Wild Blue Yonder

This interview is the second in a periodic series profiling those who have recreated themselves following a job layoff. Each story is unique, yet the challenges they've faced will resonate with many who share their experience.

I recently spoke with "Don," a former senior-level IT director in southern Connecticut who carved a new path outside the corporate track after losing his job at age 58.

Q. What happened to your last full-time job?

Don: It's been four years since my job in IT was outsourced to India, like so many others. At the time, I was 58 years old and had known for over a year that this was probably going to happen as my company was merging different business units.

I had been working in IT for over 30 years, working my way up from a programmer's position to the level of director of information technology. My salary plus bonus in 2005 was about $125,000.

Q. What was your biggest immediate concern following your layoff?

Don: I had considerable savings and investments, so I was more worried about losing my medical benefits than I was about the financial impact of my job loss. After researching various options, I discovered that I would be eligible for health coverage if I worked part-time (at least 20 hours a week) at Starbucks, so I got a job at a local Starbucks as a lowly barista. I started working there in 2005, while I was still working as an IT director. It was just a few months before my layoff. So, for a period of time, I was working about 60 hours a week between both jobs.

As expected, I lost my IT job at the end of 2005. I got a very generous severance package and continued working part-time at Starbucks, which qualified me for medical coverage.

Q. Was it difficult to make the transition from senior-level corporate executive to coffee-server?

Don: For someone who once managed 10 people and a $5,000,000 budget, the Starbucks position was, of course, very menial; I was essentially a clerk serving beverages and emptying the garbage. But I enjoyed the job and felt a sense of relief that I had left the corporate world once and for all. It was kind of strange reporting to supervisors who were in their early 20's, but I got along well with everyone.

I enjoyed getting an inside glimpse of the workings of a large, successful company by day and reading the company's corporate news announcements in the Wall Street Journal the same night. Still, there were times when I was self-conscious and a bit embarrassed when former colleagues and friends would show up as customers at Starbucks.

Eventually, I took on two other part-time jobs to keep myself busy and supplement my Starbucks income. One was working as a clerk at a gas station eight hours a week at a low salary, but with one big benefit: getting my two cars fixed for free there whenever they need repairs. I always enjoyed being around cars, and it's a nice casual place to work, where I can bring my dog if I want. We have a big TV on all day too.

I also landed a job as a driving instructor at a local driving school for another 10 hours a week. It's something I enjoy immensely since, in the early days of my career, I worked as a high school math teacher. I like being with the kids.

While I've kept the driving instructor and gas station jobs for over two years now, I was laid off by Starbucks in mid-2009. It came during a big wave of layoffs there following a drop in coffee sales and the deepening recession, and a change in their business model where they wanted to hire mostly full time employees.

Q: Did you lose health coverage when you left Starbucks?

Don: No. I had remarried when I turned 60, so I wasn't upset to lose the Starbucks health benefits since I'm now on my wife's superior health plan. It was fun working there for almost four years.

Q. Are you able to make ends meet now and provide for a comfortable semi-retirement?

Don: My two jobs provide sufficient activity, stimulation and income, combined with my other investment income. I also decided to begin collecting Social Security benefits at age 62. This allows me to work only about 15 to 20 hours a week now between both remaining part-time jobs.

I'm happy to be out of the IT world with its politics, pressure and often incompetent managers.

Q: Did you consider any other career paths once you left the IT world?

Don: Early on, I did consider becoming a licensed practical nurse (LPN), since there's been a chronic shortage of nurses and the job prospects in that field are booming. I've also enjoyed working with elderly people in various volunteer activities I've had over the years. In the end, I decided not to pursue that path, though I'd recommend it to others. I chose not to pursue nursing because it would take me two years to get the schooling and license, and I don't want to be working that much longer or harder.

Q: Can you describe the most significant changes in your lifestyle today compared to just a few years ago?

Don: The best thing about semi-retirement is the added time it's put back into my life. I'm working less than 20 hours a week now and I have a lot of time to do many things I couldn't do before, like travel, golf, volunteer work and spending more time with my wife, family, friends and new dog.

Life is good. I'm happy, content and, while far from rich, I'm financially comfortable, with no regrets after 40 years in the work world.

Q: What advice could you give to others who face a possible layoff? How easy is it to reinvent yourself after investing so much time in your career?

Don: Take a chance and try something new. I could have advanced into management at Starbucks, but I wasn't interested. But there are plenty of opportunities out there for interesting jobs, where you don't have the pressure to make a lot of money. Just make sure you can continue health care benefits one way or the other.

First, I'd like to congratulate everyone who participated in the January "Purge 30 in 30 Days" challenge. There were many of you who went well beyond the basic challenge of de-cluttering your homes, whether by selling unwanted possessions, giving them away or recycling them.

While the January challenge was all about simplifying your life, the February challenge is about reducing your monthly food bill by eating at home as much as possible. While grabbing a pizza on the way home from work can be a convenience (and who doesn't enjoy being waited on at a full service restaurant?), dining out today certainly gives me a case of sticker shock.

And, let's face it, restaurant food is designed to taste good. Perhaps becuase of restaurateurs' desire to have you coming back for more, restaurant food is often laden with hidden salts, fats and sugars, all of which enhance the flavor of food, as well as our waistlines.

The February challenge is very simple: let's see how many days this month you can eat all your meals at home. Give yourself 1 point for each day when you don't purchase any foods or beverages outside the home. (Yup, this includes coffee from Starbucks or a candy bar at the grocery check-out line.)

If you eat at a friend's house, that's okay. You're still eating at (a) home. If you make your lunch at home but eat it at work, give yourself a point (as long as the rest of your meals are homemade, too).

The person who earns the highest score, or a score of 28, since this is February, wins.

Are you in?

The Congressional Budget Office (CBO) says we should count on the unemployment rate to average a little over 10% for the first six months of 2010, and that it probably won't fall below 9% until 2012. The CBO doesn't anticipate a "natural" rate of unemployment, about 5.3%, until 2014.

Economic growth, the CBO said, "is expected to be slightly faster during the first half of 2010 but slightly slower during the rest of 2010 and in 2011."

The CBO acknowledged the difficulty of predicting the future course of inflation as well as how successful various economic policy changes made by Congress, the Federal Reserve and the Treasury will be as they gradually phase out in the next few years.

You may find me flipping burgers at McDonald's.

When you were still lucky enough to be employed, you may have faithfully contributed to your retirement through payroll deductions directed into your 401(k). Now that you're out of work, there's no point in even considering continued retirement planning until you find your next job, right?

Wrong. While it's true that for most jobless people, retirement contributions may have to be put on hold, there are still important steps you can take to manage your existing retirement assets.

1. Rebalance your portfolio.
If you haven't rebalanced your portfolio lately, it's important to do so now. With stocks having rebounded sharply higher since last spring, your stock/bond/cash weightings may be out of kilter with your intended asset allocations.

You should be rebalancing at least once a year, and the start of 2010 is an ideal time to do so, since performance data from 2009 is readily available. By rebalancing now, prudent investors will be able to lock in gains by selling some of their winners and buying weaker-performing funds at bargain prices. They'll also be able to restore diversification - a key tool in managing risk - in their portfolio.

2. Convert to a Roth IRA.
For most individuals who believe their tax bracket in retirement will be higher than in their earlier working years, a Roth IRA is preferable to a traditional IRA. That's because with a Roth IRA, while you don't get a tax break when you make contributions, after age 59 1/2, all your withdrawals, including accumulated earnings, can be taken tax-free.

Compare that to traditional IRAs, which are taxed upon withdrawal, based on the tax bracket you fall into at the time of withdrawal.

Despite the more favorable tax treatment of Roth IRAs, the stumbling block preventing many from converting traditional IRAs to Roth IRAs has been the hefty tax bill that can often come due from such a conversion, since the amount converted is added to your income and is subject to tax.

That's why long-term unemployment or underemployment can make a Roth IRA conversion a much more doable event with a much less painful tax bite.

If you've been out of work or underemployed for a while, this could be an ideal time to take advantage of your lower tax bracket and convert your IRA to a Roth IRA. The conversion could cost you very little. (Remember, in 2010 there are no income limits restricting who can do a Roth IRA conversion.)

Consider such a tax-advantageous move only if you have adequate savings and won't hurt yourself by paying the IRA conversion tax bill.

3. Don't Write Off Retirement Contributions Completely.
Granted, sudden unemployment has a way of helping one prioritize very quickly. The distinction between "necessity" and "discretionary" becomes very clear as you end up cutting cable TV, eating out, your kid's dance lessons or pending home improvements in favor of paying the mortgage, utility bills and health insurance.

The problem is, when you stop retirement contributions "temporarily," whether due to joblessness, underemployment or self-employment, it can be difficult to catch up to where you should be later. When you land your next job, you may wind up deferring retirement contributions for longer by telling yourself you have other more pressing needs for your newfound money.

Despite the unavailability of an employer-sponsored 401(k) plan, those who are determined to save for retirement even during a challenging employment period can do so. In addition to funding your Roth IRA or traditional IRA, you might also consider opening a SEP IRA if you've turned to self-employment or freelance work to help you get by. You can contribute 25% of your net income, up to $49,000.

(If you're planning on doing a Roth IRA conversion this year, it might be best to avoid opening any new SEP IRAs because it could increase your tax bill on the Roth IRA conversion.)

Another attractive option for self-employed individuals is a solo 401(k) plan. Unlike a regular 401(k) plan, a solo 401(k) plan is only available to self-employed individuals or small business owners who have no other full-time employees (unless it's the owner's spouse).

A solo 401(k) plan lets you save for retirement as employer and employee. As a sole proprietor, you can contribute 25% of your net income, up to $49,000. And as your own employee, you can contribute up to $16,500 more.

Fully funding any of these retirement vehicles may seem like wishful thinking when you're struggling to get by, but even a modest contribution of $50 or $100 a month can make a big difference over time, thanks to compounding interest and investment gains.

Skip doing so and you may have to do an all-out sprint in later years to make up for lost time.

A job layoff doesn't have to mean your retirement planning is stopped dead in its tracks. Even if there's nothing extra to put toward retirement savings, being mindful of your investments and positioning them appropriately can help keep your long-term retirement plans from being derailed by a temporary setback.

Consult your financial adviser for recommendations based on your personal circumstances.

You'll need at least $500,000 to be happy in retirement, say retired respondents to a recent

Consumer Reports Retirement Survey of over 24,000 respondents.

Survey respondents' satisfaction with their retirement peaked when their net worth was between $500,000 and $1 million. Having a much higher net worth didn't translate into an extremely happy retirement.

% of retirees who said they were "very satisfied" or "completely satisfied" with retirement, based on net worth:

Less than $250,000 = 51% said they were happy.

$250,000 - $499,999 = 64% said they were happy.

$500,000 - $999,999 = 74% said they were happy.

$1 million - $1.499 million = 77% said they were happy.

$1.5 million to $1.99 million = 79% said they were happy.

$2 million + = 78% said they were happy.

What's your magic number for retirement?

This interview is the first in a series profiling those who are dealing with the loss of a job. Each story is unique, yet the emotions they feel, and the challenges they face, will resonate with many who share their experience.

I recently spoke with "Dido," a former psychology college professor in Pennsylvania who decided to change careers after investing 20 years in academia. Dido is also a fellow Saving Advice

blogger

Q. Dido, why did you decide to leave a 20-year career as a college professor?

Dido: To understand why, you'll need to understand the nature of traditional tenure track positions in college-level teaching. It's very much a "publish or perish" environment. I started out teaching psychology at a research university, but because I wasn't publishing enough, I was asked to leave after six years. Since then, I have taught psychology courses at several small liberal arts colleges, where I mostly worked as an adjunct professor.

Q. What's the difference between a tenured professor and an adjunct professor?

Dido: If you're on the tenure track, you need to be doing some research and getting stellar teacher ratings from the students. An adjunct professor is the equivalent of temporary help, and you're usually hired for short-term periods of a year or less. As an adjunct professor, you're likely assigned to teach introductory courses that are requirements for incoming students, and these are the classes students are most likely to rate as "average."

As an adjunct professor, I was patching together individual courses for two years with no contract longer than four months at a time. At one time, I was teaching five different classes at four different colleges. I put a lot of miles on my car.

In 2003, I landed a full-time, one-year sabbatical replacement job at one liberal arts college. I taught there for six consecutive years with six consecutive one-year contracts. That contract wasn't renewed in May 2009.

Q. So it was after that layoff that you decided not to return to teaching?

Dido: My exit strategy was actually several years in the making. I had already begun to think about a career change a few years prior to my layoff, during that period of one-year contracts. I was unhappy with the instability of my teaching career and became involved with a small group of women who each felt like they were facing a transition point in their careers. We would meet periodically and give each other little homework assignments. Those discussions helped me realized that I wanted to merge my interest in psychology with an interest in personal finance. I wanted to do financial planning, helping people overcome financially self-defeating behaviors. I'm interested in how findings from psychology and behavioral economics can be used to help people more effectively manage their financial futures.

After some investigating, I realized that most financial planners essentially end up working as sales people for some company. I decided to take a different route and am now pursuing my CPA and enrolled agent licenses so that I can eventually work at a small CPA firm doing taxes, accounting and some financial planning. (Editor's note: An enrolled agent represents their clients with the IRS.)

I've been enrolled in classes since 2004 and have completed three of the four required CPA exams. I expect to have both my CPA and enrolled agent licenses by July of this year. Of course, I would have liked to control the timing of my departure from teaching, but that was not meant to be.

Q. Job loss often triggers a great deal of emotional distress, turmoil and feelings of isolation. But it sounds like your classes and exam preparation have kept you very busy during your last eight months of unemployment. Is that true?

Dido: Yes, studying is my anxiety reduction technique. I have felt a sense of isolation, but ironically, it was while I was still working.

Q. What do you mean?

Dido: When I learned that my teaching contract would not be renewed, my colleagues at work started avoiding me. People were friendly, but most of them never asked me about my future plans. No one really had time to listen. There was a studied avoidance of me, and after my office was moved to the philosophy department away from my colleagues, the separation became even more uncomfortable.

Most educators who have committed themselves to a teaching career have a very strong loyalty to academia. So they really couldn't relate to my career switch. I have a PhD in psychology, but at the college level, everyone has a PhD, so it's not valued. Now I have to hide my degree because prospective employers think I'm overqualified.

Q. How did your interest in personal finance develop?

Dido: I got involved in a Simple Living network that was created by a group of Quakers who formed an online study group based on the book, Your Money or Your Life. That book changed my life, and really got me thinking differently about money.

Q. Tell me about your "Happiness Project."

Dido: The Happiness Project was an assignment I gave students who were taking my Money & Happiness class at several of the schools I taught at. It was an elective course for psychology majors. We delved into behavioral economics, cultural expectations about money, advertising and consumerism, and "positive psychology." As part of the class, I asked students to use what they were learning to make a conscious effort to make themselves happier.

The Happiness Project is also the title of a new book by Gretchen Rubin. I decided to create my own "happiness project" by coming up with different ways of keeping myself happy while dealing with my job loss. So this month, I'm keeping a gratitude journal. Each night I write a bit about what I'm grateful for each day. Next month, it'll be something different, maybe committing myself to performing random acts of kindness. I'll also use ideas from Sonja Lyubomirsky's The How of Happiness and the tools at Happier for guidance.

Q. What else are you doing to keep busy?

Dido: After being shunned by colleagues after my teaching contract wasn't renewed, I made sure to cultivate friendships outside of work. So these days, I exercise regularly with my walking "buddies." I'm active in my congregation, I do some volunteer work, I'm a community leader on a diet website forum and I'm part of an online women's coaching group. Each week, we talk on the phone and offer feedback to one another on "getting unstuck." And, of course, I'm looking for a full-time job.

Q. How has prolonged unemployment affected your personal finances?

Dido: I'm fortunate in that I recently started working for H&R Block for the coming tax season, but unemployment has been very hard on my bank account. Despite having a substantial cushion prior to my layoff, my credit card debt now exceeds what I have in savings. After my layoff in May 2009, I had about $3,000 worth of work done on my car. My dog became seriously ill and required expensive surgery and radiation treatments. I racked up over $9,000 in credit card debt.

Not counting my mortgage, this is the first time in 15 years that I've been in debt. I'm very much concerned about going deeper into debt before I find a real, self-supporting job.

Fickle economic currents can swamp the boats of many workers who never saw the wave coming. People like Dido can regain a sense of control by being proactive, taking the initiative to manage their careers rather than waiting passively by the phone for a call that may never come.

Although returning to school and changing career paths may not always be feasible or the right move, other choices exist for those determined to discover them.

I'm thrilled that so many of you have taken up the

January challenge with gusto and enthusiasm. It certainly motivated me to get cracking knowing that others were doing the same.

The challenge is simple: "purge" your home of unwanted or unused items as a means of simplifying your life, decluttering your home and perhaps making a bit of extra cash in the process. "30 in 30" describes the goal of finding one item to dispose of daily, or if you prefer, 30 items for the month.

You'll earn the most points (3 points) if you manage to sell your items on eBay, Craig's List, or elsewhere, but you can also donate your items to charity (1.5 points) or barter with others (1.5 points). As a last resort, you'll earn a single point for each item you dispose of by simply throwing it away.

My progress has been slower than many of you, but here are the seven items I've rounded up so far, to mark my progress at the end of the first week:

- 4 books, to be donated to the library: 6 points

- 1 VCR tape, to be donated to cable company for recycling: 1.5 points

- 2 household items to be donated to Good Will: 3 points

1st week total: 10.5 points

Your own results may vary. If you meet the monthly goal of disposing of 30 items during the month of January, and depending on how you dispose of your things, you may earn as little as 30 points (if you simply threw everything away) or as much as 90 points, if you sold everything.

I'll be posting weekly updates and inviting all of you to do the same.

If you haven't done so already, show us what you're made of and record your progress here!

Ever wish you could sit down and chat with a personal financial advisor and receive personalized financial advice, but didn't want to pay $150 to $300 an hour? Do you think you're pretty much on track toward reaching your financial goals, but still wish a financial advisor could confirm that?

Well, now's your chance.

For two days in January, the National Association of Personal Financial Advisors (NAPFA) and Kiplinger's Magazine will open their phone lines from 9 a.m. to 6 p.m., Eastern Standard Time, to dispense financial advice, absolutely free. NAPFA considers this a public service. For the ninth year, NAPFA is making this opportunity available to anyone, not just Kiplinger's subscribers. All you need do is make sure you have your financial paperwork at the ready, should the advisor require further details to answer your question.

So mark your calendars for Friday, January 22 and Tuesday, January 26. Just call 888-919-2345 to speak to a NAPFA advisor. If you like, you can also participate in an online discussion with a NAPFA advisor at

Kiplinger's on those two dates.

If you could ask a financial advisor a single question, what would it be?

If you wanted to gain insight on how working Americans are dealing with the recession, you need look no further than Michelle Vullo Pastor, a Denver-based Accredited Financial Counselor. Through her business,

Enrich Finance, Michelle visits the workplace to speak with employees about their personal finances.

I sat down with Michelle recently to talk about her impressions of how Americans are responding to the financial crises many of them face.

Q. Can you tell me a little more about your business, Michelle?

Vullo Pastor: Enrich Finance is a financial wellness company specializing in consumer credit and personal finance issues. I travel across the country to visit with employees in all sorts of industries, from manufacturing and technology to law firms, government agencies and hospitals. I get my business primarily through word-of-mouth.

This year, I've visited 95 companies, from San Francisco to Worcester, Massachusetts, to provide workshops on reducing debt and saving for the future. At some companies, I might present a two-day, 16-hour presentation where attendance is mandatory and shift work is stopped so that employees can attend. We also offer one-on-one counseling for individual employees, which could include a series of five or six sessions, according to the employee's needs. At other times, I'm called in after layoff announcements have been made.

We deal with hundreds of different companies of all sizes, and I talk with people who are making as little as $25,000 to over $400,000 a year. Regardless of income, what is striking is that for some employees, this is the only personal finance education they'll receive.

Q. What's the difference between an Accredited Financial Counselor and a Certified Financial Planner?

Vullo Pastor: Unlike a Certified Financial Planner, an Accredited Financial Counselor like me has no products to sell, so my advice is completely objective. I don't provide specific investment advice.

Q. Why do employers invite you to speak with their employees?

Vullo Pastor: My presentations are paid for by employers because they understand that a distracted or stressed out employee is not a productive employee. Research shows that fully 25% of employees worry about their finances to the point where their health and productivity suffer and this, in turn, takes a toll on the employer's bottom line. In fact, 70% of healthcare costs can be traced back to poor lifestyle choices brought on by stress, such as smoking, overeating, substance abuse and poor sleep habits.

What's more, employees in financial trouble may be fielding creditor phone calls at work, calling their bank or credit card companies from the office, using excessive sick time or even looking for higher-paying work elsewhere.

So employers are often looking to increase worker productivity; at other times, they want to offer an additional benefit.

Q. How do employers become aware there's a problem?

Vullo Pastor: Sometimes, individual employees may approach HR or their manager for a raise or pay advance. Another big red flag is they'll be looking to take out a loan or distribution from their 401(k).

Q. What kinds of things do you speak about?

Vullo Pastor: Nearly everything that affects an employee's personal finance, including budgeting, impulse spending, debt consolidation options, how to compare loans, avoiding foreclosure / bankruptcy, negotiating with creditors, auto loans versus car leases, dealing with collection agencies, 401(k) loans, medical bill relief and how to build an emergency fund.

Q. Americans have been forced to reexamine their attitudes about money since the recession started in late 2007. How successful have they been in creating a more responsible money mindset, and do you think these changes are lasting or transient?

Vullo Pastor: People are cutting back in some areas but are unwilling to reduce spending in other areas. For example, they may be willing to eat at home more often, but they won't give up their cell phone or cable TV. Those are the first two luxuries I find myself suggesting they cut back on when money gets tight, but many people refuse to do so.

People are scared. In the past, they often used credit, like a home equity line of credit, to finance a lifestyle they couldn't afford, but now that credit's tight, that's not so easy to do.

Some individuals still have trouble getting their priorities straight. I had one client who was desperate to reach me just a few days before Christmas a few years ago. She was in dire straits. She couldn't pay her utility bills, so she had opened new accounts for them in her 12-year-old daughter's name. She told me excitedly of how thrilled she was to have been "adopted" by an "angel family" at her church, which meant that her children would receive Christmas presents. As we discussed her situation further, I asked her what other big expenses were coming up, and she told me that what she really wanted to buy her daughter for Christmas was an Xbox, a video game console that typically sells for about $300. I told her she couldn't afford it, but she wasn't willing to listen to that advice.

Q. What's the #1 concern on people's minds right now?

Vullo Pastor: Job security, to the point where many employees are sticking with jobs they don't really enjoy. While funding the kids' college education and saving for retirement used to be on the radar, these financial goals have fallen by the wayside lately; people are more narrowly focused on just making it through the year.

One of the most disturbing trends I've seen is an increasing number of employees who are not only taking loans out against their 401(k)s but cashing them out entirely, despite the big tax hit many will take for early withdrawal. People want that cash in hand, but when you see a 55-year-old with barely any retirement savings, that's not good. Robbing yourself of your own retirement is probably the very last thing I would recommend.

While there are almost always other options, too many people are using that 401(k) money to maintain a lifestyle they can't afford and they may cling to a false sense of entitlement that because they work hard, they deserve this.

Another worrisome trend I've seen is a big increase in wage garnishments by credit card companies and other creditors. If, by the time an employee comes to see me, his wages are already being garnished, it can be very difficult to set things right.

Q. How do you help employees who sit down with you for one-on-one counseling?

Vullo Pastor: It's amazing that many employees, even those making a six-figure salary, have never really studied their budget. Others are close to the edge of a full-blown financial disaster.

I'll ask clients ahead of time to bring their financial information with them to the counseling session, and I've had some who brought in an entire box of unopened credit card statements and bills.

One of the simplest, yet most important things you can do is take a look at how much money's coming in, and how much is going out. Most of my clients aren't willing to track their spending for an entire month, so we arrive at their spending habits by looking at old utility bills and so on.

I worked with an attorney once who was earning over $400,000, yet he was spending $5,000 more a month than he earned. So the problem of overspending is often the same, regardless of personal income.

If there's a negative monthly cash flow, I'll brainstorm with the client for places to cut spending. For instance, I'll warn about "bill creep," or the ease with which recurring monthly bills can increase, like when you switch from basic to expanded cable or upgrade to a higher speed DSL service.

If expenses have already been cut to the bone, we'll look into possibly restructuring high interest credit card debt into a debt consolidation loan from a credit union; credit counseling, bankruptcy and home equity loans are other options. We'll send them home with a written plan and check in with them after a few weeks and tweak the plan as necessary.

Q. It sounds like your job involves two parts financial counseling and one part psychotherapy. Is that true?

Vullo Pastor: Absolutely. If I'm working with a married couple, sometimes one spouse is very committed to making changes but the other is not on board; for example, the wife wants to keep on the cleaning people but the husband does not. It can be difficult. The counseling sessions can get very heated. I've had to leave the room because people are yelling at each other. Finances are the #1 cause of divorce.

Q. How do you get people to change their behavior?

Vullo Pastor: Because so many people are operating in the dark when it comes to their finances, it can be a real eye-opener for them to learn about the true state of their financial affairs. Once we arrive at hard and fast numbers, what's coming in vs. what's going out, I can offer clients a system that allows them a fixed amount of "fun money" each month. This is money they can freely spend knowing that all their essentials (the mortgage, utility bills and so on) are covered. Knowing what their limits are can provide security and peace of mind.

Q. Are workers optimistic about the future?

Vullo Pastor: Not really. Nearly everyone these days knows someone who's lost their job, whether it's a friend, neighbor or even their own spouse. Maybe they're employed, but they didn't get a pay raise this year, their work hours were cut or there were forced furlough days.

Q. What is at the root of our obsession with spending?

Vullo Pastor: Immediate gratification. People work hard, and they feel they deserve to have fun things in life, whether it works with their budget or not.

It's important to some people that they appear as successful as their neighbors, coworkers, friends or family. For instance, I had two clients who worked at the same company. When I spoke with the first one, he told me how financially strapped he was and described a situation that really did seem desperate.

When I met with the second man, he too spoke of the terrible shape of his personal finances and how much trouble he was in, but he mentioned the first man by name and said, "Now there's someone who really has his act together. He makes so much money. That's who I want to be like."

So what you may envy as your coworker's great success story can really be just a house of cards.

Nowhere is the sense of immediate gratification apparent than in real estate. When I delve into my clients' background, more often than not, they purchased their house with no or very little money down and can't afford the payments.

Q: Do you think that, 10 years from now, Americans will look back at this recession as a blessing in disguise because of the lessons it's taught us?

Vullo Pastor: I believe that most people are reacting in crisis mode and have not yet made fundamental, lasting changes in their financial lives. Once the money starts flowing again, I suspect that many will revert back to their old ways of spending and saving.

The depths of winter are always a good time to turn our thoughts inward and focus on "cleaning house."

No, I'm not talking about the dusting or vacuuming. I'm referring to the rejuvenating effect of decluttering one's living space. How many of us can think of closets, desk drawers, basements, attics or other stashes full of who-knows-what that's been accumulating, untouched, for years? You may disagree, but I'm of the mind that living with clutter tends to clutter the mind as well. I also believe that simplifying one's daily existence can often lift an enormous weight from one's shoulders.

Over the years, as I've read your blogs, many of you have expressed a desire to shed the burdens and responsibilities that so much excess "stuff" creates, whether it's a loss of time spent in maintaining that stuff, the loss of money spent in buying that stuff or the loss of space in storing that stuff.

And so, borrowing from an idea suggested by wowitsawonderfullife, I urge you to join me in the first month-long challenge of the New Year by committing to "purge" 30 items in your home during the month of January, whether it's unwanted books, old clothing, furniture, other household items or even old paperwork you've held onto for way too long.

The goal of this challenge is twofold: 1. Declutter your home, and 2. Make some money.

Ideally, you'll do both, but depending on the way you dispose of your unwanted items, you may only be able to accomplish one of these goals. No matter! Progress is progress!

Here's how you'll earn points:

3 Points: Sale of item on Craig's List, eBay or elsewhere.
Since we're all trying to save money, it makes sense to award the most points to those who can declutter their lives and recoup some money at the same time.

1.5 Points: Bartering the item.
Bartering for what you need rather than buying something new is easy on the wallet and easy on the Earth. However, while you're replacing an unused or unwanted item with an item you can use, you're not actually reducing your clutter, so for purposes of this Challenge, you'll only earn 1.5 points for a barter.

1.5 Points: Recycling the item.
More and more items can be recycled these days, from old sneakers to electronics.

1.5 Points: Donation.
If you can find a charitable group, family member, friend or coworker who can use your item, you'll earn 1.5 points.

1 Point: Trashing the item.
Your trash can should be a last resort, but I believe you're still making progress by decluttering, as long as you don't plan on replacing what you've thrown out.

A 3-point bonus will be awarded to those who hit the target of 30 items purged by January 31.

Now, 30 items may seem like a lot, but if, for example, you have a stack of books, count them individually and you could be halfway toward meeting the monthly challenge. If you have trouble finding items to purge and it's getting near month's end, pull out a drawer you've been meaning to clean out anyway and start there.

If I'm on my game, I'll post each week asking for progress reports and consolidate them all on January 31. All you need to do is keep a numbered list of how you've lightened your load in 30 ways.

Are you in?

I was browsing Linked In this morning, scanning postings in various groups I belong to, including the Connecticut Job Openings group. There was a note posted several months ago that's still drawing replies, 907 at last count. It's an invitation to job-hunters to provide a brief profile of themselves, their geographic location and the kind of job they're seeking.

Confirming what we already know, the recession has stolen jobs from a widely diverse group of workers, from newly minted college grads to veterans of their industries, from those just trying to gain a leg hold that could somehow morph into a real career to senior-level managers hoping to replace a six-figure salary.

Here's a sampling of who's looking for work:

- An accounts payable specialist in central Florida
- An EMMY award-wining videographer from Denver
- A laboratory life scientist in Washington, D.C.
- A media consultant in Atlanta
- A senior construction manager in San Antonio
- A mechanical engineer in East Texas
- A trilingual paralegal in Atlanta
- An MBA student willing to relocate "anywhere in the world" for an entry-level management position
- A petrophysicist from Houston
- An interior designer from San Diego
- A medical salesman from the upper Midwest
- A finance manager in North Carolina
- A publications assistant seeking work in Washington, DC, Chicago or Seattle

For some, the status of American jobs is an abstract concept built around the latest unemployment figures. According to November data from the Bureau of Labor Statistics, Michigan's 14.7% unemployment is the highest in the nation, while North Dakota has the lowest unemployment at 4.1%.

In the Wall Street Journal's long-running Laid Off and Looking blog, highly educated MBAs cope with depression, remind themselves not to take their spouse's support for granted, wonder how to overcome job anxiety during the holidays and consider ways to bypass the enforced anonymity of the online job application.

A New York Times poll of 708 jobless individuals reported December 14 that:

* More than half of unemployed Americans have borrowed money from family or friends
* More than half cut back on healthcare because they were out of work
* Almost half suffered from depression or anxiety
* 55% suffered from insomnia
* Nearly half said their financial troubles were so severe they feared they would fall out of their social class
* 40% said they had moved or were thinking of moving to another part of the country to find a job
* More than two-thirds considered or are considering a career change

Chances are, you know at least one unemployed person, if not more. We know the job market will improve with time, but for some of those living in the present, their immediate prospects appear grim. So the next time you see a jobless person, give 'em a hug.

Unemployed workers may get an early holiday gift this year if the Senate votes its approval of the COBRA health insurance subsidy extension just approved by the House.

Without action, the 65% subsidy of COBRA health insurance would expire at the end of this year. By passing the extension of the subsidy for another six months, or 15 months in total, an estimated seven million jobless Americans could see their stress levels eased as the federal government picks up 65% of COBRA monthly premiums.

The COBRA subsidy was originally designed to last for up to nine months for the millions who lost their jobs in massive layoffs between September 1, 2008 and December 31, 2009 and who had an income of less than $145,000 for individuals or $290,000 for families.

Without the subsidy, COBRA coverage eats up 83% of the average unemployment check, pushing many families to drop health coverage altogether, according to Families USA, a consumer healthcare advocacy organization.

The imminent loss of the subsidy for many of the program's earliest recipients last month spurred Congress to scramble before their holiday recess. The subsidy meant that a $1,111 monthly premium for the average family became a more manageable $389 monthly premium, according to Families USA. (Here in Connecticut, I'm paying $173 a month as an individual.)

Even if you've already received the COBRA subsidy for the full nine months and have began paying the full cost of insurance, passage of the extension would mean you could retroactively restore the subsidy for the remainder of the 15-month period.

As Ron Pollack, executive director of Families USA, pointed out, the COBRA subsidy extension is simply a stop-gap measure. "Once health reform passes, this will no longer be a problem," he said, although even if some sort of health care reform is passed, it will not likely go into effect immediately.

The COBRA subsidy extension, which is part of a $636 billion Defense appropriations bill, would also enable workers laid off through February 2010 to be eligible for the subsidy. The Senate vote is expected tomorrow.

The COBRA subsidy is money well spent and a lifeline for many who are just a premium payment away from a healthcare disaster. While billions of taxpayer bailout money benefited car-makers, insurance giants and banks (many of which accepted TARP money even as they stepped up efforts to recoup lost profits from the sub-prime mortgage crisis on the backs of consumers, on the eve of new credit card reform), the COBRA subsidy is helping everyday Americans survive one of the deepest recessions this country has seen.

Do you support extension of the COBRA healthcare subsidy extension?

When your income is erratic (or even if it isn't), every household expense is subject to scrutiny, most particularly those recurring expenses that are too easily left on auto-pilot but really add up over time. Energy prices have been especially volatile during the past two heating seasons and for the majority of homeowners living in the Northeast, heating oil ranks among the top five expenses.

There's a great deal you can do to minimize your heating oil bill, from bulking up on insulation, winterizing around doors and windows and adapting to a cooler indoor environment.

Still, unless you're Paul Bunyan and rely solely on a fireplace or stove for heat, you're going to have to bite the bullet at some point to schedule a home oil delivery.

But before you dial 1-800-OIL-NOWW, there are still ways to economize. You can save a few bucks simply by shopping around each time you order fuel. Over the years, I've narrowed possible suppliers down to the three I know consistently offer the lowest prices. (If you've signed onto a contract that locks you into a set price for the entire winter season, that's another way to go, but it's also speculative and can backfire like it did last year when customers who signed fixed rate contracts last summer of over $4.50 a gallon got burned when prices began to slide in the fall. I stopped purchasing fuel in advance after the oil company I paid for an entire winter's worth of oil went out of business, but that's another story.)

When you shop around, be sure to ask the supplier if they offer a discount for paying in cash. (In my area, you can shave off another .06 per gallon by doing this.) I also make a point to fill up my tank in the peak of summer, when prices tend to be lower. This doesn't always guarantee a lower price, but with the exception of the 2008-2009 heating season, it usually works. And finally, when I have no choice but to order oil in the dead of winter, I try to wait for a relatively mild day to do so. The delivery man who came to my home today confirmed that doing so made sense and that prices do indeed dip with even a modest rise in temperatures. Most suppliers will honor the price they quoted you, even if prices are higher on the day when delivery takes place

During the past five winter seasons, I've tracked oil prices and usage in my own home. I've certainly noticed the ups and downs in prices. Looking at the five-year period from 2005-2006 to 2009-2010, my cheapest price paid for oil was in 2006-2007, when I averaged $2.14 a gallon. That must've been a relatively mild winter as well, because I used less fuel that year, 315 gallons, than any other year since then.

2005-2006
Average price paid: $2.19 a gallon
Total gallons used: 391

2006-2007
Average price paid: $2.14 a gallon
Total gallons used: 315

2007-2008
Average price paid: $2.74 a gallon
Total gallons used: 339

2008-2009
Average price paid: $2.78 a gallon
Total gallons used: 506

2009-2010
Average price paid so far: $2.36 a gallon
Total gallons purchased: 116 as of 12/16/09

The last two heating seasons took the biggest chunk out of my wallet. I paid an average of $2.74 and $2.78 per gallon, respectively. Last week's national average residential heating oil price was $2.76 per gallon, according to the U.S. Energy Information Administration.

And while my total usage remained relatively constant in every other year, when I consumed in the 300-400 gallon range, I burned 506 gallons last winter. I can't remember, but it must've been a cold one. (The Residential Energy Consumption Survey reported in 1997 that households consumed an average of 730 gallons of heating oil each season. Hopefully, we have closed that gap since then, thanks to improved home energy efficiency.)

Averages, of course, don't tell the whole story. Checking back on a post I wrote last spring, I see that the lowest oil prices I paid in the past five years was $1.99 a gallon April 2008 (ah, those were the days) and the highest was $4.24 a gallon in June of 2008. Who would have guessed there'd be such a dramatic spike in just three months?

All things considered, I didn't feel too bad paying $2.36 a gallon today.

How do your heat bills compare?

In today's hyper-connected world, it's not unusual for job-hunters to post their resume on multiple online venues, including job boards, like monster.com, as well as professional networking sites, like Linked In.

These days, finding a job may require you to cast a wide net and do everything you can to help prospective employers find you. But be prepared for some unwelcome attention when your online profile makes it easy for identity thieves and other scammers to approach you with often elaborate efforts to steal your money or good name.

I was reminded of these risks the other day as I scanned a full in-box of email and found a note from an unfamiliar name, "Keith Miller," at an outfit called UPC Limited.

"Keith" urged me to review his job description and fill out an interview form by clicking on the provided link. Oops! I nearly did so, but caught myself in time. Instead of clicking on that link, which could contain a virus or spyware, I Googled the company name. I came up with one dead link and a London clothing retailer using the UPC Limited name, but with the .com extension, not the .biz extension given in Keith's email. So I typed the URL provided in the email in my browser window and it brought me to a site whose business seemed to be helping sellers and buyers complete eBay transactions.

Reading the website copy provided a great deal of amusement, but more importantly, it underscored the need to be ever vigilant in protecting one's personal information from scammers. Follow these six tips to expose a bogus job lead or offer:

1. If the email or website language reads like a third-grader's best efforts, misspellings and bad grammar included, think twice before responding. Bad grammar and typos could be a sign the email was written by someone living outside the United States and for whom English is a second language. Some of the most prevalent Internet scams come from Southeast Asia, Eastern Europe and Nigeria, for example.

The tagline on the UPC Limited website read, "Solutions that you need, our best propositions for you, we work for your profit." In the About Us section, a photo of a smiling Kimberly Carroll is identified as "Sells manager."

If the email lacks specific details (for example, it states they found your resume on a job board without stating which one), it's more likely to be a generic form used over and over again. If you've truly caught the attention of a legitimate employer with a genuine interest in you, they will take the time to write you a personal note, not a form letter.

2. Consider whether the job offer is related to your most recent occupation, work background or expertise. In my own case, my posted resume clearly spelled out a long track record of work as a marketing writer. Why, then, would an employer encourage me to pursue a job as a "Financial Agent" whose primary responsibility was to "manage and process orders from customers?"

Payment-transfer schemes like this one abound in cyberspace. Such jobs involve accepting deposits into one's personal account and transferring payments as directed to other accounts, which are often overseas. The job offer is really a ruse used to fool job seekers into revealing their bank account numbers.

If the job has nothing to do with the kind of work you've done in the past, it's likely a scam. The so-called employer is less interested in finding qualified candidates and more interested in snaring large numbers of unemployed individuals, a few of whom may fall for the trick. Common sense also tells you that if you receive an emailed job offer from someone you didn't contact or interview with, something's amiss.

3. Beware of email requests for sensitive personal information such as bank account numbers, credit card numbers, Social Security numbers (SSN) or your driver's license. Legitimate employers won't ask for your SSN before an in-person interview and no job offer should depend on your willingness to accept direct deposit of your paychecks (unless you're applying for a federal government job).

In the UPC Limited case, the Financial Agent job description on their website included, "A bank account to process payments." A statement like that should be an immediate red flag.

Other suspect requests for information include questions about your marital status, height, weight or age. American employers don't ask those questions because they know they are barred from doing so by U.S. labor laws.

4. If at any point you're asked to pay a fee for a work permit or for any other reason, move on.

5. Use of free email accounts suggests a low-budget or fly-by-night operation. Question the legitimacy of any employer whose email includes MSN, AOL or Yahoo as part of the address. Yahoo, Gmail, Hotmail and many others all provide free email accounts which can be created and used by anyone. Legitimate businesses won't use these services.

6. Legitimate businesses are transparent. Reputable online businesses disclose their physical address, not just an email or PO box number. In the case of UPC Limited, a physical street address in San Antonio, Texas, was provided, but no such business was listed in the San Antonio yellow pages, nor does any street called "Voigt Drive" exist in that city.

Jobs are in short supply these days, but don't drop your guard to pursue a bogus offer.

It's been nearly three years since I started this blog. The approach of year's end has put me in the mood to reassess, evaluate and quantify. Today, 102 entries and 668 comments later, I can gauge which posts were most popular with readers, based on the number of comments.

Interestingly, my most popular posts included the launch of the annual No Heat Challenge and multiple updates and entreaties to throw on a sweater. All told, the 15+ posts on this topic averaged 11 comments each, while all other posts averaged just 5 comments.

Aside from the No Heat Challenge, could you guess which posts generated the most interest? No, they didn't address some aspect of personal finance, which is, after all, the predominant theme of this blog. Surprisingly, the most talked about posts, after the No Heat Challenge, had to do with my cats. My request for help in naming Luther (2/16/09) and later, Waldo (4/17/09), each elicited 20 comments each.

What can I deduce from these findings? First, that "Theo" and "Boris" are last on the list of preferred cat names in the minds of many. But more seriously, that matters of money management are perhaps more palatable, and a heck of a lot more fun to read about, when you can participate in personal challenges, quizzes or cat-naming contests to break up the stream of more weighty reading.

So that's what I'd like to strive for in 2010: the creation of more personal challenges that we can all participate in, and in the process of doing so, motivate ourselves and others to improve their financial picture in some way, big or small.

What kinds of challenges would you be up for joining? In my challenges I'd like to emphasize strategies to reduce spending, since the ongoing $20 Challenge already addresses saving money.

I'd love to track home energy efficiency, but with multiple variables (regional differences in energy prices and weather patterns, different types of energy used and varying home square footage ), it would seem a difficult thing to measure in a national challenge.

Any ideas?

Shortly after Thanksgiving, the New York Times reported on the rapid rise of food stamp use across the country. Shockingly, there are 239 U.S. counties, from the Bronx to Appalachia, where at least a quarter of the population receives food stamps. In the cities of St. Louis, Memphis and New Orleans, the Times reported, fully half of all children receive food stamps. And it is in some of the nation's richest counties, like Forsyth County, Georgia and Orange County, California, where the use of food stamps is growing most quickly.

The spike in food stamp rolls has often followed industry busts, from the collapse of the recreational vehicle business in Elkhart County, Indiana to the slowdown in car parts manufacturing in northwest Ohio. In southwest Florida, food stamp use rose sharply along with high foreclosure rates.

One food bank volunteer quoted in the Times story was surprised to find that people seeking aid were "knowledgeable, normal, well-spoken, well-dressed. These are people I could be having lunch with."

The USDA's 2008 report on Household Food Security in the United States stated that 14.6% of American households were "food insecure" for at least part of the year, meaning that the diet of one or more family members was reduced or disrupted due to lack of money to buy food. This represents the highest rate of food insecurity since 1995, when such data was first collected.

In my home state of Connecticut, the Connecticut Food Bank notes that soup kitchens and food pantries it serves have reported an average 30% increase in demand for their services this year.

In my hometown, an affluent suburb in Fairfield County, Connecticut (population 26,000), there are not one, but two, food pantries which permit those in need to pick up groceries once a month. One of them is run by the Connecticut Food Bank, which expects to serve more than 300,000 residents this year. There is no income verification, unlike the federal food stamp program, where eligibility hinges on both income and savings. (I approached one of the food pantries, where I had volunteered several years prior, about volunteering once again when I lost my job last fall, but I was told they had all the volunteers they could use. The need for donations, of course, remains constant.)

Has hunger in your part of the world increased, decreased or remained about the same this past year? Have you ever participated in food stamp or food pantry programs and, if so, how much of an impact did it have on your family budget?

1. Embrace your inner predator.
When Waldo stalks The String, I have to admire the intensity of his concentration. In that moment when his eyes lock on their target, the outside world ceases to exist. There are no distractions. All energy is focused on his quarry. Every movement, every twitch of The String is processed and adjusted for as the animal prepares to pounce at exactly the right time. In a house cat, such single-minded attention comes from instinct and genes, but cultivated by a person, these qualities could enhance one's accomplishments where patience, commitment and clarity of mind are required.



2. Life is best savored from a lounging position.
Like good old boys who never tire of telling the same story over and over again, the Fur Boys repeatedly urge the following wisdom:

"When you lie down, the pace of life slows down."

"Take time to smell the food bowl."

"You only go through life nine times."

"Stretch, roll, yawn and repeat."

"Indulging in a little catnip now and then is good for the heart."

"Decisions come easier following thoughtful meditation, preferably in morning sunlight."



3. Always make time for play.
Waldo has the long legs and lean body of a ballet dancer. He'll readily go airborne to pursue a flung mouse. His twists, turns and pirouettes would earn him points from a television dance contest judge.

Luther has the body of a weight-lifter, strong, stocky and stout. He's not much of a jumper and is more inclined to look for a seat as soon as he enters a room. At play, he prefers to have The String dangled inches above him as he lies on his back, four paws to the wind. At all times, he maintains a perpetual state of innocent, wide-eyed adorableness, a fiction he frequently plays up to get himself out of trouble.


4. Lick your loved ones.

The expression of love can take several forms, Luther told me one day, feeling philosophical. Licking, for instance. Waldo's gentle snoring, Luther confided, awakens in him a fierce desire to show his love, and he does so by firmly placing his paws around his best bud's neck and vigorously bathing Waldo's head in a no-nonsense kind of way. Should Waldo have the temerity to protest or the poor judgment to move, the licks are replaced by jaws locked on the throat and a tussle ensues.

Leisurely sipping a glass of Zinfandel in the afternoon sun, Luther was feeling expansive and eager to articulate his feelings. To prove his love to me, his Keeper, he explained, he only needed to beam and squint in beatific joy and gratitude.

When feeling particularly demonstrative, Luther expresses his love by gently gnawing on delightfully odoriferous human toes, starting with the littlest and saving the biggest (and best) for last. He'll begin by artfully gaining the victim's trust with gentle, tender nipping that lulls one into complacency. Then, without warning, the delicate sampling of the 5 Little Piggies degenerates as the victim's toes are noshed on while Luther clamps down hard with a devilish grin on his face.

Are you better off now, financially speaking, than you were this time last year?

I pondered that question while I was answering a survey from the investment management firm that oversees a good chunk of my investable assets. It caused me to stop and think a while, because the answer was not clear-cut.

Investments

Speaking strictly in terms of investments, the rising stock market has buoyed my portfolio by 27% in just a year's time. (But what the stock market giveth, the stock market can easily take away.)

Earning Power

It's hard to overlook, however, the obvious elephant in the room; my present state of joblessness means I am most certainly worse off than I was this time last year.

Debt

Here's one more angle to look at: the balance on my only debt (my mortgage) has shrunk by about $9,000 in a year's time, helped along by sizable prepayments of principal until my layoff in September.

How do you measure your financial progress and where do you think you stand?

Being out of work can be a daunting experience that's mostly filled with anxious questions about how you're going to pay the mortgage and your many day-to-day expenses.

While the good things one can say about how unemployment affects your finances are few and far between, there is at least one positive scenario you should take advantage of if you've been out of work for more than a few months: a Roth IRA conversion.

For most investors, Roth IRAs have long been recognized as a preferable alternative to traditional IRAs, due to their tax treatment.

With a Roth IRA, you don't get a tax break when you make contributions, but after age 59 1/2, all your withdrawals, including accumulated earnings, can be taken tax-free.

In contrast, all or a part of your contributions to a traditional IRA may be tax deductible, which could lower your taxes. You will be taxed, however, on withdrawals, and your tax rate will vary according to what tax bracket you fall in at the time of withdrawal.

While you must take minimum distributions from a traditional IRA by age 70 1/2, there is no such requirement associated with Roth IRA withdrawals, making them an ideal tool not only for retirement, but for passing assets on to heirs.

Many workers believe their tax bracket upon retirement will be higher than in their earlier working years, making Roth IRA conversions an attractive option.

Yet the stumbling block for some has been the sizable tax bill that can often come due from such a conversion, since the amount converted is added to your income and is subject to tax.

That's why long-term unemployment or underemployment can make a Roth IRA conversion a much more doable event with a much less painful tax bite.

In my case, I was laid off in September 2009, so I will still have significant 2009 income to report when I do my taxes. But given the extraordinarily poor job market, it's conceivable I'll remain unemployed for much of 2010; what income I do earn, aside from unemployment benefits, may come from freelance writing or other temporary work assignments.

If that's the case, or for others who have already been out of work for much of 2009, this could be an ideal time to take advantage of your lower tax bracket during this time and convert your IRA to a Roth IRA. The conversion could cost you very little.

In my own case, I've been wanting to convert at least a portion of my traditional IRAs into Roth IRAs for some time, but the subsequent tax bill made me reluctant to do more than think about it. If my unemployment continues well into next year, however, my income will be abnormally low and I could fall into a lower tax bracket.

Remember when calculating your total income to include any unemployment benefits you may be receiving.

A Roth IRA conversion now might still make sense for you, even if you've only been out of work for a few months. If, for example, your salary when you were employed placed you close to the minimum income within any of the federal tax brackets. In a case like this, even a small reduction of income could bump you into a lower bracket.

Remember, you can only convert to a Roth IRA if your modified adjusted gross income is under $100,000 in 2009. And this limit on income disappears next year.

Consider such a tax-advantageous move only if you have adequate savings and won't hurt yourself by paying the IRA conversion tax bill. But then again, if your only income is unemployment benefits or sporadic, part-time work, the tax bill could be pretty manageable.

Please consult a certified finance planner or tax professional to determine whether a Roth IRA conversion is suitable for your needs.

I am not sure who is still in the contest. I believe at last count there were 3 or 4 of you, including ImaSaver and MonkeyMama?

If you are STILL living with no heat on in the house, could you please email lbruno@gannett.com.

She is especially interested in talking to you if you don't live in the Northeast.

She's a reporter with USA Today and she is spring-boarding off a recent story on the no heat challenge that appeared in the NJ Star Ledger.

This is a great opportunity to get some exposure for your blog and offer your thoughts on what it's like to live with no heat.

Here's who has already turned on the heat:

Canoineag (Denver): Oct. 1
Dido: First week of October
creditcardfree (Iowa): Oct. 3
wowitsawonderfullife (Toronto) Oct. 8
AnnLink (Buckeye)(Ohio): Oct. 8
Boomeyer: Oct. 10
Fern (CT): Oct. 12
JoanoftheArch: Oct. 12
NorthGeorgiaGal (GA): Oct. 16
LuxLiving: Oct. 17

To Debtfreeme, Househopeful, monkeymama, imasaver, momfrommissouri, Patrick and PrincessPerky, are you still in the contest?

With temperatures expected to reach into the low 70s yesterday, I knew it could be one of my final chances to take Little Minnow out for a fall foliage cruise. So I set out yesterday and put in on the lake at one of my hometown's boat launches.

I've learned from experience that one can look mighty foolish getting into a kayak in shallow water, only to find yourself unable to move because the hull of the kayak is wedged on the water's bottom. Unless you have a boating companion who can push you out, you really need to wade into deeper water so the kayak is truly floating before you get in. So, because I knew I would get wet, I wore a pair of sweatpants with those elasticized cuffs on the bottoms. I scrunched them up to my knees before wading in. I was expecting freezing cold water, but in truth, the air temperature was so warm it didn't bother me.

Once on the lagoon that leads out to the lake, I can only say the view was exquisite. It reminded me of a John Denver song.

Like a night in the forest
Like the mountains in springtime
Like a walk in the rain
Like a storm in the desert
Like a sleepy blue ocean
You fill up my senses



The lake really did fill up my senses. A warm breeze riffled through low hanging tree branches and sent cascades of leaves floating down to the water's surface. That's what I heard, too...the wind in the trees and acorns raining down, some of them plunking into the water. Even the air seemed incredibly fresh and clean.



Once through the lagoon and on the lake, I decided to head south toward the dam, hugging the shoreline. The rhythmic sound of my paddles dipping into the water put me in a meditative state as I gazed upon the birch, beech, hemlocks, maples and mountain laurel with their impressionist-like palette of rust, gold, rose, red and amber foliage.

One or two motor boats made a few passes down the middle of the lake, creating broad swells that smacked against the banks of the lake. I thought it ironic that these same boaters, who evidently enjoy being on the water as much as I do, could be so disrespectful of the environment. There was quite a bit of floating debris, all of it plastic. I fished out about a dozen objects ranging from a motor oil bottle to bait containers, along with the usual food and beverage containers.

When I neared the dam, I turned round and headed back from whence I came. I considered crossing over to the other side of the lake, but in truth I was afraid of getting mowed down by one of the motor boats patrolling up and down. Kayaks are low-lying boats and I doubt you'd even catch my profile in the bright sun, doing about 30 mph, until you were practically on top of me.

So I contented myself with the same view, only in reverse. It was a picture-perfect day, so no regrets.

The cost of a kayak, roof rack, life vest, paddle, anchor, and assorted pulleys and ties about 5 years ago? About $1,500. Two-and-a-half hours out on the water in late October? Priceless.

I decided to look up in my old blog posts what date I finally turned the heat on last year. I figure, that's the date I want to beat this year, by at least one night, preferably more!

I turned on my heat in 2008 on October 18.

Brrr. So i have a few more weeks to go, and it got mighty chilly here last night, down to 59 degrees inside.

It's harder this year because now I'm home all day long.

As for who won the No Heat Contest last year, I see from a December 13 08 blog I wrote that I still had, as far as I knew, 3 semi-finalists:

1. sevenofseven - Northern California
2. nomorecredit- NY
3. swimgirl - Northern California

No one ever got back to me, I don't think, so I'm not actually sure who won!

For anyone who wasn't around these parts last year this time, a bunch of us entered a challenge to see who could hold off turning on the heat the longest.

There's no special prize if you win, but it's a lot of fun (umm, yeah, right). Let me know if you're in; I'll make a list and try to update it (who's caved, who hasn't) every weekend.

May the best frugalite win!

I was really waffling on how to spend my last day at home. The weather, as I've mentioned, has not been cooperative, but today is a decent day and not as humid as it's been.

I was torn between kayaking, bike riding or tackling my "to do" list.

After reading MonkeyMama's post, i decided to do the kayaking. I've only been out once this summer, and I'd been wanting to go on a quiet weekday when I knew I'd have the lake to myself.

I was out for 2.5 hours and got another good upper body workout in. Only three boats passed me; otherwise, complete solitude. The sound of my paddle dipping into the water becomes rhythmic and so relaxing. Still, I could feel my stomach muscles tightening as I put some "oomph" into my paddling.


Saw 5 great blue herons. (It's possible some were the same bird.)


Emerald green waters


Rocky shoreline

Day #1 of heat wave....I decide to take the kayak out, alone, for the first time in about 2 years.

Although it's not my favorite spot, I went to the closest put-in spot in my town. I headed for the town boat ramp on Lake Lillinoah, about a mile or so past the state boat ramp on the same road, same body of water. They call it a lake, but it's really just a very wide river.

When I arrived at 7:50 a.m., the gate was closed, causing me to do a u-turn back to the state boat ramp a mile down the road.
There were about a half dozen vehicles and empty trailers already in the parking lot.

I unloaded the boat and pushed out into a channel that opens into the lake after about a half mile.



Today's the first day of at least a week-long heatwave with temps in the 90s, so I wanted to get an early start, and in fact, the fog was still overhanging the water, so much so that I worried a powerboat bearing down on me might not see me.

I hugged the shore and entertained myself by looking at all the houses.


Some are quite grand.


And some homes can't even be seen from the lake.


I startled a great blue heron on the dock (at right) who silently took wing when I came too close.


The first hour of my journey was calm and quiet, but 9 a.m. seemed to be the magic hour when a jet ski as annoying as a high-pitched, buzzing mosquito buzzed around. Mostly, there were just people fishing from their boats.


I went as far as the bridge, then turned around. I didn't want to overdo my first kayaking trip in a while, even though it's wonderful upper body exercise for me.

I made it back in half the time, due to the current.

There were more people unloading boats in the water, and an older man with his own kayak offered to help me get my boat on my car. Since I'd been paddling for a few hours, I was tired, so I said yes.

I enjoyed it so much that I hope to go again next Friday (a day off) when I think it might be quieter on the water. And I want to leave from the town boat ramp, about a half mile further north, so that I can paddle beyond the bridge. I'll have to call Parks & Rec to see when they open that gate up on a weekday.

And maybe I'll pack a simple lunch of some sort.

Yes, I won the Potato Lottery!


Potatoes! Alleluia! I am blessed!

I actually returned the potato seed to the nursery because they were shriveled and wrinkled. I planted them, but then became disgusted at their black, blotchy appearance and convinced myself they were no good.

I was so surprised when healthy green shots sprung up two weeks later.

Then I endured three consecutive weeks of nightly slug picking. They decimated my once healthy plants despite my best efforts.

The tops began dying back a few weeks ago, and because they never had a chance to flower before the slugs took over, i figured there'd be no tubers.

WRONG. I harvested half my crop, only becus mosquitoes were biting. I dug up 6 lbs. of big, beautiful, red potatoes!!!!

I hereby declare tomorrow Potato Salad Day!

I'm roughly halfway through a 30-year fixed rate mortgage.

My balance is low enough that I don't think it would make sense to refinance from my current 6% rate, given the closing costs.

I would love to be completely debt-free.

Yesterday, I came upon an

article written by some researchers at Boston College Center for Retirement Studies.

They went into great detail and explanation, but the bottom line of their paper was that, given today's current low interest rates, it makes sense for most people to pay off their mortgage if their mortgage is more than 2%.

Tax deductions on the interest paid really don't make up for spending thousands extra on interest payments, they concluded.

For example, I'm looking at my current amortization table right now. I just sent in my August payment, and $316 of my total payment was purely interest.

So this loan is costing me (right now) an extra $300 and more in purely interest each month, month after month. In my mind, it's like throwing money away. I get nothing extra for that money. Yes, it slowly decreases, but still, why not pay it off when I have the money sitting in various mutual funds that are performing pretty horribly?

If I continue throwing extra money at it in the form of monthly prepayments, I will still pay it off in six more years.

However, if I chose to pay off the entire loan now, or perhaps a big chunk of it now, I could save up to $12K in interest.

The money I would use to pay off all or a portion of the mortgage would come from one of my taxable mutual fund accounts.

So, looked at this way, it seems clear that I'd be better to pay off a 6% loan than let the money I'd use for that sit in a fund that's earned me about 4%. I also pay an annual expense charge of 0.83% on that fund.

However, I'd probably take a loss on the withdrawal from that fund. I guess a pretty big loss since as I said, I've had that fund a while and I know most of the contributions I made to it were made during the bull market.

But I'd been wanting to move that money to another account anyway in my gradual moves toward having only low-cost index funds for investments and simplifying my investments overall.

I think that was the important distinction in the Boston College analysis. They were only considering whether it was worthwhile to pay off a mortgage using money from a money market account, which as you know, won't earn more than 2% these days. In that context, they said, it would make sense to use money market money earning 2% to pay off a mortgage.

Using stock or bond mutual funds is a whole other beast because you'd have to factor in the loss you'd lock in if you withdrew that money from investments you made near stock market peak, paying higher prices per share than now. So maybe it doesn't make sense.

Another valid concern in paying off the mortgage is the loss of a great deal of liquidity, particularly in these uncertain economic times.

Yet another risk is that while I say now that after paying off the mortgage I would throw all savings into retirement, I may not be so diligent in reality.

One alternative would be to pay off only a portion of the outstanding mortgage and so preserve a greater portion of my liquidity while still reducing total interest paid on the life of the loan.

What do you think? Your feedback is welcome!

I've made a lot of progress with Waldo in just this past week. I've had him exactly 30 days today.

For the first time, he emerged from under his hiding place to eat his dinner last night while i was still standing there. I was amazed. Up til then, he'd waiting until it was dark and i had left the room before he'd eat.

He's eating more in general, not just the one evening meal.

He's also cautiously eaten a few snacks I've tossed in his direction.

Even better, the last 3 nights, we've spent a good 15 or 20 minutes playing with the cat dancer. He will paw and pounce on and bite the cat dancer and i even got him to enjoy rolling around in some catnip last night.

He also used the litter box while i was in the room, for the first time while I was there.

He will also groom himself while Lither and I are in the room and sometimes, when he looks at me, he closes his eyes. This is all BIG progress.

He also has made some cautious forays around the room while I'm in it, sticking close to the walls. I can see him eying the entryway to the room and it's clear he'd like to explore, but my shelter contact said conventional wisdom is not to let them have run of the house until they bond with you, and we aren't quite there yet.

It's tempting to just let him access my upstairs only, as i have a door at the top of the stairs. I don't know if he'd explore during daylight hours, but i may leave the upstairs closed off during the day, just to see. I decided against doing it last night because it would probably ensure a sleepless night. Luther would probably shadow and stalk Waldo as Waldo tried to explore. To Luther, who so wants a playmate, it's just a game as he is lord of this house, but Waldo is still new to it.

Waldo's brother, Scottie, was adopted by another woman who said that even after 8 months with Scottie (also feral) she could pet him, but only on his terms.

Sometimes, what you long to hold is sitting right in front of you.

I picked out my second cat. No, I don't have him yet, but I hope to in another week or two. I decided to go with "Stripey," the large male tabby who time and again has been passed over by potential adoptees.

As befitting of an older male cat, these are the names I'm mulling over. Please tell me which TWO you like the most:

Arlo
Calvin
Chester
Clyde
Theo
Waldo
Bartholomew
Sebastian
Boris
Otto
Basil

I am leaning most toward "Waldo" or maybe "Basil."

Anyway, as I said, I don't have him yet. My last contact with my shelter contact was when she emailed me yesterday saying they were going to have a traveling vet come to the shelter to give him his shots and put him in the carrier for them.

Luther and I have gotten into a nice lifestyle here and while I can still see he's got oodles of energy and needs more company, I also don't want to upset/disrupt our loving little household.

On the plus side, everything is pretty much cat-proofed at this point, and I don't think an older cat would be likely to get into more mischief than Luther already has. My shower curtain is now permanently thrown over the bar since Luther clawed the bottom. Same goes for my bedroom floor-length curtains. (Unfortunately, he managed to get one down and there are small holes in one panel. I really had to grit my teeth then.) I have vinyl blinds in several rooms and I've been careful not the let the cords dangle, as that is just like waving a raw steak in front of a hungry cougar. He HAS to attack.

If I can see fairly early on that Stripey won't hurt Luther and they more or less look like they'll get on, that would be huge for me. I am prepared for it to be weeks (maybe more) for this cat to warm up to me. That's ok. I can be patient. I just would find it very difficult to have to keep the 2 cats separated for any length of time, since I could see closing myself in whatever room i put Stripey in will cause Luther to start meowing and carrying on. (Plus, my upstairs bedroom doors don't close to well; they tend to pop open.)

I plan to put Stripey in my office here. Luther and I spend more time in my bedroom, so during the time when Stripey is still acclimating, this will be a quieter area where I don't HAVE to be.

I am pleased as punch to have pushed my emergency fund over the $10,000 mark with today's contribution. (I do a transfer every payday.) I'm about 41% toward my goal of 8 months worth of living expenses. I am 2 months ahead of schedule with having saved that amount, and it's because I threw my tax refund in that.


This is part of my daily commute. These daffodils cover a wide area. (The homeowners live across the street.)