The surest sign that you’ve reached the adolescent stage of growth is that there’s simply too much information being thrown around for you to keep track of it all. You either can’t get the access to all of the data you want (meaning the data tubes are clogged) or the sheer volume of data is overflowing everything. At this point, you can no longer have your hands on every tiny decision at the company and that means it’s time to transition from being an entrepreneur to being a corporate leader. It’s your job not to make every quibbling decision, but to make sure that decisions can be appropriately made by the appropriate people. There are countless business books on how to do this, advocating all sorts of things - the key is to take the time and implement things that work for you. Another key is to remember that marketing is still your main job, but now you’re marketing to different people - potential great employees, investors, and often broad swaths of consumers at once.

Ch. 21 - Filling Your Stage Three Business with Stars and Superstars
Of course, doing that means hiring quality people that you trust - many business books refer to these people as “stars” and “superstars.” How do you get these people into your organization? Give them almost infinite upside - the better they do, the better off they are, almost without limit. Barriers and job descriptions aren’t important with people of this caliber - you just need to point them in a general direction and let them loose to show what they can do, and you can usually quickly tell if they’re up to it or not (if they’re constantly foundering, they might not be what you need). When you find these people, mentor them and cultivate them. Talk to the top people in your organization all the time, share your ideas, and listen to what they have to say and where they think you should go.

Ch. 22 - Bottlenecks, Bureaucracy, and Politics
Every organization begins to deal with these issues eventually, and Masterson offers one central cure. Make your company’s central mantra about the customers, period. Nothing else matters but the customers. If a situation arises that’s slowing things down or creating a distraction, ask everyone involved how this helps the customer. Have people prioritize their work based around that principle. Usually, that means letting other people do their thing - if someone sends out a memo specifying the exact formatting of a company memo, this should be shot down immediately. How does it help the customer? It doesn’t. When someone plays political gamesmanship to get ahead, ask the people involved directly how they’re helping the customer. They’re not. Cut through the nonsense by focusing on what really matters: the people you’re serving.

Ch. 23 - The Problems, Challenges, and Opportunities Faced by the Stage Three Entrepreneur
Again, this chapter provides a concise summary of the materials that came before: let go, build the necessary structures, hire good people that you can trust and let them do their thing, and focus entirely on making customers happy. Everything else just follows from those tactics.

Part Five - Stage Four: Adulthood

The closing section seems tacked on a bit, as it addresses huge businesses that are likely addressed much better by books for large businesses, like Built to Last.

Ch. 24 - The Last Big Change
If you’ve managed to get a lot of good people on board, developed some sensible flows of information, and the company’s products are still growing and you’re still adding new people, you have a real winner on your hands. Unfortunately, it also means that you’ll have to step back even further - the company is now out of your hands and effectively running itself. The best you can do now is guide it - find strong, ethical leaders that can keep pushing things forward and keep asking the right questions. It’s also the point where you’ve got a huge asset that you’ve built up - your business is worth a ton. What do you do with it? Take it public? Sell the company? Keep running things and eventually pass the business off to your handpicked successors? I know what I’d do.

Ch. 25 - Acting as Your Company’s Main Investor
In essence, your role now is that of an investor in the company. You’re likely the largest shareholder in the company - and perhaps the only shareholder. Your focus should be on building long term value for that share. Make choices that keep the business growing, but keep it ethical and healthy so that it will stay vibrant for a long time. In some ways, it’s still about the same things it was when you started: a reflection of what you consider ethical and right, and built on the backbone of your ideas. Keep that in mind - and make sure the people who will run your company in the future believe in the same things. That way, your investment will continue to pay dividends for a very long time - in both the literal and figurative sense.

Some Thoughts on Ready, Fire, Aim

I was left with several thoughts while reading Ready, Fire, Aim. Here are a few of the more interesting ones.

Ideas are simply the key to everything. If you are creative and can consistently generate workable ideas, you’ll always find success at something in life. This book basically boils down businesses to a series of creative endeavors, particularly in the early stages - how do I create one product, how do I sell that product, how do I create more products, how do I sell those products. I’d go so far as to say that creativity is the most powerful skill a person can have in the modern era.

I understand now why some people actively choose to “keep it small.” Many of the problems faced by businesses as they grow are ones that don’t interest me very much. Developing a corporate culture? Yawn. Developing procedures for others to follow? I’d rather not. I think if I ever grew something to that size, I’d sell it and go do something else with my life (likely volunteer work, because at that point I wouldn’t need to earn any income).

The key to making the stuff in this book work is drive. If all of this seems exciting to you and you can’t wait to try out some of these things, then you’re probably ready to be an entrepreneur. But that’s not everybody - if this stuff sounded as boring as can be, you’re probably cut out for a different path in life. You’ve got to have the drive to make all this stuff work - without it, things will fail.

Is Ready, Fire, Aim Worth Reading?

This is a solid introduction to the things a person needs to think about while growing a business. It made me think carefully about many of the choices I’m making as a self-employed writer and consider the choices I may be making in the future if I choose to develop some of the other possibilities I have floating on the back burner.

My biggest complaint about the book is that it almost feels like too much was jammed into this one book. Because of that, the portion I was most interested in - the infant stage - felt really compressed, even in a large book like this one. For me (and for many readers), a book focused in on the specific growth stage that we’re involved with as entrepreneurs would be quite insightful and useful - I’d happily read Masterson’s book on the infant stages of a business.

On the other hand, seeing the concepts that a large business has to deal with versus the concerns of a small business was insightful. There are a lot of things you can focus on when you’re making a nascent business work, but if you follow the “generic business book” advice, you’ll quite likely follow the wrong ones for what a small business needs.

Masterson makes that distinction quite well, and because of that, this book is a very solid read for anyone interested in entrepreneurship, from baby steps to building something big.

We only have a limited amount of time on this wonderful Earth, and there are almost countless people around the globe who have far fewer opportunities for a pleasant life than we have. Thus, it’s natural for most people to eventually come to the conclusion that it’s quite important to share the wealth we’ve earned by sharing the resources we have with those that are less privileged in life. If we have an excess of resources while another person doesn’t have enough resources, it makes sense to share those resources.

When we cast our bread upon the waters, we can presume that someone downstream whose face we will never know will benefit from our action, as we who are downstream from another will profit from that grantor’s gift.
- Maya Angelou

Giving Now

Many people argue on behalf of giving money now. I disagree - one should never give money to charity if it endangers their long term financial future. There, I said it.

If you give money to a charity, especially amounts large enough to put your own financial future at risk, you risk having to line up and take back charity money for yourself later on. You’re far better off making your financial ship very sturdy - but that doesn’t mean rampant consumerism is okay. It means pay off your debts and build some long term financial security and independence, so that you’re never at risk of having to eat charitable money yourself.

That doesn’t mean you do not have gifts that you can give. Give your time. Give your talents. Give your youthful energy. Devote a few evenings and a weekend each month to working for a charitable group, giving them your ideas, your energy, and your effort to make sure that the group’s work is done. It doesn’t matter what charity you work for - just find one that can utilize your skills and makes sense to your own personal values.

Giving Later

Andrew Carnegie, in his famous essay Wealth, argues on behalf of giving later:

Individualism will continue, but the millionaire will be but a trustee for the poor; intrusted for a season with a great part of the increased wealth of the community, but administering it for the community far better than it could or would have done for itself. The best minds will thus have reached a stage in the development of the race iii which it is clearly seen that there is no mode of disposing of surplus wealth creditable to thoughtful and earnest men into whose hands it flows save by using it year by year for the general good.

In other words, the people who are already rich know how to accumulate wealth, and their best gift to charities is to keep using this knowledge to accumulate more wealth if, in the end, it is eventually bequeathed to the needy.

This philosophy is derided by many as being greedy, but I don’t see it that way. I think Carnegie is actually quite right, and I think he’s basically voicing the exact same philosophy that Bill Gates and Warren Buffett are espousing with the Gates Foundation.

To put it simply, if you have a gift for acquiring wealth, but you need those financial resources to earn more wealth, then you should not just sign over all of your assets to a charity while you can still use that gift. Instead, plan to bequeath what you have to charity once you can no longer use your gifts - in your dotage or after your passing. Alternately, you can devote time and money by bequeathing a large portion of your wealth to a charity then agreeing to serve as that organization’s treasurer, putting your wealth-building skills to work.

To me, this is charity in its purest form - people using their gifts, both monetary and non-monetary, to help charities.

Giving Both

My belief is largely this: give time now, give money later.

Early in life, the resource you have huge amounts of is time, not money. Thus, it makes sense for a young person to give their extra time to charitable work. Find a charity you actually agree with and spend some weekends and week nights working for them. Maybe you can volunteer to coach the community Little League team, or perhaps you can help hand out food at the food pantry. Maybe there are local committees that could use your input and attention, like a church council or a local school board or a political campaign.

On the flip side, younger people often don’t have as much money. They might be working at well-paying jobs, but they’re often facing huge debts from student loans and mortgages, and they also need to financially plan for their old age. Many are also loaded down with children who also eat into the pie and also need some planning for their future.

On the other hand, later in life, time is shorter. You might not be working and you might still be able to give your time and talents to charities, but you don’t have the youthful vitality of others. Often, your role is teaching others how to hold the reins.

However, late in life is when many people have the most wealth. It’s also the time when you can be setting up bequeathal plans, giving much of that accumulated wealth to people who may need it, both when you’re alive and after you pass.

Because of that, I generally believe that earlier in life, your time is your best gift, not your money. Your time can be used to provide all sorts of services, and your youthful vitality makes that time quite valuable, because most volunteer work really thrives on energy and focus. Take your money and do sensible things with it, ensuring that your family doesn’t have to use the charities, now or later.

Later in life, use that experience in both time spent volunteering and money saved to allocate some financial gifts. You’ll have a very good idea of good places for your money to go, plus you’ll have the experience to hand over the reins of your volunteer work to others in a sensible fashion.

Obviously, there’s no reason not to give a surplus of money now, nor no reason not to give a surplus of time later. The key is to look at what you have in terms of both money and time and give what makes the most sense, but never forget to give. There are many, many people not just in your community but in the world as a whole who could benefit from your help.

I’ve watched one of my childhood heroes throw his life away to a methamphetamine addiction. I remember him surging with vitality, going to school full time while simultaneously working at a full time job to make ends meet. He had the future open to him - college scholarships, a killer work ethic, and a quiet mannerism that made people who barely knew him trust that he could get the job done. Five years later, he was broke and jobless and reduced to making meth in an abandoned shack.

Another person I know lost his home, all three of his cars, his wife, and his children due to an addiction to gambling. He’d constantly bet more and more and more, believing he could turn around the losses with just one big score, until he had lost everything he had ever valued in his life, spending the night attempting to sleep in a casino bathroom.

These two people lost everything they had to their addictions. They once had all of the assets and opportunities that could be afforded to them, but in each case an addiction to something drug them down.

Any addiction is a danger to long term personal finance stability. If you have a compulsion to commit a non-vital behavior, particularly one that requires you to lay out money, it’s a massive risk, not only to you, but to everyone around you.

Addiction counseling is something I confess to knowing very little about, so I spent some time scouring for resources both online and off. Below are some of the tactic summaries I’ve discovered (while I’m providing links to online sources, there are many similar offline resources available at the local public library).

If You’re Addicted

The best summary of dealing with one’s own addictions came from a nonprofit site dealing with teenage addiction sponsored by the Nemours Foundation. The site lists countless signs to self-identify an addiction, then offers some excellent solutions that really sum up many of the tips out there - the tips focus on drug addiction, but the principles apply to all addictions:

Tell your friends about your decision to stop using drugs. Your true friends will respect your decision. This might mean that you need to find a new group of friends who will be 100% supportive. Unless everyone decides to kick their drug habit at once, you probably won’t be able to hang out with the friends you did drugs with before.

Ask your friends or family to be available when you need them. You may need to call someone in the middle of the night just to talk. If you’re going through a tough time, don’t try to handle things on your own — accept the help your family and friends offer.

Accept invitations only to events that you know won’t involve drugs or alcohol. Going to the movies is probably safe, but you may want to skip a Friday night party until you’re feeling more secure. Plan activities that don’t involve drugs. Go to the movies, try bowling, or take an art class with a friend.

Have a plan about what you’ll do if you find yourself in a place with drugs or alcohol. The temptation will be there sometimes, but if you know how you’re going to handle it, you’ll be OK. Establish a plan with your parents or siblings so that if you call home using a code, they’ll know that your call is a signal you need a ride out of there.

Remind yourself that having an addiction doesn’t make you bad or weak. If you fall back into old patterns (backslide) a bit, talk to an adult as soon as possible. There’s nothing to be ashamed about, but it’s important to get help soon so that all of the hard work you put into your recovery is not lost.

The real key here is to find a support network of people who can help you through this. Ask for help, even if it’s hard to admit your weakness. The truth is that the people who care about you most will be relieved that you’re realizing your problems and will be extremely happy to help you with your challenges.

If You Care for Someone Who’s Addicted

The advice here seems much more varied. Some sources seem to advocate an intervention and confrontation, while others encourage not confronting the addict.

The one thing that the sources do agree on is that you shouldn’t ignore it. Universally, it seems to at least be a good idea (though some say it’s not the best route) to tell the person that you’re worried about them, you care about them, and any time they want to talk, they can talk to you. You don’t have to even directly mention the issue, just let that person know very clearly that you are available to them if they need you.

At the same time, it also seems to be universal that you don’t support their addiction in any way. Cut off their financial supplies in any way you have to, but provide them with alternatives that take them away from the addiction. For example, if they come to you and ask for cash to get some food, say no but invite them to come over and eat with you.

No matter your position, addiction can be a very serious issue. It can drain your finances and everything else you hold of value in your life. If you’re recognizing a problem of your own, or know of a problem that someone else has, don’t ignore it. Address it now, for your future’s sake.

Lately, I’ve been looking at sources of passive income in order to bolster (and hopefully eventually replace) my current income. It is a fond dream that at some point in the future, I could largely step back from doing active day-to-day work and instead use these sources as my primary income stream. In that eventuality, I could devote my time to volunteer causes and charities I’m passionate about (and maybe have time to sit back and read a book for pleasure on a lazy afternoon every once in a while).

First of all, what is passive income? You’ll find a lot of definitions of it online, but mine’s pretty simple: passive income is any source of sustained income that you earn without any additional work. You might have to put up a lot of work up front, but once the money is rolling in, it doesn’t require any additional effort to earn money (additional effort might help to increase earnings, but it’s not required for some level of income). Thus, I don’t identify things like being the landlord of a rental property or blogging to be passive income - both require significant and regular work to earn money.

Passive income isn’t a way to get rich. That’s not the point, and anyone claiming you can get rich from it is selling snake oil. For me, it’s an investment of money and time now to buy time later. Notice how the output has nothing to do with money - it’s about putting resources away now so that I don’t have to invest time working in the future to maintain my standard of living.

Here are four sources of passive income that I’m looking at for my own future, along with some suggestions on how you can get started.

Investments that pay dividends or distributions
The mere act of owning many investments can be considered a source of passive income. You merely hold the investment and regular dividends are paid out to you. Many people tend to focus on investments in terms of the increase in resale value, but many others quietly hold stocks and bonds that pay large dividends, lining their pockets with capital gains. Look for individual stocks and bonds or index funds that pay good dividends, then sit back and watch the money roll in.

How can I get started? Just start an account at an investing house (Sharebuilder’s my pick for beginners who want to buy individual stocks; Vanguard’s the place to go in my opinion for index funds) and set up an automatic deposit into the account. Let the dividends roll over until you need them for income, then just collect the dividends as cash. Passive income at its easiest, and I plan on digging into these options more in the future, both as investments for future things and as potential passive income if it’s necessary.

My plan Once our non-mortgage debt is gone (hopefully by the end of the year), I intend to start investing in Vanguard index funds in a taxable account (and perhaps a few individual stocks of companies I believe in) and holding that investment with a fairly long time. While our goal is to eventually use that money to buy a plot of country land and build a home, it’s also quite possible that I’ll just turn it into a passive income source by collecting dividends or bond distributions.

Writing a book
The normal procedure for writing a book involves getting a book deal and an advance check, writing the book and submitting the manuscript, then getting (possibly) another advance check, then sitting around while the royalty checks come in. It’s a nice way to get a passive income stream, but it requires a ton of upfront work and a significant time investment. However, once it is done, it not only earns money slowly over the long tail, but it also opens the doors to other active opportunities - an active-passive double header.

How can I get started? You can start by getting your toes into writing. Find venues where you can sell written pieces and make a bit of cash while also building up your resume. Then, when you have several pieces in print and a good idea, pitch a book to a small-to-medium sized publishing house or get an agent to shop one around for you. Get the deal, write the book, then the royalty checks come.

My plan I’m currently in the process of doing this. Once the work is done, I receive my final advance check, the book goes into print, and I receive royalties, no extra work really required. Granted, it won’t be large checks, but it’s a start. The real key (for me at least) is to write several books, enough so that the royalty checks are significant.

Developing a static website of some interest
If you don’t want to invest all the effort of writing a book, you can instead just develop a static website with whatever amount of written material you want. An individual site won’t earn you much, but considering you can set the whole thing up with just a few hours’ worth of work and walk away, even a few pennies a day can make the endeavor worthwhile over the long haul.

How can I get started? Think of a topic you know something about. Write down the useful information you know about the topic, and take pictures, too, if need be. Find a free hosting site online, like Google Pages, then put your materials there. Sign up for an ad service like Google Adsense and put a few ad blocks on the site. Submit the URL to a search engine or two, then sit back and wait. This is something you can do in an afternoon. Be aware that one single site won’t earn you much unless you have something seriously compelling - many people that do this make new sites and pages all the time to add to their repertoire. It’s passive in that they’ll earn income whether they add new sites or not - adding new sites merely increases the income potential.

My plan These are great ways to develop specific written ideas you might have and to share them with the world while earning some passive income. I have a few things I plan on documenting in just this fashion. In fact, if I ever get tired of actively writing The Simple Dollar, this is what it will functionally become - a static site on a server somewhere, slowly earning some income over the long tail for many years to come. I don’t think I’ll stop actively writing The Simple Dollar for a long time, though - I truly enjoy it.

Creating and selling creative products online
There are many sites where you can create or upload creative products and have them earn an income for you over time. Zazzle and Cafepress let you design t-shirts, coffee mugs, keychains and such to sell (they manufacture it and you get a cut as a designer), while Metacafe and Revver let you upload videos of your own creation and pay you if they’re viewed by others. The best part is once you’ve uploaded your design or your video, you can just walk away and the passive income will trickle in.

How can I get started? If making a video or designing a t-shirt sound compelling to you, give these sites a shot. They’re all pretty simple to use and can be lucrative if you create something that catches on. Just try uploading some things - even if you don’t make any money, you can still leave them up there and it might catch on later.

My plan I’ve been thinking of making a series of videos to run on Metacafe or Revver focusing on a number of topics (personal finance and cooking). My wife and I have already plotted out several ideas and have thought about creating them in our spare time, then posting them also to The Simple Dollar. We’ve also talked about designing t-shirts to put on Cafepress and/or Zazzle, but that’s a more nebulous idea. Both of these are in my “projects” folder - they’re things that would add to the portfolio of potential passive income streams if we invest the time to create them up front.

These are the four methods of passive income I’m strongly looking at. Do you have any interesting ideas for ways that people can create passive income?

Each Friday, The Simple Dollar reviews a personal finance book of interest.

I’ve always found social issues revolving around money to be infinitely fascinating. Why don’t people talk openly about money? Why do people loan money to friends and family, knowing quite well that if that loan blows up, their friendship is done? Why do some people consider it socially fine to be cheap, while others throw such heavy disdain upon it?

Isn’t It Their Turn to Pick Up the Check? focuses in like a laser beam on these social money issues. The subtitle really sums it up: Dealing with All of the Trickiest Money Problems Between Family and Friends - from Serial Borrowers to Serious Cheapskates.

The book has a light tone and a lot of advice on handle these uncomfortable situations, but does it offer enough meat to really make it a compelling read?

A Deeper Look at Isn’t It Their Turn to Pick Up the Check?

I’ll confess up front - I enjoyed this book quite a bit. It was a very fun read, loaded with anecdotes and situations that I can easily visualize in my own personal and social life. Most of the book is filled with a series of questions and answers that focus in on specific situations - I’ll pick out one or two from each chapter that piqued my interest.

1. I’ll Take the Flu
Whenever family and friends intersect with money issues, it’s uncomfortable. According to Isn’t It Their Turn to Pick Up the Check?, when asked whether they’d rather have the flu or have a relative ask them for a large loan, more than two thirds prefer the flu - and I don’t blame them. A loan between family members is uncomfortable and often ends in complete disaster.

2. Take My Relatives, Please!
Here, Fleming and Schwarz mostly focus in on how the spending habits of relatives often intrude on our own lifestyle choices. For example, one issue focused on in the chapter is that of a parent who is spending lavishly in her final years, blowing what would be a sizable inheritance that the children had been planning for financially. Their response? It’s not their money, it’s her money to do with what she chooses (unless it makes her financially dependent on them). What about a cheapskate brother? It’s only cheapskate behavior if it’s uneven - if he gives “cheap” gifts, but doesn’t complain when others give him nice gifts, then it’s not cool, but if he gives “cheap” gifts but asks to only receive inexpensive gifts or none at all, then you’re just pushing your own values on him. Interesting advice.

3. Borrowers and Lenders Behaving Badly
What about lending within families? It’s a pretty obvious no-no, but people still tend to do it anyway. Through the questions and answers in this chapter, a pretty clear policy emerges: don’t lend money unless you feel genuinely obligated to (for example, if that person lent you money in the past), but when you do, keep it private and don’t expect repayment, but if you are repaid, accept it graciously. This avoids most of the pitfalls that you might fall into when lending money to family and friends.

4. To Lend or Not to Lend
So, are there ever situations when it’s okay to lend money to family and friends? There are, but they’re rare (at least in my experience). The authors advise that you only lend money to people if you believe they actually need it, believe they’re reliable, are close to them, and if you’re confident they’ll make a serious effort to pay you back. And you don’t have to be consistent, either - because you lend money to one niece doesn’t mean you have to lend money to another, though you should be able to clearly explain why one is fine and the other isn’t. I still think lending money within families is a pretty dodgy idea.

5. That’s Not How I Remember It
Verbal agreements are bad when lending money within the family. That’s the story of this chapter - if you lend money without getting it written down on paper, then it might as well be a gift. Fleming and Schwarz advise writing all of the details down on paper: the total amount, the interest, when it needs to start being repaid, what the repayment plan looks like - then having all parties sign enough copies of the agreement so that everyone can keep a copy. While that’s probably overkill for small loans, it’s a great idea if you’re lending significant cash to a family member.

6. Rich Brother, Poor Brother
Whenever there’s financial inequality in families, it eventually causes some problems. Social circles and customs begin to change, people become jealous, and expectations begin to be altered. The advice here mostly revolves around taking responsibility for your own situation and not worrying about the situation of others. Thus, for example, a rich brother shouldn’t be expected to cover the expenses of a brother who chose a low-paying career (though it’s just fine if the brother chooses to - it just shouldn’t be an expectation). Just keep your eye on your own ball and put it in the best position you can, and assume that your family is doing the same.

7. Rich Friend, Poor Friend
That advice works well for families, but what about for friendships? Fleming and Schwartz mostly believe that if a money difference is starting to become a problem in the friendship, talk about it. That’s why you’re friends, right? However, there’s a hidden problem at work here: it’s not just a resource difference, but a status difference. Almost every social situation is tied into social status, and when income becomes disparate, often status does as well. Don’t be afraid to honestly talk things over, and also don’t be afraid if friendships slowly drift apart over time - if people begin to spend their time in different worlds, it’s bound to happen.

8. When Gifts Come with Strings
Giving a gift with strings attached is pretty cheesy, as you’re just begging for an extra dollop of resentment on top of that gift. On the other hand, if you choose to accept such a gift with strings attached, don’t fight to break the strings - that makes the person that gave you the gift resent you even more. In other words, gifts with strings attached, particularly ones that make the recipient uncomfortable, aren’t cool, and there’s no such thing as an “implied” string, either. If you want to give your grandson $100 for his college education, start a 529. Don’t just put $100 in a card.

9. Promises, Promises
What about unfulfilled promises? The failure of expectations can be devastating for relationships of all kinds, when something believed to be promised doesn’t appear. Are there situations where this is appropriate? Fleming and Schwarz argue that there are many situations with changed circumstances where it’s appropriate to break a promise. One such example revolves around a person who promised to provide for the care of a younger sibling when their parents passed away, but now that sibling is a reckless adult, bringing negative consequences into the household. In events like these, Schwarz and Fleming encourage the breaking of a promise, because the situation has transformed from when the promise was made. Their key advice is to not make a promise that you know you might be unable to keep, like promising someone that they can live with you as long as they’d like.

10. What Are We Going to Do about Our Wills?
Many people go through a lot of consternation and guilt when deciding who they should leave money and assets to in their will (or trust). I wholly agree with Fleming and Schwarz: it’s your money, do with it what you want, but you should have the moral fiber to be willing to tell everyone involved the decision you made and why to their face - and listen to what they think of it, too. If you’re doing things in a secret fashion or doing things unevenly without telling everyone why, you’re basically writing a guarantee that the people you’re leaving things to won’t get along after you pass on. I strongly agree with this. I’ve witnessed the complete destruction of familial relations between several siblings because their mother, when she passed, left an item that they all treasured solely to one daughter.

11. Beneficiaries and Their Great Expectations
What about the reverse situation, when you’re a beneficiary and you feel there are unethical things going on with the estate? Again, the key is communication - talk about it, don’t let it fester. Remember that the aging person has a right to spend and bequeath their money as they see fit, so you generally don’t have a strong position to stand on if you feel you’re being “ripped off” by that person’s money decisions. The best solution is usually just to ask questions so that you understand what exactly is going on.

12. After the Funeral, Who Gets What?
Most wills usually have an unhappy surprise or two laying in wait for the people expecting to get inheritances, and how these inheritances are handled often can make a big difference in whether hard feelings exist in a family or not. If someone feels like something is unfair, whether unfair to themselves or not, speak up and state your case. Letting stuff fester isn’t going to help anyone. Legally, you have to follow the wishes of the will, but in a healthy family situation, people will make things right.

13. Neighbors from Hell (and Other Places)
How do you handle obnoxious neighbors? I put a pretty large premium on good relations with my neighbors, as I’ve seen time and time again how having a friend next door can be an enormous help in a pinch. But what if they’re just foul people who do things that reduce your property value or cause you to have unnecessary hardship, like parking a car in your driveway or letting their dog poop in your yard. As usual, don’t let it fester. Swallow your feelings, go over there, and talk about the problem. If it doesn’t go away but it’s not a legal problem, then you may have to take matters into your own hands with a privacy fence or something similar, but try to talk through the problem first.

14. You Did What to My Car?
Here, Schwarz and Fleming focus on the implications of lending items to friends and family, or when family members cause damage to your property and just blow it off. In short, any time someone treats your property as though it’s their own and doesn’t step up to the plate to keep it in good shape, there’s a problem. Their advice? Always make it as right as you can if you break or damage something that belongs to a friend, and then you have the right to expect the same from them. If your child, for example, breaks something at a friend’s house and you don’t replace it, you have no right to expect a replacement if they accidentally break one of your items.

15. Let’s Break a Deal
Deals between family are made all the time, and are broken all the time, too. You promise to go on a vacation with friends, they put up the deposit for you, and then you’re unable to go. You’re late paying back a loan, or someone wants you to pay back a loan early. These things happen all the time, and the best way to deal with them is to try to do what you can to make it right, whether you’re the person on the hook or you’re the person with the hook. Recognize that the other person has needs, too, and suggest an equitable arrangement. If your actions are leaving someone hanging (like in the deposit example), do what you can to make it right by paying for at least your half of the deposit if not all of it.

16. The Wedding Bill Blues
So many people get emotionally tied up in weddings and the costs easily spiral way out of control, bruising feelings and relationships. The best way to plan for a wedding is for everyone involved to be clear on what their expectations are, and everyone who is paying a bill should be involved in that decision. So, if mom and dad are paying for all or part of the ceremony, they should be involved in the decision to buy $100 champagne. If you’ve asked bridesmaids to participate, they should be involved in the dress selection process both as a group and individually, so if you’re asking them to spend more than they can afford, they can tell you honestly without creating a social situation. Be aware that there are others who are impacted by your wedding choices, and be considerate of them, but if you’re afraid of being drug along for the ride, just ask what’s entailed in being a bridesmaid (or whatever role you’re filling).

17. Parents and Kids
The relationship between parent and child is often very complicated, and this chapter addresses many such issues. The one that really caught my eye was the advice concerning how to handle expensive lessons for a talented child without fostering sibling jealousy. Their advice was (as usual) spot on: go for the lessons, but not at the expense of denying things that the other child might want. Their example basically said that lessons are fine, but not if the other sibling has to give up the basketball camp they’ve been dreaming about. The key, as usual, is balance, and with your children, you need to balance attention and care, regardless of individual talents.

18. Cheating on the Friendship
Ever had a friend take complete advantage of your friendship by mooching off of you repeatedly, or only calling you out of the blue every once in a while when they want something? It stinks, doesn’t it? My view is a bit harsher than the authors of this book: I take such mooching to be a sign that the friendship is over (or nearly so) and thus I don’t often respond when it becomes clear that I’m just being used for something. The authors mostly just say that you should be up front about any such fairness issues if the friendship is still close, or just quietly let things drop if it’s a long lost friend calling up and asking for something.

19. Living with the Thieves of Kindness
The advice in this chapter really boils down to a catch-all for most situations not covered elsewhere: learn to say no.

Some Thoughts on Isn’t It Their Turn to Pick Up the Check?

I was left with several thoughts while reading Isn’t It Their Turn to Pick Up the Check? Here are a few of the more interesting ones.

The root cause of most problems that spring up because of money is lack of communication. To me, the real result of society’s unwillingness to talk openly about money issues is a lot of hurt feelings and built-up resentment. I can think of countless times in my life and experience where a good conversation would have solved something that eventually boiled up into a fight or the end of a friendship over a simple money issue. Don’t let it happen - if something’s rubbing you wrong, talk about it and get it straightened out.

Keep a friendship active if it’s important to you. If you’ve ever thought about an old friend and feel regret that you’ve let the relationship start to melt away, take the effort and contact the person. Send them a note just to see what’s up. Don’t wait until you need them for something - just try to keep the friendship alive without being a mooch.

Money does strange things to people. I often think that a money situation reveals a person’s true colors - what their values actually are. If someone’s willing to completely rip you off for $20, what really is the value of that relationship? I’d say not very much.

Is Isn’t It Their Turn to Pick Up the Check? Worth Reading?

Isn’t It Their Turn to Pick Up the Check? does a great job of focusing in on the touchy boundary issues between friends/family and money. It addresses a lot of these issues in a very specific fashion, and their selection of specific areas to tackle was quite good. I was easily able to envision similar situations in my own life in many of the examples.

I think it’s because of these examples that this book really worked for me. It became very human and very applicable to my own life, and thus it gave me a lot of pause to think about the money/family mistakes I’ve made in my own life and how I can avoid them in the future - mostly, by talking about things before letting resentment grow.

If you’ve been burned by money issues with friends and family, this is an enjoyable and fairly short book well worth reading. Here’s a good litmus test - if anything in the above review really seemed to strike at a situation you’re familiar with, this is one well worth reading. It definitely applies more to people with large social and family circles than to loner types, though - if many of these issues seem unfamiliar, then this book won’t do much for you at all. For me, though, it was an enjoyable book that made me think about money in new ways - and that’s always a successful book in my eyes.

After my recent post on looking at your automobile purchase as an investment, an interesting discussion broke out in the comments: should a car even be considered an investment? A few choice comments:

Automobiles are nothing more than consumable goods. Tools in a toolbox. I say drive them till the wheels fall off and then go get another. I guess I have never understood the love affair some people have with automobiles. The treat them as objects of desire. I really get a kick out of my neighbors that waste so much time washing, waxing, and detailing. I can think of 100 better things to do.
- Jeff @ 11:24 AM

“A car is an investment. Without it, almost every car owner would see a vast decrease in earnings potential”

It’s not an overstatement, it’s just ridiculous. And I’m not even talking about investing the money that what would have been wasted in a car.
- Ben @ 11:31 AM

Cars, bikes, and public transportation are all investments.
- Andy @ 11:47 am

A car is still an investment, though, because a car buyer is investing in his time and convenience. Without my car, sure I could ride my bike to work every day. But that would take more time and energy. It would be more difficult (though not impossible) to buy groceries (in my hilly city, pulling a bicycle trailer is extremely difficult). It would be less “cool” to go on dates without a car.

Yes, a car is indeed an investment, just not a strictly financial one.
- Rick @ 11:32 am

So which is it? Are consumer products investments or not? My feelings are actually neutral on this one, but it’s an interesting discussion, so let’s try to make each case and see where things fall out.

Consumer Goods Are An Investment
The government defines investment as referring to “an expenditure of funds to acquire a new capability or capacity.” Every time you purchase a consumer good, you’re looking to acquire a new capacity or capability that you currently do not have.

Take, for example, a car. The purchase of a car gives you the capacity to drive about, and it also contains a certain amount of resale value as well which you might apply to a new car in the case that the current car no longer fulfills its capacity or another car you might wish to purchase fulfills the capacity better.

You can apply a similar line of thinking to almost any consumer good. A beverage provides enjoyment and refreshment. An electronic device provides some information-sharing capacity. And so on. And so forth.

You evaluate non-monetary investments in the same general way that you evaluate monetary investments: are you getting more value out than you’re putting in? Sometimes, it’s not straightforward to evaluate, because it’s not as cut and dried as it is with a strictly financial investment.

But it is real. If you buy something and it’s “worth it,” that’s a good investment. It means that you got more value out of it than you put in. If it turns out to not be worth it, then it’s a bad investment - you didn’t get enough out of it to make it worth what you put into it.

Consumer Goods Are NOT An Investment
Princeton WordNet defines investment as “money that is invested with an expectation of profit.” Quite simply, when you buy almost all consumer goods, you are not expecting a profit - they are a guaranteed loss, and buying them is simply a necessary expense of life.

A drink is just that, a drink. You spend some money, get a beverage, drink it, and it’s over. You’re now out a certain amount of money, no matter what. There’s going to be no return on that financial investment.

If you make a move with your money that doesn’t have a good chance of a positive financial return, then it isn’t an investment. It’s an expense. Getting a good deal on a product isn’t an investment, either. It’s a bargain.

An investment is when you walk away from something with more financial resources than you committed to it. Consumer goods don’t fit the bill.

My Thoughts
To me, this is really a question of how broad your definition of the word “investment” is.

In the broad definition, you’re looking at the amount of value you put in versus the amount of value you get out. In that sense, it can be applied to pretty much any aspect of life. I consider two hours at the park playing with my kids to be a spectacular investment: everyone’s happy and having fun, there’s almost no financial outlay, we all got exercise and fresh air, and I’m building a long-term bond with my children. My cost? Two hours.

The problem with looking at investments from that perspective is that they’re wholly tied to who you are and what you value. You can’t compare the value of that time investment from person to person. Another person might find two hours at the park with kids to be a horrible investment - a complete waste of their time. Thus, we would label the investment of a trip to the park wholly differently - I’d label it a great value, he’d label it a loss, but the actual physical input and output would be identical.

That’s why it often makes sense for people to strictly look at investments that can be quantified and transferred from person to person. You and I can both invest $10,000 in VFINX tomorrow and both get out $11,000 at some point in the future, on the same day. The input is clear and the output is clear for both of us.

The real distinction is between personal investments and financial investments. The naked word alone means different things to different people, but the prefix makes all the difference.

As for me? I think it’s useful to look at everything we buy and do as a personal investment, but I realize that my conclusions won’t necessarily match yours because my values are different. To me, frugality basically means getting the maximum bang for the buck out of personal investment - what can I do or buy that will give me the most personal value for what I put into it?