Green initiatives are often promoted as paying for themselves, leading to widespread acceptance. Why wouldn’t we do things that also have environmental benefits if they have little or no financial cost? When considering such matters, it’s important to use conservative estimates of the true costs.

According to a recent Newsweek article, Are We Underestimating the Cost of Going Green, author Robert J. Samuelson argues that in far too many cases, computer models make assumptions that are much too optimistic. As someone who models complex systems regularly for my day job, I can tell you how quickly the accuracy of a model can diminish when faulty assumptions are made. Even the best of models is only as good as its worst assumption.

I am not suggesting that we should blatantly disregard modeled results. In fact, they are often highly accurate and superior to other estimation methods. I simply try to approach all cases where things seem too good to be true with a moderate amount of skepticism. Would you blindly trust a stock-picking algorithm that promised above-average returns for below-average risk? No, you need to balance modeled results with known laws and rules, such as, it takes more risk to achieve more reward.

As stated previously, there are certainly non-monetary reasons to transition to a greener lifestyle. On a micro scale, you often see monetary benefits as well. A simple change, like transitioning to energy-efficient appliances, really can save you more than the cost of the upgrade over time. On a larger scale, coming to accurate cost conclusions can be more difficult. Green initiatives are also a politically charged topic. Supporters can produce highly favorable models as quickly as denouncers can produce ones with conflicting results. A minor change of assumptions can have a major effect on the results. So take the steps you feel are necessary to achieve a greener lifestyle, but remember that it will probably cost more than the supporters suggest and less than those opposed would have you believe.

Did a green project you implemented cost more or less than you expected?

With consumers trying to stretch each dollar further, it should come as no surprise that thrift stores are seeing a surge in sales.

According to USA Today, February revenues at Goodwill Industries stores increased 7.2% over last year. A similar increase was seen at a group of Salvation Army thrift stores. The rise in sales is likely due to an influx of new customers who are turning to thrift stores out of necessity or an increased awareness of their financial situations, due to job loss or the general state of the economy. Thrift store regulars may also be increasing their own reliance on the stores as well.

One downside of strong sales is that all thrift store shoppers may find great deals harder to come by. Rising sales means that fewer items are left for purchase. Donations to thrift stores are also way down. The cited article said that Salvation Army donation pickups in six states for the first eight weeks of 2009 were down nearly 13% from last year. Higher value donations, such as furniture and major appliances, are down the most. This is likely tied to the downturn in the housing market as well as the slow economy. Lower supply and higher demand generally raises prices, but in the case of thrift stores – whose prices generally remain unchanged – this situation simply results in a smaller supply of high quality items.

Though rising thrift store sales may be driven by need, this good financial habit can be continued when situations improve. As the economy rebounds, you’ll likely be able to find even better thrift store deals as other consumers return to their traditional retailers of choice. Their newfound prosperity may also increase the quality and quantity of donations.

Have you visited a thrift store for the first time or relied more heavily on the products they offer?

In part 1 of this interview, we met Adam Baker from one of the fastest growing personal finance blogs, Man Vs Debt. We discussed his lifestyle downgrades, ramifications of selling most of his possessions, and aspirations for his impending relocation abroad. Today’s topics include his financial mistakes, what he’s learned during his war on debt, his unconventional debt elimination strategy, and what the future holds. Here’s the conclusion of our conversation:

Mike Smith: Do you have any financial regrets?

Adam Baker: Sure. I regret going to college the way I did. I don't regret the experiences I had, but I went to college and took on loans when I wasn't serious at all. I had no chance of success and even if I had, I might have wanted to travel or open my own business, etc...

I regret ever getting used to the ease of credit cards and I regret initially financing my first car, instead of saving up cash. That all being said, we've done a great job of overcoming these hurdles and have luckily avoided what may have been our biggest regret... buying a house right after marriage.

MS: One could argue that your debt helped to make you the person you are today. Were the lessons you've learned worth accumulating that debt?

AB: I would say "Yes" at this point, but only because we didn't go too far overboard. In my mind, I got in just enough trouble to learn a lesson without doing some serious damage. I consider myself lucky in this aspect. I could have easily over extended myself into real estate, leased or purchased a new car, or any number of other financial mistakes that would have probably not been worth the lesson!

MS: Do you hope that sharing your experiences on ManVsDebt will allow others to benefit in a similar way, without having to experience the pain?

AB: That would be really awesome. Prevention is always the best solution to a problem. Whether people avoid some of the mistakes we did or simply have increased passion on their own battle against debt, this would be a major plus in my book!

MS: You advocate a different approach to debt reduction, which you call the Debt Tsunami. Can you briefly explain the idea and why it works better than other methods in certain cases?

AB: Briefly, the Debt Tsunami is a debt reduction method which has you prioritize your debts in order of their emotional impact. Many times in finance, it's good to remove emotions from the equation. Buying a house or investing a windfall, for example. However, for most people this theory doesn't work well for debt reduction.

My biggest problem with approaches like the snowball is that they assume that the lowest debt will always help you build the most momentum. This obviously isn't always true. Also, some personality types (although not the majority in my opinion) receive much more validation from paying off debts with the "logical" or "quickest" method. They tend to minimize the emotional impact altogether.

That's why I love the Debt Tsunami and why it has worked for us. It has the flexibility to incorporate both of the examples above. The hard part is connecting with each debt and being honest about its emotional impact.

[For more information, read ManVsDebt’s full post describing the Debt Tsunami.]

MS: You've also been building up savings while paying down debt. This method seems to have an emotional, rather than mathematical, motivation as well. Can you describe your thought process regarding this approach?

AB: The only reason we did this is because, we made the decision almost a year ago that we were going to relocate to Australia. Had we not made the decision to relocate, we would have kept our emergency fund low and continued to plow into debt. The decision to relocate was one that was much more emotional than mathematical, though.

It's about prioritizing your life. For us, we knew we had to eliminate non-student loan debt, as well as save substantially for the move. We prioritized it in that order, which is now followed by knocking out the remaining student debt.

MS: Your blog currently reports that you are about $52K in debt, with a net worth of about negative $33K. Where do expect your net worth to be in two months, two years, and two decades?

AB: In two months, I expect our net worth will actually be down a little bit. We will need to rely on our savings a little while we get set up in Australia, which has been the plan all along. We plan on concentrating on making this as short as possible in terms of time, though.

Two years down the road, our goal is to be completely debt-free. I'd be happy with a $0 net worth. Two decades, I'm not really sure at this point. I'm not worried about saving X amount of dollars, because I have no idea what our priorities will be. If we decide to extend our family, I'm sure we will focus more on building net worth, although we may decide to continue to travel and donate our time to worthy causes. Either way, we'd like to maintain a completely debt-free lifestyle!

Many thanks to Adam for taking my questions, especially so close to his move date. You can follow his interesting story at ManVsDebt or connect with him on Twitter. I know I’ll be watching his progress closely.

Would you consider extreme actions to eliminate your debt?

Adam Baker has been taking the personal finance community by storm. His blog, aptly named Man vs. Debt, has seen an unprecedented growth in popularity in its first two months of existence. His aggressive approach towards eliminating debt, coupled with his outgoing personality, make reading his blog both educational and entertaining.

The birth of his first child led him, along with his wife, to a series of decisions that included: selling their small business, leaving a stable career, declaring war on their debts (read his Declaration of War), selling all of their possessions, and heading off to Australia within 1 year. The plan has all come together and the move to Australia is set to take place this weekend. I had a chance to ask a few questions to better understand the man behind ManVsDebt. Here’s what he had to say just before heading out of the country:

Mike Smith: It seems as though the things that bring us the greatest success make us weak in the knees when we first consider them. Do you feel a healthy fear regarding your impending move?

Adam Baker: Actually, not really. I don't think it has actually set in yet. Plus we have been able to save up a $15k+ emergency fund (a lot for our lifestyle), so this really takes the edge off. Most importantly, we've done as best as we can to set our expectations and to have an open mindset. We are really viewing this as a stress-reliever more than anything! I'm thinking my tune will change after the long flight with the baby.

MS: Has selling your possessions been a sacrifice that feels limiting or a relief that feels liberating?

AB: On a small scale, it's been a sacrifice. There have been a couple things we've really struggled with parting with. However, once we got rolling the sacrifice "feeling" quickly got replaced with an overwhelming sense of liberation. Now it feels AWESOME! It's actually an addicting process. I continually want to eliminate more and more.

MS: Has downgrading your lifestyle been easy or hard? That is, are you making sacrifices that hurt or do the positive benefits make it seem worthwhile?

AB: Once again, the hardest part was really shifting our mindset early on. Luckily, the birth of our daughter gave us a ton of motivation to kick into high-gear. Unfortunately, it often times takes an event like this for us to overcome our "but we deserve it" attitude. Like eliminating our possessions, once we got rolling with a more limiting lifestyle it became easier and easier. It's almost like a game to us, seeing how minimal our lifestyle can be.

MS: Am I correct to assume that you have very few monthly bills, other than debt repayment? How can you live without the things most people consider 'necessary'?

AB: That would be a fairly accurate statement. Right now, I think people are really taking stock of what is necessary. For example, television. With so many online options it seems almost silly for computer-literate people to still pay these high cable bills, especially when they are eliminating debt. I don't want to beat a dead horse, but it comes down to your mindset. It only took me one week to get used to not having a TV. It went from "necessary" to "frivolous" in almost exactly 7 days.

MS: My year abroad brought me much more in life experiences than it did in financial success. Do you expect the same, or are you looking for a balance of the two (or a focus on financial success)?

AB: Well, we are certainly looking for a balance of some sort. Although, I will say we are much more concentrated on the life experience part of the equation. I'd like to eliminate the remainder of our student loan debt within a two-year time frame, which will still include us living on under 50% of our expected income. Frugal traveling is the name of the game for us right now! It's not an oxymoron!

MS: How will you manage your domestic obligations from abroad? Do you believe in automating your finances?

AB: We are almost exclusively online now. We've known the trip was coming up for nearly a year, so we've been minimizing our domestic obligations. Our mail will be going to a family member, which helps. We bank with ING Direct and do electronic payments for our student loan debt. Since we have no other U.S. bills, this system will be easy.

I believe in automation, but only to a point. I think often times people become too automated and thus lose touch with their finances. You should only be automated if you are completely in control and can maintain some intimacy.

In the conclusion of our interview, Adam will discuss the lessons he’s learned from his financial mistakes, his unconventional debt elimination strategy, and what the future holds.

Emergency funds are an important part of your financial plan, covering an unexpected expense or normal expenses during a period of reduced income. But many of the situations traditionally associated with emergency funds aren’t really unexpected expenses and can thus be handled in a different way.

Many people confuse irregular expenses with unexpected expenses. An irregular expense is typically known, or can be estimated beforehand, but occurs on an irregular schedule. Things like auto repairs, medical costs, household repairs, and even gifts fit this description. One of the nice features of tracking your expenses and using a budget is that you start to get a better understanding of such expenses.

Take gifts, for example. Obviously, birthdays and holidays are gift-giving occasions that are known ahead of time. By tracking your expenses, you’ll probably see other trends emerge as well. You may notice that you get invited to a few weddings each year, or that a handful of friends have babies, etc. Once you get a sense of the total amount required in a typical year, you’ll be able to add that amount to your budget.

If you have an expense item in your budget for each irregular expense category, then savings will happen automatically. If you budget $1,200 a year for auto repairs, you’ll save $100 each month that a repair isn’t needed, and that money will be available when the inevitable repair does come up. If the repair is needed early, before you have saved enough, then you can dip into your emergency fund, but then the money you allocated towards repairs in future months should be used to repay the amount you took from that fund.

I have many expense categories in my budget that I rarely use. Most months I spend nothing and the budget surplus accumulates in savings. Then, when an expense is necessary in that category, the money is already in place. You shouldn’t have to rely on an emergency fund to cover irregular expenses, since they can be planned for in a budget. That will allow you to save your emergency fund for true emergencies, such as the loss of your job.

Do you budget for irregular expenses that others define as “emergencies”?