California

By now we’ve all heard about how the giant national banks (Bank of America, Chase, Citibank) are “too big to fail” and have to be rescued from their mistakes with our taxpayer money. Like most Americans, I watched the bailouts of 2008 and 2009 unfold in helpless disbelief…these big banks were taking money out of my tax dollars to spend on CEO bonuses and stock market gambles, and it felt like there was nothing I could do about it.

But I decided there was something I could do. I’d been a customer with Chase (previously Washington Mutual). After reading J.D.’s article on rewards checking accounts and realizing I was missing out, I closed my account with Chase and moved my checking and savings to a local credit union down the street. I have to say, it felt great.

My new credit union insures my money just as well as the big bank, but it also offers a ridiculously high interest rate on my checking account, refunds on ATM fees so I can use any ATM I want (even those $3 fees at the back of the convenience stores), really great customer service, and — best of all — free cookies on Fridays.

They can afford to do all of this because, as a credit union, their top priority is me, the member. Not CEO and shareholder profits, not bloated advertising budgets. And best of all, by moving my money to a local community bank, I’ve taken money away from the poorly-managed, impersonal big bank and given it to a bank that will actually use it to help me and people in my community.

I made a real difference, and while my tiny accounts are nothing to a company like Chase, they matter a lot to my local bank and my community. (And did I mention the free cookies?)

Here’s an interesting (if over-earnest) video about the difference between big banks and small banks:

If you, too, have been thinking about moving your money, here’s what you can do:

Ask your friends, neighbors, and coworkers if any of them are using a local community bank or credit union. What do they think? Do they have any recommendations? You can also try the “Find a Bank” locator at the Move Your Money project.

Once you’ve decided on a local bank that meets your needs, set aside half an hour to stop by a nearby branch and open an account. I’ve always found this a very pleasant experience.

Start to contact any companies that have your debit/credit card or bank information on file, and give them the new bank’s info. It’s best to get this all done about a week before the next step, so that everything’s nice and tidy.

Set aside about an hour to head to your old “too big to fail” bank and close your account. If you haven’t already done so, get the rest of your funds in a check to bring to your new bank. If you’ve already transferred all auto-billing to the new bank, this should be a quick and relatively painless process (easier than trying to cancel your cable service, anyhow).

As soon as you start thinking about how to live more lightly on the earth, your eyes start opening to the myriad ways you can do that. You can eat only organic food. You can bike to work instead of driving. You can insist on high-efficiency appliances. You can line dry your clothes.

Some of these lifestyle shifts will save you money. Others are expensive. Often, I hear cost used as a reason not to “go green”. In fact, environmentally damaging products and lifestyle choices are only affordable because we’re not paying the full cost of them. While you enjoy your cheap plastic toys, people in the developing world are paying the price in terms of pollution, exploitative labor, and natural resource consumption.

Most of us want to do right by the environment. We’d love to have pesticide-free homes and diets. We want our spending to support small farms, local businesses, and fair wages for workers in the developing world. That doesn’t mean we necessarily have the available cash to do what our values dictate.

A lot of green lifestyle changes also have a time cost, associated with them. A few weeks ago, I wrote about how easy it is to slip into Time Debt by thoughtlessly taking on new commitments. Biking to work sounds great, but if it adds an hour to your commute time each day, you’re losing an hour at work or at home.

With every green step you take, you need to consider whether or not you can truly afford it.

Here are some inexpensive steps you can take that will “green up” your bank account and the planet:

Stop buying Stuff. You all knew I was going to say that, right? When you buy consumer goods, you create demand for resources to make, transport and sell those goods. That can be good for the economy, but it’s bad for the planet — and your wallet. When you do need to buy something, always investigate your options for getting it used rather than new. Used goods are cheaper and greener.

Cut back on utilities. You can save about $150 a year worth of electricity by line drying your clothes instead of drying them in a machine. Another $150 can be trimmed just by washing them on cold cycles instead of hot. Using high-efficiency light bulbs, insulating your home, and using recycled rainwater to quench your garden are all small changes that can save you big money. They also leave a smaller ecological footprint.

Park your car. Biking to work might not be practical every day, but maybe you can do it one day a week. Try expanding your radius for walking and biking, and explore public transit options in your area. My family of four drives less than 500 miles a month these days; much less than that in the warmer months. How low can you go? Make it a game. The prize: more money in your pocket, and fewer emissions into the atmosphere.

Once you’ve explored your free or cheap options, you may want to take a close look at some of those spendier choices. Should you be buying organic strawberries? What about “green” disposable diapers? How do you know what the best use of your limited resources is?

Making a decision about a green lifestyle change or product is like making a decision about any other expense. You just need to add the impact on the planet into your set of priorities.

It helps to do your homework. I can’t afford to buy only organic foods, so I use this handy table to help me understand which foods absorb the highest amount of pesticides. I prioritize getting organic apples and strawberries because they’re high on the list, and worry less about sweet potatoes, since they’re very low.

It’s also useful to consider how the added cost of an eco-friendly item will affect your ability to do other things you value. For example, I cloth-diapered both my children. We used second-hand diapers and washed them in a high-efficiency washer. If you’re going to use diapers at all, this is about as low-impact as you can get.

When my daughter’s daycare refused to use the cloth diapers, I assumed I’d put her in the “eco-friendly” disposables you can buy at Whole Foods. Those diapers, made in part from recycled paper, can cost as much as ten times what a box of generic disposables costs at Costco. I bought the generics, and used part of my savings to pay for a membership in the Union of Concerned Scientists.

Ultimately, being an earth-conscious shopper is a bit like being a frugal shopper. It’s important, but it isn’t the whole answer. The simplest, best thing we can do as consumers is to just consume less. That’s good for our bank accounts, our environment, and our bodies.

When we do consume, we’d do well to weigh the environmental impact of our purchases and look for used or eco-friendly options. We also need to hold corporations and governments accountable for large-scale change.

Don’t buy into the idea that every purchase you make needs to be local, organic, hand-made, or recycled. What matters most is that we bring our lives into balance, value the simplicity of buying less, and work for change on a global scale — as well as in our own backyards.

So what books about money are good for teenagers and young adults? Here are a few top choices:

I Will Teach You to Be Rich by Ramit Sethi. My friend Ramit set out to write a money book for young people, and he succeeded admirably. Even if I had no idea who he was, this would be the first book I’d recommend for most students. Two drawbacks to note: Not everyone likes his tone and style, and the book doesn’t really address the psychology of spending. (Here’s my review.)

Debt is Slavery by Michael Mihalik. I raved about this book a few years ago. Of all the personal finance books I’ve read, I think this would have been most useful for me when I was in college. It’s not a comprehensive guide to IRAs and stocks and bonds; it’s a short treatise on how to take control of your financial life.

The Money Book for the Young, Fabulous, and Broke by Suze Orman. This is a pretty comprehensive introduction to personal finance aimed specifically at young adults. There’s almost too much information.

Reality Check: The Student’s Guide to the Real World by Grant Baldwin. I haven’t read this book; the publisher sent me a copy, and I’ve leafed through it. It gets great reviews at Amazon.

Get a Financial Life: Personal Finance in Your Twenties and Thirties by Beth Kobliner. This book comes highly recommended, but I haven’t read it.

Who knew after we posted a link on Facebook last night to search for unclaimed property that there would be such a reaction? To our surprise we found money for our family members, and now several friends and clients have told us that they have found money and property (a safe deposit box) too!

So, we thought we would share it with our friends who read this blog.

While it’s not “real estate”, it is “property” … so allow us the latitude, please.

There may be money or property for you – just waiting to be claimed! In the state of California, you can search for unclaimed property here:
California unclaimed property search

We used the “individual search” function and started by putting only a last name. When there were too many results, we put only the first initial of the first name (in case there were any derivatives of the first name).

Other states have similar searches. Put “unclaimed property search”

When I sat down to write Your Money: The Missing Manual, I knew I wanted to start with a chapter on happiness. (Well, to be fair, I was going to conclude the book with this chapter; my editor suggested moving it to the beginning, which was a stroke of genius.) In particular, I wanted to make the point that money doesn’t buy happiness. Because we all know that’s true, right?

Well, not so much, as it turns out.

Can Money Buy Happiness?
As I wrote the chapter, I found that I had trouble locating data to support my hypothesis. There were plenty of people (including me) who loudly proclaimed that money and happiness were unrelated, and their arguments were persuasive, but none of these folks ever offered numbers to support their case.

In fact, the more I read, the more I realized they were wrong. And so was I. The numbers actually show the opposite. Money does buy happiness; researchers have found a strong correlation between increased wealth and increased contentment. In their book Happiness, Ed Diener and Robert-Biswas Diener write: “Rich people and nations are happier than their poor counterparts; don’t let anyone tell you differently.”

But the authors don’t just make the claim — Diener and his son had the numbers to back up their position. Though it’s a widely-held belief, it’s a myth that happiness and money are unrelated.

Sometimes, as in the case of this money/happiness stuff, money myths are just plain wrong. Other times they sprout from a grain of truth.

Note: Here’s the thing: Though the correlation between money and happiness is strong, except for when it comes to boosting people from poverty, increased wealth has only a small impact on well-being. To put it another way, more money will make you happier, but unless you’re poor, it won’t make you much happier.

Do People Spend More When Using Credit?
Financial guru Dave Ramsey often cites a Dun and Bradstreet study that purportedly reveals people spend more with credit than with cash. I’d always accepted his claim as true, and hadn’t bothered to double-check it. But when I was researching the credit chapter for my book, I had to do more than just take things on faith. I had to find actual sources.

Nobody I know has been able to track down this mythical Dun and Bradstreet study. Even Dun and Bradstreet themselves have been unable to locate it. GRS reader Nicole (with the assistance of her trusty librarian Wendi) contacted the company and received this response: “After doing some research with D&B, it turns out that someone made up the statement, and also made up the part where D&B actually said that.”

In other words, the study doesn’t exist.

So why do Dave Ramsey and a host of others cite it? Who knows? It’s tough to trace the origin of urban legends, but that didn’t stopped Nicole and Wendi from digging further. They kept searching for the source of the D&B myth. Eventually, they succeeded.

Turns out, this “fact” doesn’t come from a study at all. Instead, it’s from a short (739 word) article in the March/April 1993 issue (vol42, no2) of D&B Reports (which is no longer published). The article, written by Robert J. Klein, a founding editor of Money magazine, isn’t available on the web, but I was recently able to read a copy.

It doesn’t say what people (including Dave Ramsey) claim it says. Here’s an excerpt:

Well-run businesses borrow money to finance plant, equipment and research. They do not borrow to pay operating expenses. Families should do the same. They should borrow to buy a house to live in, a washer and dryer to keep house more efficiently, a car for transportation to work, a college education for the kids. They should borrow to refinance existing debts at lower rates. They may even borrow to start or expand a family business. On principal, though, they should never borrow to pay for living expenses.

Sure, the article advocates against overuse of credit, but it doesn’t say anything about people spending more with credit than without.

My point isn’t that Dave Ramsey is wrong about this idea. My point is that he’s citing a bogus study, and then hundreds (or thousands) of others are subsequently accepting what he says as gospel. My point is this: It always pays to question what you hear, and to do your own research. (You should even question me. I do my best to provide accurate information, but I’m only human.)

Note: You can actually find a number of real studies to support the claim that people tend to spend more with credit than with cash. (For example, here’s a 2008 article from the Journal of Experimental Psychology: Applied that contains research into the effect of payment type on consumer behavior

Too much control
Obviously, it’s difficult to give a complete answer without knowing more about the situation. Still, I think this is a great example of how financial decisions are often about more than just the math involved. There are three basic approaches to debt here:

Tackle the debts in order of interest rate, knocking off the high-interest debts first. Mathematically, this is the best option because — if you follow through — you’ll pay less interest in the long run.

Tackle the debts in order of balance, starting with the debts you owe least on first. Psychologically, this is usually the best option because you can get some quick wins, knocking off several debts in a short amount of time. This is the method Dave Ramsey recommends. (And so do I.)

Or, as Kim’s boyfriend recommends, try to coordinate payments so that each debt is paid down to a certain level before focusing on a specific obligation. For various esoteric reasons, this method should have the greatest impact on your credit score.

My recommendation during the question-and-answer period? No surprise: I told Kim that she should use the approach that makes her most comfortable, the approach that actually leads her to pay off her debts most quickly. I think it’s great that her boyfriend is eager for her to improve her credit score, but I think it’s dangerous to be dogmatic, especially if it involved becoming controlling about another person’s financial situation.

I believe it’s vital that both partners have an equal say in the finances, and that one person doesn’t take the role of “controller”, especially if, as in Kim’s case, it’s to move from a perfectly good option to a seemingly better option. If the option is good and your partner is happy with it, then leave well enough alone. Why pursue financial perfection at the cost of your relationship?

Not enough control
On the other hand, it’s important not to be completely ignorant about your partner’s financial situation. Recently, an anonymous user at Ask Metafilter posed an interesting question. She writes (in part):

My husband and I have been married for almost nine years and we have one giant recurring problem. For our entire relationship, even before we got married, he’s been full of nasty financial surprises.

If you need a payday loan to help short term cash flow problems, visit: California Payday Loans

Yesterday, a couple of readers pointed me to a CNN Money article about why Amish businesses don’t fail. Good timing, because today’s guest post is from the author profiled in that piece. This is a guest post from Erik Wesner, who researched the Amish for his new book Success Made Simple: An Inside Look at Why Amish Businesses Thrive. He blogs about Amish culture at Amish America.

Most people associate the Amish with certain things: simplicity, rumspringa, funny hats. I’ve been fortunate enough to spend a lot of time with Amish over the past few years. And I’ve found there’s both truth and myth behind many of the perceptions.

But one thing that is accurate is the idea that Amish use money and resources wisely. I’d like to share a few observations from my time in Amish America — simple ideas for amping up your savings, cutting waste, and maximizing what you get out of what you already have.

Lower tech, lower costs
Contrary to common belief, the Amish do actually accept a good degree of technology. During a recent stay at my Amish friend Abe’s home, his three-year-old woke up one evening with a nasty bark. I first thought it to be whooping cough (sounds pretty Dickensian, I know) but turned out to be the

This is a guest post from Robert Brokamp of The Motley Fool. Robert is a Certified Financial Planner and the adviser for The Motley Fool’s Rule Your Retirement service. He contributes one new article to Get Rich Slowly every two weeks.

Happy anniversary to…well, all of us, I guess. This post marks my one-year (and five days) anniversary of being a contributor to Get Rich Slowly. It’s been a hoot.

My very first post was a report from my journey to last year’s Berkshire Hathaway annual meeting. While I didn’t attend this year’s meeting, which occurred two weekends ago, my interest in Warren Buffett’s commentary and biography hasn’t flagged. After all, I’m a Berkshire Hathaway shareholder.

The wealth snowball