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In the past I have been in financial prison while making a ‘good’ living, and now find myself more financially ‘free’ while making less money than I’ve earned in almost 20 years. I think financial freedom is mostly about attitude. Freedom means that I have choices, and mostly, choices are about having an awareness of what my choices are.

e.g. I bought gas for the car today and when I wrote down the debit in my checkbook and spending notebook (that I carry everywhere) I realized I had not spent any money in almost one week. I also realized that although it is two days til payday, I have over $250 in my checking account. (not including a small amount in savings.) When I was earning three times my current income in the early 1990’s it was rare that I had any money by two days before payday, making those last couple of days before payday very fearful.

I could have chosen not to buy gas today and instead walked or taken the bus everywhere I need to travel, in my city it is not an easy way to function but it is doable. So buying gas for the car was a choice. However it was not a choice I wanted to make.

However, some “spending less” choices I do make. I choose not to have cable TV. I have “rabbit ears” and get seven channels, which is about six more than I need. I rarely buy clothes, (probably about $200 per year total) and usually they come from Goodwill or TJ Maxx or big sales at Macy’s. I rarely eat out, but I eat very well at home. I NEVER buy coffee out, even though I am a coffee snob. Instead, I buy fair trade organic coffee a pound at a time and make it at home. A pound for $10 lasts over two weeks, compared to $2 per cup in a cafe.

I have a busy social life, I am involved in church and civic life, I have family and relationship commitments, I teach and consult and write professionally. I go to cultural events (many are free or super cheap in my city.) I read a lot. (mostly used books or library books.)

My life is rich and full and I use my money is as a tool to make that happen. I also donate ten percent of my gross to my church, which is heavily involved in social justice causes.

At times I get wistful about things that I want or places I’d like to travel. At some point I will make a choice to shift some of my money toward those things, but I feel financially free about 90 percent of the time in my current lifestyle.

Part of my money goes toward saving and part on paying off old debt but both are at a pace that is workable for both me and my creditors. I don’t let it make me crazy or compromise my quality of life.

Every time I make my mortgage payment I am making a choice. Every time I pay my electric bill I am making a choice. The consequences of not making those payments are not consequences that I want to experience. However, it is still MY CHOICE.

I don’t know what the meaning of life is, but I think that if something happens to me tomorrow, I will be much more satisfied with my time on earth living how I live today than if I had spent the last several years sacrificing everything I enjoy in order to put more money in the bank, in order to have “financial freedom.”

“To Have More, Desire Less.”

Kelley wrote recently with the sort of dilemma I get asked about all of the time: Is it better to invest or to prepay a mortgage? We’ve covered this topic in the distant past, but it’s time to review the debate for current readers. First, let’s look at Kelley’s e-mail:

My husband and I are on the right track. At age 25, our only debt lies in our home mortgage. We have the six-month emergency fund in place, I currently meet the 3% 401(k) match offered by my employer, and I started a Roth IRA for myself and my husband last year. I started each Roth IRA with $4,000.

My financial advisor recommended for us to max out each of our Roth IRAs each year. My husband disagrees. He thinks paying off the house is a bigger priority. Starting this year, we’ve made an extra payment on our house each month. If we continue doing this, we can have our house paid off in nine years rather than 30 years. However, we can’t do both.

Currently we’ve decided to throw $1,000 into each Roth each year until the house is paid off. Is this the wise decision? Or is it better to put more toward the Roth IRA and less toward the house?

I understand either option is good because I’m saving money. I’m just curious of which route would be wiser.

Kelley’s right: Both of these options are good. This is like choosing between an apple and an orange. Both taste good, and they’re good for you &madsh; but is one better for you in the long run?

What the experts say

Three years ago, when we last covered this topic (holy cats! — where has the time gone?), I collected the following roundup of advice from personal-finance books:

• Ric Edleman (Ordinary People, Extraordinary Wealth): Never own your home outright. Instead, get a big 30-year mortgage and never pay it off — regardless of your age and income. “Every time you send an extra $100 to your mortgage company, you deny yourself the opportunity to invest that $100 somewhere else.”




• Suze Orman (The Laws of Money): Invest in the known before the unknown. Paying off your mortgage offers a guaranteed return on investment. “You cannot live in a tax return. You cannot live in a stock certificate. You live in your home.”




• Elizabeth Warren (All Your Worth): Save 20% of your income. Use 10% for retirement savings, 5% to accelerate your mortgage, and 5% to save for future dreams. “Paying off your home also does something many financial planners neglect to mention: It gives you freedom. Once that mortgage is gone, just imagine all the freedom in your wallet.”




• Dave Ramsey (The Total Money Makeover): Prepay your mortgage if you can, but only after you’ve saved an emergency fund, and only if you’re putting at least 15% of your income toward retirement. Don’t use a program designed by a broker; use your own self-discipline.




• Dominguez and Robin (Your Money or Your Life): “Pay off your mortgage as quickly as possible.” This book, too, was written when interest rates were higher. Also, the authors emphasize frugality over investing.

Financial authors don’t agree on this subject. Maybe the personal finance gurus writing for the web can clear things up?

• Liz Pulliam Weston at MSN Money: Don’t rush to pay off the mortgage. “You’ve got better things to do with your money, like saving for retirement, building an emergency cushion or even living it up a little.”




• Walter Updegrave at CNN Money: If you’ve funded your retirement, and if it will make you happy, then pay down the mortgage. Otherwise, it makes more sense to invest.




• Laura Rowley at Yahoo! Finance: Using very conservative figures, investing instead of prepaying the mortgage yields an extra $400 per year. If you feel compelled to pay down your mortgage, do it. But realize you’re paying a price to do so. (She offers more details at her blog, as well as tips on how to estimate the investment return you need to earn to make it worthwhile.)




• Bankrate: Pay down your mortgage if your investments would be conservative. Invest if you’re planning to do so for the long term.




• USA Today: It depends on your income, your monthly expenses, your risk tolerance, and your desire to own your home free and clear.




• Kiplinger’s: Invest unless you’re near retirement




• The Dollar Stretcher: Mathematically, it makes more sense to invest, but it all depends on your risk tolerance.




• My fellow pfbloggers at Bargaineering and Million Dollar Journey recommend that a person do a little of both: pay down the mortgage some and invest some. Free Money Finance says: “If you have the discipline to save/invest the money you would be using to pay off the mortgage, it’s likely that saving/investing is the better option. But if you’re more the “average” person out there managing your money, I still believe it’s a better option to pre-pay your mortgage.”

The Rowley article offers some interesting background to this debate:

Why do so many people choose to put extra money into a mortgage when other options would likely increase their wealth? “This is really remnant of Depression mentality that has persisted from generation to generation,” says [one expert]. At the time, most mortgages had one- to five-year terms, with a lump sum payment due at the end.

“Any shock to income meant you couldn’t afford your payment — mortgages were much more susceptible to economic uncertainty,” [the expert says], and roughly one-quarter of Americans were unemployed during the Great Depression. “It’s fine to pay down your mortgage if it gives you peace of mind, but you should recognize what that peace of mind costs.”

If you’re facing a similar decision, you may find this calculator useful: prepaying your mortgage vs. investing.

The bottom line

My conclusion in 2007 (and the one I still hold today) is that unless your mortgage rate is very high, it makes more sense mathematically to invest your money. But most gurus agree that psychologically, you should do what works for you. If paying off your mortgage would take a weight off your shoulders, then pay off your mortgage. Sure, you might be losing a bit in the long-term, but you’re still making a smart choice. As I said earlier, it’s like choosing between an apple and an orange. One may be better for you, but they’re both good.

Ultimately, I kind of like the choice that Kelley and her husband have made. They’re prepaying their mortgage and putting some toward retirement. But enough of what I think. Kelley really wants to know what you think.

Which option is better? Should she and her husband be pumping as much as possible into their Roth IRAs? Or should they be paying down their mortgage as quickly as they can? Have you been faced with a similar dilemma in the past? What did you choose to do? And would you make the same choice again?

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Personal development books aim at helping people improve themselves and their quality of life. Personal development books are really about self improvement. Through personal development, a person can become happier, more focused, and more successful. Personal development books can be about almost any topic that will aid a person in taking charge of his or her own life. For example, you may find personal development books on personal finance, goal setting, parenting skills, conflict resolution skills, and/or productivity. There is no end to the topics that can be covered. What all personal development books have in common is that they help the individual to focus efforts on gaining control of his or her actions, to be able to achieve results. Personal development books seek to have the individual take responsibility for the self. Once this is achieved, the individual is able to focus and pay attention to different areas in his or her life, and cause positive changes and meet personal goals. Personal development books are helpful because the individual becomes more satisfied in life, by being able to make things better. Personal development books provide insight, and how to use that insight to achieve results. For example, the individual might have had problems with finances. Through reading a personal development book about personal finances, the individual can learn how to take control of his or her finances, and achieve financial success. Or, a person may have conflicts with friends and family. A personal development book about conflict resolution can help the individual get along with friends and family and improve these relationships. Here are ten top personal development books:

1. Emotional Intelligence, by Daniel Goleman. This book discusses how emotional intelligence is more important than intellectual intelligence in determining whether a person is successful. By gaining emotional intelligence skills, one can improve the quality of their relationships and life. Some qualities of emotional intelligence include self-motivation, compassion, and empathy for others.

This book talks about how poor relationships can prevent one from having success in other areas, such as one's career. There is guidance in the book as to how to go about improving one's emotional intelligence, even for children. To do this, the author goes into the understanding of one's own feelings, which leads to the ability to be able to take control of these emotions and focus them into productive activities. The author also teaches how to read other peoples' emotional responses to relate to other points of view. In turn, this understanding can help one be able to work with someone else and come to mutual agreements on decisions.

I highly recommend this book. The information is presented in a clear, easily understood format with direct instructions on how to go about understanding and developing emotional intelligence. The book has solid ideas that are formed into clear cut beliefs and directives. The book is of incredible quality, and the information is extremely effective. I do believe that my background in psychology and years of bartending experience helped me to understand what this author was talking about and relate. Someone who has no background in relationship issues might need to read the book a few times before grasping everything entirely. I do feel, however, that even a beginner to the subject will find many of the topics and discussion useful.

2. Get the Edge, by Tony Robbins. Any book by Tony Robbins is worth reading. His books are mainly aimed about taking charge of one's finances, but each of the books also deals with goal setting. In this book, the author talks about his personal experiences of times when he had financial difficulties. The book goes on to tell about when he decided to make changes, and how he went about making changes to improve his personal finances. The author also gives examples of other people who have had tough roads to travel but have been successful doing so.

Reading a Tony Robbins book such as Get the Edge is very motivating. You feel a connection with the author and with anyone mentioned in the book. If someone else can come from financial desperation, so can you! The book's quality is unquestionable. As for the effectiveness of the information, the stories bring the idea of the book to life, and help readers relate to what is trying to be conveyed. This is a must read book.

3. Remembering Wholeness by Carol Tuttle. This book is about how all individuals are whole, and how we sometimes get off track of our wholeness. The book talks about energy, and how an individual's energy may be blocked, as well as how to unblock the energy. The book has many chapters that discuss such things as disease, depression, negative emotions, and how unblocking our energy and freeing our minds can get rid of many physical ailments.

Remembering Wholeness is a good book to read because it separates each idea into a chapter and gives examples of personal stories. You can read each chapter separately and realize the theme to that chapter that has to do with wholeness. The book's quality is high, because of how the book is organized. As for effectiveness, the book effectively conveys the energy theories and shows vivid examples of the theory. One is then exposed to how to heal and become whole. The book can take some time to understand for those who have never been exposed to this type of information. I was lucky enough to personally be exposed to it in a psychology of personality class at Shepherd College with the great professor Irving Tucker. Many find this book spiritually motivating as well, although any one not religious or spiritual will still get alot from it.

4. The Law of Attraction by Esther Hicks and Jerry Hicks. Although this book is based on religious/ spiritual principles, it is still an excellent read for those who are nonspiritual/ nonreligious. The book helps us understand how we attract what we focus on and think about. If we think we'll be rich, we become rich. The book is aimed at helping people develop the skills to think about what it is that is desired to be achieved, and to make this happen. The book is easy to read, and it gives clear examples of how to work its principles. The quality of the book is high, in that the book is easy to understand and follow.

5. Think and Grow Rich, by Napoleon Hill. This book is about building wealth. However, like Tony Robbins' books, it also talks about achievement in general. The interesting part of this book is that the author actually interviewed successful people like Theodore Roosevelt and Graham Bell. This makes it interesting and helps its effectiveness. The book quality is high in that you can tell many years were spent compiling the stories you will find from the interviews with famous people. The book has easy to understand instructions on how to achieve goals. Even though the book was not just written this year, the principles in it surpass time.

7. Forgiveness, by Michael Henderson. I found this book to be personally motivating because one of my main road blocks in life has been to stay angry at people about everything. This book talks about how to get past the anger and hatred and forgive, so that one's energies are freed for other pursuits. The book is good in quality, as it tells stories of different people who were wronged by others and were able to forgive. These examples make the book effective in what it is trying to show. Forgiveness shows how to recreate peace and hope in people who have turned toward hatred and resentment. This book would be useful for anyone who is holding on to a grudge that is affecting his or her daily life.

8. You Just Don't Understand, by Deborah Tannen, PhD. This book explores the bridge between men and women, and how men and women can understand each other so they can have effective communication. By understanding the opposite sex, you will be able to fulfill more of your own dreams and goals when you are met with open arms instead of resistance when working with men or women. The book is highly effective in getting the point across of how to understand the opposite sex. However, I will admit that I don't know that men will ever totally understand women or vice versa! As for quality, the book easily explains how to understand the opposite sex.

9. Fit for Life by Harvey and Marilyn Diamond. Some may not see this book as a personal development book, but rather as a weight loss or healthy eating book. However, I feel that personal development includes being able to take control over one's eating habits and weight, and think this plays a major role in self improvement and self empowerment. This book gives guidelines of how to eat and when to eat, not just what to eat. The insights provided have been tested over time with the authors, and I thus find the quality of the book very high. The book is effective in showing how to take control of your eating habits. It does this through showing what is behind the principles in the book, and then how to make them work. The book is very well organized.

10. I Hope You Dance by Mark D. Sanders and Tia Sillers. This is a simple little book that is very precise and to the point. If you actually get involved in your life and take chances, you will find the success you seek. If you don't have alot of time to read a book that takes days or weeks to finish, this one can motivate you to enrich your life in a few pages. The book really talks about what is in the song I Hope You Dance sung by Lee Ann Womack. We find that she didn't write this song, but was allowed to sing it by the two authors of this book and the song. As for effectiveness, the book is able to give you hope from just one reading, and it can be read over and over again anytime you are lacking in inspiration. The quality of the book is above average, with its on point examples and words to live by. I highly recommend reading this book and listening to the song.





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