With the constant fluctuation of economic indicators, often conflicting advice of leading investment gurus, and the legal battles of Wall Street, even the savviest investors are looking hard at their portfolios and re-assessing risk. Consumer indicators are shaky, unemployment (though stabilizing) is at historic highs. But smart investors still have options, and it usually makes a lot more sense to invest your cash wisely rather than hiding it under the mattress. Remember to keep some assets liquid for financial security, although most of the options below have a very short time frame if you need to convert to cash. A carefully researched, planned approach can help you earn a return on your hard earned dollars without getting in over your head.

1. Treasuries (“T-bills”)

T-bills are backed by the government and are considered extremely low-risk investments. These notes are issued to raise funds and pay for government projects, and are some of the most solid investments you can buy. After all, you can choose the maturity date according to your planning needs, and time frames span from several weeks to several years, with varying levels of return depending on the time frame. T-bills are usually offered in increments of $100, and within the past two years the government decreased the minimum investment from $1000 to $100, making these an accessible investment regardless of how much you have to invest.

2. Bond Funds

The principle behind bond funds is basically that of a mutual fund comprised of bonds rather than stocks. Offered by the government and by investment firms, these diversify types of bonds and allow for a higher return. By combining the low risk of a bond with the potential for higher than average returns through different bond vehicles, you get the best of both worlds with a lot of downside protection. Make sure to educate yourself on the types of bond funds as there are a plethora of options out there.

3. Money Markets

Banks are competing hard for your deposited dollars these days, and this is one case where consumers can benefit from the current economic downturn. With so many competing offers, you may snag a higher interest rate on a money market account than some bonds and CD’s. A monkey market account consists of relatively low risk, high quality short term investments (similar in theory to a type of mutual fund). A few caveats- the higher the amount of cash, the higher the rate you’ll likely be offered, and make sure to check to see if the rate is fixed or a ‘teaser’ rate that is only applicable for 90 days (or some other finite timeline). Money market accounts are FDIC insured up to $250,000.

4. CDs

CD’s are notorious for being safe places to stow cash. Rates vary based on time frame, like bonds, but Certificates of Deposit are issued by banks rather than the government, and have a locked interest rate. Typically, there’s only a small penalty if you need to liquidate the CD before it matures. And while rates aren’t as high as the return on stocks or some bonds, it’s still a great way to earn some interest on your cash.

5. 401k/Retirement Accounts

Employer sponsored 401(k) plans offer a place to park pre-tax dollars to help save for retirement. While many employers cut matching contributions during the recession, even a 1% match is free money. Allocate your retirement portfolio according to your risk tolerance. If you’re self employed or your employer doesn’t offer a match, consider a traditional IRA or a ROTH IRA based on your tax needs and years to retirement.

When she’s not watching the DJIA tank, Melissa Tamura writes about online schools for the Zen College Life blog. She most recently ranked the best accredited online colleges.

Before my husband went on disability, we stopped spending money in order to increase our savings. We’ve found that our spending has actually been much lower while he’s been out of work, but we also had a few unexpected events develop where the savings has come in handy.

Delays in Disability Pay
The first issue is delays in processing disability pay. We were prepared for it to take up to a month to get the first check, so we needed to have at least one month’s expenses in the bank. As it turned, we got the first check in two weeks, but it gave us peace of mind anyway.

Being on Disability Longer than Planned
We initially planned for my husband to be out of work for two months. Due to a complication, that timeline stretched out to three months. We reached that point, and another small issue arose. My husband won’t be returning to work until three and a half months after he went out, and he may not be full time at first. Fortunately, we still have savings to cover any gaps, because our spending will start to rise again once he returns to work.

Gaps in Disability Pay
The initial disability application had an end date of April 1. At the end of that period, the state sent us an extension form, but it took a month to restart the payments from that point. We received back pay, but our check account got a little low during the gap period because we also had a plumbing emergency and some work done on the kitchen. Again, because we’d saved up, we were able to cover the gap without a great deal of stress. We were close to transferring money from our savings, but the checks arrived just in time.

So far we haven’t had to spend any of our savings, although we will when the plumber finally asks to be paid. We were very fortunate to be able to plan for disability, but this is yet another reason you need an emergency fund. California provides state disability pay (funds come from employee payroll taxes), but most other states do not. If you don’t have disability insurance, or your disability coverage is taxable, make sure you have enough money to cover a three-month shortfall. You’ll be glad you did you or a family member suffers an accident or illness.

I’ve been on a slow burn for a few weeks over something my husband said. First, a little backstory. We helped found a small non-profit about ten years ago. For several years, we had to provide loans to the org to get it through some shortfalls. We’re actually still owed about $300. So, the other day my husband was speaking to one of the other board members about a current shortfall and said, “They expect Aryn and I to cover it, because we’re rich.”

Folks, I hit the roof. We are NOT rich. In comparison to the other board members, we’re certainly well-off, but we’re not rich by any stretch. The mere suggestion that we’re rich, or that he was telling someone we’re rich was infuriating. If we lived in Kansas with our income, we’d be rich. In LA? Not so much.The very idea that we’re rich makes me stabby.

What Is Rich?
In my mind, rich people earn more than $500,000 a year. According to Obama, it’s families earning more than $250,000. I know people in both camps, and neither would say they’re rich. Again, it’s partly location. In Kansas, that would be rich. In California or New York? Most definitely not.

Stretching the Middle Class
According to Wikipedia, the middle class starts at $65,000 for a family, and maxes out around $166,000. Of course, these are squishy numbers. The upper middle class is defined as a family earning more than $100,000. In my view, that upper threshold is low – in coastal states you can be well beyond $166,000 and still be upper middle class.

Why I Consider Us Upper Middle Class
I grew up upper middle class, so that’s a comfortable spot for me. I feel like we’re there. My husband was more staunchly middle class, so being upper middle class feels rich to him. We earn a comfortable income with two higher degrees between us. We also budget carefully, because we have many of the expenses associated with upper middle class families, like a large mortgage and student loan bills. We hope to start a family, so day care would also join that list eventually.

And that’s where the “we’re rich” argument breaks down. Day care, a pending increase in student loan expenses, and a car loan would eliminate our current monthly excess income. We still haven’t managed to boost our retirement savings, and we desperately need to. We’re frugal and budget carefully to afford our life. I’d be much more comfortable if we earned 20% more, but even then we still wouldn’t be rich. We’d just be able to save more.

Let’s Get Rid of the Term Rich
Why even bother calling people rich? Most people don’t define themselves as rich, even if other people think they are. So, let’s just dispense with the term, especially when discussing which portion of the population is rich enough to pay more taxes. At the very least, reserve the term for people for whom work is merely a hobby, not a requirement for living. People like Athina Onassis.

Phone books are becoming a bane of my existence. They keep showing up at my house. From there, they go directly to the recycling bin. I haven’t used a Yellow Pages in at least 8 years. I don’t think I’ve used a white pages in even longer. At least not to look up phone numbers. I’ve used yellow pages to weigh things down a time or two.

So how do I stop this scourge? It never, literally never, occurs to me to look for something in the Yellow Pages. Why would I when I have the internet complete with address-based search and local reviews?

So, I’m on a mission to stop receiving phone books. I’ve already blocked the bulk of my junk mail and catalogs. Next up: those heavy wastes of paper.

How to Opt-Out of the Phone Book
I’ve determined that there are four steps to opting out of the phone book:

1. Note the phone book provider each time one arrives on the doorstep. Look inside it for a contact number or website – probably in the first page or two.

2. Also determine who your local phone providers are. You may have more than one. For example, although I was an AT&T Digital telephone customer in my old apartment, I was in Verizon’s service area, so I received phone books from Verizon as well as a couple of independent companies.

3. Visit YellowPagesOptOut to get links to opt-out forms or find phone numbers for your local area. This will work for the major yellow pages publishers, but may not work for the small ones that also hurl these monstrosities on your doorstep.

4. Call the remaining companies and ask the customer service representative to remove you from their delivery list.

Repeat these steps each time you receive a phone book.

Always recycle the phone books you do receive. Only about 15% of phone books are recycled – the rest are thrown out. Sadly, I doubt you could compost phone book because of its size.

Also note that opting out of home telephone service won’t stop the phone books from coming! It might stop the books you receive from the local service provider, but the indie books will keep coming.

This weekend, I finally got my compost bin. If you haven’t considered composting, you should, and I’ll tell you why. If you want to, but aren’t sure how to start, I’ll show you how.

Why You Should Compost
There are two main reasons you should compost:

1. It’s cheaper than buying potting mix or garden soil. And you don’t have to drive anywhere to get it. You’ve got a ready supply on hand.

2. It reduces the amount of trash you produce. If you live in an area that offers smaller trash bins at a reduced price, this could also reduce your trash collection costs.

What You Can Compost
You can compost a great variety of things. There’s a long list at Planet Green. In short, you can compost:
Yard trimmings
Egg shells
Fruit and vegetable kitchen waste
Coffee grinds and tea bags
Shredded paper
Dead leaves

You can’t compost:
Protein and bones
Fats and oils
Some seeds
Weeds with seeds or infected plants
Moldy food
Pet waste from carnivores (cats, dogs)
Citrus (you can use a little, but not a lot)
Glossy paper printed with non-biodegradable in (soy ink is OK.)

Where to Get a Compost Bin
You can buy a compost bin online for $100-$200. If you don’t want to spend that much, you can see if your city or county offers bins free or at a reduced price, or you can make one.

Los Angeles County offers free composting workshops where you can buy a yard bin for $40 or a worm bin for $65. My friend tells me that even if you get a regular bin, the worms will get in there, so you don’t necessarily need a special worm composting bin.

To find out if your city or county offers bins, either Google “Your City/County + compost bins” or visit the website for your waste division. It will probably be under the Programs or Information for Homeowners section.

If you want to build one, try one of these sets of instructions.

How to Start Your Bin
Starting a bin is easy. I saved three bags of dead leaves from the fall, but you can start one now even if you didn’t do that.

Choose a Site
compost binFirst, assemble the compost bin. It took me about ten minutes to put this one together. Then find a spot for it. Ideally it should be on ground, not concrete. You can put it near a fence, but not right up against the fence. It should also get some sun, but not all-day sun. You’ll need to water it occasionally, so it should be close enough to a water source that it’s convenient. We put it near our trash cans, which are also near the kitchen.

Gather Supplies
composting toolsNext, gather your supplies. You’ll need garden gloves, a shovel, dead leaves, green matter, kitchen waste, pruning shears (for cutting up the larger items), a water source, and a shovel. I got the white kitchen compost crock at Cost Plus World Market for $15. It sits on my counter, then I take it out to the bin when it gets full. It includes a charcoal filter, so it doesn’t smell or attract bugs.

Fill the Bin
Ideally, you want to use a 50/50 mix of green matter and brown matter. My gardeners haven’t come yet this week, so I was a little light on green matter. I started with about 6 -8 inches of leaves.

add leaves to the compost bin

Next I dumped in the kitchen waste. The egg shells should be dried and crushed.

add kitchen waste to the compost bin

Next I cut the green yard trimmings into smaller pieces and added those.

trim stalks and green matter before composting

Add water to moisten and help it build heat.

Add water to the bin

Stir. You’ll need to water and stir it every 7-10 days.

Stir compost to mix it well.

Cover and wait. Add more kitchen waste as your container fills up. Add yard trimmings when you have them. Want to dispose of shredded paper? Toss it in. Got an empty egg carton? Add it. I’ve got a container full of dryer lint. That’s going in, too.

It will take about 3 months for the compost to become soil. It shouldn’t smell during that time. If it does, it needs water, stirring, or it may not be getting hot enough. It should be about 140 degrees.

With the plastic bins, you can then open a door in the bottom to scoop out the soil. Always add to the top, and remove from the bottom.

As I’ve mentioned several times, my husband and I built up a sizable emergency fund before he went on disability. While on disability, we’ve been down some from our usual income, so we’re not increasing the emergency fund, but we have been continuing our tax set asides. When this plumbing emergency developed, we had the cash, but also had to readjust our spending plans for three sofas and sliding doors.

Why We Want to Readjust the Budget
Although we could buy the sofas and sliding doors right now, we also need to replenish the emergency fund with the $5500 we just spent on plumbing. When it was just $1775, we weren’t concerned, but we were concerned when it ballooned to $5500.

Other Priorities This Year
We have several major priorities this year, two of which are now in flux.

  1. Replace the French doors with sliding doors. We want to do this in 2010 because there’s a 30% tax credit for energy-efficient windows. That would be a significant savings.
  2. Buy me a new car. One car I’m considering also has a tax credit, although others I’m considering do not. I don’t expect the tax credit to be used up this year, but I don’t want to miss out on it by waiting too long. The other reason I need a new car is simply because mine is almost 14 years old and has over 130,000 miles on it. It’s starting to show its age.
  3. Buy furniture. One room of our house is empty and another room has furniture that is too large for the room. We’d started to buy, but we’re not done yet.
  4. Increase retirement withholding. We really need to get on this.
  5. Build our emergency fund. We need to get up to six months expenses, but we have to balance that with other priorities.

How to Adjust the Budget
In order to adjust the budget, we did a few things.

First, we looked at our planned spending for the next few months. We worked out that we’ll need to transfer money from our emergency fund in June to cover the plumbing bill. That doesn’t yet include the sofas we want to buy. It does include upcoming insurance bills we already have the money saved for. We may not need to dip into savings to cover them, which will help replenish the emergency fund.

Second, we figured out how much we plan to spend and when we can realistically expect to do that this year. We also looked at what we expect to be earning once my husband returns to work.

Finally, we looked at the increased budget expenses we expect to have next year.

Then we did the math and worked out what we need to save to replenish the fund and what we have left over to work with.

It’s challenging to have such a huge crimp thrown into our plans. That’s why we have an emergency fund, but we also don’t like dipping into it, because then we have to replenish it! We haven’t quite figure out how we’re going to make this all work, but we’ll find a way. And if we can’t, some things will get delayed. That’s just life.

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