I’m not so sure this couple have as big a problem as the article suggests, however. While I agree with the general recommendations it makes about their non-real estate assets, it doesn’t treat a $40,000 pension from the U.S. military as what it is – as safe an investment as you can come by. That pension is an asset, and it’s not real estate. In fact, it’s probably worth close to the value of their properties – which means they’ve only got about half their money in real estate. Moreover, the rental properties are in two states, which is in itself diversification – it insulates you from the problem of one state market going south.

I say this because many people follow this strategy, and it’s a good one – buy up a few rentals, let them pay the mortgage, and in 30 years you own them outright and reap the income for yourself. If that’s your retirement plan, I wouldn’t sell one of the houses to put the money elsewhere (a common rebalancing move). Having all your money in one house would be risky – but spread it over several, and you can take a hit. The mistake this couple made in my book? Not taking advantage of 401(k)’s and the military equivalent. The tax savings are free money. There’s just no reason not to be maxing out those contributions if you can. And over time, if you put that money in a good fund (the article suggests several), you won’t be relying on real estate alone.

Discuss this in the Free the Drones Forums.

Discuss this in the Free the Drones forums.

1) You don’t need as much money to guarantee $15,000 a year in retirement as you do to get $100,000 a year. So if you make less, and you think you can live on that in retirement – set your targets lower.

2) The best way for you to solve your problem is not going to be to try to wring a few more pennies out of your budget. It’s going to be to earn more.

3) Remember that as people age, they tend to make more. The reader Uncle Bill refers to is atypical in that he’s still in a lower income job at age 50. It looks like health problems have been at least partially to blame. But you need to keep this principle in mind if you’re young and making minimum wage – you’ll have to work at it, but you WILL be able to find a higher paying job if you try. Focus on that (I mean seriously focus) and in a few years you should have a higher salary – then you can focus on saving.

4) If you’re not making much money, switch careers. Sound harsh? Yes, but it’s the only good advice you’re going to get. If you’re in the Peace Corps, that’s one thing – taking a lower salary for a few years to do good at a nonprofit or something isn’t going to kill you. But in the example given by Uncle Bill, a convenience store position where the only path to advancement is as manager of the same store, you’re probably going to have to go somewhere else. I’d bet that even the manager doesn’t make all that much more. Where can you go to make better money? With no education, it might mean taking a job no one else wants to do. At the extreme of this would be something like an embalmer / funeral director, a horrible job no one wants – that pays above average wages as a result. But you don’t have to go that far. In high school, I worked a summer job delivering Dr. Pepper – doesn’t sound that bad, but it was exhausting and a lot of work, causing high turnover among the drivers. The result? They made around $50,000 or so (more even than the embalmers – and above the average COMBINED household income of Americans of $44,000 or so). There are lots of jobs in this category – truck driver, prison guard, security guard, cops in bad areas, teachers in bad areas. These jobs either don’t require much in the way of credentials or will be willing to waive them just to get you to take it.

Is it awful that you have to go be a prison guard somewhere just to be able to have the money to retire? Yes, but I’m not trying to tell you what it should be like or reform the system or whatever. I’m telling you how it might have to be. You might have to make tough choices where there’s a downside either way – either stay in the low income, easy job that won’t let you retire – or go work a horrible job that will pay more.

You can also move to a different area, and that will often solve your problem entirely. If you’re living in New York City and you have a low income – again, I’m sorry to have to tell you, but your best solution is to get out and move to Wyoming or somewhere else with a low cost of living. Yes, it will cost you money. Yes, you will move from friends and family. Yes, it won’t be as fun. But you WILL improve your financial situation. You’ll be able to get a job with similar pay but won’t have to blow as much money on your expenses. If your area is in economic decline (think Michigan), then the same applies to you. You should go where the jobs are.

Other than moving or taking a bad job, your best option is to plan for a few years down the road and try to get training or education that will get you into a better job. My suggestion for lower income workers is to look at teaching, technical trades if you think you’d be good at them (plumbing, electricians, air conditioner repair in the South, auto repair, etc.), nursing, and pharmacy work. Why? Because those are all fields that have high demand. My sense is that a lot of people who get an education and end up with a lower income have this happen because they try for something that is too popular – too many people want a job there. Hairdressing, for example, or court reporting – you see ads on TV all the time for schools that will teach you how to do that. But because so many people try, a lot of them end up with a credential that won’t really get them a job. If you get a teaching certificate, you’re going to find a job SOMEWHERE – and while it won’t pay what a doctor makes, you’ll be able to retire on that salary. Being a nurse takes a little more education, but it pays more – and again, you will never lack for a job. And again, the answer isn’t pleasant – you’ll have to work yourself through school and wait several years to actually increase your salary. Sorry – but there aren’t easy answers to your problem. If there were, there wouldn’t be people in low income jobs.

Discuss this in the Free the Drones Forums.

“This is not an all or nothing situation. Every bonus or raise I receive is split between the young lady (marvelous moi) and the old lady (marvelous moi in the distant future).”

Hopefully everyone understands the excuse is wrong on some level, but then again people do a lot of things that they know are bad for them later on in life. Smoking, for example, costs you on average six or seven years off your life span, but people do it anyway – often they say they’d rather be happy young than have a few extra years when old. But it also speeds up the aging process, causing premature wrinkling. According to this site, frequent smokers look about twenty years older when they hit the forties and fifties.  Tanning beds do pretty much the same thing – aging your skin rapidly and giving you a big risk of skin cancer. It’s probably about as dangerous as cigarettes – but people use the same rationalization, or don’t think about it: they want to have fun when they’re young. That they could look like they’re 60 when they hit 40 is something they don’t face until later on – and it’s a risk, not a certainty.

It’s things like these that suggest it’s not just that people have problems managing money – because my guess is that the same people who don’t save tend to be the same people who do other things that are really bad ideas in the long run. It’s not logical – as No Limits Ladies points out, why ever do anything if you don’t care about the long run? Why have a kid or buy a house or not run out into traffic every morning? Odds are you’re going to survive and are going to have to deal with the consequences of the decisions you make today. And some of those are pretty scary.

Discuss this in the Free the Drones Forums.

Having played World of Warcraft and many of these other games myself (though not Second Life), I’m certain that he’s wrong about the idea that you can’t monetize your “online assets.” I made several hundred dollars in college selling imaginary items and characters in a game called Diablo 2. You’d be surprised what nerds with more money than time are willing to blow $10-15 on – that Sword of Superior Demonslaying of the Eagle +1 to Agility can go for a pretty penny on E-bay. Some extremely rare items would sell for $1,000 or more.

It’s a little harder to do that these days, both because some games have changed the rules to make it harder to transfer items among players, and because people in China and other countries have figured out that the $2 an hour or whatever I was making as a college student is a pretty high salary by their own country’s standards. On the other hand, while some companies are trying to crack down on people spending real money on virtual things, others are basing their entire business model on it. There’s a game called Project Entropia that doesn’t even charge you to play. You buy your weapons, houses etc. with real money – and they take a tiny cut of all the player transactions. They had $160 million in real-money transactions for virtual things last year. These include a $30,000 island and a $100,000 space station – which according to their owners have actually made them a profit by charging access fees to other players. In the game Second Life, one player has reportedly made several hundred thousand dollars in virtual real estate speculation. My guess is that this kind of thing will only get bigger in the future – mainly because the number of people who grew up with video games becomes a bigger and bigger part of the population.

That’s also why I think Yet Another Money Blog sees poker as a place where there’s real money, but not video games. His blog lists his age as 38 – part of an age group where video games weren’t as pervasive a part of your childhood as they have been for anyone born after about 1980 or so. I’m just inside that dividing line myself, and most males in my peer group still play them. If they’re jocks or not really that into it, they play sports games or James Bond games, and they do it more as a social thing like playing pool. If they’re nerds, they play Warcraft (as well as pretty much everything else). Even many women play games like the Sims or Roller Coaster Tycoon. And the upper cap on this age group is in the mid to early twenties. That means most of the spending now is from people who are just starting out in life, not really anywhere near their full income. As the people who grew up with video games age, my guess is they’ll be considered more like movies – most people buy them or spend money on them. With poker, a much broader section of society is interested in it right now. And for people who are good at it to make money, it takes a lot of people who are bad at it to casually play and pump money into the system. The only difference I see is that a larger group of people is currently interested in one than the other.

Discuss this in the Free the Drones Forums.

1) Negotiate. The MSNBC article has this right – buying furniture is just like buying a used car. It’s expected that you’re going to pay less than the tag price. So don’t go in there and buy for full price. And don’t forget about the extras – it’s often very easy to get free delivery or get them to throw in a frame or some other accessory, sometimes easier than getting them to cut the price.

2) Test it, and know what size you’re getting. Again, another good point from the article. If you aren’t comfortable on it, you’re going to spend one-third of your life for the next several years disappointed. I slept on one for a few months that was almost exactly my height – having your toes crammed against the bed frame is not a comfortable position. One thing the article doesn’t mention is that you may actually have to measure the mattress. You can’t rely on the standard measurements for Twin, Full, Queen, or King. Why? Some manufacturers will try to cut you out of an inch or two to save money. Others add extra inches as a feature, marketing the extra space you have.

The problem is that either one of these can be a really bad idea, because they make it harder to get sheets – and much more expensive. This guide on measuring mattresses will show you a few of the pitfalls. One of the tips: watch out for the phrase “deep pocket.” That’s a sign you’re getting a larger than normal mattress. Supplement the guide with this list of standard mattress sizes. I’d stick with the standard, just because it’s easier on you in the long run.

3) Know what the new technologies are. These are often the selling points that salesmen will try to use to get you to buy a higher-priced model. “Memory foam” is one of these – it’s a material that reduces pressure on the body because when you sleep on it, it doesn’t try to push back into its original shape. A lot of higher quality mattresses use this – but then, a lot of junky ones do, too. But do you really need it? Maybe not – I found some pretty cheap memory foam toppers online (here’s one by Serta). They’re the same thing, you just stick them on top of a regular mattress. Latex is another technology that is a relatively new thing. Quality can vary a lot depending on who makes the mattress, though – and while it’s touted as being a lot softer, with some mattresses there can be “hard spots” where it may actually be less comfortable.

Also, there is a very good article on Slate on the different gimmicks used to try to get you to pay more for your mattress. I think it’s probably a must-read before any trip to the furniture store. The author is

4) Be willing to look online. You can actually buy mattresses online – some for pretty low prices. I found this deal on Amazon – there is a company on there selling memory foam mattresses in all sizes. They ship them crammed up into a tiny box, and when you take it out the foam expands into a normal mattress size. They are extremely cheap – the only bad thing is it looks like one bad review for every dozen or so good ones. It might be worth the risk, though, because it’s about a third of the price of a normal mattress.

5) Think about buying used. This can cause you an entirely separate set of problems, but it can also be a lot cheaper. Look for weird smells or odors. Check out Craigslist and Ebay, along with your local classified ads. If you go this route, it might be a good idea to have it professionally cleaned. There are very real reasons that people are reluctant to buy a used mattress, from bed bugs to urine stains to diseases. Personally, I would always go new with this one, but if your financial situation demands it you’ve got to make some sacrifices. Also remember that you can get a mattress cover for pretty cheap.

6) Think about a futon. This is another way to save money. They’re a lot cheaper, and socially acceptable for kids or college students. I was sleeping on one for awhile recently and they’re not very comfortable, though. It’s doable, but a real mattress is a definite step up.

7) Shop around. Different stores in the same area will have the same mattress on sale for a big difference in price – the reason being that there is a lot of profit margin built into these. Before you buy, find the lowest price in the area – and knock a couple hundred off that before you make your offer. Don’t be afraid to make a really low offer. If they say no, walk out and try higher at another store. No one’s going to stop you from coming back. And the salesman just might grab you at the door with a deal close to what you suggested.

One important tip related to this: stores will “name” the mattress something else to try to stop you from doing this. So they’ll take a model from Simmons, stick a tag on there that says “Sleep Right 2000 Plus Extreme Model” – while the store across the street put a tag on saying “Bed Rest No Turning Snooze Factor 100.” It’s the same thing, but when you walk across the street to try to find it to compare prices, you won’t be able to. Look for company name (Serta, Simmons, etc.) and an identifying feature such as the number of springs / coils.

Watch for things that can nullify your warranty. They will often be sticklers about this. You can find out that you’re using the wrong frame to support it, or you didn’t buy the box springs that were part of a set the mattress was made for. Your mismatched mattress might not qualify, either. Read the fine print.

9) Go read this Epinions page. This section has dozens of articles about buying mattresses, many by former salesmen or by chiropracters. There’s a lot of good advice in there. It’s the best place I found on the Internet that wasn’t some company’s web site.    

Discuss this on the Free the Drones forums.  

My view? They’re both right. Your kids shouldn’t be expecting to get a toy that costs you hundreds of dollars just because they want it, and really really bad. Even if you’ve got the money, this is a horrible parenting choice. Think I’m wrong, and your kids will turn out fine no matter how badly you spoil them? Then I suggest you turn your television dial over to MTV to watch “My Super Sweet 16.” It’s a “train wreck” show (sort of like the Anna Nicole Smith show) – the people on it are such awful human beings it’s hard to turn away. I caught this last week. Two sisters were planning a dual party – after one threw a fit and rescinded someone’s invitation for hugging her in gratitude, her sister commented on how proud she was of her for being willing to turn people away from the party. They spent the rest of the episode congratulating themselves on how wealthy, important, and popular they were. Apparently this isn’t even the worst of it – this review points to an episode where the girl throwing the party forced her less popular schoolmates, desperate for the final invitations, to have a “dance-off” in front of her. What did she learn about money from her parents? When her dad tried to negotiate the rental of the nightclub (for one night) down from $50,000 to $25,000, she cut him off and insisted that $50,000 was fine. Wouldn’t want to seem cheap.

All that may not stem from one Elmo – but it’s a bad path to start down. Give them Oscar the Grouch instead (come on, anyone who lives in a trash can has to know something about lowering his expenses, right?).  

If you’re selling the things to make a profit, I don’t see the problem. Maybe it’s not very Christmasy to profit off of the holiday, but it’s a pretty commercialized season anyway. You can use that money to buy your own presents, and the people paying that much for the Elmos did it voluntarily. Bad decision in life, but you can’t make everyone do the smart thing.

Discuss this in the Free the Drones forums.

Carol Dweck, a psychologist and professor at Stanford University, studies the connections between people’s outlook and their willingness to take risks. “The view you adopt for yourself profoundly affects the way you lead your life,” she writes in her book “Mindset,” which was published earlier this year. Dweck identifies two types of people: those who have fixed mind-sets and those who have growth mind-sets.

People with fixed mind-sets believe that they were born with a certain amount of intelligence, and they strive to convince the world of their brilliance so that no one finds out they’re not actually geniuses.

Growth-mind-set people believe that intelligence, knowledge and skill need to be “cultivated” by trial and error. Failing at something, they believe, is the best way to ensure they’ll succeed at it the next time.

She pointed to this experiment:

She posed a series of trivia questions to a group of people with fixed mind-sets and another with growth mind-sets.

After each answer, one and a half seconds passed before the participants were told whether they were right or wrong, and, if they were wrong, another one and a half seconds lapsed before they were given the correct response. Their brains were monitored with electrodes the entire time.

Dweck found that the people with fixed mind-sets cared a lot about whether they were right or wrong but not at all about what the right answer was. The growth-mind-set participants stayed interested until the correct answer was given, showing an interest in learning new information rather than in simply validating their intelligence.

When the test was repeated right away, only the growth-mind-set group performed better.

I’m not sure if this is something about the people’s attitude or something innate that results in the attitude – it’s definitely got some relevance to the discussion earlier this week about the philosophy behind the Rich Dad, Poor Dad book. I went and found her book, called Mindset: The New Psychology of Success. She believes that your mindset is something that you can change – that you can essentially turn yourself into someone with a “growth mindset” by changing the way you think about things. I’m not so sure that it’s that easy for people to change the way they look at the world, but the book looks pretty interesting.

Discuss this on the Free the Drones forums.

It’s a vexing, and increasingly common problem for families mourning the loss of loved ones. As more and more people move their lives, address books, calendars, financial information, online, they are taking a risk that some information formerly filed away in folders and desks might never be recovered. That is, unless they share their passwords, which poses security threats.

“He did not keep a hard copy address book. I think everything was online,” said Talcott’s daughter, Julie Talcott-Fuller. “There were people he knew that I haven’t been able to contact. It’s been very hard.”

“Yahoo (his e-mail provider) said it wouldn’t give out the information due to privacy laws, but my dad is dead so I don’t understand that,” she said.

This policy has actually been in the news for another problem it created – families trying to access the e-mails of soldiers who died in the Iraq war. The family in that case had to go to court to get access, and still may not have all the e-mails.

This is something to think about when you write your will. Because of the security issues, I would go stick my passwords on a piece of paper in a safety deposit box, where the person who executed the will could go get it if I died. But you’ve also got to keep in mind that everything you use on a day-to-day basis needs to be listed – and you have to think about whether you really want all your e-mails known to the family after you die. You might want separate passwords for anything you want to die with you. Printing out contact information onto a hard copy can solve the problem of losing your e-mail address book. It’s a thorny problem, and not one people like to think about, but it’s the kind of thing you ought to take care of just in case.

Discuss this in the Free the Drones Forums.

I should also clarify that while I think most of the investing advice Kiyosaki gives is wrong and dangerous for most people (I’m of the school that it’s very difficult to beat the average returns of the market over time, even if you’re an expert), I don’t think his suggestions about avoiding formal education in favor of entrepreneurship are necessarily wrong. I’ve posted before on why some people might not want to go to college anyway. I also don’t think that there’s nothing you can get out of the book or some of the stuff he suggests. Some people also have personalities that are much better suited to starting their own businesses, too. They may get rubbed the wrong way by having someone, anyone in a position of authority over them. That irks a lot of people, especially if you know more about what you’re doing than the boss does. They may like taking risks – and they may be good at it. Or they may have a very creative idea that would really make them a lot of money.

The problem I have is that in a lot of his writings, there’s an attitude that this is the only way to do things, and that there’s something wrong with the people who don’t. My guess, just from my experience with other people, is that very few of them could succeed as entrepreneurs. Mostly this is because they have some personality trait that keeps them from trying, taking the risks, or devoting the time they would need to do it. It’s not about intelligence or ability or even laziness – it’s about personality. That’s why I think different people need to be taking different financial approaches, and my guess is that in terms of sheer numbers, most people are better suited with a conservative strategy of investing in relatively safe stocks over a long period of time.

Discuss this in the Free the Drones Forums.