This weekend I was talking to one of the new neighbors who had just moved in a week or two ago. We chatted about the great fall-like weather we were having and how great its timing was for his moving in - mostly small talk, getting to know you kind of stuff.

As we were talking, his son walked up to the conversation. His dad introduced him. He said hello, and in the single-minded way only kids can truly master, asked his dad if he could borrow $50 for a new skateboard.

Michael's dad replied with some of the most sage debt management advice I've heard:

It's funny sometimes how you can watch these little wavelets go around the financial community. It's sort of like the waves that get started at sporting events except in this case it's writers picking up on each others' stories and taking a topic a little further, or off in another direction.

I recently saw a little wave of articles asking and answering the question about what to do with extra money:

Given some amount of extra money, should I invest that money, or would it be better to pay down debt?

I just couldn't jump on this one because to me it always seemed so obvious. The best strategy is the one that leaves you with more money in the end. The problem is only a little complicated because all debts are not treat equally, just like not all income is treated equally, in the eyes of the IRS. The answer relies on how the interest paid and the income earned are treated when it comes to taxes.

We're having a Christmas sort of day here in our household. We're finally replacing our old refrigerator, the one we purchased more years ago than I care to think about, with a new model.

Our reasons for replacing the old appliance with the new have almost nothing to do with the cost savings we will realize by upgrading to a more efficient appliance. But I happened to be reading an article recently about the true cost of an appliance and in the interest of all things money I thought I would have a look at the real dollar savings we'll be seeing.

An email I received over the weekend was sort of a knock on the head. The sender made me realize that sometimes I dive too deep in my articles. I assume too much knowledge on behalf of the reader. The suggestion was that I create a few "Personal Finance 101" articles with some basic personal finance rules and definitions.

Fair enough. Today I'll start with some of the terms you might encounter when buying a home. After all, buying a home is unlike almost every other kind of purchase. The activity has its own language; and as anyone who has visited a foreign country can tell you, not understanding the language can be not only intimidating, it can get you int trouble.

Down Payment - This one's easy, just like when you buy a car. The Down Payment on a home is the initial amount you'll want to pay in cash toward your home's purchase price. Your down payment becomes your initial home equity. The amount of your down payment is typically expressed as a percentage of the purchase price. Down payments are usually in the 15-25% range.

A large down payment–typically 25%–may help you get a more favorable interest rate and let you avoid paying for mortgage insurance.

An old friend and ex-coworker called me late last week. She just wanted to call and catch up. She had decided to take a big new step in her life and wanted me to know about it.

After nearly twenty years with her current employer she was cutting the cord and venturing out on her own.

The news didn't surprise me very much. The only part that really was a surprise to me was her willingness to take the leap, to cut the cord and go solo.

We've been friends for a long time. I know a bit about her and how she thinks. From conversations about money and personal finance I had her tagged as a likely stealth economics practitioner. I say likely because I'm one myself and I have always seen those characteristics in her. However there is no way to really identify such a person, not if he or she is truly operating under the radar.

So for me it was no surprise she'd realized she had the financial resources to retire from her corporate cubicle career. That left the open question of how this came about. Her willingness to take the leap - that was the surprise. So I asked.

Take a look at what a long time friend said to me the other day:

When you're just starting out you're house poor. Until the kids leave for college you're kids poor. Then you're college poor... When does it end?

He was lamenting the fact that the long and easy retirement he'd always envisioned for himself was starting to look like a shorter and shorter one. Not only that but he feared it might also be one in which he'd have to work at least part time to make ends meet.

Now in reality his retirement picture may not be as bad as he lays it out. He's a highly paid professional for a big company. He gets lots of great benefits: stock plan, options, health care... He does alright. He might have more in his retirement portfolio that you or I might need.

It's a dog-eat-dog investment world out there today. Figuring out what's the best investment vehicle in any given situation can be a challenge. One of the areas where people seem to have a really tough time of it is in IRA investing.

IRA accounts are different. They have a special tax status; and that tends to throw people off when it comes to how to invest those funds.

First a quick review... The traditional IRA is a tax deferral vehicle. Money deposited into a traditional IRA is deductible, and is allowed to appreciate tax deferred. Taxes on capital gains, interest and dividends in a traditional IRA are due as withdrawals occur. And of course the expectation is your tax rate will be lower in retirement when you start taking those withdrawals. With a Roth IRA taxes are already paid on the funds you deposit, contributions are not tax deductible. But from that point forward the account is exempt from taxes.

It is because of these tax advantages that funds inside an IRA account are particularly well suited for certain types of investments.

One of the features in GnuCash which I really like is the ability to schedule transactions. The other personal finance management applications, Microsoft Money and Quicken, both have a way to deal with recurring transactions. GnuCash offers it's own verson. Having been a Money user before changing over to GnuCash, I personally prefer the way GnuCash does it.

Let's have a look at how you would go about entering a regularly scheduled transaction in GnuCash. The image below is the Scheduled Transaction dialog box GnuCash presents when you click on the "Schedule" icon. The best time to use it is when you've just entered a transaction which can serve as a template transaction for all the future occurrences.

I'll cover each of the entry areas in this dialog box to walk you through the process of creating a new scheduled transaction in GnuCash.

I'm a little over 3 months now using GnuCash, the free open source software alternative to personal finance applications such as Microsoft Money and Quicken. Today seemed like a good time to give you an update on my progress.

If you're thinking about switching away from Microsoft Money or Quicken, I would urge you to do it now before it gets too late in the tax year. Entering a couple of month's worth of transactions isn't very hard. Six month's worth is a bit of work. GnuCash will make the job relatively easy to be sure. As I pointed out before however, it's a change (for the better) in thinking about your personal finances.

I still have no reservations about making the switch from, in my case, Microsoft Money, to GnuCash. I saved a bundle of cash, and my personal finances are better organized than ever before.

Here's an example of how GnuCash helps me to keep my personal finances better organized than Microsoft Money ever did.

OK so maybe that's a bit misleading. I didn't actually spend the weekend in Monte Carlo. I did, however, spend the weekend learning about and doing a few Monte Carlo simulations.

For the uninitiated, Monte Carlo simulations are a statistical process for forecasting event outcomes. The process involves repeatedly running a scenario whose outcome is determined by the interplay of various parameters. The parameters themselves are subject to some statistical variance. The Monte Carlo process repeats the scenario process any number of times using these random variations and tabulates the results, yielding a distribution of likely outcomes.

What I set out to do this weekend was educate myself in the ways of using a spreadsheet to perform Monte Carlo simulations on various mixes of securities. I wanted to know - I still want to know - just what sort of diversification scheme is most suited for me and my investment style.

It's not hard to understand that taking on more risk can result in a much larger nest egg down the road; but that taking on that risk also greatly increases the chances of going bust. Alternatively, shunning risk greatly reduces the chances of going bust, but your portfolio's future value can be severely limited. Monte Carlo simulations against various mixes of low and high risk securities in a portfolio can help us to understand what future portfolio values we might expect at a given level of risk.

My models are producing interesting results. Not altogether unexpected, but they do illustrate the importance of being well diversified and accepting some amount of risk.