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Jim Cramer of CNBC hosts a show called Mad Money. If you’ve seen a few episodes, you are familiar with a view call-in segment called, “Are You Diversified?” The challenge is for users to call in and list five stocks that own and ask if they are properly diversified. I chuckle a little each time that I watch the segment. I wouldn’t consider anyone with five stocks “diversified.” Nonetheless, the exercise serves for good entertainment (if you are into the stock market) and a learning opportunity (for beginner investors in the stock market).

I believe in diversifying my investments with mutual funds and/or exchange traded funds (ETFs). How you allocate your investments depend on a number of factors. If you are young or like rolling the dice, you may find that investing in stocks suit you best. If you are older or risk adverse, you may want to want to hold more bonds, certificates of deposits (CDs), and/or possibly some real estate investment trusts (REITs).

Personally, I like to invest in a little bit of everything. My reasoning is that some asset or market is always going to being doing well. I have about 40% of my money in US stocks. Half of this money is small stocks and half is in large stocks. One way to invest in both styles with one purchase is to buy the Vanguard Total Stock Market Index ETF (VTI). I have another 35% of my money in international stocks, specifically Vanguard’s FTSE All-World ex-US ETF (VEU). I invest 10% of my money in real estate through Vanguard’s REIT index ETF (VNQ). Usually the domestic stock market and the real estate market do not go down at the same time (with the last month has been an exception). I also invest 10% of my money in bonds through Vanguard’s Total Bond Market Index (VBTLX). Like with real estate, this gives me protection against a falling stock market.

The last 5% of my investment is with Prosper.com. One of the reasons I lend money on Prosper is that it further diversifies my portfolio. I have a few friends who got depressed when the Dow drops from 14,000 to 12,700. I slept very well at night knowing that 60% of my money was invested elsewhere.

In my opinion the biggest benefit to this plan is those good nights of sleep.

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Lazy Man has been a lender at Prosper since February 2006. His lending has been written up in the Globe and Mail, Canada’s largest national newspaper. He is the author of the personal finance blog, Lazy Man and Money. He enjoys watching Boston sports while sipping diet cola.

This is a common question in personal finance circles. Personal finance guru David Bach made the question popular by writing about people’s daily spending habits. He calls it the “Latte Factor” because so many people spend a few dollars a day on their morning specialty coffee. It doesn’t have to be limited to coffee. I’ve known people to buy their lunches for $10 a day. Imagine the savings of making your own coffee and lunch at home. Those simple changes add up to hundreds of dollars a month. If those savings are invested, they could be worth hundreds of thousands of dollars over time.

Often times when people realize this, they change their spending habits. The question is when do you stop trying to save every penny?

I struggle with this at times. I find myself looking at every penny that I spend and scrutinizing whether it’s a necessary expense. I have to admit that it’s not a comfortable frame of mind to be in.

Like many things in life, balance and moderation is the key. However, I think how vigilant you are with small expenses depends on your income. If you are high level corporate executive, you will probably find that saving a dollar here and there is more work than it’s worth.

On the other hand, if you are living on a fixed income, you may find it worth a lot of your extra time to save a dollar or two. I try to position myself somewhere in the middle.

I look for easiest things that I can do to save money. I find that this often gives me the best value for my time. Some might know this phenomenon as the 80/20 rule or the Pareto Principle. For example, I’ll buy generic foods rather than spend time clipping coupons for brand name products.

How much effort do you put into saving money on small purchases?

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Lazy Man has been a lender at Prosper since February 2006. His lending has been written up in the Globe and Mail, Canada’s largest national newspaper. He is the author of the personal finance blog, Lazy Man and Money. He enjoys watching Boston sports while sipping diet cola

Many people would say this is an easy question to answer. However, I believe the answer depends on the life experience of the person giving the answer. I have asked this very question to many people and the answer is almost always a resounding “yes” or a resounding “no.” I don’t think I’ve ever gotten back an answer of “maybe.”

I’m going to be the one giving back that answer of “maybe.” By many people’s financial standards, I have done very well without ever establishing a budget. In fact, to this day, I don’t know how to balance a checkbook. I have had a healthy income which is part of the reason, but it’s not the main one. I simply evaluate each purchase I make and do my best to determine the value that it represents. I ask myself if I really need the item or service that I’m purchasing. Often, I’ll just put it in the back of my mind for later. If it keeps coming back to the forefront, then it’s worthy of consideration.

A few years back I wanted a Sony Aibo. It was a robotic dog that retailed for thousands of dollars. It was something that failed the “do I need it” test. It also failed the “do I still think about it every day after 20 days” test. Just recently, I noticed that some are available for around 20% of the original price. They are even more advanced than the one I originally wanted. I thought about purchasing one once again, but I haven’t found it for the value that I think an Aibo is worth – probably around $300.

I don’t think my idea of the anti-budget will work for everyone.

There are many people that may be best served by adhering to a strict budget. Some of these people may include those who live on more of a fixed income or saddled with significant debt. However, some of these people might be just the opposite like my best friend. I would estimate that he and his wife have a combined income of roughly $300,000 a year – yet he can boot up his Quicken software and show you exactly how much he has budgeted for vacations this year.

In short, I think that budgeting can help many people maximize their wealth. However, it is important to remember there are often multiple avenues to the same destination. I encourage you to explore each of them to determine which route suits you the best.

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Lazy Man has been a lender at Prosper since February 2006. His lending has been written up in the Globe and Mail, Canada’s largest national newspaper. He is the author of the personal finance blog, Lazy Man and Money. He enjoys watching Boston sports while sipping diet cola.

As some of the readers on my website, Lazy Man and Money, know, I was asked to resign from my day job a couple of months ago.As one might expect, it was an emotionally straining day. For many people this would be a simply disastrous circumstance. Take a minute and think about what would happen if you lost your day job - I’ll wait.

It doesn’t seem too good does it?

I found there were two major emotions running through me. One is the blow to my ego - that since of failure. I found I was able to escape depression by realizing that I was talented and experienced at things other than my career. The second emotion, and the one I want to focus on, was one of financial despair. There’s a natural reaction to wonder how you will pay the bills.

For many people this loss of 99% of their income would be a major obstacle in their life.

It was more of a speed bump for me.

Eighteen months ago, I realized that losing a job is always a possibility and took strides to diversify my income. The result was that the loss of my day job only represented 75% of my income. The remaining 25% would be extremely difficult to live on indefinitely, but it certainly stretches my emergency fund quite a bit. I’d estimate that I can live a year on it - more if I start cutting out some luxuries like I plan to.

I recommend that everyone try to build income streams separate from his/her day job. I know that it’s not easy, but you never know when a recession may come and take your job with it. I found that blogging, investing, and dabbling a very little bit in real estate works for me.

There are other options if those aren’t your talents. I have a friend who is really good with computers. He does computer maintenance for the neighborhood part time. You may even find that balloon art turns into a full time career. Imagine that - twisting balloons for a living!

Doesn’t it make you smile?

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Lazy Man has been a lender at Prosper since February 2006. His lending has been written up in the Globe and Mail, Canada’s largest national newspaper. He is the author of the personal finance blog, Lazy Man and Money. He enjoys watching Boston sports while sipping diet cola.