Mrs. Frugal and I just got back from a birthday party for a friend of ours this evening. We sat next to someone who is an executive at a large garden plant wholesaler. Mrs. F. and the executive had a long talk about plants and her fight to keep ours alive.

At the beginning of the summer, Mrs. Frugal and I put some plants into the patio outside our unit. At first, we marveled at the beauty of the patio. Gone were the weeds and dried up bushes. They had been replaced by a combination of annuals and heartier shrubs. Soon, though, the plants started to struggle. Snails invaded, only to be followed by a torrential heat wave (this week, the thermometer topped out at 105 or so). In addition, our patio gets less than an hour of sunlight a day.

Being that I think lots about finances, I began to put plants and money together. Here are some thoughts:

A Good Foundation is Key
We knew our soil wasn’t very healthy. When we began to plant our plants, we mixed 2 large bags of fresh soil into the existing plot. What we learned tonight was that we should have replaced as much as 75% of the dirt with new mulch*. We probably replaced about 15% of the old dirt.

In the same way that good dirt is key to provide the nutrients to plants, a good foundation in your relationship is going to be key to growing your finances as a couple. If there are a number of other issues that need to be worked out, it may be difficult to talk about money. (This goes to my primary law about money: Money is a magnifier. If you have a difficult life/relationship/etc., more money will most likely make things worse. If things are good, it may make things go smoother.)

Choosing the Right Plants is Important
Plants are like the assets in your accounts. You want to choose things that will thrive depending on the amount of attention and cost you want to devote to them. Most plants like sunlight. Some like shade. Some need lots of water, others need hardly any water at all.

Likewise, when it comes to investing, you should choose investments that are appropriate to your needs. Low cost index funds almost always make more sense for individual investors than buying individual stocks. If your idea of financial gardening is to plant something and hope it’s still around in three months if you forget to water it, index funds are probably the right investment for you. They don’t need to be tended to frequently and they don’t cost a whole lot.

Diversification is Necessary for Beauty
You wouldn’t want a garden full of one type of flower. Neither should your investments be all stocks of the same category. As boring as they are, bonds should be held in order to reduce the fluctuations in prices. Bonds will reduce extreme swings in the value of your entire investment portfolio if your stocks or stock mutual funds lose significant value.

This post is a bit simple, but many of us need to be reminded that investing in low cost funds on a consistent basis is the best avenue to providing the best chance of getting ahead.

*Note: I don’t know if “mulch” is the right word for dirt. Mrs. Frugal is the gardener, not me.

I’ve had a side business for a number of years of printing letterpress stationery and invitations. When I turned it into a hobby, there were several things I hadn’t thought about. As you begin exploring this path, there are some important questions to ask yourself.

First, do you want to make money from a hobby?
This may sound strange, but the truth is that when you turn a hobby into a business, you change the relationship between both you and the hobby and you and the customer. When you’re simply knitting shawls for friends and family, they’re happy to get them and there isn’t much stress involved.

When you start charging for the shawl, the receiver begins looking much more carefully at the quality of the product and the value they’ve received in exchange for their hard-earned money.

You need to realize that people will become more critical and more demanding when they trade money for a product.

Second, how are you going to sell your product or service?
When you begin charging for a product, the pool of buyers shrinks rapidly. You will need to move beyond friends and family if you want to earn more from your hobby. How are you going to reach these new customers?

Many people assume word-of-mouth will move their business along, but if you’re dealing in a niche area, you need to ask yourself how often your specialty will come up in other people’s conversations. If you knit the best wool socks out there, but you live in Phoenix, Arizona, wool socks may not be the conversation topic du jour.

Third, if you market online, are you prepared to take the steps necessary to generate traffic?
Website traffic comes from many sources. You can buy ads through Google or Facebook, you can commit to putting fresh content on your site regularly (which helps with search engine ranking), or you can work to get other sites to link to yours.

Each of these takes time, money, or both to work efficiently. If you set up a blog to drive traffic to your business, are you committed to posting at least three articles a week?

If you buy ads, make sure you have good analytics working in the background. Take a look at Google Analytics (http://analytics.google.com). If you’re using a blog platform such as Wordpress (what The Frugal Couple runs on), there are some plug-ins that allow you to automatically place Google’s code on each page so you can see how your traffic is maturing. (I use Google Analyticator.)

As you think about all of these things, it may be good to seek help from other people who have been successful in the area you’re looking to go into.

If you have questions about any of these topics I’ve raised, feel free to email us at:

frugality (at this domain).

I read a post by a staff writer (Adam Baker) at Get Rich Slowly yesterday on what to do with financial windfalls and I got to thinking about how couples deal with extra money that comes in.

Adam brought up two good points. First, dedicate “extra” money to one specific goal. Second, allocate a certain percentage of extra money to simply spend as your whims direct you.

This is great advice. But what do you do when you have joined your finances with a partner? There are several variables to take into account. For example, do both partners have the same ability to earn extra income? Or do your goals align?

What if Mr. Frugal works and Mrs. Frugal stays at home and Mr. Frugal is able to earn extra money from a hobby.

In this case, my best advice is to have a common goal that both of you are happy with. Instead of a new item (such as a new LCD TV or a new couch), perhaps you should look at taking a vacation together.

Whatever the case, I would strongly suggest that the person who has brought in the extra income should make more of an effort to yield his or her partner’s desires.

A few months ago I listed and sold four used books on Amazon.com for a total profit of $101. I’ve been turning old pages into cash for a while and I’m surprised more people aren’t doing it. I’ve learned a few things over the years that will help you sell more and make the process worth the trips to the Post Office.

Niche Books Command Higher Prices in the Used Market (when compared to the new Amazon price)
For some reason, used books on topics that are of interest to a more narrowly defined group of people (home gardeners, finance folks, or people interested in computer programming) seem to sell at a price closer to Amazon’s price than those in the general fiction category.

For example, I took a look at the five top selling books for 2008 overall and the five top selling books in the finance category. The average difference between the lowest used price and Amazon’s price for the top five books overall was 17%, while the average difference between the lowest used price and Amazon’s new price for the top five finance books was 8%. If you were to try to sell a used book that Amazon is selling for $20, you might expect a used price of $18.40 for a finance book but only $16.60 for a book with a broader market.

Price Low
If you want to sell an item quickly, price at the bottom of the range. It’s simple economics, but most people don’t know the difference between you and other sellers, so simply having the lowest price is key. Case in point: a few months ago I placed a Harmony Remote Control on sale at Amazon’s Marketplace. The item was a gift and it was new and in it’s sealed, original packaging. Amazon’s price was about $240. The lowest price of used remotes was $205 or so. I priced it at $199 and it sold within 90 minutes. After Amazon’s commission and shipping was accounted for, I made $184.

The remote sold quicker than most items do, but books I place online either sell within a day or two or they don’t sell at all.

Be Honest About the Condition
This is simple, but reviews from buyers are much more likely to be positive if you tell the truth about the item’s condition. If the book has a bit of shelf wear, say it. If there’s a bent page, let them know. Most people don’t really care that page 106 is dog eared, but if you’re selling a product in like-new condition, the buyer should know what they’re getting.

Buy Packaging Materials in Bulk
This should be a no-brainer, but the packaging materials at the Post Office or some other shipping store are grossly overpriced. Buy packs at your local office supply store. If you’re trying to sell your entire library, try a company like U-Line (www.uline.com). You can save a bundle on padded envelopes and boxes and such.

Use Media Mail
Finally, if selling a book, use Media Mail if the buyer requested standard shipping. There are some restrictions on Media Mail. You can only use it to send books, CDs, and videos. Also, if the package is returned to you for some reason (typically because the address is incorrect), you have to pay the return postage as well. I’ve never had something come back to me from a sale on Amazon, but in the rare case that it might, the savings from shipping all packages via Media Mail add up to more than the cost of an occasional return.

Ahh, ’tis the season for going over budget. It’s so easy to go over budget when buying gifts for family and friends. It’s even easy to spend money on people you don’t particularly want to buy gifts for, but do so out of a sense of obligation.

So how do you show your love for someone without feeling it in your finances until April? Here are a few tips to help reduce the cost of the holidays.

First, think about what the person might really want. Many people, especially those in the second half of life, have enough stuff. What they really value is time with those they love. Mrs. Frugal’s mother loves it when Mrs. Frugal helps her organize and clean out the closets. Last year, Mrs. Frugal offered to take time out of one of her trips to her parents’ town to do just that. The two of them organized and cleaned for several hours. Cost: $0. Value: much more than $0.

Another way to reduce the cost is to re-think Christmas cards. (I’m talking about the greeting cards you give to individuals here, not the ones you mail en masse with a picture of your family and a note mentioning every trip you took in the last year.) The average counter card (the greeting card industry’s name for the cards you buy that say, “Merry Christmas, Grandma.”) cost about $3.00. If you buy seven to ten of these for immediate family, you’re looking at spending $20-$30 or more. If you’re the type to buy cards that are like a gift in themselves (think Papyrus or Paper Source paper boutiques), the cost can go up to $40 to $50.

Over the last several years, I have begun to write more notes to people than simply buying cards. A handwritten note on nice paper may cost you fifty cents to $1.50, depending on how nice the note sheets are. I began this when I realized I was paying good money for cards that condensed what I wanted to say into a few lines. I decided I should probably write what I wanted to say rather than pay someone else to write it. You’re looking at paying less than $20 for 40 letter sheets and 20 envelopes from Crane’s (a traditional American stationer who happens to make the paper used for dollar bills) if you shop around.  

When it comes to buying for siblings and siblings’ spouses, if you’re in agreement it can be nice to do a gift exchange. I (Mr. Frugal) do this with my sisters but we go the traditional route with Mrs. Frugal’s siblings. My sisters and I appreciate the savings, but Mrs. Frugal’s family likes the individual attention. Whatever your choice, it’s probably important to make sure everyone is in agreement.

Finally, the primary value of the gift is the thought that goes into it. When the recipient opens the gift, she should see why it was chosen for her. A well planned gift for $10 may be prized much more than a $50 gift certificate. As you go into this gift-giving season, remember to stick to your budget and think about what the person will value most.

This is not an article about buying life insurance or setting up your will or trust (two things that should be taken care of). Instead, this is about how to pass on your financial system to your spouse/partner in case of your demise.

In our relationship, Mr. Frugal takes care of most of our finances. Mrs. Frugal wants to know what to do if he keels off, but is happy to relinquish the day-to-day responsibility of managing the finance.

As I (Mr. F) made our monthly transfers today, I realized that if I were incapacitated, Mrs. F wouldn’t know what to do because I’ve set the system up in a fairly complex way.

For example, my car loan is paid out of our credit union account, but I keep the balance low in that account because we don’t use it for anything else but to pay for my car payment and because it doesn’t pay interest. So each month I transfer money from our brokerage account to our credit union account. I haven’t gotten around to making this automatic quite yet.

Mrs. Frugal knows nothing about this system. She’d probably think it’s inefficient (I’d have to agree with that her on that) and wonder how we could make it simpler.

There are about eight to ten steps that must be taken each month in order to make sure no debts go unpaid, and today I outlined each of them, including website addresses, logins and passwords for each account, and where to find transfer information for each account.

One thing that’s important is to make the information as simple and detailed as possible. These directions may be used in a time of crisis, such as your incapacitation or death, and you don’t want your partner to have to figure anything out on his/her own.

Hopefully these instructions won’t need to be used, but in case they do, your partner will be happy to have them.

I just finished Richistan by Robert Frank and I can’t recommend it highly enough.

A detailed (and often-times humorous) look at how the new rich live and spend their money, Richistan covers topics such as schools sprouting up to educate people in the finer art of butlering, the difference between the inflation rate for the super-rich and the rest of us, and the different ways the ultra wealthy give away their money.

Robert Frank is the wealth correspondent at The Wall Street Journal. In Richistan, Frank provides extensive non-academic research through both statistics and interviews that help the rest of us figure out how the rich think and why they spend the way they do.

Overall, I would give the book a 5 out of 5 stars.

I first heard of 100 Ways to Create Wealth on a radio show a few weeks ago. Mrs. Frugal and I were going to Costco to buy in bulk and one of the authors (I think it was Sam Beckford) was being interviewed by Bob Brinker. As I’m trying to figure out how to eventually enjoy the freedom that comes from being an entrepreneur, I figured this might give me some insight into how to create wealth.

After reading about 50 of the ways, I can give a preliminary review, starting with what the book isn’t.

It’s not about getting rich quickly, nor is it a collection of money making ventures. Instead, it’s a collection of 100 psychological checks. I agree with most of them. The book has some new-age type thoughts sprinkled through it (Way #1 is to draw a line in the sand and decide that you want to be wealthy), but it has some very good points (Way #4 is to use an hour a day to think about how to solve problems rather than escaping problems through TV or some other distraction). In #4 the authors point out that you don’t really need to know about Russell Crowe hitting a hotel clerk with a phone and that people live their lives through surrogates when they watch too much TV. I think I’ve pointed out in a recent post that Mrs. Frugal and I don’t have a TV, so #4 stuck with me.

Another point that I agree with wholeheartedly is that it’s easier to deal with money if you can make it a game (#5). I’ve made saving a game and I like to try to beat my previous bests. I’ve had difficulty, though, making work a game. I’ve had jobs in the past that were so much fun that I couldn’t wait to get to them, but my current job is far from that. If you can make earning a game, it’s much more fun.

Overall, 100 Ways to Create Wealth is a four-out-of-five stars book. It’s definitely worth reading (at least through Way #50, which points out that you aren’t bad if you have lots of money), but I am not fully sold that thinking your way to riches will work.

Oh, and don’t let the cover fool you. It’s not the best looking cover I’ve seen. According to the jacket, the cover was designed by the editor.

Last night I was in a writing class and we were talking about personal finance. We were talking about how thrifty I am and I said, “My free time is worth about $12/hour to me.”

The people in the room asked how I reached that number. I didn’t really know at the time, but as the night went on, I continued to think about it. I remembered back to my freshman year in college and what my economics professor taught us.

He said that researchers have found that people are generally willing to spend about 1/3 of their hourly wage so that they don’t have to wait. The conversation came up when the class was discussing how to price tolls for a toll road most effectively.

In order to measure potential demand, an economist would estimate how many minutes would be saved and charge the fee based on what the average salary in the area is. Charge too little, and the number of drivers increases. At some point, the cars will increase to a point where the number of minutes saved decreases.

Charge too much, and no one takes the toll road. Given speed limits, there’s a limit to how many minutes the toll road can save a driver.

What’s funny is that $12/hour is roughly 1/3 of my hourly salary (not my real salary, as my previous post points out).

So if a toll road could save me 15 minutes, I would be likely to spend $3.00. If it saves me 20 minutes, I would spend $4.00.