Comments on: Reader Mailbag #23

By: M

Mon, 18 Aug 2008 17:49:58 +0000

Thank you for giving me the answer I already knew, it’s so hard to watch a train wreak over and over. Already I hear how difficult the winter will be with the price of LP, how much extra it’s costing to drive to work, he has just taken in another dog, but went out and purchased some new furniture because his place looked a little empty. His new job isn’t exactly what he expected and thinks he can start his own business now that he has a house, needed the job to get the loan. And all I can do it throw my arms up in the air and say here we go again. The unfortunate thing is I feel I am going to need to start distancing myself from this person, the constant self destructive behavior is a huge strain when I’m working full time and as much overtime as I can handle. But the guilt associated with not coming to the rescue is just as hard.

By: SteveJ

SteveJ — Mon, 18 Aug 2008 13:25:13 +0000

@mischa

I’ve heard it here and elsewhere but put your money into a savings account (like ING Direct) until you figure out what to do with it. For me at least, the psychological boost of earning a few bucks a month on my funds make me want to put more in. It also makes me “greedy”, so I’ll do the research to figure out what investments are best for me and can beat that 3%. And if you don’t get around to it right away, you’ll still be getting that compound interest in the meantime.

By: Dawn

Dawn — Fri, 15 Aug 2008 23:44:23 +0000

DH bought me Henkels knives – not a set but a few here and there for xmas and birthdays. I’ve had most of them for 10-14 years and I love them. I sharpen them myself and get them professionally done every few years as well as use a cutting board all the time.

By: mischa

mischa — Wed, 13 Aug 2008 18:41:25 +0000

I have an off-topic question:

I just turned twenty and am hoping to open a roth-ira, or at least a retirement savings account soon.

The dilemma is, I don’t know if I should take time to research where to put my IRA, or start investing now to start earning interest. Should i wait and figure out a good place to start investing, or don’t waste a second and stuff my funds in a place where it can earn interest until i retire?

By: Shevy

Shevy — Wed, 13 Aug 2008 03:39:08 +0000

I do understand about compound interest, but that’s most effective over the long term. Here we’re talking about retirement in 15 years and too many people are seeing their retirement plan values drop right now, never mind earn 8%.

I’m relatively content to be getting in the 3 to 5% range (depending on when the various investments mature). And the overall trend is slightly upward, that is, that when I reinvest I’m getting a higher rate. I would really hate to get to retirement and find that my (say) $50,000 investment was now worth $30,000! Much better that my $50k should be worth $60,000!

But that doesn’t help me turn $100 per month into over $750,000 in 15 years. ($750,000 would allow us to withdraw $30,000/yr at the recommended 4% per year withdrawal rate no matter how long we live.) And that doesn’t include the money for other expenses down the road, like paying for my youngest daughter’s wedding.

By: brooke

brooke — Wed, 13 Aug 2008 01:50:53 +0000

Agreed about the Global Knives, if you can’t afford one right off the bat, start with Henkels or Wustof. Check ebay too for these brands.

By: Kim

Kim — Wed, 13 Aug 2008 01:38:58 +0000

I love it when people have kids and then, when it comes time for college, they moan and groan and say “How am I going to pay for this?”. Honestly! They act like the kids just showed up on the porch at age 16 or something.

By: SteveJ

SteveJ — Tue, 12 Aug 2008 16:58:47 +0000

Everyone definitely has different college experiences. It was made clear to me before I got out of elementary school that I was paying for any college I wanted to get. Since I really wanted to go, I did the high school job, and got excellent grades, so I went on a full ride academically. While I was in school, I was going for me and not my parents so I did well while working for living expenses. I find that far too many kids go to school because their parents want them to or they just don’t know what to do after high school. College is a rather expensive way to figure out what you want to do. I had many evening classes with the commuters doing real jobs/families etc, and those classes were always more active and involved because they actually wanted to be there. We kids rolled our eyes a little bit at all the eager beavers, but they really knew what they wanted out of the experience and they were determined to get their thousand dollars worth out of every class. I had a prof that always made the joke that they should just set up a drive thru window for the teenagers, you drive up, pay thousands, here’s your degree, and the rest of us could actually get some learning in :)

Anyway, I think it’s great that people are setting aside money for your kids, but I’d think about making sure they want to go and will stick it out, even if you aren’t footing the bill. My wife and I are still working out the details, how do you make your kids do their own thing, rather than pushing your agenda on them? I think we’ll set aside the money so we don’t hold them back from getting financial aid, but try to avoid handing it out until they’ve taken the first few steps solo. Make it like any other investment, you show me some returns and I’ll give you some money :)

By: Francine

Francine — Tue, 12 Aug 2008 14:22:30 +0000

Trent,
I have a question. Yesterday I received an offer from a bank to open up a new checking account. I saw that they also offer checking accounts to college students and high school students, as long as the parents co-sign. I had to call, and was horrified to learn that 13 year-olds qualify. What do you think about this? Thank your for your time and consideration.

By: getagrip

getagrip — Tue, 12 Aug 2008 13:10:28 +0000

I had to chuckle a bit at the first comment. Specifically “We make a decent wage but it’s never enough…” (been there, said that :-) However, since when are anyone’s wages “enough” for them?

Our “needs” if not watched closely always grow to match, and more often exceed, our salaries. It doesn’t really matter for most “middle class” folks what your education or income is because if you aren’t watching and aware of where all your money is going you never have enough at the end of the month since you will always spend everything you make. This is even more true if you don’t have any specific goals like Trent mentioned. Honestly, if you have a one or two hundred left at the end of the month do you say, “great, lets create a goal for that and set it aside for the future,” or do you say “Gee, I’ve been needing a new couch/TV/bed/dress/etc.” and spend that money as it appears? (Or worse you just add to credit card debt by taking an “extra” hundred and charging another hundred and fifty for that “great deal”, again, been there, done that.)

I feel much of the advice on living frugal, finding a way to begin savings, etc. provided by this and other PF sites, have value to most anyone. Particularly the points about budgeting (watching your money) and determining what are “needs” versus “wants”.

By: James

James — Tue, 12 Aug 2008 12:37:10 +0000

Our family has come a long way toward financial simplicity and debt-free living. Now we have set a goal that is really stretching us: We are trying to save about $10000 extra by the end of 2008, so the whole family can visit our daughter in the Philippines. So my question is, do you have ideas for family fund-raisers? I don’t think a lemonade stand would quite be the thing in this case. We’re looking for ideas to raise extra money together, that the kids can be involved in.

By: K

Tue, 12 Aug 2008 12:34:19 +0000

@Shevy
The way people do it is compound interest. Most people need $1.5M or more to retire. Dividing that by 40 working years means you need to save $37,500 per year from age 25 to 65! Not possible for most people. But if you put your money in a fund that earns 8%, you would only need to save $5000/yr to reach that same point.

Trent’s method is for shorter term goals, where you can’t count on the 8% returns from the stock market, and usually have to rely on the 2% that your bank offers.

By: Jesse

Jesse — Tue, 12 Aug 2008 11:15:17 +0000

“The real benefit of a cloth diapering service is simply that it keeps you from having to touch baby poop. If that’s a really big stumbling block for you… I recommend not having children.”

That last line had me laughing early early in the morning. Classic!

By: Shevy

Shevy — Tue, 12 Aug 2008 07:18:09 +0000

Hmm. What about if you figure out what you really want from life in the next 15 years (i.e. retirement time), add up how much you need, subtract what you already have put away, divide it to end up with a monthly amount to set aside and discover that this amount is larger than your entire family take home pay for the month?

Admittedly we aren’t saving enough right now (about 3% of our gross when we’re allowed by the Canadian government to save 18% for retirement plus $2,500 for educational purposes plus $5,000 annually in a tax free savings account, let’s say a total of 30% of gross) but even if we saved half our money we still wouldn’t be in the ball park (and we’d still have to pay taxes on that other 20%).

That’s a little depressing, even leaving aside how unrealistic it would be to go from saving 3% to 30% or 50% overnight. What would you do?

By: Dee

Dee — Tue, 12 Aug 2008 06:47:17 +0000

Thank you K, Andy and Saagar for the advice :) All the debt was at 0% until about one month ago, now it’s at about 6.99% I will pay some of it down.

By: Matt R.

Matt R. — Tue, 12 Aug 2008 03:16:19 +0000

Got a video game question for your next Mailbag! What strategies do you use to keep yourself from getting sucked into a game for hours? I normally try to limit myself to an hour session, but I end up getting so caught up in the action/drama of the game I can’t stop. I tell myself, “as soon as I beat such and such level, I’ll quit”, but then something awesome happens and I keep playing. I quit video games for year because of this weakness and I just started playing recently. The problem isn’t near as bad as it used to be, but I still end up going 30-45 minutes past my planned sotp time.

By: Chiara

Chiara — Tue, 12 Aug 2008 03:09:32 +0000

Thanks for the answer – proving once again, spammers should be tarred and feathered!

By: John

John — Tue, 12 Aug 2008 02:33:28 +0000

What would be the three main goals you would like to accomplish in either one or two terms as the President of the United States?

By: Dennis Robert

Dennis Robert — Mon, 11 Aug 2008 22:32:59 +0000

Here’s a tip on the knives:
I sold Cutco for a few months and they make a quality knife set. Most of the salespeople don’t make it more than a couple weeks. At any given time you can look on craigslist or ebay and find a small set of knives (chef, paring, steak, a few others) without a block for $150-$200, that are very slightly used, have a lifetime warranty, and they’ll put a new edge on them for free if you want.

By: Saagar

Saagar — Mon, 11 Aug 2008 22:07:31 +0000

@Dee,

Here is what I would do. Get a credit card with 0 percent APR and transfer your balance ($5000) to it. That way you make sure you don’t pay any interest. Now let’s say you have 1 year for the 0 percent APR. So 5000/12 = 417. Try to make this payment each month and at the end of the year you would have your debt cleared and emergency fund built up. If you cant afford 417 a month then half the payment to 209 a month, at the end of the year get another credit card with 0 percent APR and transfer the remaining 2500 balance and continue with the same. I guess you get the picture…