What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Using wedding money wisely
2. Percentage of savings for retirement
3. Asking for wedding money tactfully
4. What to do with savings?
5. Self-employment advice
6. Retirement Roth versus 529
7. Repayment troubles
8. Windfall options
9. Debt snowball or not?
10. Prioritizing reading

What do you do when you have a family commitment on the same day as something you’ve been planning to do with a friend for months? What if the two events are two states away from each other?

My solution right now involves a one-way flight and an extremely tightly booked day after my family commitments are complete. Family comes first, of course, but some creative thinking (and a bit of hyper-rushed travel) can make everything work.

Q1: Using wedding money wisely
I am getting married in June (huge wedding, not our choice!) and we conservatively anticipate receiving about $15,000 in gifts from our family and friends. In the past year, we have moved across the country to be closer to family and have finally in the last 6 months or so settled into our new routine. We bought a home, actually the one that we were renting. The owner wanted to sell and offered us first chance, she gave us owner financing, and counted all of our rent as a down payment. The house is livable but needs significant updates to all of the bathrooms and the kitchen. I found employment, but have significant travel everyday. Because of this, we had to trade in my car and get something more reliable for the winter weather and the route that I drive.

Our debt is as follows:
Student Loan 1: 10,000 @ 8.5%
Student Loan 2: 10,800 @ 6.8%
Student Loan 3: 7500 @ 6.8%
Car Loan: 14,000 @ 4.99%
Mortgage: 143,000 @ 5%

I am the breadwinner, my salary is $43,000. My fiance works part time at a university and is going to school for his master’s degree (free while he is employed there). We live off of my salary and save his. We do have an emergency fund saved up ($1000) and then other money in an online savings account for any other life events (approx 15,000). I pay $1000 a month towards debt (not counting the mortgage), which is the minimum on everything except for the SL at 8.5%. We have lived very frugally for the past 4 years and will probably always do so.

My question is: should we use the wedding money to pay down the loans as much as possible, or should we put that into savings and use it for repairs on the house? I feel guilty using the money to pay down the debt, but I know it’s probably the better choice for now and repair/update the house at a later time. I would love to buy new bedroom furniture (everything we have are hand-me-downs and nothing matches, plus we need a new mattress) and possibly renovate 1 or 2 of the bathrooms. It is MY student loan debt, but I’m also supporting the whole household. My fiance is fine with paying off the loans, but I’m feeling guilty.
- Marjorie

It really depends on how urgent the updates you need to make are. You say the house is livable, but that it needs updates. Is this for the purposes of decor? Or are there really important functions missing?

If it’s mostly decor, I wouldn’t make that a high priority unless you’re looking to sell the place fairly soon. I’d pay off the debt first.

If you’re in a position to sell soon or these repairs will make a significant functional improvement, then I’d go for the home repair.

Q2: Percentage of savings for retirement
We often hear of retirement savings goals such as: if you begin saving for retirement at age 20 you should strive to save 10% of your gross salary, if you begin saving for retirement at age 30 you should strive to save 15% of your gross salary, etc. When you think of the percentage of savings, should this be for a pre-tax account such as a 401K, a 457, or a pension plan or a post-tax account such as a Roth IRA? Or is it a combination of both?
- Kelly

Those numbers are very simplified “rules” for people who just want a quick answer without digging in deeper.

If you want to break down those numbers, my impression is that they assume you’re talking about an equal mix of pre-tax and post-tax savings. I would assume that of any simplified numbers bandied about for retirement.

I would never bank my entire retirement plan on such a number, though. Use some retirement calculators and get a strong sense of what you need for retirement.

Q3: Asking for wedding money tactfully
My fiancee and I have been dating for ~4 years. We both went to college and thanks to incredible parents, both managed to graduate without student debt. We’ve had our small debt struggles with credit cards, but we’ve got our act together for the most part. We currently rent in a not-too-desireable part of town, and as we both have fairly entry-level positions, it’s difficult to save the kind of money necessary to make a down payment on a house in a better area.

Her sister, who herself has been through 2 weddings, reccomended that for our wedding, we should ask for ONLY what we ABSOLUTELY need for our registry and ask for the rest in cash to put towards a home. This struck me as great advice, as in our 4 years together, we’ve accumulated more than we need without registering for things like tortilla warmers or color-coordinated coffee makers. However, I’m stuck trying to figure out how to ask in a classy, tactful way that doesn’t come off as a charity case. Do you have any reccomendations on how one might go about mentioning, on an invitation or otherwise, that this is our gift of choice?
- Pete

There is no real classy, tasteful way to say “give me money.” Not only does saying so imply that you’re expecting a gift, it’s also implying that you’re dictating what type of gift to give.

The best thing you can do is say nothing at all about gifts in the invitation. Set up a simple registry at a common place like Target. Then, tell your innermost circle that you’re hoping for money to help for the down payment. The word will get out to a lot of people.

Then, just be happy with the gifts you receive. After all, people are giving you things. If you don’t like them, return them and use the store credit on essentials, then bank the money you saved on essentials.

Q4: What to do with savings?
What should I do with the money I have in my savings account? I know it is low yield to keep it in a “high yield” savings account, but I am already maxing out my contributions to my IRA. Should I invest it? Where should I invest it if I do?
- Shelley

It depends on how much risk you’re willing to take on and how “locked down” you’re willing to allow that money to be.

Savings accounts don’t offer a great return, but there’s virtually no risk involved and you can take your money out as you please. With other investment options with a better return, you tend to lose one or both of those things.

For example, with stocks in large blue-chip companies, you take on risk in exchange for a higher average return. With a certificate of deposit, you lose the ability to take the money out freely for a somewhat higher return. With real estate, you lose on both counts but have some very nice long-term potential with the money.

The real question to ask yourself is why you’re saving this money. If it’s still more or less an emergency fund, leave it in the savings account.

Q5: Self-employment advice
My husband is about to graduate from grad school and will be self-employed upon graduation. I am wondering if you have any good resources for self-employment, and especially regarding affordable health insurance options for the self-employed. He is currently getting health insurance from his school, and I am on my employer’s policy, but I too would like to make the switch to self-employment (most likely working with my husband) within the next few years, or even being a stay-at home mother if we are able to afford it. We live in an expensive part of the US, and want to watch our expenses as much as possible. Going without insurance is not an option for us–I had a very expensive health situation over the last 5 years that has proven to both of us the need for good insurance. My health issues have recently been resolved, so I do not have any pre-existing conditions anymore. My husband has been healthy since I have known him.
- Catherine

I would start with the National Association for the Self-Employed when looking for options. There are a lot of options out there, and those options vary wildly from state to state.

I explored the options available in Iowa several years ago and we made the decision to stick with my wife’s work insurance for as long as she continues to choose to hold that position. Prior to that, I worked at a job with mediocre health insurance, so we were already using her insurance.

That’s not to say there aren’t good options available for the self-employed – there certainly are. I found the most luck starting with the NASE, though.

Q6: Retirement Roth versus 529
We are hesitant to put money into a 529 fund for our daughter when retirement amount may still not be enough. There are no loans available for retirement, as they say.

A Roth is almost as good as a 529 – except you can’t take the earnings out tax free for college, and it counts as income for the child – so no financial aid can be obtained. The upside is it can be used for school (I will be over 59.5 when daughter enters college) or retirement – whichever is needed more.

Certainly we could look for ways to save and afford to do both 529 and Roth, but I am not sure my family feels that is the way they want to live. We already do live fairly simply, but we could do much more. It might not feel like a positive to them, so I plan to identify areas one by one and see how far I can get them (and truth be told- myself) to agree to change.

Any advice?
- Oswald

You’ve basically summed up the benefits and drawbacks of a 529 versus a Roth for education. It’s flexibility versus better tax benefits.

If you’re asking which is better, you need to sit down and assess what your retirement looks like if you put all of your Roth money towards your child’s education. Assuming you do that, do you like your retirement picture?

If you do, I’d put that money into a 529 instead and then benefit from the taxes. If you don’t like that picture, then I’d try to balance it, probably committing more toward the Roth knowing that it’s more flexible.

Q7: Repayment troubles
I wrote to you last spring about advice regarding student loan repayment and starting a new business. Since then, I’ve moved to Canada, gotten married, and started my business, which I now work on full time. I have a steady client base, and am planning to expand more this year. I make approximately $300-$500/month at the moment.

Thanks to the low cost of living in our city as well as a wedding gift from my parents, we’ve actually been able to save nearly $30,000 in the 7 months we’ve been here. I have started to make payments on my student loan debt (all from law school) of $145,000. However, my husband’s contract may be ending at the end of June. I’m not sure if I should continue making payments on my loans or if we should continue to save for our potential “emergency” (unemployment). If we continue to save and defer the loans (the loans are currently on forbearance/income-based repayment, although I’m still trying to pay down interest), we’ll probably have approximately $35,000 saved by the time his contract ends.

My questions are the following: Should I stop making payments on my loans for now? Should I try to find some sort of part-time job to add to our emergency fund/throw at the loans (keeping in mind that most jobs here require you to be bilingual in French and English, and while I can speak French proficiently, I’m not bilingual)?
- Monica

My big question is whether or not you’re going to stay in the area you’re in when your husband’s contract runs out in June.

You seem to be in Quebec. Does it look likely that you’re going to be leaving Quebec at that time? Is your client base local or is it internet-based?

If you can retain your business through this transition and your business is growing, I’d put all my efforts into building it. You already have a start, after all. If you’re going to lose that base, I’d get a part-time job as soon as I could to get more short-term cash on the table before you leave.

Q8: Windfall options
My wife and I were gifted $15,000 by my grandmother recently and have a couple options. This is half of what we make in a year together so it would be easy to blow it on a bathroom remodel, but instead, I’d like to do something smart. We have only two debts: my wife’s $8,000 student loan and our $132,000 mortgage. The loan could be paid off instantly and the $150 to $200 we pay on that monthly would be freed up and that would be wonderful, but I could also refinance the house. We have a 4.875% rate, but rates are even lower than that at the moment. Our current mortgage payment is $1,004. But even if we only shave $50 off our monthly mortgage payment, that seems like it would add up to a whole lot more saved in the end compared to paying off the student loan, no?
- Charles

The question is would you honestly save that extra $50 a month, or would it end up being spent on something unimportant?

The best thing you can do right now is put yourself into a repayment plan that will take you to debt freedom the fastest. Refinance not into another 30 year, but into a 15 year or something. This would actually raise your payments a bit, but it would get you in a far better position sooner rather than later.

If I were you, I’d pay off the $8,000 debt, then refinance into a shorter term mortgage with a much lower rate. You’ll probably not see much change in your monthly payments for now, but you’ll be free from debt a lot faster.

Q9: Debt snowball or not?
I’m pretty new to your site but I have enjoyed it for the last couple of months. I have a couple of questions for you. My wife and I, along with our 4 young children have recently started on Dave Ramsey’s plan. We are currently on Baby Step 2 (debt snowball). We have approximately $14,000 in CC debt, and about $4,500 in student loans, along with about $4,000 left on our van payment.

I have also been trying to save a little money for different expenses I know we will have at some point (future car, car/home maintenance, etc). This is where my question comes in. Is it wise to do this while going through the debt snowball? Or since I already have the $1,000 EF in place, should I be putting every other possible penny towards the debt?

I mentioned the $4,500 in student loans my wife and I still have. I also have about $40,000 in other student loans but I do not have to currently pay on them because of the income based repayment plan I am on. My wife makes decent money but it is all “under the table”. So they only look at my salary when calculating my monthly payment. I am hoping to get through the debt snowball in about a year, then build up the EF to about $15,000 then try and payoff the $40,000 extra in loans I have. The loans are accruing interest but I am not obligated to pay anything on them unless our household income jumps. My wife plans to go back to teaching in 3 or 4 years so at that point I would have to pay at least something on them. My other question is would you stick with the plan I have in place as far as paying the loans back, or would you lump them in to the debt snowball?
- Andreas

First of all, you need to be very careful with “under the table” income. If the IRS hears of it from anyone – and there are a lot of people out there who quietly report such things – you guys will be in a world of hurt.

That being said, I would lump all of your debts into the debt snowball. If the interest rate on those debts is higher than the ones you’re currently paying, then I would make extra payments toward those student loan debts.

Eventually, you will have to start repaying them, and if you can keep that interest in check now, you’ll be better off for the long haul.

Q10: Prioritizing reading
I know you’re a voracious reader like me and I’m going to guess that you have a long list of books that you want to read like I do. How do you prioritize them? How do you decide what needs to be read next?
- Ivan

I keep a stack of about ten or fifteen books on my bedside table or on the front page of my Kindle. These books are ones that have been on my mind lately that I’m wanting to read. I rotate books in and out of this grouping pretty regularly.

When I finish a book (which happens once or twice a week), I just look through the books that are right there and pick the one that intrigues me at the moment.

That’s really all there is to it. I don’t really prioritize beyond that, but I’m usually happy with what I’m reading.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

When I was in college – and for the first several months of my post-college career – I was an avid user of public transportation. I would ride the bus to work every day like clockwork.

For many semesters, I would catch a bus at about 7:48 AM or so. It deposited me right in front of one of the buildings where I would have a class at 8 AM at between 7:55 and 7:58 AM, giving me just enough time to stroll into the classroom, sit down, and open my notebook just as the professor began talking.

Later on, I would stand outside of that apartment building to catch the 7:37 AM bus, which would deposit me about two blocks from my work at about 7:55 AM or so, causing me to walk in the door about 8 AM. On days where I got an early start, I would catch the 7:07 AM bus (getting me there at 7:30) or even, on occasion, the 6:37 AM bus (getting me there at 7:00).

The best part was that the bus ride enabled me to do things like read a book or listen to NPR or an audiobook on my way to school or work. I did this virtually every morning and evening. I’d just carry a book in my bag and when I got to the bus stop, I’d pull out the book and start reading. When I got on the bus, I’d stick my finger in place just long enough to show the driver my pass, then I’d keep reading until it was time to pull the “stop” cord and get off at my destination.

On my way home, the bus stopped right by a grocery store, so I could stop there and pick up food. The bus ran roughly every fifteen minutes in the afternoon, so I would return to the bus stop and there’d be a bus along pretty quickly to get me if I made such a stop.

It was also far cheaper than driving myself to school/work. I paid about $79 for a six month bus pass that covered all rides, which is less than I would have paid just for the insurance on a car.

Time passed, though, and when I found myself making a good income, I convinced myself I needed a good car, too. I “bought” a truck (I no longer really think of it as “buying” something if you’re carrying a big debt on it) and, soon after, moved to an apartment outside of the range of the bus system.

Suddenly, I was free. I could go to work whenever I wanted! I could come home whenever I wanted! Freedom!

That freedom cost me about $250 a month in car payments, about $40 a month following the vehicle’s maintenance schedule, about $50 a month in gas, about $70 a month for auto insurance, and another $12 a month for parking.

$422 a month, down the tubes. Compare that to the $79 every six months I was paying for that bus pass.

Even if I just bought the vehicle and let it sit there, driving it rarely, I would still have about $335 a month in extra spending. In other words, it would have been cheaper to buy the vehicle, let it sit in the parking lot, and ride the bus to work than it would have been to drive the vehicle to work.

Unless you’re in a very unusual situation, where the cost of public transportation is really high or the price of gas and parking is really low, riding public transportation to work is going to be saving you money over driving to work.

That’s not to say that you must take public transportation every day. Ride it four days a week, then take your car the other day and do all of your lunchtime and after-work errands on the day you take your car. That way, you save money from the public transportation on the days when you’re just commuting, but have the flexibility of the automobile on the other days.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

If I had to give someone advice on how to keep a marriage in good shape, here’s what it would be.

Every day, do two things. One, tell your spouse that you love them and tell them something specific about them that you love. Two, spend half an hour doing something that helps them in some way and expect no compliments or comment from it – do it just because you care about that person. This works better if you focus on something that you know will really matter to your partner. For instance, if your partner loathes doing the dishes, just do them without comment once or twice a week.

Do these two things every day and you’ll be surprised how much better your relationship goes.

Money Lessons Learned from Traveling Well For me, money is better spent on experiences than stuff. (@ saving advice)

Can Money Buy Freedom? It can do that only in a limited sense. On some level, you have to choose to be free from the things that worry you. You can be rich and still be depely worried (and controlled by) lots of things. (@ get rich slowly)

Beware the Entrepreneur’s Recoil If you succeed at something, you tend to become more risk-averse and that often leads to undoing what made you succeed in the first place. (@ jonathan fields)

How to Get the Most from Your Gym Membership & Avoid Burning Out I usually have two things that keep me from really hitting a home run at a gym. The first is the soreness that comes from a period of not exercising. It goes away in a few weeks, but it’s hard to get through. The second is injury and convincing myself to return to the routine after recovering from a minor injury. (@ len penzo)

One of the fun things about my wife’s car is that it has a constant readout of the miles per gallon on the dashboard. It lets you know what your miles per gallon over the last five minutes is, the mpg of your entire trip, as well as your estimated miles per gallon right at that moment.

The data it produces is really accurate. We’ve measured this ourselves by checking the gas mileage manually by calculating it from the odometer and gas receipts and comparing it to the data in the car.

It’s often a competition between Sarah and myself to see who can get the best gas mileage over a given trip. Not only is it a bit of friendly competition, the reward for it is that we save money over the course of that trip.

For example, I managed to drive an entire three hour car trip while keeping the fuel economy average over 50 miles per gallon. I did this by utilizing lots of little tricks along the way, and doing so saved us several dollars in gas while only eating up a few more minutes of driving.

Sarah, on the other hand, managed to drive about fifteen miles while keeping the fuel economy average over sixty miles per gallon. She was aided by wind, which was blowing strongly in almost the perfect direction for her route, but it was still quite impressive. It added maybe thirty seconds to the drive but saved her about $0.50 in gas.

If this sounds like hypermiling, you’d be right. Although we don’t go to the extreme measures often advocated by hardcore hypermilers, we do try out the techniques.

The real impact of doing it is that several techniques for improving our fuel economy have become completely second nature for our driving. Here are some of those techniques that you can easily translate to your own driving. They might add a minute or two to your drive, but they’ll save you enough money along the way to make up for it.

Stick close to 55 miles per hour on the open road. This seems to be the sweet spot in terms of speed. If you go much faster than 55, your fuel efficiency starts to decrease. If you get much above 65, it decreases rapidly, somewhere in the realm of about 1% fuel efficiency lost for every mile per hour you’re going over 65.

When going through stoplights, accelerate slowly and coast. Rather than accelerating strongly out of a light, racing up to the next light, and then hitting the brakes, instead accelerate slowly out of a light and when you see the light turning red half a block in front of you, let off the accelerator and just coast until you need to stop. This minimizes your gas usage and gets you to the stoplight with plenty of time to spare.

When going down a hill, lay off the brake. Let your car accelerate a bit naturally, then use that extra acceleration to coast for a while when you get to the bottom of the hill.

When going up a hill, lay off the accelerator. Many people hit the accelerator when going up a hill. Don’t do it. Instead, let your speed go down as you’re climbing the hill, then slowly bring it back up when you get to the top. Often, hills link into each other, so you’ll often use the speed from the previous hill to climb the next one or get your speed back from the previous climb when going down the other side of a hill.

Things I don’t recommend that you might see as gas mileage tips include rolling through stop signs and overinflating your tires. The former is simply begging to get into an accident, while the latter tactic makes it very easy to blow out a tire.

Making a few little changes to how you drive can save you a surprising amount of fuel without adding much time at all to your trip. I’ll happily arrive a few minutes later if I’m saving a few bucks in gas.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

In the past few months, we’ve ended our subscription to GameFly, reduced our subscription to Netflix to streaming-only, stopped receiving four magazines, and given away or sold a bunch of items around our household.

At first glance, one might think we were going through some sort of economic crisis. After all, this is the exact same kind of cutting back that I regularly suggest to people who are finding themselves in a financial pinch.

We actually made these decisions based on time, not money.

With each one of those spending cuts we made, we realized that we simply weren’t getting our money’s worth out of the item.

With GameFly, I recognized that my time playing electronic games was actually pretty small, and most of that time was actually spent at my computer. We would get a game in the mail, it would get played an hour or two on the day it arrived, then it would usually sit for a long time and eventually get mailed back.

With Netflix, we had a very similar problem. The disks we’d get in the mail would sit for a month or so until we could find a great evening to watch that film.

With the magazines, we realized that some of our magazines were consistently going unread. We’d end up with a pile of unread magazines, then one day we’d just flip through them, tear out a piece or two that we wanted to read, and toss a pile of magazines.

With the other items around our home, we just got rid of items that we didn’t use.

In each case, we cut our spending on an item that we didn’t use enough to justify the cost.

Over and over again, though, I see people having a challenging time making that justification or, in many cases, never bothering to make that justification at all.

My own original experience with Netflix is a perfect example of this.

About eight years ago, I opened a Netflix account. Sarah and I used it like crazy for several months, then the usage dropped off. It reached a point where we would have a couple of Netflix envelopes on our DVD player for weeks, almost gathering dust. Why didn’t we cancel? We liked the convenience of having the movies available if we did decide to watch them. We ended up keeping the account until our 2006 financial meltdown, and only resubscribed a few years later due to the availability of streaming and a large backlog of children’s movies that our kids wanted to watch.

The natural counterargument that many people have when they hear about such changes is that we’re losing some degree of convenience or joy by making these changes. In fact, we actually have great alternatives to each of these if we were to use that service.

For example, the reason we had GameFly is so that I could try out new video games if I wished. However, at the rate of one per month, it’s actually less expensive to just keep trading games at the local used game store. If I end up keeping a game for two or three months (as would happen), I’m far ahead simply trading games.

With Netflix, if we decide that we want to watch a particular movie that’s not on streaming, we have lots of options to rent that movie, from Redbox to Amazon Instant Video. Considering that we’re looking at most one rental a month, it’s far cheaper to just rent them individually.

The same concept is true for the magazines. If I just bought a weekly magazine at the newsstand once a month when something interested me, it’s still far cheaper than the cost of the subscription.

A subscription can save you money if you use it consistently, but if you’re not using it consistently, you’re better off just buying or renting individual items when the opportunity comes up.

In the end, it’s all about time. If your interests are such that you’re actually devoting a lot of your time to a particular hobby, a subscription service might make it worthwhile for you. If you’re doing it mostly for the convenience of the one time every month or two you actually end up using it, drop the subscription and find another option. Your wallet (and your clutter) will thank you.

Depending on the specific model, your car loses 1-2% fuel efficiency for every 100 pounds of extra weight in the car. That’s a surprising amount that can really add up.

For example, let’s say you’re matching the extra weight that a friend of mine (who we’ll call Cathy) carries in her car. She consistently carries (mostly) unused car seats in the back seat of your car, plus she hauls around a box of books in the trunk along with a few other excess items. The sum total of that extra load is about 70 pounds.

That means, depending on the model, Cathy is burning an extra 0.7 to 1.4% in gas just due to this extra weight. Let’s say it’s 1%.

If her car gets 20 miles to the gallon with the weight in it and she commutes, putting 20,000 miles on it per year, she’s burning 9.9 extra gallons of gas per year just due to carrying the extra junk.

Say goodbye to $33 or so a year in just fuel costs, Cathy, never mind the additional wear on all of your car’s components.

Even a slight difference of just ten pounds can have a real financial impact. Let’s say you’re driving the same car Cathy is, where you’re getting 20 miles to the gallon and you’re driving 20,000 miles per year. That 0.15% in additional weight is eating up 1.5 gallons in gas per year, costing you about $5 in additional fuel along with slight additional wear on your car.

The message here is clear: get the excess weight out of your car.

How can you do that? Simply make sure that you’re not carrying anything unnecessary in your trunk or your backseat. Evaluate what’s in there and get rid of the things that you don’t need to be carrying back and forth.

I’m constantly amazed at the things people carry in their trunk, from huge assortments of shoes to large gun cases. These things add weight to the car and you pay for that weight directly at the fuel pump and indirectly whenever you get maintenance work done on your car or need a repair done.

There’s only one exception to this rule that I’ve found. If you’re seeing any chance of icy roads, it’s worthwhile to have extra weight in your car because it improves your traction and keeps you safe. I often carry that extra weight in the form of sand bags or rock salt, both of which can help you in a rough winter situation. The extra safety is well worth losing a few percent in fuel efficiency for a season.

Aside from that, you’re only saving money and helping your automobile’s lifespan by reducing the load you’re carrying. If you’re not hauling it around for a purpose, don’t haul it around.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Vacuum sealed bags
2. Boardgame with new couple friends
3. Investing for house down payment
4. Roth IRA versus Roth 401(k)
5. Hedging bets for retirement
6. Multiple savings “funds”
7. Extra mortgage payment impact
8. Car selling advice
9. Dodgy mortgage lender behavior
10. Going back to school

Sarah and I attended a Super Bowl party yesterday hosted by a couple who have two giant Saint Bernards as pets.

I love the dogs. They’re like children in a very big body. They want to hug you and play with you and they wear themselves out from all the excitement.

Q1: Vacuum sealed bags
I was wondering what your take on vacuum seal bags is. We have 2 freezers and stock way up on meat and frozen vegetables when we catch a really good sale. Especially since we live way out in the boonies with the closest store being 17 miles away. My question is, with the price of the vacuum seal rolls (we make our own bags) how much are really saving by doing this. I do wash, sanitize and re-use the bags until they get too small to use. So, I get 3-5 uses out of each bag depending on what the size of it was to begin with.
- Megan

I used a vacuum sealing system for a while. I found that they merely make it possible to store food in the freezer for just a little while longer than ordinary Ziplocs. Eventually, the freezer burn gets to the vacuum sealed stuff, too.

Dollar for dollar, I’m pretty happy with the gallon freezer Ziploc bags that we use. We get at least a dozen uses out of them (using masking tape for the labeling) and there’s no equipment.

The only disadvantage with freezer Ziplocs is that the food doesn’t stay protected from the freezer burn for quite as long, but if you’re reasonably consistent about eating your frozen goods, it’s not a big deal.

Q2: Boardgame with new couple friends
You’ve probably run into this, so I figure I would ask you. My wife and I play board games and card games with each other quite a lot and we also play with other friends. We’re going to have a couple over soon that’s open to trying some games, but have never played anything other than things like Monopoly when they were kids. Do you have any “go to” games for this situation?
- Shawn

My default games for these situations is either Ticket to Ride or Settlers of Catan. I usually bring them both out and give a one-sentence explanation of each, then let them decide.

However, I throw that out the window if I know there’s a game that will really fit the other interests of the people involved. For example, my wife has a friend who is really into the “zombie apocalypse” subgenre, as is the friend’s husband. We’re already planning on inviting them over to play Last Night on Earth after dinner.

Remember that you never want to overwhelm someone with a game if they’ve never played many games. Some games are just more complicated than others, and when in doubt, go for the one with simpler rules.

Q3: Investing for house down payment
I am 26 and my soon to be fiancee and I want to buy a house in 5 years. We are debt free, already have an adequate emergency fund, and I recently got a raise from 62k/yr to 85k/yr. I had been saving $100/month for the down payment, but that’s not nearly enough and I intend to take the difference in my paychecks and put it all to saving for this goal. I have been using SmartyPig to save for this, but the interest rate of 0.7% is bumming me out. Would you recommend investing in bonds? I know bond duration should be less than my investment time frame, but I’m also concerned about the tax implications (as I’ve never invested in bonds, and only know that they are less tax efficient than stocks). I already max out my Roth IRA contribution in an aggressive portfolio, and I contribute another 5k/yr to a similarly aggressive portfolio at my employer (no match there, sadly). Is there any tax sheltering I can do for my house down payment saving? I know IRAs allow you to withdraw for a first time home purchase, but I’m concerned about losing out on my retirement goals if I do that (plus 5k/yr is not enough to get me where I need to be for this down payment). Am I worrying too much about taxes and should just go for a short- to intermediate-term bond index fund at Vanguard (where my Roth IRA is)?
- Rick

I think you’re worrying far too much about the taxes here.

The real reason people worry about tax sheltering is that they’re trying to minimize their total tax bill taking into account a lot of years. For example, they might want to pay minimal taxes on their investments in a year where they earn a lot of income from other sources, and pay more of the tax load in a year where they earn little income from other sources. Eventually, you do have to pay the income tax on your investments – and it’s only on the gains, anyway. If you invest $100,000 and earn a 2% gain on that investment and find yourself in the 25% tax bracket, you’re talking about only $500 in taxes.

It sounds like you’re looking at a fairly short term period where you’re worrying about this, and it doesn’t sound like you’re expecting significant changes in income during that period. The only real advantage that such tax manipulations might get you is if you think you won’t be prepared to pay such an amount one year, you expect huge changes in how income taxes are assessed, or you think you might see a big income bump. If neither of those is true, you have very, very little to be worrying about.

Q4: Roth IRA versus Roth 401(k)
My employer gives the option to contribute to a regular 401K and/or a Roth 401K. I currently contribute 14% to the Roth 401K, 0% to the regular 401K, with my employer matching the a percentage of the first 6%. My employer matches the first 4% and I currently do not contribute to a Roth IRA. My yearly contribution comes out to about 12,000.

Should I instead be contributing in the Roth 401K up to what my company matches, then maxing out the Roth IRA at 5,000, and then anything leftover going back into the Roth 401K?

The past couple of years I have put any increases in my salary straight to retirement contributions. I should be on pace to be able to max out the Roth 401K and Roth IRA contributions within the next 4 years so it’s more of a short term problem for me.
- Sully

The first thing I’d do is make sure I was milking every single drop of possible employee matching, as the value of that blows away any tax benefits you might get.

Once that’s covered, I would max out the Roth at $5,000 and contribute the rest to the normal account. This diversifies you in both pre- and post-tax retirement savings, which hedges your bets against whatever may come in terms of taxation changes.

You seem to be completely on the right path here. Good work.

Q5: Hedging bets for retirement
My husband (31) makes $120,000 and I (26) make $70,000 per year, so we are well over the income limit to contribute to a Roth IRA. We would like to take advantage of the Roth accounts at least in part to hedge our tax burden in the future. Currently my husband contributes the max in a non-deductible, traditional IRA and I contribute 5% of my income to my Roth 401k. My employer matches that 5% dollar for dollar and has a discretionary extra contribution which has been 10% of my salary per year for a number of years. Since all of my employer’s contributions are pre-tax and we are not eligible for Roth IRA or deductible traditional IRA accounts as it stands now we are only contributing 5% of my income on a Roth basis.

Should we put more money in the Roth 401k or convert some of the money in the traditional IRA to a Roth in order to hedge our tax bets for retirement? Additionally, would it make sense at all to convert the traditional IRA to Roth since we are already using after tax money to fund it, even though it is treated as pre-tax? That seems like we’d be paying taxes twice on the money.
- Kendra

Converting a traditional IRA to a Roth IRA more or less means that you’re paying the income taxes on the money now rather than at retirement age.

By paying now, you’re providing yourself some level of tax-free income in retirement. If you can shoulder that tax hit now, it can be a good idea.

I usually recommend that people do as you suggested and hedge their bets between pre-tax and post-tax (Roth) retirement investments. This way, you’re spreading out your taxes between now and retirement since you don’t know for sure which point will have the higher tax rate.

Q6: Multiple savings “funds”
One thing that I’ve noticed through reading your posts is that you mention you several ‘funds’ that you put money back into. Savings, emergency, appliance replacement, etc. My question is: how do you manage these various funds? Do you have multiple bank accounts, one bank account and a spreadsheet showing the balance on each fund, multiple piggy banks, etc? That’s one of the biggest problems we’ve had when it comes to allocating money to specific funds. No matter what method we try, it takes more time to put money in each one, or maintain the balance in each one.
- Calista

I do use multiple savings accounts for this. I handle all of the transfers automatically from one bank which makes the automatic transfers really easy from their online banking servies.

ING Direct, to name one specific bank, also allows you to open as many savings accounts as you wish under your name and handle them all through one login. You can set up all kinds of transfers using their service – it’s one I’ve used for years.

It really comes down to how convenient your bank’s online services make such tasks. If you have great online services, this type of thing can be really easy.

Q7: Extra mortgage payment impact
I have a $107,895 mortgage that I have 23 years left to pay on (it is a 30 yr mortgage) at 5.5% interest. If I make two extra payments a year (that go to principle only) how quickly can I get it paid off?
- Leona

For starters, I’d highly suggest playing around with a mortgage calculator like this great one at Bankrate.

As for your specific situation, the exact answer depends on when exactly you started paying your mortgage off and exactly how long ago that was. I guesstimated that your original mortgage was for $120,000 and you’re just a little over seven years into the mortgage.

Given that, making two extra payments a year would shave just a bit under six years off the end of your mortgage. For just making 17% in extra payments, you’re shaving about 25% off the length of your mortgage. That’s money ahead, no matter how you slice it.

Q8: Car selling advice
My husband recently bought a new car, and now we’re in the process of getting his old car ready to sell. We’ve checked the Kelly Blue Book value for it, which says in its condition, we should be able to fetch about $3,500 for it in a private sale. Neither one of us has sold a car before, and we’re not sure how to go about doing it. What would be the best places to list it? How should we go about negotiating? Should we start at $3,500, higher or lower? We both find it hard to believe we could sell it for so much just because it has so many miles, but it’s in pretty good condition otherwise. Plus, we have proof for why we would ask that much; it’s not like we pulled a number out of nowhere. We need to get at least $2,000 out of it because our emergency savings recently took a hit when we had a plumbing emergency, and that will get us back to where the savings needs to be at, but is going down all the way to $2,000 ridiculous when supposedly we can get $3,500 for it?
- Tessa

First of all, the Blue Book value of a car is what you should consider a reasonable selling price for the car. It’s not a guarantee or anything at all. In order to sell a car, you have to have a willing buyer for the price.

My suggestion would be to define what you consider to be the minimum amount you’d sell the car for, then add at least 25% of that price to the car without exceeding 10% more than Blue Book value. If you exceed Blue Book value by too much, very few shoppers will bother looking at your car.

Pricing a car fairly high gives you plenty of room for negotiation, and buyers that can negotiate the price of a car down some is more likely to buy it. Just don’t put it so high that you scare away people to begin with.

Q9: Dodgy mortgage lender behavior
A few years ago I fell behind on my mortgage. My mortgage company was “good” enough to restructure the mortgage even though it took almost 2 years to get everything settled with them. The initial lapse was my fault, but it took them 9 months between 2 separate decisions to let me restructure the mortgage. The whole time they’re adding fees. The original loan amount was $169,000. I had paid on it for 2 years when this happened. Now the loan amount is $203,000 and I can’t get any information from them about why this is. I’ve called a number of times over the past 6 months, each time they promise to send me all the information, and I never get it. Is this illegal what they are doing since they can not provide me with the information?
- Mark

If I were you, I’d contact a lawyer.

My initial impression is that you’re dealing with a financial institution that’s struggling in some fashion or another. The current climate of the real estate lending market is a mess, and some companies are not handling it well.

$35,000 is a significant amount of money. A decent lawyer should be able to help you resolve this situation.

Q10: Going back to school
I currently have a student loan of $14,700 at 4.5% fixed interest rate. I have a master’s degree in marine biology and work in my field, but my salary is quite low. I’m playing with the idea of going to nursing school in the fall of 2013, which would give me job security and a better income (very important in my rural area). I love my job, but I want to go in a different direction. Nursing school tuition would be about $11,000 (3 semester program, since I already have a degree), would require increased use of my car, and because it’s an accelerated program, I would not be working. Of course there will be books, and normal living costs as well. I’m wondering if I should save every penny for nursing school, or pay as much of my loan down as possible?

I pay $200/month to my IRA. My minimum student loan payment is $132 (I have no other debt). Right now, I can probably pay about $350 towards that loan monthly. Is it best to pay off this loan, or save for school, and thus decrease the amount of a second student loan that I will need in the future? Should I decrease my IRA contribution and put it towards my loan?
- Erin

If I were in your shoes, I would continue the IRA payments and the minimum student loan payments for now and save as much as I possibly could to have a fat chushon in your savings account for when you start school.

Having that cash in your savings account will make it much easier to make ends meet during this period of reduced income. That’s really the key – you need to make sure you’re still paying your monthly bills. Your best friend is improved cash flow and access to an easy cash reserve, and since the first doesn’t really seem possible, your best bet is to maximize the second.

I would also look into forbearance on that student loan for any period where you return to school. If you can eliminate that monthly payment during your crunch time, all the better.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

Of all the useful specific pieces of information in your car’s manual, the manufacturer’s maintenance schedule is perhaps the most useful. It tells you exactly how often normal maintenance should be performed on your car based on the odometer, and it’s that maintenance that will keep your car on the road without worry for a long time.

I can speak from experience on this topic.

The very first car I owned was a 1985 Buick Skyhawk. It was a rusty old beast that a friend of my parents had basically abandoned. He had driven it practically to death and it needed several repairs to become road worthy, so I invested some significant time and quite a bit of savings into that car.

I loved that car and the sense of freedom that it represented, but I didn’t have a clue about how to keep it running. Once I had the thing working, I pretty much drove it into the ground. When it stopped running once, I took it to a garage where a guy showed me that my fluids were basically sludge.

That got me to regularly replace my oil and transmission fluids, but most of the rest of the maintenance was lost on me.

In college, my wife-to-be Sarah was driving a van when a master timing belt blew out. It turned out that the belt was about 25,000 miles past time for replacement according to the maintenance schedule. This resulted in us spending a night in a very tiny town in the middle of nowhere.

Rather than looking at the schedule, though, I just kept adding things like this to the “checklist” in my head. Whenever I would go to a repair place, they’d just tell me something else to worry about and I’d try to remember it – and usually fail.

It wasn’t until 2006 or so when I really began to recognize that the maintenance schedule in the glove compartment was really useful. It’s just so simple to schedule an appointment every two or three months, get the next line in that schedule filled in (usually, it’s every 5,000 miles on newer cars), and be on your merry way.

It’s also far cheaper, less stressful, and easier on your time management, too. It’s just better to drop maybe $20 or $30 every few months and maybe an extra $100 to $200 a year on maintenance on your vehicle than to watch something blow out a year and a half later, causing you to lose hundreds out of pocket on repairs and likely find yourself in a real pinch in terms of getting to work or getting to other life responsiblities.

With our two newest vehicles, we’ve followed that maintenance schedule in our manual to the letter. Every item has been handled right on time, within a few hundred miles on either side.

Guess what? We’ve had no significant breakdowns of any kind in years. No emergencies, no unexpected smoke from under the hood, no thousand dollar towing and repair bills.

It’s just been regular maintenance and cheap, worry-free driving.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.