Comments on: Reader Mailbag #53

By: Johan

Johan — Mon, 16 Mar 2009 05:45:22 +0000

“Given your situation, you’re what the credit card companies think of as a bad customer. You don’t earn them anything for their efforts, since you keep your bills paid off.”

Stop propagating this myth. Credit card companies charge for transactions, which is how they make 1-2% on you for simply using your card (hence why they still give you “rewards” even if you don’t carry a balance) with no risk on their part. If you don’t carry a balance, they have no risk that you won’t pay it off. When their risk increases, so does your interest rate in the form of a 20+% APR. They charge that to ensure that they make a profit and to cover the costs of those risks that cause them to lose money. Casinos are built on 1-2 percent take.

By: Ali

Ali — Sun, 15 Mar 2009 17:21:26 +0000

Hey Trent,
What did you think of the interview of Jim Cramer on Jon Stewart’s show? Do you think it was just a horse and pony show?

By: Courtney

Courtney — Sun, 15 Mar 2009 04:11:59 +0000

http://unclutterer.com/2009/03/13/ask-unclutterer-what-to-do-with-receipts/

By: Karen

Karen — Sat, 14 Mar 2009 14:42:06 +0000

Re Executioner’s Song–If you can stand it when you’re done, read Shot in the Heart, by Mikal Gilmore, Gary’s brother. Simply the truest true crime story I’ve ever read. Painful, though.

(You can find a similar “both sides now” approach to murder and the death penalty by reading Death Row, by Jeffrey Bledsoe, and Woman on Death Row, by Thelma Barfield. Thelma would have prevented more murders if she had been allowed to live in prison than she did by being executed.)

By: Sarah

Sarah — Fri, 13 Mar 2009 18:40:08 +0000

That “bad” customer thing is not true about people who pay off their balance in full. Sure, those people aren’t giving the credit card company any revenue through owing money, however, everything charged to the card is paid for in the form of merchant fees. Actually, you’re a great customer if you pay off your balance in full each month because you’re not a risk to the credit card company – you won’t suddenly run up a huge bill and then disappear without paying it. They make a steady income off the merchant fees from everything you charge AND you probably won’t leave them hanging by not paying off your debt.

By: Jonathan

Jonathan — Wed, 11 Mar 2009 22:19:07 +0000

Mailbag Question:

My wife and I live in Riverside County in Southern California, an area where house prices have plummeted especially low. This is great for us, because we are planning to become first time home buyers.

I am a high school teacher, and I have the opportunity to get what they call an 80/17/3 loan. Basically one loan covers 80% of the value of the home, a second 5-year deferred loan covers 17%, and I pay 3% up front. Mortgage insurance is waived, as the 17+3 serves as a 20% down payment. There is no pre-payment penalty, so I plan to begin paying both loans immediately

My question is regarding the size of home I should buy. My wife and I are newly married and do not plan to have children for probably 2 years. Should we buy a home that’s just big enough for what we need now and move up later, or should we take advantage of the especially low prices to get a house that is big enough to meet our future needs (without breaking the bank)?

Like I mentioned earlier, it’s a great time to buy. 2,000 square foot homes can be found for ~$110,000. If home prices eventually rebound, I’d rather have a $175,000 investment doubled than a $90,000 investment.

Sorry if the question is confusing… thanks for taking the time to look over it.

By: pv

pv — Wed, 11 Mar 2009 17:08:18 +0000

Hi there,

I recently finished graduate school and am working in my first real job and am earning more than I ever have (and more than I expected to). I live with my partner and the both of us are fairly conservative when it comes to spending. We both enjoy your blog and ardently believe that life is for living and that we want to make money only so that we can be free to spend as much time as possible experiencing different things. We are 28 and 30 years old, have retirement accounts, and routinely put money into different savings “pots” for various future plans, most of which involve traveling. In four or five years we hope to be able to spend a year traveling abroad working in developing countries (we both have doctoral degrees and we’d like to use our expertise for a good cause).

I recently got into a surprising argument with a friend who insisted that my partner and I should be buying a house as we are both securely employed and are making decent incomes. She argued that we would actually be saving more by taking out a home loan. My partner and I both live in a very inexpensive rented apartment in a very nice part of our city and have not wanted to take on the responsibility of a home especially because we both are somewhat nomadic. Owning a house is not something that either my partner or I aspire to in the near future but do you think we are missing an opportunity here?

By: littlepitcher

littlepitcher — Wed, 11 Mar 2009 15:30:16 +0000

Best way to get a kid to eat veggies is to grow some!
This will involve child participation and may make a mess, but should be worth it in better health and reduced meat bill.
If you have no yard or it’s too shady to grow veggies, start out with a dishpan in a sunny window or under a grow light. Leaf lettuce is ideal. Once the young’un learns that one, try sweet radishes or baby carrots. Then move on to young mustard greens (great stir-fried with garlic and scrambled egg) and a few scallions.
If you are really ambitious, go for a miniature squash or a determinate variety of cherry tomato.
It’s become the kid’s project, and he will eat what he grows.

Excellent article on reducing credit card rates. I have none but am passing it on to a friend with serious business card balances.

By: Rebecca Hammer

Rebecca Hammer — Wed, 11 Mar 2009 15:13:23 +0000

Trent,

My husband and I have been pondering the prices at Sam’s Club to determine what’s worth it. I read your earlier posts, and see that you buy diapers and a few other things. What have you found there to be less expensive than locations that do not require a membership. Could you estimate the price difference?

Thanks,
Rebecca

By: Marcy

Marcy — Wed, 11 Mar 2009 13:38:40 +0000

Trent, I have a mailbag question:

My boyfriend’s father has been telling me recently how “dumb” it is to be putting away money for retirement at my age (24). He thinks I should be putting more money away in my savings, buying a house with a 15 or 7 year mortgage, then start saving for retirement around age 40 when my house is paid off. Now, I know this is taking a lot of things for granted: that when I’m 40 I’ll have a job with a decent retirement plan, that I won’t have kids in college, etc., and it’s not really a risk I’m willing to take. But I’m considering maybe a slight decrease in the percentage I am putting away. Right now I contribute 8% of my income to a 403(b). Once I have been with my current employer for one year (September 2009), they will begin contributing 11% of my annual salary. With the market the way it is, I know I am buying low and should continue to contribute, but is it worth maybe reducing my contribution to, say 6% and putting that money right into my savings? I have considered that my 403(b) contributions are pre-tax, so it’s not exactly an even trade. Sorry for the long-winded question! Thanks!

By: prodgod

prodgod — Wed, 11 Mar 2009 02:12:48 +0000

@Amy: No, no, I didn’t even consider food sensitivities, sorry. And I didn’t mean to accuse other people with “lax parenting.” Just stating my experience and pointing out that I’m not bitter as a result.

@Battra92: LOL!

By: Matt Brubeck

Matt Brubeck — Tue, 10 Mar 2009 21:48:52 +0000

Trent’s answer to the CD/savings question is pretty ironic, since ING savings accounts have already dropped to from 2.4% to 1.65% and are likely to go lower. In hindsight it’s obvious that the 12-month CD at 2.0% would have been a better choice.

Some reasons you might want to increase your months of emergency savings when you have a family:

1) If you’re single and in a tight spot, you might be able to move back in with your parents, or camp on a friend’s couch for a while. Family of five? Not so easy.

2) It’s a lot harder to move to a new city or neighborhood to find a new job (or lower your rent) when you have kids in school.

3) The larger the family, the higher the chance you’ll eventually have to handle two financial emergencies (e.g., loss of job AND serious illness) at the same time or one after another.

By: princes_peas

princes_peas — Tue, 10 Mar 2009 20:16:03 +0000

Regarding the contents of wallets…. I do a similar thing with a variation: keep a small envelope in the wallet. I find the “money envelopes” to be exactly the right size – I keep it in the notes section at the back. Simply, all reciepts etc get put in the envelope. Usually, I write on the reciept itself why I bought whatever it is and therefore combine this with tracking where my money goes and if my expenses are jutified. I have one envelope per month (but I don’t buy a lot of things a week, so one per week or fortnight might work better for others) and write eg. “Reciepts March 2009″ on the outside. At the end of the month, I just put the envelope in a box with all the other ones I’ve collected. I have only been doing this or less than a year so I don’t need to do anything else with them, but I will probably use a large paperclip or bigger envelope to group a year’s worth together when I get more. This means I can always lay my hand on the reciept if I need to return something, I have a complete record of my expenses (apart from small change purchases that didn’t give reciepts) for months in a convenient way, I can examine the written reasons for purchases to see if my motivations have changed similarly if what I actually buy etc has changed. Works for me.

And now I have two questions or next week’s mailbag:

1) I have seen a number of times the “rule” that people should pay themselves (savings) first, before their creditors and before their regular expenses, but this is something that I don’t understand. Partly because I thought it was obvious that if you have savings, you use them to pay debt where you have got it because it seems counterproductive to keep savings but also keep debt as well. If you used your savings, your debt would be gone quicker – the same goes, as far as I can tell, for putting money in savings
on a monthly basis. Or does it depend on what you’re saving for and your income level (barely make the bills or got a little to trim down) and other things?

2) How do I go about finding a local credit union?

By: !wanda

!wanda — Tue, 10 Mar 2009 20:03:10 +0000

Re: vegetables: There are ways of preparing many vegetables that also help. My mom always removes the skin of broccoli. This greatly increases prep time, and you’re probably throwing away nutrients and definitely fiber, but it takes most of the bitterness away. She also removed the strings in celery, to improve the texture, I guess. When I was elementary school age and older, I ate nearly everything because I really wanted to be taken for an adult. I probably eat fewer foods now because I decide what to buy, and I just don’t order chicken feet or fried intestine or brain now.

By: Amy

Amy — Tue, 10 Mar 2009 18:56:54 +0000

Prodgod: attempts at that approach in my house resulted in vomiting. I was either physically or psychologically incapable of eating many common foods. Please don’t insinuate that lax parenting is to blame for food sensitivity.

By: Battra92

Battra92 — Tue, 10 Mar 2009 18:11:00 +0000

@prodgod I would’ve run away from home if I was you. My dad was that way (and still is, even though all his kids are grown) and he would really turn it into an all out war.

By: viola

viola — Tue, 10 Mar 2009 16:48:54 +0000

On the CD’s vs. the savings account, I would stick to the CD’s if you don’t need your money liquid. Those savings rates ARE NOT guaranteed, are usually teasers, and can go down at anytime. The CD rate is guaranteed.

By: Lisa

Lisa — Tue, 10 Mar 2009 15:21:38 +0000

1. Don’t make it a battle field.
2. Don’t ignore it. Nutrition for growing bodies is important.

In our house, “no thank-you bites” of everything put on your plate works fine. We also make a game of seeing who can eat the most different colors.

By: Lori Beth

Lori Beth — Tue, 10 Mar 2009 14:38:38 +0000

For my kids I have the rule: You have to try it. If they actually try it and don’t like it, fine, they don’t have to eat it. But that includes different ways of cooking it. They can’t throw down the blanket statement of “I tried broccoli, I didn’t like it” when they’ve only tried it raw, not cooked and vice versa. That way, there’s no fighting, and most of the time they discover they do like it.

By: prodgod

prodgod — Tue, 10 Mar 2009 14:22:21 +0000

As a child, I was never given a choice as to whether I could eat a particular food item or not. Meals were served and we were expected to eat EVERYTHING on our plates; no options, no alternatives, no discussion. Most would consider that cruel these days and I hated it, to be sure. However, I eventually developed tastes for ALL of the foods I detested before. My spouse has a different idea (similar to most here) and as a result, we have raised picky kids.