Comments on: Reader Mailbag #44

By: Christine

Christine — Sat, 10 Jan 2009 17:50:14 +0000

My question: While growing up (I am 37), I learned about money, managing expenses, and saving through, for lack of a better term, observations of the “real world” – my parents always explained to me what was going on when they went to the bank, used a credit card, or sat down to pay bills every month. Now that so much of banking and bill paying is done on-line (making money far less tangible), what would be your strategies for teaching children everyday concepts about money?

By: ontguy

ontguy — Fri, 09 Jan 2009 17:34:14 +0000

Have you tried the board(card) game Race for the Galaxy, if you have what are your thoughts? Its in the Puerto Rico genre of games.

By: KTK

KTK — Fri, 09 Jan 2009 00:50:38 +0000

Trent: the Simple Dollar arrives in my email-box every day, and I love reading it. I have a question: how do you start getting solvent if you are starting from nothing? We’re talking extreme paycheck-to-paycheck here! I graduated at an advanced age (38) from college last May, and haven’t been able to find a good job- I currently work for the university I graduated from, but do not have a full-time position (they’re hard to come by and it’s very competitive). I work full-time hours in my part-time position. I bring home between 1200 and 1400 a month. Right now, I’m working with no benefits, a vague promise of a full-time position with benefits in the future (not in my field, of course), and with the cloud of a massive student loan payment hanging over my head- I just got married, have a ten-year-old son, don’t own a house, own a 1991 beater, and have been trying to eliminate unnecessary expenses- but to no avail. There’s always a bill to be paid and hardly enough for groceries. My husband is a construction laborer who is laid off for days or weeks at a time with no notice, and he brought his own debts to the marriage. I am at my wits’ end and don’t know where to start. Sell the car and take the bus? Disconnect the internet and the cell phones? (We don’t have cable!) These are the only things I can think of to eliminate. We live frugally already out of necessity. I just got a forbearance on my loan tonight, after calling Direct Loan out of desperation. Please help- if you can’t, maybe you can direct me to someone who can?

By: Jessica

Jessica — Thu, 08 Jan 2009 19:08:39 +0000

Couponing – I would love to but have to follow a special diet (gluten free) and find that most coupons for food items to not meet the standard. Our food bill is on the higher end since we need to buy alot of unprocessed food, but we eat alot healthier and one from scratch meal will usually feed us all week.

Question – I’m in my mid thirties, and it seems that only in the last several (5 or so)years have I even heard the term emergency fund. Too bad I had not been introduced to the term earlier, or I might have one.

I’m in the process of paying off credit card debt and starting an emergency fund.

If a whole house humidifer would be a asset to the home and our health, should we invest now? I really do not have the cash for it, but according to my debt payoff spreadsheet, it would only add about a month or two extension to the payoff….thoughts?

By: Eve

Eve — Thu, 08 Jan 2009 14:36:15 +0000

Mol – Put it in a trust. You’ll need a lawyer’s help.
http://en.wikipedia.org/wiki/Spendthrift_trust

By: K

Thu, 08 Jan 2009 14:25:30 +0000

Mol – pretty much, you can’t. You can set up a UGMA account for them, or a Roth IRA if they have earned income, but once they turn 18 or 21 the money is theirs to do whatever they want with. Even though a Roth is designed for retirement, they can withdrawl the contributions any time without penalty. You could set up a 529 or coverdell which can only be used for college without a penalty, but it stays in your name. What you’re asking is how to give a gift with strings attached. Either you give them money and trust your children to do the right thing (because you’ve taught them), or you give it to them with the knowledge they may waste it, or you don’t give it to them at all, or at least buy them something specific.

Another alternative is to set it up in their name and not tell them about it until they are mature enough to be responsible with it. But unless you are doing their taxes for them, then that’s a little hard.

By: Mol

Mol — Thu, 08 Jan 2009 01:10:56 +0000

I know this has been asked before, but I can’t find the article. How do you give an index fund to your child when they’re all grown up without having them spend it unwisely?

By: Brad

Brad — Wed, 07 Jan 2009 20:55:57 +0000

Regarding gasoline, ETFs have really become an easy way to hedge for the public. The US Gasoline Fund, symbol UGA, directly tracks gas prices. Worried about gasoline prices this summer, but the ETF and hold it until the summer before selling it and buying physical.

Same thing with your mortgage rates. Worried about rates going up? But TBT, and ultrashort ETF hedging against rising interest rates and the subsequent fall in long bond prices.

By: heather

heather — Wed, 07 Jan 2009 17:33:08 +0000

I have a 14 year old step daughter who appears to be obsessed with her concept of rich and poor. She frequently makes statements about how when she’s out of school, she’s going to be “rich” and not have to worry about anything. Of course, when asked, she doesn’t have a plan in mind on how she’s going to get rich.

She also frequently comments about how we are poor, her mother is poor and her friends’ parents are all rich. Her father and I try to gently explain that while her friends’ parents may be “rich”, they could also be in debt up to their ears, but no one would know unless they told. Of course, she insists this is not the case. Her mother does not manage money well, and before my stepdaughter moved in with us, we heard stories of her mother not having money for groceries, gas, etc. Her father and I are definitely not wealthy, yet we manage to always pay our bills on time, put a little in savings, and we are trying to eliminate our credit card debt and feel we have a decent plan in place to do so. Without giving her all those details (I don’t think a 14 year old needs all that detail) we will mention to her that we need to save up for certain things (she wants another pug dog) and we can’t just go out and buy things on a whim. She of course, has said we could “just use credit cards”, which I have to counter with an explanation as to why that isn’t a good idea. And that just brings it back full circle, and she’ll say, “When I’m out of school, I’ll be rich so I can buy whatever I want.”

How do we get through to a 14 year old about the differences between rich, poor, and all that is in between? It’s not just black and white. And also, how do I encourage her to come up with a plan for being “rich” (I prefer having her come up with a plan for success, not just being “rich”), without coming straight out and saying becoming “rich” doesn’t just happen overnight? Which, I have said, but I need something to translate to her young language.

I asked her how much money she thought one needed to be “rich”, and she didn’t have an idea.

Thanks!

By: steve

steve — Wed, 07 Jan 2009 02:17:37 +0000

@ Brandon:

I wouldn’t recommend turning the heating system completely off during the winter. If for some reason you can’t make it back and the inside temperature drops enough, you can freeze a pipe, which will cost you about 20 times your $178 gas bill. Just knock the thermostats down to 50F (or as low as they will go–electronic ones will go down to 42F) while you are out of the house. That’s what I do. Keep bringing them lower but be aware of the position of your water pipes and make sure there isn’t an uninsulated gap in the foundation (or whatever) blowing cold air right on one–I’ve seen that in a friend’s (rental) home.

It takes about an hour for the temperature to recover once I get home and put the heat back, but that’s alright with me.

I also turn it down to 50 at night at bedtime until the morning. No need to heat the entire house when I can (and do) just throw another sleeping bag (or comforter) on the bed.

By: Lynn

Lynn — Tue, 06 Jan 2009 21:52:43 +0000

K – no WM I’ve been to has. =(

By: Brad

Brad — Tue, 06 Jan 2009 21:27:06 +0000

A Chrono Trigger fan…. now I REALLY need a hug. That is my all time favorite game. It’s just always struck a warm spot when I hear the name. I miss days of games like these.

By: K

Tue, 06 Jan 2009 20:41:42 +0000

Erin – I live in PA so I can deduct it from my state taxes no matter which 529 plan we choose.

By: T

Tue, 06 Jan 2009 18:35:33 +0000

Hi Trent,
Long time reader, first time writer, and I’d like to say, you do an excellent job! My question is what if you have been married for a while, are very much in love with that person and vice versa, but the one thing that has changed about that person is her spending habits? I find myself having to be the bad guy all of the time about vacations and material things. I’ve tried various ideas such as making her write down everything she spends money on every day and the spending decreases, but after a month or so, it’s back to the same old same old. A common disagreement for example may be, I want to go on a week long Carribean vacation and she does as well, but when it comes time to finalize the trip, our savings does not allow it. So we go back to see where the plan derailed and it often ends with an average of $300 a month of unneeded items such as clothes, shoes, etc. Another example is she may go and grab lunch at a restaurant, whereas I’m brownbagging my lunch every day and even if the cafeteria at work has something that I really enjoy, I pass on it to save the money, only to come home to hear how wonderful her lunch was, which often causes me some resentment, feeling like I’m the one making all of the financial compromises, etc. I approach her on it, and her take on life is we could go at any time, so we should live life now. I should also add, we do have 401k, an emergency fund to last us about 6 months, and additional money invested in stocks and savings. Any opinions on this type of relationship or her view on life?

By: Erin

Erin — Tue, 06 Jan 2009 16:25:55 +0000

Regarding K’s comments above – my understanding is that 529s vary widely as far as fees and the amount of control you have over the funds chosen. Utah, Iowa, and New York, for instance, are known for having very low fees in their plans. Others are known for giving more investment choices than others. Were your parents looking at just the 529 for the state they live in? Your own state’s plan might offer a state tax benefit, but not all do, and you can invest in any state’s plan. I’m not saying that there aren’t better options for some people, but I don’t think the blanket statement that all 529s have high fees and low control is totally accurate. I would be interested in other’s opinions on this as well.

By: Katie

Katie — Tue, 06 Jan 2009 14:24:23 +0000

Is anyone considering joining my gallons? It sounds great but I’m skeptical because it’s just starting.

By: Spoodles

Spoodles — Tue, 06 Jan 2009 13:31:41 +0000

I’ve been reading this blog for a while now, but I somehow missed that you’re an RPG fan. Awesome! Now I trust your money advice even more! I disagree about Final Fantasy. It’s vii that’s the best! You’re right about Chrono Trigger, though. Best. Game. Ever.

By: K

Tue, 06 Jan 2009 13:08:15 +0000

About Walmart doubling coupons – it is not advertized so you may want to try it sometime to see if yours does as well.

About savings bonds… I would also like to see a more comprehensive explanation of the EE and I series bonds. I understand they are guaranteed to double in 17 years (~4.2%) but you can also buy them half price. Does that increase the rate of return or is that what they mean by doubling?

By: Griffin

Griffin — Tue, 06 Jan 2009 08:07:38 +0000

Do you have any suggestions on how to find a good attorney, and how to save on attorney services?

By: reulte

reulte — Tue, 06 Jan 2009 07:56:58 +0000

I don’t think you really answered the question about saving bonds. You’re suggesting they invest in the market rather than in savings bond, but it appears that the bonds have already been purchased and given to them. Isn’t there a time limit on cashing in bonds early (i.e. a ‘penalty’ for early cash-in)? Shouldn’t they keep the bonds for at least some amount of time before cashing in? Doesn’t it depend on what kind of bonds (EE or I) they are? I am interested in the question but was disappointed with the answer which seemed a bit glib (’cash ‘em in and buy stocks’).

I have a variety of bonds – both Series EE and Series I – dating back 10 years or so and would be interested in a slightly more comprehensive answer.

Not to say I haven’t been investing in the stock market at this time . . .