One of those few people was John Wooden, who passed away this past week (I mentioned it briefly in my reader mailbag on Monday). A few years ago, I wrote about how John Wooden had taught me a lot about personal finance and over the years, I’ve read his books and a big pile of interviews he’d given.

Of all of the things I’ve taken away from the things he’s said, one stands out above all others.

Make each day your masterpiece.

In other words, how would you spend today if it were the one day by which your entire life would be judged?

This is something I make a genuine effort to keep in mind every single day of my life.

What would I write if I knew I only had one shot at making a difference in someone’s life?

How would I spend the next hour with my four year old son if I knew it was the only hour he’d remember from his childhood when he was an adult?

How would ...

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I’m a 30 yr old professional and have saved up about $40k from living within my means sitting in my savings account (I know, I could put it to better use). I contribute about 10-15% in 401k off and on (due to job jumps and 6-12 months working period for eligibility) and have approximately $20k in it. I recently read “rich dad poor dad” and realized it would be a dream come true to no longer have to “work for money”. The book talked about buying “assets”, as in things that would generate more money for me, and use the money generated to buy more “assets”. But I don’t know what to buy. I’d like to keep $10k as emergency money and put the rest to generate money for me. I know I can always buy index funds, but are there any ideas on what I can buy that’ll immediately start making money for me?

I live in Northern Virginia (DC suburbs), so rental property is out – real estate is expensive and rent is a lot cheaper than mortgage.
- Paul

First of all, be aware that Rich Dad, Poor Dad paints an insanely optimistic picture of “making your money work for you.” Remember that it is supposed to be a parable – in his own words, Kiyosaki compared the book to Harry Potter (in the Feb. 2003 issue of SmartMoney).

The idea that you should really take home from the book is that there is a lot of merit in purchasing investments that earn you money without continued work input from you. Fully managed rentals are one type of this. Another type is a stock that has paid dividends over a very long history (and thus will likely to continue paying dividends). Treasury notes are another very stable example of this – they don’t pay as well as the others, but they’re rock solid.

The book essentially proposes that you look for bargains on such assets and keep accumulating them until they produce enough income for you to live on.

If you have about $10K to start with, one place to start might be stocks that pay a strong dividend, as you don’t have enough to really buy rental properties yet and you don’t need the rock-solid stability of treasuries, either.

It’s important to remember that such “income-paying investments” aren’t necessarily the best investments for the long-term growth of your money. They’re simply nice in that they provide a steady income for the owner.

I am very upset. Our Chevron gas card that we’ve had since 1987 is now handled by GM Money Bank. Our joint account now lists my husband as the account holder with me as an authorized user. I didn’t notice this until they start calling to verify purchases as part of their fraud prevention program. If you don’t respond, they block the card and won’t talk to me about anything. I handle the billing and payments on all our accounts, and am incensed that they won’t talk to me. They wouldn’t even let me report fraudulent purchases posted to the account. Are there no longer joint accounts available? What happens if he is incapacitated and unable to speak?
- Cindy

Many credit cards have moved to a single cardholder with additional authorized users, mostly in an effort to standardize accounts. It’s not really anything to worry about.

If you are the main cardholder’s spouse, you should have power of attorney over his affairs in the event that he is incapacitated. This will give you the right to make choices and administrative decisions about his credit card.

I really wouldn’t worry about it too much. For now, it doesn’t change anything about how you two use the cards. If he did wind up being incapable of managing the card, you would be able to do it for him.

When my wife and I got married, we took ‘control’ of a 40K full-service/managed investment account that had been set up for her in the past by her parents. I have been considering turning that into a self-directed account, as the managers of that account just about matched the stock market, and i prefer to just invest in a long term, low fee indexing strategy.

We also have 15K in liquid savings and another 45K in IRAs and CDs. Any advice?
- Brian

That seems good on paper, but there are very painful tax complications to doing that.

If you take $20,000 out of a 401(k) before retirement, not only will you have to pay income tax on whatever you pull out, you’ll also have to pay a 10% early withdrawal fee. This will quickly eliminate about 30% of your savings (depending on your exact tax bracket, of course).

You’re better off leaving the money there. The 10% penalty alone will eat up any potential “extra” return you might earn versus leaving it in the 401(k).

My boyfriend and I live together and he makes a lot more than me because I’m in graduate school. We split bills 50/50 for the house we rent right now, but we’re moving into a bigger house soon and he will pay more of the rent than me. He also has money saved for when we one day decide to get married and buy a house. Since we’re not married or even engaged at this point, I feel a bit guilty that he will be paying more of the rent than me. How do unmarried couples (or married couples, for that matter) reconcile differences in income? It really bothers me when wives expect too much from their husbands financially and I never want to turn into that.
- Kate

I think it’s completely reasonable to proportion bills in proportion to the incomes of the household members. Of course, that proportion would have to change every time there is a change in income for either household member or in household ...

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So, let’s say we go on a ten day trip. That would mean five books. Does it make sense to tote that many books back and forth?

Our idea is this. We each take one book with us and look to borrow stuff when we’re there. If that doesn’t work, we hit the bookstore. If we finish a book and aren’t sure if we’ll read it again, we do the ol’ “put a read-me note inside the book and leave it on a park bench” technique that I often use to pass along books.

That way, we don’t weight our luggage down with books either coming or going.

I am 30 years old and have finally found my dream job at a non-profit after years of working in a very fast-paced, stressful environment. Of course, my dream job pays much, much less than my previous job. And the work is fairly easy for me, based on my previous experience, but is very fulfilling. I also have very reasonable, flexible hours. However, there is also not much room for me to grow beyond my current position at the non-profit.

What do you think I should do?
- Meg

You’re comparing two sets of values to each other, and that’s more of a question of what you personally feel is important. There is no black-and-white answer to a question like this.

How much, dollar-wise, are the positive attributes of your current position worth to you? For some, they might not be worth much at all – for others, they’re worth a lot. It all depends on your personal makeup.

It sounds like the positive attributes of your job are worth a lot to you. If they are, they should trump earning more money. Of course, they should also point you toward having more energy and initiative to take on endeavors in your personal life outside of the workplace.

I just looked at the anticipated tax brackets for 2010 from the link on your site. It’s anticipated that $34,000 is the cut-off between the 15% and 25% brackets. So I make $35,000 as a single person. 25% of my salary goes to taxes ($8750) but if I only made $34,000 then I’d be in the 15% bracket and 15% of my salary ($5100) would be going to taxes.

This can’t be true…can it? I either need to ask for a big raise to make the jump to the 25% bracket “worth it” or I need to ask for a small pay cut? Oh, and I always seem to take the standard deduction. I work for a non-profit (not sure what other info you need). How do I decrease my taxable income so that I am in the 15% bracket…I think that’s the place I need to be.
- Amitra

Amitra is referring to a link to my old pal Jim’s site that lays out the predicted tax brackets for 2010. This question also shows one of the biggest problems with our tax system – it’s just simply very confusing.

OK, let’s use your example. Let’s say you make $35,000 as a single person (after deductions and the like – $35K is your actual taxable income). The tax brackets on that link are:

10% Bracket: $0 – $8,375
15% Bracket: $8,375 – $34,000
25% Bracket: $34,000 – $82,400

Here’s how it works. Of the $35,000 you’re paying taxes on this year,
$8,375 of that income is in the 10% tax bracket.
$25,625 of that income is in the 15% tax bracket (the $34,000 maximum of the bracket minus the $8,375 minimum).
$1,000 of that income is in the 25% tax bracket (the remaining income).

Your total tax bill for the year would thus be the total of:
10% of $8,375, which is $837.50
15% of $25,625, which is $3,843.75
25% of $1,000, which is $250
which adds up to $4,931.25. That’s what you’d pay for the year.

Now, if you earned $1,000 less, you’d owe only $250 less in taxes. If you earned $1,000 more, you’d owe $250 more in taxes.

The paranoia about higher tax brackets is just that, paranoia. You’re always better off earning more money.

Do you ever get a question or request for advice that just makes you say “What were you THINKING?!” Do you ever find it hard to give the patient, thought-out answers you do?
- Jess

The only questions I get that make me really uncomfortable are the ones where people are basically asking me permission for them to do something unethical or illegal. I usually just delete those without any kind of response.

People will write to me about how to commit Social Security fraud in various ways. I get questions about how to avoid paying any and all taxes. I’ve had questions about money laundering schemes. That’s the kind of stuff I don’t like – breaking the law to take more than your fair share or pay less than your fair share.

I don’t really mind when people are struggling with the ins and outs of how a complicated situation works. For example, in a question below, I address a family trying to deal with a nanny employment and being unsure how to do it. In these situations, it’s clear to me that the person wants to do the right thing, but the right thing is made difficult by confusing and draconian laws and regulations. If a person’s heart is in the right place, then shaky legal standing doesn’t make me feel bad.

Jointly, my husband and I make a pretty good income. We have no debt, besides our mortgage, and we spend about 80% of our after-tax income, which does 401K contributions as they are taken out pre-taxes. Our savings equal about $2,000 a month.

Any advice?
- Megan

Quickly, a Roth IRA is one that takes in after-tax money and pays out after-tax money in retirement. A normal IRA does the same with pre-tax money.

At the very least, you should have that extra cash in a savings account earning at least a little interest. Your own bank can be a start, but you’ll ...

Yesterday my husband found out he has lost his job. We don’t know what to do.

He was making $38,000 a year as an IT specialist. I make about $36,000 a year as a school teacher. We have about $10,000 in credit card debt spread across three cards and a $1,300 a month mortgage payment. We don’t have anything saved either other than some retirement account money.

I am so scared we are going to lose our house and lose everything! What do we do? Help!

First and foremost: don’t panic. No problem is solved well in panic mode. Bad choices – choices that you’ll regret down the road – are made when you panic.

Take a deep breath. Here are seven things that you should attempt to do in the coming days.

Be proactive. Some people “turtle up” in bad situations like this and spend their time avoiding the problem, doing things like playing video games and watching television. Now is the time not to do these things to excess.

Instead of withdrawing, fill as much of your time as you can with one simple question: what can I do right now to fix our financial situation? Don’t turn away from the problem – grab it by the horns.

Get that second paycheck back as soon as possible. Your husband needs to find work quickly and get back in a situation where there is a second stream of income coming into your home. He should not be picky at this point. Look for a job in retail where there is often work available for people.

Once he has that in hand, he can then spend his spare time searching for a job that matches his resume and skill set. However, it is vital that you not “hold out” for a better job right now. If you do that, you are going to dig yourself into an even worse hole than you’re in right now.

Cut all unnecessary services. Yes, ...

A note: I get enough questions to do two or three mailbags a week. I’ve considered putting a second Mailbag on Thursdays. Would this be of interest to you guys?

I recall a few months ago you were thinking seriously about cutting out all or most meat from your diet? Where did you get to with this? What was it inspired by? (I seem to remember there was a book that started you thinking about this?)

- Eve

In late 2008 to early 2009, I had a bit of a health scare that prompted me to start exercising more and eating better, a trend I followed during most of 2009. However, during the final crunch for my book, my diet and exercise regimens both went downhill. Now that the book is done, I’m putting both back into place.

I found a lot of inspiration from various books when I got started with this regimen. Two really stood out from the pack: In Defense of Food by Michael Pollan (which I actually reviewed here a while back) and Animal, Vegetable, Miracle by Barbara Kingsolver.

My current plan is the “vegetarian until 6 PM” plan, which bascially means eating vegetarian for breakfast, lunch, and any daytime snacks, then eating a normal dinner.

Your post on Framework and distractions reminded me of an idea I’d heard of – a media fast. To drown out the noise of life and listen to ourselves and what we value rather than media outlets. No tv, no non fiction books, no music with words, no magazines. I’ve been meaning to try it soon for mental health reasons, but it also seems like a very frugal way to spend quality time. Here is a post on it from another blog.
- Amanda

I used to do “media fasts” somewhat regularly in college through the mid-2000s. I would allow myself books, but I wouldn’t watch any television, listen to the radio, read magazines, or use the internet in any fashion. I’ve done many week-long sessions of this, with one session lasting a month.

The biggest thing I noticed is how much the advertising shocks you when you stop doing this. Ads are everywhere, even in the content we read and listen to. It’s amazing how much content is there simply for the purpose of selling you stuff. Once you see it, it becomes hard to trust a lot of the messgaes out there.

I’d love to do it again, but at this point it would require a full-on vacation from The Simple Dollar, which is difficult. With my previous work, I could still easily do my job while doing a media fast, but that’s much harder when you’re basically writing for and managing a media property.

I am currently employed, but at about 1/2 the amount I was making a year and a half ago. I was making $72,000 – which helped me pay off all credit card debt, but I got laid off in Aug. 2008. I was unemployed for about three months and then found another job making around $35,000. My only debt right now is my mortgage – around $32,000 and my school loans – around $68,000 (and also about $300 in credit card purchases from Christmas, but that will be paid off within the month.) I have depleted the majority of my savings – mostly through making purchases that I probably could’ve lived without when I first got laid off, but needless to say I have about $500 in savings right now. That’s some background so here’s where my question begins, I have been making extra payments on my mortgage – my current payment is $300 a month (the joys of small town rural life) and I’ve been paying $65 extra a week – about $260 a month. I am employed in a state job and it looks like there’s a better than average chance that with the economy I could get laid off again this summer. Should I stop making the extra payments on my mortgage (currently 7.5%) and put all of that in to savings (at maybe 1.5% interest at ING), or should I keep making the extra payments until I can no longer make them? I am currently able to put about $200-300 into savings every month.
- Sandy

I would stop the extra mortgage payments (for now) and channel the difference into personal savings for a while.

The big reason for this move is that you need an adequate emergency fund, especially given your current financial situation. An unexpected event, like a car repair or a lost job, can really derail your fairly stable situation, causing you to have to dip into the debt pool to stay above water, and that can become a downward sprial.

How much should you have? I’d suggest having enough in your account to cover three months’ worth of living expenses. Since you’re fairly confident that you’ll be laid off again this summer, I’d probably keep going beyond three months.

So, I would just channel the extra mortgage payment purely into your savings for now so that you don’t have to rely on debt if you’re laid off.

I graduated last December and was blessed to get a job in my new field that began in January. My loans come due in July but I will apply for loan forgiveness with my new job and that will leave me with about $8000 principle. What I am wondering is if it is better for me to just pay it off or make a few months payment because of my credit rating. I use two credit cards monthly but pay my balance in full and I don’t have a car payment or a mortgage. I pay bills to my family where I live but my name is not on any of the utilities. I used to live in my own place so I did have bills in my name several years ago but I have no plans to change my current living situation. I am asking because of a previous post I read where a couple saw their insurance rate increase and their credit rating decrease because they had their bills paid.
- Andy

If you have credit cards and pay the balance in full each month, you’re doing what you need to do to maintain a good credit rating. Thus, I wouldn’t worry about maintaining that rating and instead would focus on getting yourself in the best position.

The advice about maintaining a good credit rating was directed towards people that had absolutely no lines of credit for a period of seven years, at which point their credit report was blank. If you’re paying off your credit card in full each month, this doesn’t apply to you. Even just leaving the card open would suffice.

I don’t know the exact ins and outs of your situation, but debt freedom is certainly a strong path to take in any situation. If you have the financial resources to pay the whole debt off, I’d do so.

I’m a 26-year-old woman working as a part-time music teacher in a local public school district. I’m extremely lucky, because my school district is paying for my master’s degree in full! I will graduate in May from a private university with my master’s in school counseling, with zero student loan debt. However, there is a clause in my teacher’s contract that states that I must stay in my current school district for one year after finishing my degree, or else I will need to pay back half of my tuition. In other words, if I leave my job next year to pursue my career in school counseling, I will owe $24,000 (my entire degree costs my district $48,000). My question is, should I stay one more year to eliminate my debt? Or should I take on the debt, knowing that I could potentially earn $45,000 in a new job? Is it ever smart to have debt? Other information: I currently have $3,000 left on a car loan, but other than that I have zero debt to my name. No credit card debt, no other tuition debt, nothing. I enjoy reading your website, and look forward to your feedback. Thanks so much!<br ...