Comments on: Reader Mailbag #7 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/ Simple, applicable personal finance advice for the modern world Mon, 22 Mar 2010 10:09:06 -0700 http://wordpress.org/?v=2.8.4 hourly 1 By: yoth http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-251676 yoth Wed, 23 Apr 2008 15:01:42 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-251676 Nate, I think that a big concern with the "higher paying investment/credit card substitute" issue is that the rate of return on a high risk investment is extremely variable. What if you stashed your emergency fund (which will now be another investment account as you are using a credit card instead) in an investment that lost 10% during that year. Of course, it would average 10% gains if you held it long enough but you need it now, or within 30 days. In that scenario, you have reduced your available cash-equivalent funds with this strategy. Of course, you have the option of liquidating another fund instead so maybe it's not as big of an issue. Cash advances usually require a transaction fee of 3%. The likelihood of you getting an annualized return on investment that offsets the 3% transaction fee and cash advance interest rate is pretty low. Also, changes in employment can result in a change in the credit card APR as you are a higher credit risk. That's a lot to budget on. There's also the psychological component. When you start drawing cash advances you're starting down a path that is hard to stop. You have now begun thinking of your credit cards as sources of savings or income streams. Thinking of them as a money sink in that situation is hard to do. Now, that said, there's the pareto principle. What are the odds of you having an emergency in any given year? Depending on how far out there your lifestyle is, you may NEVER run into this situation but you may be planning for it like it is very likely to take place. Maybe you would do better to focus on the likely events rather than the unlikely events and just consider the emergency fund a contingency (as such, a credit card is fine, isn't it as you only have a very small chance of needing to use it). Only time will tell. Primarily, if you are saving money with at least some available for short-term withdrawal, you are getting at the spirit of the emergency fund even if not following the rules exactly. Nate,

I think that a big concern with the “higher paying investment/credit card substitute” issue is that the rate of return on a high risk investment is extremely variable. What if you stashed your emergency fund (which will now be another investment account as you are using a credit card instead) in an investment that lost 10% during that year. Of course, it would average 10% gains if you held it long enough but you need it now, or within 30 days. In that scenario, you have reduced your available cash-equivalent funds with this strategy. Of course, you have the option of liquidating another fund instead so maybe it’s not as big of an issue. Cash advances usually require a transaction fee of 3%. The likelihood of you getting an annualized return on investment that offsets the 3% transaction fee and cash advance interest rate is pretty low. Also, changes in employment can result in a change in the credit card APR as you are a higher credit risk. That’s a lot to budget on. There’s also the psychological component. When you start drawing cash advances you’re starting down a path that is hard to stop. You have now begun thinking of your credit cards as sources of savings or income streams. Thinking of them as a money sink in that situation is hard to do. Now, that said, there’s the pareto principle. What are the odds of you having an emergency in any given year? Depending on how far out there your lifestyle is, you may NEVER run into this situation but you may be planning for it like it is very likely to take place. Maybe you would do better to focus on the likely events rather than the unlikely events and just consider the emergency fund a contingency (as such, a credit card is fine, isn’t it as you only have a very small chance of needing to use it). Only time will tell. Primarily, if you are saving money with at least some available for short-term withdrawal, you are getting at the spirit of the emergency fund even if not following the rules exactly.

]]> By: Nate http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-251302 Nate Wed, 23 Apr 2008 07:25:20 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-251302 Mailbag Question: Couldn’t you use a credit card instead of an emergency fund, and stash the emergency cash(sorry for the rhyme) into a higher paying investment. Isn’t the point of an emergency fund to hold you over until you can liquidate some of your more valuable investments? So wouldn’t a credit card be the same, using the grace period? I wouldn’t think it takes more than 30 days(the grace period) to liquidate enough of your investments to live off of. And you could argue that you’re going into your investment which you shouldn’t do, but isn’t that what your doing when you set aside cash for an emergency fund? Mailbag Question:

Couldn’t you use a credit card instead of an emergency fund, and stash the emergency cash(sorry for the rhyme) into a higher paying investment. Isn’t the point of an emergency fund to hold you over until you can liquidate some of your more valuable investments? So wouldn’t a credit card be the same, using the grace period? I wouldn’t think it takes more than 30 days(the grace period) to liquidate enough of your investments to live off of. And you could argue that you’re going into your investment which you shouldn’t do, but isn’t that what your doing when you set aside cash for an emergency fund?

]]> By: Another Anne http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-251172 Another Anne Wed, 23 Apr 2008 03:23:12 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-251172 @John F: I find the break-even to be at a LOT of driving. I'm a Zipcar fan in Chicago. When I think about owning a car, it's overwhelming: Car payment (or depreciation if car is paid for) Registration Insurance Gas Parking Maintenance $9/hour for a car, insurance, and gas is an incredible bargain to me if you don't need a car on a daily basis. I use public transportation and my own two feet for most everything and Zipcar only for errands where I need to haul stuff. For road trips out of town, it's still cheaper to just rent a car for the weekend than to own one all year. @John F: I find the break-even to be at a LOT of driving. I’m a Zipcar fan in Chicago. When I think about owning a car, it’s overwhelming:

Car payment (or depreciation if car is paid for)
Registration
Insurance
Gas
Parking
Maintenance

$9/hour for a car, insurance, and gas is an incredible bargain to me if you don’t need a car on a daily basis. I use public transportation and my own two feet for most everything and Zipcar only for errands where I need to haul stuff. For road trips out of town, it’s still cheaper to just rent a car for the weekend than to own one all year.

]]> By: cendare http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-250933 cendare Tue, 22 Apr 2008 21:54:31 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-250933 Trent: You Have to Burn the Rope is the funniest thing I have seen in weeks. Thank you so much for mentioning it. Trent: You Have to Burn the Rope is the funniest thing I have seen in weeks. Thank you so much for mentioning it.

]]> By: Anne http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-250844 Anne Tue, 22 Apr 2008 20:00:08 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-250844 I'd love to see your grocery list response made into a separate post. It'd be like the hamburger post, but larger. For me, groceries are a big expense, and one of my few regular expenses that can vary a lot. I’d love to see your grocery list response made into a separate post. It’d be like the hamburger post, but larger. For me, groceries are a big expense, and one of my few regular expenses that can vary a lot.

]]> By: NED http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-250749 NED Tue, 22 Apr 2008 18:06:58 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-250749 Just 1 question, where's Mad Max: Beyond Thunderdome on your most fav movie list? =) btw, the definition of a theory is that it is a statement that has not been proven (or disproven) as yet. A theorem is a proven theory. Therefore, the theory of global warming is just that, a statement that is not wholly proven. However, more facts are in support of it than not. My final argument is the application "law of odds and consequences": Global warming might and might not be true, but if it were to be TRUE, can you (or your children) afford the consequences? Go green, don't play with your children's future recklessly. P.S. Your "about" profile listed that movie. Now I sound like some stalking troll. =/ Just 1 question, where’s Mad Max: Beyond Thunderdome on your most fav movie list? =)

btw, the definition of a theory is that it is a statement that has not been proven (or disproven) as yet. A theorem is a proven theory. Therefore, the theory of global warming is just that, a statement that is not wholly proven. However, more facts are in support of it than not. My final argument is the application “law of odds and consequences”: Global warming might and might not be true, but if it were to be TRUE, can you (or your children) afford the consequences? Go green, don’t play with your children’s future recklessly.

P.S. Your “about” profile listed that movie. Now I sound like some stalking troll. =/

]]> By: Amanda B. http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-250176 Amanda B. Tue, 22 Apr 2008 12:19:24 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-250176 I am exhausted from playing DTD all night, can I charge you for the coffee it will take to keep me awake? I am exhausted from playing DTD all night, can I charge you for the coffee it will take to keep me awake?

]]> By: Jon http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-249393 Jon Tue, 22 Apr 2008 02:33:29 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-249393 I guess my comments are not showing up any more. I guess my comments are not showing up any more.

]]> By: michael the conservative http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-249321 michael the conservative Mon, 21 Apr 2008 23:30:29 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-249321 It's worth pointing out to the anti-global warming crowd that many of the things that "green" folks want to do in order to prevent global warming are exactly what we need to do to starve terrorism of U.S. dollars. I don't care about global warming, but I wouldn't consider driving an SUV because I have no interest in supporting Middle Eastern terrorist regimes like Saudi Arabia (you know -- the guys who actually carried out the 9/11 attacks?) I also appreciate that recycling (as someone has already mentioned) keeps my taxes low, and as a backpacker/hunter/fisherman, find pollution controls and preserving our nation's few pristine natural areas absolutely vital. It’s worth pointing out to the anti-global warming crowd that many of the things that “green” folks want to do in order to prevent global warming are exactly what we need to do to starve terrorism of U.S. dollars.

I don’t care about global warming, but I wouldn’t consider driving an SUV because I have no interest in supporting Middle Eastern terrorist regimes like Saudi Arabia (you know — the guys who actually carried out the 9/11 attacks?)

I also appreciate that recycling (as someone has already mentioned) keeps my taxes low, and as a backpacker/hunter/fisherman, find pollution controls and preserving our nation’s few pristine natural areas absolutely vital.

]]> By: Jason http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-249284 Jason Mon, 21 Apr 2008 22:24:21 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-249284 It's bee said many times throughout the comments, but, as a scientist and someone who works closely with one of the nations more well-known researchers on the topic, I want to add my voice to Palm (comment #7) and all the others. There is a mountain of evidence supporting the theory of anthropogenic global climate change (instead of global warming because "warming" is not the universal outcome) and its effects. The actual measured warming, climate effects, and future predictions are more dire than the worst possible outcomes cited by the press even in the last several years. Thanks for everyone who pointed out that scientists use the word theory in different context than many non-scientists. To those who are still unconvinced: who do you trust the most to give you an accurate rundown of whether to worry about global climate change: an economist? a politician? a PR specialist? or a climatologist? Contrary to what you may sometimes read in the press, there is consensus among researchers about global climate change. The rest of the research is just focused on better illuminating the details. Some good websites for more info: http://environment.newscientist.com/channel/earth/dn11462 (Climate change - a guide for the perplexed) http://pewclimate.org/global-warming-basics (Global warming basics) It’s bee said many times throughout the comments, but, as a scientist and someone who works closely with one of the nations more well-known researchers on the topic, I want to add my voice to Palm (comment #7) and all the others. There is a mountain of evidence supporting the theory of anthropogenic global climate change (instead of global warming because “warming” is not the universal outcome) and its effects. The actual measured warming, climate effects, and future predictions are more dire than the worst possible outcomes cited by the press even in the last several years. Thanks for everyone who pointed out that scientists use the word theory in different context than many non-scientists.

To those who are still unconvinced: who do you trust the most to give you an accurate rundown of whether to worry about global climate change: an economist? a politician? a PR specialist? or a climatologist? Contrary to what you may sometimes read in the press, there is consensus among researchers about global climate change. The rest of the research is just focused on better illuminating the details.

Some good websites for more info:
http://environment.newscientist.com/channel/earth/dn11462
(Climate change – a guide for the perplexed)

http://pewclimate.org/global-warming-basics
(Global warming basics)

]]> By: Linda http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-249246 Linda Mon, 21 Apr 2008 21:38:28 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-249246 Green living isn't just specifically about global warming. It's more about being aware of the environment - where we live, how it affects us, how we affect it. It dovetails easily with being frugal - you really get to thinking about all aspects of what you bring into the house and what you send out of it. For example, I use flannel washable female sanitary pads instead of disposable pads and tampons. Not only is this much cheaper in the long run (I've been using the same pads for years!), it also prevents that much more junk from ending up in landfills. Another example is using baking soda and vinegar as cleaning agents in the home. It's a frugal solution because it's cheaper than buying commercial cleaning products, but when you really think about it, it's also a more "green" solution (fewer harmful chemicals, less disposable cleaning junk to just throw away, fewer plastic containers if you get baking soda in boxes and vinegar in glass bottles). Green living isn’t just specifically about global warming. It’s more about being aware of the environment – where we live, how it affects us, how we affect it. It dovetails easily with being frugal – you really get to thinking about all aspects of what you bring into the house and what you send out of it.

For example, I use flannel washable female sanitary pads instead of disposable pads and tampons. Not only is this much cheaper in the long run (I’ve been using the same pads for years!), it also prevents that much more junk from ending up in landfills.

Another example is using baking soda and vinegar as cleaning agents in the home. It’s a frugal solution because it’s cheaper than buying commercial cleaning products, but when you really think about it, it’s also a more “green” solution (fewer harmful chemicals, less disposable cleaning junk to just throw away, fewer plastic containers if you get baking soda in boxes and vinegar in glass bottles).

]]> By: Jetts http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-249241 Jetts Mon, 21 Apr 2008 21:30:49 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-249241 Green Grant, you might be interested to see that the numbers are a little different in Canada where the government does its best to empty our wallets. Understanding Gas Prices http://www.petro-canada.ca/en/media/296.aspx That pie chart is on the Petro-Canada pumps to try to soften the blow of $1.23/L gas prices as we fill up. (http://www.canada.com/windsorstar/news/story.html?id=9a3cfa14-4088-4240-845e-bfa526ec5947&k=18010) To save you doing the math that's $4.66/gal. Green Grant, you might be interested to see that the numbers are a little different in Canada where the government does its best to empty our wallets.

Understanding Gas Prices
http://www.petro-canada.ca/en/media/296.aspx

That pie chart is on the Petro-Canada pumps to try to soften the blow of $1.23/L gas prices as we fill up. (http://www.canada.com/windsorstar/news/story.html?id=9a3cfa14-4088-4240-845e-bfa526ec5947&k=18010) To save you doing the math that’s $4.66/gal.

]]> By: Kate http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-249232 Kate Mon, 21 Apr 2008 21:24:50 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-249232 I have had a problem with an automatic draft by a health club from a bank account attached to my debit card. (This account contains my "walking-around" money and is separate from my household account that my cable, utilities, regular bills etc., come from.) At the end of my 1-year contract term, I notified them in writing I was ending my membership and dropped it off at the club, in addition to my key cards. The next month, the drafts stopped, so I thought it was taken care of. It came to my attention recently that they continued to take money out of my account over the next two years, to the tune of over $600. It is embarrassing that I didn't catch on sooner, but some months there were no withdrawals and other withdrawal dates skipped around the calendar. Also, since it's a draft, it does not show up on my statement with a vendor name, just a number and amount. I talked to the club manager, who said they did not have my note in my file, which they say they are contractually required to have before they can "turn off" the automatic draft. (I did not receive a copy of my signed contract until this issue arose last December. Although I had requested one when I joined, they never provided one while my membership was active.) Because I didn't send the notification by certified mail, I don't have any proof I gave it to them. Since then, I notified both the club and my bank by certified mail to stop the drafts, which was done. But now I am wondering if I have any recourse or if I am just stuck. If a company does not provide the contracted service, does that make a contract voidable? P.S. I walk at the park now for free! :) I have had a problem with an automatic draft by a health club from a bank account attached to my debit card. (This account contains my “walking-around” money and is separate from my household account that my cable, utilities, regular bills etc., come from.)
At the end of my 1-year contract term, I notified them in writing I was ending my membership and dropped it off at the club, in addition to my key cards. The next month, the drafts stopped, so I thought it was taken care of.
It came to my attention recently that they continued to take money out of my account over the next two years, to the tune of over $600. It is embarrassing that I didn’t catch on sooner, but some months there were no withdrawals and other withdrawal dates skipped around the calendar. Also, since it’s a draft, it does not show up on my statement with a vendor name, just a number and amount.
I talked to the club manager, who said they did not have my note in my file, which they say they are contractually required to have before they can “turn off” the automatic draft.
(I did not receive a copy of my signed contract until this issue arose last December. Although I had requested one when I joined, they never provided one while my membership was active.)
Because I didn’t send the notification by certified mail, I don’t have any proof I gave it to them.
Since then, I notified both the club and my bank by certified mail to stop the drafts, which was done.
But now I am wondering if I have any recourse or if I am just stuck. If a company does not provide the contracted service, does that make a contract voidable?
P.S. I walk at the park now for free! :)

]]> By: Phil A http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-249194 Phil A Mon, 21 Apr 2008 20:54:30 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-249194 Daniel Plainview: Are you envious?...I have the competition in me. I want no one else to succeed." Daniel Plainview: Are you envious?…I have the competition in me. I want no one else to succeed.”

]]> By: Green Grant http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-249193 Green Grant Mon, 21 Apr 2008 20:53:25 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-249193 Jon, any data to back up your claims? Do you work for Exxon Mobil? Regarding the gas taxes statement ("Everyone complains about how much the oil companies make, but the government makes almost 4 times what they do on every gallon of gas just in taxes."), you are wrong. The Federal Gas Tax is 18.4 cents per gallon. State taxes vary (between 8 and 30 cents per gallon, with an average of 18 cents). Exxon Mobil made $40B in profit on $360B in sales in 2007 (or 11% profit margin). So that's about 38 cents on your $3.50 gallon of gas. So for most states, Exxon Mobil makes more profit per gallon than the federal and state governments combined take in on taxes. Where does your "4 times" number come from? My source is the American Petroleum Institute. Jon, any data to back up your claims? Do you work for Exxon Mobil?

Regarding the gas taxes statement (”Everyone complains about how much the oil companies make, but the government makes almost 4 times what they do on every gallon of gas just in taxes.”), you are wrong.

The Federal Gas Tax is 18.4 cents per gallon. State taxes vary (between 8 and 30 cents per gallon, with an average of 18 cents). Exxon Mobil made $40B in profit on $360B in sales in 2007 (or 11% profit margin). So that’s about 38 cents on your $3.50 gallon of gas. So for most states, Exxon Mobil makes more profit per gallon than the federal and state governments combined take in on taxes. Where does your “4 times” number come from? My source is the American Petroleum Institute.

]]> By: Phil A http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-249188 Phil A Mon, 21 Apr 2008 20:51:39 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-249188 "There Will Be Blood" is excellent. It is a terrific morality/cautionary tale about what greed does to people. “There Will Be Blood” is excellent. It is a terrific morality/cautionary tale about what greed does to people.

]]> By: Stephen http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-249180 Stephen Mon, 21 Apr 2008 20:39:27 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-249180 In every day life a "theory" is often a fancy way of saying a "WAG." Which is a wild [something] guess. In science, nothing can ever be considered proven. Theories are things that are pretty much accepted as true. Like the "theory" of gravity. Or the "theory" of evolution, I mean evilution. When someone states something is "Just a theory," they either need to review their high school science definitions or they are trying to deliberately mislead you with this play on words. That being said, referring to Global warning as a theory basically means all right thinking scientists (not on someone's payroll) think it is just about fact. While I think we will end up at that point, we are not quite there yet. -Stephen In every day life a “theory” is often a fancy way of saying a “WAG.” Which is a wild [something] guess.

In science, nothing can ever be considered proven. Theories are things that are pretty much accepted as true. Like the “theory” of gravity. Or the “theory” of evolution, I mean evilution.

When someone states something is “Just a theory,” they either need to review their high school science definitions or they are trying to deliberately mislead you with this play on words.

That being said, referring to Global warning as a theory basically means all right thinking scientists (not on someone’s payroll) think it is just about fact. While I think we will end up at that point, we are not quite there yet.

-Stephen

]]> By: Melanie http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-249164 Melanie Mon, 21 Apr 2008 20:13:28 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-249164 Trent, I have read your blog for about a year and was excited to see your blog referenced in an article in CityBeat which is our small local indep paper. The article is at: http://citybeat.com/gyrobase/Content?oid=oid%3A144646 Melanie Trent,

I have read your blog for about a year and was excited to see your blog referenced in an article in CityBeat which is our small local indep paper. The article is at: http://citybeat.com/gyrobase/Content?oid=oid%3A144646
Melanie

]]> By: Trent http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-249163 Trent Mon, 21 Apr 2008 20:13:05 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-249163 <em>"I’VE ABANDONED MY BOYYY!!!"</em> <em>WAAAAAAAAALLLTTTT!!!!!</em> “I’VE ABANDONED MY BOYYY!!!”

WAAAAAAAAALLLTTTT!!!!!

]]> By: Kari http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/comment-page-1/#comment-249155 Kari Mon, 21 Apr 2008 20:09:17 +0000 http://www.thesimpledollar.com/2008/04/21/reader-mailbag-7/#comment-249155 "Quite often, to those who do disagree, that’s viewed as smugness whether it’s intended to be or not." I agree 100%. “Quite often, to those who do disagree, that’s viewed as smugness whether it’s intended to be or not.”

I agree 100%.

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