'Spend Well, Live Rich'

Would you believe that you can achieve your most important goals with the money that you're earning right now?

That's the philosophy behind Washington Post columnist and author Michelle Singletary's book, "Spend Well, Live Rich."

She visits The Early Show to talk about it. Read an excerpt from Chapter One. Click here.

Singletary, who credits her grandmother, Big Mama, with teaching her everything she ever needed to know about money, tells how we can save a buck or two in four different specific areas.

Big Mama raised Singletary and her brothers and sisters on $13,000 a year. Big Mama paid off her mortgage and her car. She never invested her money in stocks or bonds, but she always had enough to pay her bills and indulge her one passion - fancy church hats.

Tax Refunds And Paycheck Withholding

"I know that a lot of people like getting a big fat refund check at the end of the year, but that's a big fat mistake," Singletary writes. "Just think about the logic. Would you give your Uncle Bunky $1,000 or $2,000 to hold for a year without it earning interest, just because you couldn't trust yourself to save or invest it? Of course you wouldn't. So why give it to Uncle Sam?"

The average tax refund in 2002 was $1,966. Remember, that's not "found" money; it's not a windfall; it's money you have earned. It's about $164 a month that you could be bringing home in your paycheck, depositing in a college fund or using to pay off debt.

Ideally, you want to break even on your taxes. You don't want to pay Uncle Sam come April, and you certainly don't want him paying you. If you do regularly receive a refund, change your withholding allowance on your W-4 form - the form you had to fill out when you started your job. The more allowances you claim, the less money withheld from your paycheck.

Kids Birthday Parties

Singletary and her husband have three kids. One year they sat down to total up all of their "birthday bills" and realized that the three birthday parties, plus the gifts purchased for all of their children's friends' birthdays, were making quite a dent in their budget.

"I'm certainly not calling for a moratorium on giving or receiving gifts at birthday parties," Singletary writes. "But shouldn't we consider toning down our largesse? Kids are getting so much stuff, it's hard for them to appreciate it all.

"...Now, you might be inclined to say, 'It's just a birthday party.' But year after year of overindulgence will make it harder to teach your children about moderation later. Already, we have an epidemic of over-spending among adults. Perhaps this is how it starts."

Instead of paying for 15 kids to go iceskating, for example, Singletary suggests looking for free events in the community or at a museum, and then having everyone back to your house for cake and ice cream. Occasionally, break the gift-giving cycle by coming up with an alternative to presents. Maybe each child can bring a favorite book to the party and parents can facilitate a book exchange. At the very least, when you throw a child's birthday party, consider setting a price limit on gifts.

Gift Giving In General

Singletary writes extensively about gift giving. Let's get one fact out on the table immediately: Singletary re-gifts. And she's not ashamed of this practice. People get something they want, her closets aren't cluttered with junk, and she saves money. What's wrong with that?

Here's an interesting statistic about re-gifting: The more people make, the more likely they are to regift. Maybe there's a reason wealthy people are wealthy, eh?!

"Many of the objections to regifting make me wonder how many people really know what the word gift means," Singletary writes. "A gift is defined as something voluntarily transferred by one person to another without compensation. I didn't find a single definition that said the giver had to make a sacrifice.

"... Too many people believe the purchasing of material goods is evidence of love or appreciation. Therefore, the more you spend, the greater your love. If this weren't true, then why would you care whether a gift was inexpensive, free to the giver, or recycled?

"...Is it being greedy or stingy to be prudent with your money? If you are choosing to spend less on Christmas gifts because you have to pay down your debts, save for your kid's college education, or fund your retirement, the answer is absolutely not. And if the person receiving your inexpensive gift -- whether homemade or store-bought -- chooses to complain, then just keep in mind what my grandmother said about such people: 'They ain't your friend anyway.'"

CARS

Singletary has a lot to say about this one. In short, she believes that Americans spend way too much on cars.

"I believe in buying the best car I can afford - and letting it rust off the road before replacing it," Singletary explains.

It just kills her that people who have bought three or four cars in their lifetime say they can't afford to send their kids to college without student loans.

Say you spent even $20,000 apiece on those cars, Singletary explains. If you had just bought one and continued to drive it until you had your local mechanic on speed dial, you could have put that other $40,000 or $60,000 into a college fund. That amount may even pay for your child's entire college education.