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. Housing challenges
2. Employer matched IRAs?
3. Paying ahead on credit cards
4. Bus pass math
5. Selling a small business
6. Negotiating a promotion
7. Finding a community group
8. Thrift stores in Des Moines
9. PMI or student loan debt?
10. Pocket change

There are so many times that I’m grateful for the friends and the family that I have. They support me in so many ways, both subtle and obvious.

I don’t know how to express it without sounding mushy other than through my own actions: I try to be a good friend in return. I don’t backstab people or try to hurt them. I try to help them when I can. I try to be an entertaining and fun person to hang out with.

In other words, I try to be the friend or family member that I wish that I had.

Q1: Housing challenges
My wife and I currently live in condo that we have a mortgage on. We purchased 4 years ago, rate is 5%. We purchased for $140,000 and have about $135,000 remaining on the mortgage. When we purchased the condo we took the $7,500 housing grant that we have to pay back over a 15 year time period or when you sell the house. The stipulation is if you do not make a profit then you don’t have to pay this back. We have already paid back $1,000 of this. The purchase price is adjusted for any improvements or commissions you have paid in the process. We put in more than $10,000 of improvements so if we were to sell for anything over $143,500 we wouldn’t have to pay back any of the remaining grant. We could also choose to rent, which is what I would do if we didn’t take out the grant, but if we were to do this we would have to pay the remaining balance of the grant back at that time since it is no longer our primary residence. This was the $7,500 home buyer credit, not the $8,000 that you don’t have to repay and can rent after 3 years.

So our current situation, my wife and I are both 27 have no debt (no credit card, no student loans) besides our mortgage and 2 car loans. Car 1 – 1 year remaining $250/month, Car 2 – 2 year remaining $350/month. We make a combined $115,000/year. We currently put about $1,000 a month in retirement (+ company match) and have a combined $40,000 currently saved in our retirement. We also have $10,000 in our savings for a future down payment on our house. We are expecting our first baby in February and at that time my wife will take off 12 weeks of work, she will get 50% pay during this time. I am going to lower my retirement to just the company match during this time period to make sure we have enough money, although I think we should be fine and and will increase the retirement once she goes back to work. We will be incurring day-care costs once she goes back to work of roughly $800 per month.

Here is our dilemma. We have our condo currently listed at $144,000 however we may only be able to get $135K or even less for it, which after commissions would barely break even on our mortgage and could possibly even take a little loss. We want to continue to save and build our savings account up to around $15K before we buy our new place. For us to do this we can’t really afford to lose that much when we go sell. The condo we are living at will probably be too small once the baby gets to about a year old so we are looking at houses in our area at around $200-$250K, (I realize we wouldn’t have 20% down but this is what we are wanting for now). We also want to take advantage of the lower interest rates that are currently in affect right now (I personally believe they will be low until 2013).

Looking back I now realize we should have probably just rented 4 years ago but hindsight is 20/20. Anyway, I guess our options are stay in the condo until we can get a buyer that is willing to give us a decent offer, take a loss on our condo and not have as much to put in a downpayment, or pay out the remaining grant and rent out the condo ourselves until the market turns around in our area (this would also lower our down payment).

It is frustrating because I feel like we are responsible with our money and didn’t necessarily do anything incorrect yet we may end up losing money on this decision to buy our first place, however I realize this is just the times we are living in and going forward I will think more indepth of our decisions. Any advice would be greatly appreciated.
- Kevin

You didn’t do anything particularly wrong. You were simply caught by the collapsing bubble of the housing market.

If I were in your shoes, what I’d do is investigate rent prices in your area compared to the mortgage payments you’re making on your home. If you can find housing that suits you that’s significantly less than the interest on your mortgage payments, you’re going to be money ahead getting out of that condo and then channeling the money you’ll save each month into your down payment fund for the house you really want.

Once you’ve resolved your condo, I would sit on that savings for as long as you can. Build it and wait until your life changes in such a way that a house of your own is really necessary. You’re going to be in far better shape for the long haul if you have a small apartment for several years now before you buy a home than if you tried to swing into one quickly.

Q2: Employer-matched IRAs?
I have an employer retirement plan with Vanguard that allows me to automatically direct a portion of my paycheck to both Roth and traditional IRAs which they will match to an extent. I also have a separate Roth IRA I set up with extra job money in college that I’d like to add money to. My question is, do I need to count the contributions to the employer sponsored accounts towards my $5000/yr limit on IRA contributions?
- Charlie

I tried to find the specifics for the plan you described, but after thorough searching of the Vanguard site and a few emails to people at Vanguard, I found nothing that seems to match up with what you’re saying here. I’ll admit that I’ve read about thousands of retirement plans and I’ve never heard of employers directly contributing to the Roth IRAs of their employees.

The people to ask about this is Vanguard themselves. They would be able to give you a straightforward answer based on how exactly this IRA matching plan is set up

Contact them with your specific plan information and make sure that you understand the taxes and contribution limit issues before you make any major moves.

Q3: Paying ahead on credit cards
In the questions section people mention often that they pay off the credit card monthly. Do you know people who ‘pay on’ or ‘pay up’ the credit card? DH and I do most of our payments with debit card, but when we need the credit card, we discuss it beforehand, then send the money from our account to the credit card, then pay with the credit card. We have about 150 euro positive on the credit card as a cushion; the credit card company gives us about the same interest as the savings account. I was just wondering if we are the only ones to use the card ‘proactively’.
- Stephen

You absolutely can keep a positive balance on a credit card. The drawback to that is that you’re not able to earn anything from that positive balance. Instead, the credit card company is.

Let’s say you had that 150 euros in a bank account instead of sitting as an extra balance on that credit card. Over the course of a year, that 150 euros would generate 1.5 euros straight into your pocket. If it sits on a credit card, you don’t earn a dime.

Perhaps that relatively small loss is worth it for the peace of mind it gives you, and if that’s the case, stick with it. It’s certainly not hurting anything by doing this.

Q4: Bus pass math
I usually take the bus to work. It costs $1.20 for a round trip fare and it’s about two miles each way from work. Since I have a very old car I had somewhat decided that it would be cheaper for me to drive to work rather than catch the bus each day.

Where the math has thrown me is with the bus passes. You can get a bus pass for a month of unlimited riding for $20 and an annual pass for $175. Do you think that this is now cheaper than driving my car to work?
- Larry

Let’s assume you work five days a week and you work forty eight weeks out of the year. That would mean that paying each day, you’d pay $288 in bus fare. The monthly pass is a bit cheaper than your monthly bus fare, and the annual pass is a tremendous savings.

The real question is how much it costs you to commute every day in that car. You can use an online calculator to estimate this. As you can see, the calculation gets complicated really quickly. After playing around with the numbers, I estimated that in your situation, you’d probably be spending about $0.37 per mile driving your car to work, taking into account all of the factors mentioned there.

In other words, you’re still spending more driving to work each day than you would be just paying for the bus out of pocket at that rate. If you buy the annual pass, it falls even more in favor of the bus.

To get that $0.37, I assumed quite a few things, such as not paying toll, that you’re going to keep up your license and registration and insurance whether you drive it to work or not, and that it’s depreciating very slowly because the car is already very old (I estimated a nickel a mile).

Q5: Selling a small business
I am a software developer, I have traditionally worked as a regular W2 employee but I have recently been doing some freelance side work. I am really unhappy at my current day job and I am leaving as soon as I find the right opportunity. I am very lucky in that respect because the market for my skills is really on fire right now.

An opportunity has come up to work on a very exciting project as a 1099 contractor. I have two things I am trying to work out about this opportunity. First, I am trying to figure out how to compare an hourly rate between a W2 job and a 1099 job. I am paid hourly even at my current W2 job (I get no benefits), and I was offered the same hourly rate for the 1099 job. I know that even at the same rate the 1099 offer is worth less in total because I will have to pay the self employment tax, but I cannot figure out exactly how much less. My understanding is that as a 1099 contractor, I will have to pay an additional 7.65% tax, however I can also deduct half of that tax from my income, which makes the calculation more difficult. I get even more confused when I factor in tax-deductible retirement contributions because as a 1099 contractor, it seems like my tax-deductible contributions are worth approximately 7.65% more because I would not being the SE tax on them. I looked at some online calculators, but I could not tell if they took into account the 50% tax deduction. What I really want is a formula that tells me how much an hourly rate under W2 status is worth under 1099 status.

I have a second, unrelated but interesting question about the same 1099 job. I have an LLC which I try to use for my freelance jobs, and every resource I find says that as an independent contractor, I should use the LLC for all my contracts. With this new opportunity, they asked me to sign the contractor agreement personally, rather than through my LLC. Their reasoning was that my LLC has no assets and is worth nothing (which is true), so I basically have nothing on the line when I sign the contract. They are also concerned that potential future investors would be scared off if they can’t guarantee that the company’s intellectual property (the software I would work on) was not protected by a strong contract, and my contract under the LLC would not provide any real protection to the company’s assets. I offered to purchase professional liability insurance for my LLC, but they still want me to sign personally.

I am not really too concerned about having to sign personally, but I cannot find anyone who has ever encountered this problem before. Do you have any insight? Are they being unreasonable by asking me to put my personal assets on the line, or am I being unreasonable by trying to hide behind what essentially is a shell company?
- Charlie

Their reasoning is correct when it comes to the contract, and it’s also the reason why you’d prefer to sign the contract through the LLC rather than personally. The LLC limits your risk and increases their risk.

I don’t think they’re being unreasonable to request this given the current market. I’m assuming that your field does have some level of competition with a lot of people seeking work. If that’s the case, then the power is more in the hands of the employer and they’re able to make such requests.

If you’re wanting to stick to your guns on the LLC issue, you’ve got to be willing to accept that the company may just find someone else for the position. That’s part of the risk of sticking to your guns here.

If I were you, I’d sit down and do a risk assessment. What is your real risk from signing on the dotted line yourself? What is the worst possible outcome? You may wish to contact a lawyer for assistance in reading through the contract you’re being offered.

Q6: Negotiating a promotion
My responsibilities at work have changed significantly over the past year. I have taken on not only more areas of responsibility, but also higher-level responsibilities such as strategic planning. My boss agrees that I deserve a promotion. Today I received a copy of my new job description, which spells out all the things I have been doing plus what else I’ll be expected to do in my new position. Unfortunately, the position title wasn’t the one I was hoping for. I believe I should be promoted to the manager level, but the job description says “junior manager.” My question is, what is the best way to negotiate for the position and pay I think I deserve?

Here’s what I’m thinking to do:
1. Be straightforward and tell my boss that I was hoping for a manager position, and invite her to explain her reasoning for only promoting me to junior manager. I would then try to counter her reasons with concrete examples from my performance this year and my potential for future growth. (My main weakness is that I have relatively low experience and am slightly underqualified; my counterargument is that my instincts have been spot-on so far, and my ability to think through problems has helped me perform well despite my lack of experience.)
2. If that doesn’t work, I will point out that my responsibilities are on par with what other managers are doing, plus I have been assigned to lead those managers on several team projects despite currently being the lowest-ranking member of the team. Thus, I should be promoted to the manager level if I am expected to do manager-level work.
3. If that doesn’t work, I will ask what steps I would need to take to get a full promotion and when we can meet again to discuss my performance. I will try to get a concrete timeline from my boss. If it is within a year, then I will accept the position and work my butt off to get that full promotion. If it is more than a year or if she refuses to specify the steps or set a timeline, then I will accept the position and work my butt off while keeping my eye open for opportunities at other companies.

What do you think? Is this a good plan for negotiation?

One more thing: I have found an interesting job listing at another company. It is in the same field with the same responsibilities, but with 15% more pay, a full manager title, and the possibility of working from home. These are big incentives, but I have not applied yet. I’m rather torn. I enjoy working for my current employer, I am getting a promotion (just not the one I hoped for), and I don’t know if I can get this other job (I would be more confident with 1 more year of experience under my belt). I don’t have pressing financial obligations that are forcing me to search for higher-paying work. In short, it would be safer to stay with my current employer and work toward a full promotion. On the other hand, I am young, hungry, and ambitious, and that job listing is dangling a lot of carrots.

Should I apply for this position? What if I requested an informational interview instead?
- Sandra

If I were you, I’d stick with the third option. I’d go in there, simply state that I would like to have a certain title, and ask what I would need to do over the next six months to achieve that title.

You already have your answer to the first option, and honestly, the answer to the third option is basically what you stated in the second one. If you talk about a gameplan to get you the title you want and you’re already doing the work for that title, then it’s going to be easy. Plus, sticking to the third option makes it appear as though you’re hungry and an up-and-comer, not someone who demands a reward.

As for the other job, there’s no reason not to feel out other opportunities, particularly if you feel like you’re hitting a glass ceiling at your current job.

Q7: Finding a community group
You talk a lot about finding groups in the community to join and participate in and find people that are potential friends. But how do you even go about finding such groups? I don’t even really know where to start.
- Angie

The best place to start is on the website of the community you live in and on the websites of surrounding communities. Look for their parks and recreation departments, their libraries, and their community calendars. Many communities also maintain a list of community groups of interest.

If you’re looking for opportunities, these resources will likely give you more than you could ever want.

If you have difficulty finding these opportunities, simply go to city hall and ask for assistance in locating such resources in your town. They’ll be glad to help you out.

Q8: Thrift stores in Des Moines
I’m going to be in Des Moines in a couple of weeks for business. Can you recommend any good thrift stores in the area? Thanks!!
- Annie

In the Des Moines area, I’ve had success with three thrift stores in particular.

The Goodwill at 1982 Grand Avenue in West Des Moines usually has a pretty interesting selection of stuff. I’ve had quite a few interesting finds in there, including some clothes that fit me well and some vintage video games.

Once Upon a Child is a great place if you’re a parent looking for items for your children. I’ve found some great clothes and a few toys there at awesome prices.

The best place I’ve found for used larger items in the Des Moines area is Changing Places Consignment. They mostly carry used furniture, lamps, prints, bookcases, and the like. If you’re driving a larger vehicle through the area, this is a place well worth stopping at.

Q9: PMI or student loan debt?
I am having a hard time trying to understand what interest rate is higher, my current student loan interest rates, which are pretty clear – 6.55%, 7.65%, and 6.8%. Or my FHA loan, which is locked in at 4%, but I am also paying PMI. I want to know if I should be making my additional monthly payments to my home loan so that I can remove the PMI by reaching 20% in equity or if I should pay down my loans? What makes more sense? My husband and I owe about $90,000 in student loan debt and our home loan is $220,000. We put down only 3.5% when we purchased in December.
- Richard

Unless it is an egregious amount, the PMI on your loan is likely not boosting the interest rate on your home loan to the point where it compares to the other loans. My experience has been that PMI amounts to an increase of roughly one percentage point in one’s annual rate.

For example, on our original mortgage, we had a 5.875% rate, but when you added in the PMI, our rate went to 6.601%.

My suggestion to you would be to call your lender and ask about the effective rate of your loan including the PMI. My speculation is that it will be somewhere close to 5%. Use that rate when comparing all of your loans.

Q10: Pocket change
What exactly do you do with your pocket change? I don’t accumulate much of it and it mostly just seems to take up space. I’m never really sure what to do with it.
- Ed

I keep all of my pocket change (and loose dollar bills) in a jar on my bedside table.

About once every year or two, I take the contents of that jar down to my local bank, fish out the dollar bills, and have them count the change using their change-sorting equipment. That money is then just deposited into my checking account.

I’m lucky in that my bank accepts change and counts it without skipping a beat. This is apparently a feature that many banks don’t offer. If you don’t have a bank available to you that offers this service, there are change-counting services such as Coinstar, but they take a large fee off of the top.

I’d probably try to seek out a bank that accepts loose change.

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.

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. Helping partner build credit score
2. Rechargeable batteries
3. Job and heavy course load
4. Renting a mailbox
5. Reading time
6. Thrift clothes for tall folks
7. To sell or not?
8. Car search in new location
9. Sell now or later?
10. How do you find bargains?

On Monday at about noon, my stomach took a giant lurch. I quickly began feeling tired and mentally out of it. By Monday evening, I barely wanted to leave my bed. I spent most of Tuesday crawling back and forth between the bathroom and my bed.

As I write this Wednesday evening, I’ve lost about twelve pounds, I still hurt all over, and I’ve realized how important it can be to have posts written in advance. I spent most of my “advance” posts over the Christmas holidays, which mean that when I got sick, I didn’t have more than two or three posts written ahead.

This is one of the realities of writing for a constant deadline. Sometimes, you just get sick. Sometimes, your kids get sick. You’ve got to be able to plan for it and deal with it.

Q1: Helping partner build credit score
My boyfriend is 29 years old and has never had any significant financial accounts in his name. He’s had savings and checking accounts with two different banks over the years (currently at my Credit Union), but no credit cards and his credit report does not show any reports (either positive or negative) from his previous bank or any utility companies. In fact, it has very little on it at all other than his previous addresses and an old debt from a medical bill that is paid and just hasn’t fallen off the report yet. We tried using Credit Karma and they said he had too little credit history to even give him a credit score. He recently applied for a credit card (the Chase Amazon card) and was turned down because he had no credit history.

I plan to sell my house (I own it and he lives with me and pays half of the bills) in the near future and we will be moving to a neighboring town, where we will rent for a few years and eventually may want to buy a house together. I have very good credit and could easily get approved for an apartment or mortgage on my own, but if we go in on something together we don’t want his lack of credit history to hurt our chances of being approved. What should he do to start building a credit history? Would a “starter card” with a yearly fee be the only way to go? It doesn’t seem like he’ll be eligible for any decent cards. He’s extremely conservative financially, we’ve lived together for several years and I trust him with money. Could I put some of the utilities in his name? Would that even affect his score?
- Annie

There are a lot of things you can do in this situation.

For one, you could get a card yourself and add your boyfriend as a user on that card. Check with your credit card company to make sure that authorized users you add to your cards have the credit reported to the credit bureaus.

You could also get him his own secured card. This wouldn’t have a yearly fee, but it would require you to pay money up front as a security deposit on the card. Most large banks have such an offering.

Don’t worry about the interest rates on such cards. He shouldn’t be using it for many purchases (though using it for a few is a good thing) and he should be paying off the balance in full each month. If he does that, then there’s no reason to worry about the interest rate because he won’t be paying any interest.

Q2: Rechargeable batteries
I have been thinking lately about getting some rechargeable batteries and wondered if you have posted anything about the cost comparison between getting some decent rechargeable batteries and just buying the standard type. I guess just the standard sizes are what I’m most concerned about (AA, AAA, C, D, and 9volt). I have also been concerned about how well they would perform if you don’t use them frequently (I.e. Flashlights that you only use periodically during power outages etc.)
- Greg

I am a big fan of eneloop batteries, made by Sanyo. I have had good experiences with them over and over again.

Most of the time, rechargeable batteries for “C” and “D” size come in the form of an adapter, which looks like a “C” or a “D” battery, but just contains two or three “AA” or “AAA” batteries. There are eneloop adapters for both of these sizes.

I do not have any experience with 9 volt rechargeables. The only items in our home that use a 9 volt is our smoke detectors, and I don’t use rechargeables in those.

Q3: Job and heavy course load
Right now I’m 19 and a sophomore at a college studying mechanical engineering. It’s a rigorous college, but I like it and I’m doing pretty well. The only part I don’t like is the undue financial strain it’s putting on my parents. We’re not a rich family. My dad’s getting up there in years and being a firefighter is starting to take a toll on him. My mom is self employed in property management, and while it brings in some money it’s sometimes not enough, especially now as she’s trying to refinance her buildings.

I want to get a job. Right now I have some scholarships helping me out but it still comes down to about $12,000 a year for college, not including living expenses, food, etc. I feel guilty every time I get money from my mom and I know that they could be using it to help elsewhere, as my little brother still has to get through college. Every time I try to bring the subject up, my parents tell me it’s not a good idea, and that school is my job until I graduate and I must concentrate on that.

What do you think I should do? My average course load is between 17 and 19 hours for the next two years, and I also have a position as a service coordinator for the local chapter of Alpha Phi Omega service fraternity. Is it worth it for me to get a job to help with the cost of school?
- Sam

During my fourth semester in college, I took on a 19 credit course load and worked an 18 hour a week job and another 12 hour a week job. It was a complete disaster. I didn’t do either of the jobs well and I had my worst academic semester of my entire college career. I was stressed out constantly and exhausted by the end of it.

If I were in your shoes, with a similar courseload to what I had and a job as a service coordinator, I would not add additional responsibilities to the pile. I’d stick with what I have, use student loans to finance the experience, and try to create fantastic results for both the classwork and the service positions. (A reminder: an “A” alone isn’t necessarily the best result from a class. You’ll get much more value out of building relationships with classmates and with the professor and teaching assistants along with the good grade.)

If you come out of college with a solid GPA, a lot of professional contacts, and an interesting resume with a variety of activities and accomplishments, you’ll be primed to get a good job. That is the focus here above all else.

Q4: Renting a mailbox
I started blogging myself in August and ocassionally have readers or sponsors send me packages in the mail. This looks like it might increase a bit in the coming months, but practically we’re looking at two to four parcels a month, average. I feel a bit uneasy about always giving out my home address to people, many of whom I only know online and only a little at that. I would feel more comfortable with a PO Box, but am concerned about the cost.

The local post office rents their smallest size box for $13 per 6 months, which is quite reasonable, but it is significantly out of my way and annoying. I had a PO box there a few years ago and hated going there to see if there was anything I wanted, and the junk mail piled up so that it filled up fast and I usually had to wait in line to get a pile of my mail–most of it circulars that I would toss.

I’ve called around to most of the private mailbox rental stores in my area and the best price I could find is about $10/mo, which is significantly more, but they do have an email service to let me know when something comes and it is directly on my way to work. It is a local shop and I know the people who own it, and like supporting local businesses.

My question is, is it worth it to spend the extra to get a convenient mailbox (that’s $120 per year!!!) or should I go with the annoying but cheap option? Or not sweat giving out my home address for a few packages a month? I’m trying to save money and pay down my debt, not spend more. Am I making too much out of this? I would appreciate your perspective.
- Hannah

For me, it would really depend on the volume of mail I was receiving. If I was making a trip to pick up a package once a month, the trip out of my way to the post office would be worth it.

On the other hand, if this is a daily or a thrice-weekly occurrence, I would go for the more convenient pick-up option, even if it were more expensive.

Let’s say, for example, that the more convenient pick-up saves you ten minutes per package. If you’re receiving one package a month, that’s two hours (120 minutes) of time over the course of the year. The box is costing you $94 more than the post office, so you’re spending $47 per hour of time saved.

Now, let’s say you’re receiving packages three times a week. That’s 26 hours (1,560 minutes) saved by having a more convenient pickup spot. That breaks down to $3.61 spent per hour saved over the course of a year.

For me, the cutoff for something like this would be between $5 and $10 an hour, depending on environmental factors and other concerns. So, for me, if the packages were coming in much more frequently than weekly, I’d rent the more expensive and more convenient box.

Q5: Reading time
How do you find the time to read so many books? I find that a typical book takes me eight or ten hours to read. Where do you find the time for it?
- Angie

I make it an effort to set aside one hour each weekday for reading related to The Simple Dollar. I shut off all distractions and read a personal finance or a time management book.

Also, every single day, I set aside at least an hour devoted to reading for my own enjoyment or growth in other areas. I often exceed this because I’ll take a book with me whenever I go out and about, so I’ll get in fifteen minutes at the doctor’s office or something like that. Usually, this hour is in the evening when other households might be watching television or something.

This adds up over time. On top of that, because I’m such a practiced reader, I can read pretty quickly, allowing me to go through more books than I would if I didn’t practice so much.

That’s really all there is to it.

Q6: Thrift clothes for tall folks
I have been selling clothes on Ebay for about two years. I make about $500.00 per month and am looking for a way to earn more. In your article today you mentioned that tall clothing for men are scarce or hard to find, so that led me to wonder if that’s a niche I should research. If you don’t mind, my question is: how much do you pay in the thrift stores for shirts, tshirts, pants, shorts etc for tall men? This would also help me decide if buying these items for resale would be worth it.
- Alvin

Finding good tall clothes at thrift stores is completely luck-based, but when I do find them, they’re not usually premium priced over anything else. They’re usually hung on racks alongside non-tall items.

The question for you would be whether or not the additional time you spend seeking out good tall clothes that you could likely eBay at a small premium is worth it.

My perspective is that it probably wouldn’t be worth it if you were just hunting for tall clothes. However, if you use thrift stores as a general resource, identifying both tall and regular items that are sell-able, I think you could turn a reasonable profit. You’re essentially acting as a clothes filter in that situation.

Q7: To sell or not?
My fiance and I are living together in a house in Toronto, Canada, which we bought one year ago. We bought it for $415,000, which for our neighbourhood, is a great price. I absolutely love our community – very warm, supportive, good shops etc, and good schools (for the children we’re planning to have in the next 2 years). I’m 30, he’s 32. We have a great relationship (lots of love, and good teamwork), and I’m so excited for our life together. There are two issues for me: current stress based on our present situation, and difficulty knowing what to do for future planning.

Currently: My fiance has no debt (aside from our shared mortgage; $1800 per month, variable rate… a good one, just can’t remember the number at the moment). My fiance makes a good salary (80,000) and has started some investments for our future. Me, on the other hand, I don’t have a good track record for being smart with money, but I’m working hard to change that now in my life. I have a large student debt (40,000 interest at prime through my father’s line of credit, and a personal line of credit 12,000 interest at prime). In addition, my employment has been unstable (a difficult market at the moment for Social Workers) so I’ve been building a Private Practice (which I love, and wish to grow!). Luckily I have a small client base, and I’m working right now on increasing this through an Online Counselling service. I’ve also been working odd jobs part-time for extra income, but most of the money goes towards paying my debt payments, and not towards our life (which causes me frustration). And to top if off, we’re getting married in April … luckily with financial help from our parents… but we’ll have to cover a large chunk ourselves (10,000). I’m not sure there’s any more solutions, per se, for this current situation other than continuing to work hard and communicate with my fiance about finances. What do you think?

WIth regard to the future: as I mentioned, I love our home and our neighbourhood… and I don’t want to move anytime soon. I know from our friend’s experiences that house-hunting in this area is very difficult, and we’d never be able to find another home with these perks for this price. There were lots of strange factors that led to our home purchase, which I won’t go into now… but it was unique, and not likely to happen again. However, my fiance wonders if we should sell our home in the near future and use profits to pay down some of the debt (which I admit, is huge and weighs on us). If it were just me, I’d say sure… but given we want to start a family, I feel being in a good neighbourhood is more important. But I don’t want to push for staying here if there are reasons I’m not seeing which could damage our future financial situation. Finally, when we do have children, I will not be eligible for social assistance because of my unstable employment, therefore we’ll only have one income (and maybe some extra from my private work, if I can afford the time). If you have any insights or advice, I’d appreciate it.
- Claire

The thing you need to keep in mind is that working to pay off your debts is working toward your shared life. Every hour you spend paying down those debts is an hour that will eventually improve your situation. It reduces that debt load and also brings forward the date that you’ll be able to be rid of all of them.

I am worried that you are living a bit beyond your means. The debt load you have is pretty high, you’re working at a job that seems to be relatively low income, and you’re spending more than $10,000 on a wedding.

If you’re feeling like your debts are insurmountable, which seems to be the reason you wrote this, part of it might be your lifestyle level. There are ways to reduce your lifestyle level without selling your home, particularly if it is somewhere you want to live long term.

Q8: Car search in new location
At the end of October, we moved about 150 miles away from our then current home to pursue a new job in a new market that offered significantly more opportunities then where we were. Along with it came a 50% raise (and minimal increases in living expenses) – plus my old job (that I quit to move) is still paying me to consult. In a lot of ways, I have more money than I’ve ever had in my life and projects that were on hold (new bed for the kids, clothes, etc) due to money are finally getting fulfilled.

However, being 150 miles from “home” has presented its own difficulties. We find ourselves driving back to visit family and friends every couple weeks (especially during the holidays). However, because everyone we knew was within 20 miles of us, our car was never purchased with all the miles we’re putting on it in mind. Plus, it’s not all that comfortable for long trips, and lacks adequate trunk space for packing for overnight trips.

So here is the basis of my question(s): how do we even start the car searching process? I want decent gas mileage and decent leg room in the cabin and would like something we can fit more than a few blankets and a suitcase into. Since it will also be my wife’s primary vehicle, reliability is a must as well. I have to admit, I’m overwhelmed just looking at the options and not sure where to start.

The other half of my question is: We had to take out a small loan (4,000) to move here – knowing we would be able to pay it off quickly. I have the money to pay off the loan, plus some savings, plus some extra money in my checking account, which would give me about 10,000 to pay on a vehicle (if I didn’t pay off the loan). Would it be better to pay cash for the vehicle and make payments on the loan, or better to take out a small loan for the vehicle and pay off the moving loan? I have no idea what interest is on a car loan (have never had one), but the moving loan is at 11%. Otherwise, the only other debt we carry is school loans which are currently in deferment.
- Fred

Your best move would be to pay off the loan, buy a lower-end vehicle that you can afford to pay for with cash, and then start saving right now to replace it. That way, you avoid debt, which is just money lost to the bank, and you also avoid depreciation on a higher-end car.

As for your specific car choice, we find ourselves in a similar boat. All of our extended family lives about four hours away from us, so we often find ourselves on road trips to visit people. That’s a long car ride, particularly with three kids.

What we’ve found is that the two most important factors on the trip are reliability and fuel efficiency, assuming that we have minimum space for our legs and our belongings. Most of the time, we make that trip in our Prius, which gets great gas mileage and is very reliable. It has enough leg room for me, too (I’m 6′ 6″).

I’d suggest just going to the lot and focusing on fuel efficient cars that you fit comfortably into. Test drive a few to get an idea of what you like in terms of comfort, then shop around for the best deal on some of the models that fit your needs.

Q9: Sell now or later?
I am potentially facing the issue of selling my condo at a loss or renting it out at a loss. I have applied for a job within my current organization in another city roughly 1.5 hours away so commuting for me would not be an answer. The city I would be moving to is a lower cost of living area but my salary would also drop approximately $5000.00. I figure I will be bringing home $1450 ($200.00 less) every two weeks after taxes and pre-tax items. I have lived in my condo for 5 years, but I just refinanced in April to a 20 year mortgage with a 4.875% interest rate.

If I would sell today I think I would break even on what I owe on the mortgage $140,000; however, to pay realtors, closing costs etc. I think I would have to bring $8,000 to $12,000 to the closing table. I have that amount but I would be left with little or no emergency fund. If I try to rent the condo I would probably get $1100-1125 per month in rent. My known costs would be the mortgage of $1048, condo fees of $335 and payment to someone to manage the place of $125. I would be short approximately $485.00 per month. I believe I can make up the $485.00 by changing some lifestyle habits, not paying extra principle on the mortgage and cutting back on saving for a new car which I will not need in the next 4-5 years.

The big kicker is if I took this job it would probably only be for 5 to 7 years and I would likely move back to where I live now and move back into the condo if I keep it. Strictly on the basis of money would you sell at a large loss now or have the losses over a few years? I don’t expect rents to go up that much because of the size of the condo, the lack of a dishwasher (I can’t add one) and the laundry is down the hall. Also as an FYI the condo is not underwater but I have lost approximately $75,000 (all equity from the sale of a previous property I put in at closing) in value since my purchase.

In the new job I would be doing what I actually want to be doing in my career right now. I would be away from a lot of the bureaucratic issues I am facing right now and I would get out of a job situation that I am not a 100% happy in. The job is in a city I use to live in. I have friends there, a church family that I miss and I will be closer to my immediate family. I miss the sense of community I use to feel in that city. There is a lack of that in the metropolitan area I live in right now.
- Connie

The decision of whether to sell would hinge on a lot of factors that you haven’t really specified here.

How likely is it that you’ll move back there in five to seven years? Are there other opportunities besides the career path you’re on that would cause you to move back there? How is the market for rentals in that area? Are there a lot of rentals sitting unoccupied or are they in high demand? How much of a shortfall would there be on the mortgage payment if you rented out the property (after taxes and after management fees, assuming you go that way)?

The less likely I was to return to the area, the more I’d lean toward selling. The more likely I was to rent it, particularly at a price that would pay most of or all of my mortgage, the more I’d lean toward keeping it.

This is one of those situations where there is no strict right or wrong answer because we can’t see the future. We don’t know where our path leads. All we can do is give it our best guess and move forward from there.

Q10: How do you find bargains?
What I’ve never really been able to understand about frugality is how people find all of these amazing bargains. Let’s say I need a new kitchen knife. I do some research and find some potential knives that I might by. Then, I go on amazon and a few other sites and find prices and then I do the same thing in local stores. Usually, I just buy the lowest priced one I find, but I never seem to find these amazing discounts people seem to find. How do they do it?
- Darla

When you hear about a big discount, it’s often on an item that the person wasn’t necessarily planning on buying. They just happened to find that bargain, had enough sense to see it for the bargain that it was, and had the resources to pounce on it.

It gets much trickier when you’re looking for a discount on a very specific item. The more narrow the item you’re looking for, the harder it is to find a big bargain in that specific area.

What I often do is wait. If there’s an item I would like to replace but I can hold off for a while, I sit on it and look for a bargain for as long as I can.

Sometimes, it pays off. For example, I mentioned how I waited around for the right price on a blender. Our old blender had a broken lid (which meant that it would splatter if you used it) and a motor that had a very loud whine to it that started after my son dropped it on the floor. However, it was still usable, so we kept using it. I started watching a variety of places very carefully for a discount on a really good reliable blender that wouldn’t easily break and might survive a bump and would also blend anything we threw in there (our old one was dodgy at times when it came to blending perfectly), but I knew I could just go buy a $30 replacement for it at Target if we needed to switch it.

What happened? After some waiting, I found a wonderful new blender on sale at a local food store that was going out of business and had marked it way down – something like 70% off the sticker price. About a day after that, I found an even better price on Craigslist for a similar blender.

People find bargains through a mix of serendipity and patience. You can’t wake up one morning and expect to find a huge discount on the specific item you want.

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.

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. Trading cars before a move
2. Handling an old retirement account
3. State income tax after leaving
4. Student loan repayment plan
5. Unexpected job offer
6. Job change and unfinished mortgage
7. Reconnecting
8. 401(k) loan for debt?
9. Which insurance policies?
10. Best books of 2011

Yesterday, my wife and I took a long walk in the park with our kids. The grass was green and there were people jogging and riding their bikes.

We stopped at the playground and played for an hour. Several other kids joined them at various points.

This is mid-January in Iowa, remember.

Q1: Trading cars before a move
In May 2011, I bought a 2008 Certified GMC Acadia for $28,5000. Currently we are paying 2.5% APR loan, a very comfortable $400 monthly payment, and owe $16,000. The problem is my husband just received news we are moving to Italy. Italy has small roads, lots of mopeds, and tiny parking spots. A SUV that has a lot of blind spots is not ideal when it comes to driving in traffic, mountain areas, or parallel parking in the city. Not to mention the likelihood of accidents and the high cost of repairs in not good. I also have a child and back issues. So considering all of this I am thinking about trade-in my GMC Acadia for a BMW X3 or something similar. My car is on only worth around $23,000. A total depreciation of $5,500 in 8 months. We do not have time to private sell, only about a month til we ship the vehicle. Am I making a huge mistake trading in the car? Can I ask the finance company to finance the other car, and will the dealership trade in a more expensive car for a cheaper one?
- Kelsey

I agree that large SUV is really not a good choice in that environment. If I were in your situation, I would probably sell the Acadia.

Your challenge, of course, is the short time frame. If I were you, I would list the vehicle on Craigslist immediately for something approaching the list value of the car. We purchased our car on Craigslist and were able to go from listing to completed purchase in about two weeks, so you do have time for that.

If that doesn’t work for you, your best option is probably to trade in the car. You’re much more likely to get some value approximating the trade-in value in the United States rather than in Europe, so I would trade in the car for something smaller before I left. If you downgrade enough, you should be able to make the trade-in work without incurring a big lump sum expense.

Q2: Handling an old retirement account
My husband had a retirement account for his post-doc that ended in march. It was in a TIAA-CREF account. We are no longer making contributions to it and am wondering what to do with it. We will be leaving the country in 2012 and will be working in a different economic structure, therefore, we don’t know our future regarding coming back to the states or staying out. I think the balance last we checked was around $8000. We also have a state fund with maybe $300 or something in it. I honestly have no idea how these things work and the money is sitting. What would you advise us to do?

Our finances are simple: $1800 monthly income, about $1200-$1300 expenses, $6000 in student loan debt at 1.65%. no other debt/expenses.
- Monica

I would leave the money for the time being. When you reach an appropriate retirement age, you can withdraw it as normal income in the United States.

The other option would be to empty it out right now, but you’re going to take a tax penalty for doing so. From what you’ve described, there really isn’t any sort of rollover option that would provide you any real benefit.

I would just leave the money there and consider it a start on your retirement. You’ll be able to get the money out of it wherever you’re at.

Monica had a follow-up question.

Q3: State income tax after leaving
Leaving the country, we are required to pay income taxes. I’m aware of the $92000 income limit on federal tax exclusion on foreign income. Virginia (where we live, we rent) requires tax on all income, regardless. This is what I know. However, we will be leaving and probably will forward mail to my parents (who live in VA). Would you happen to know how this works? We don’t own property and won’t rent so technically we aren’t residents anymore. Does that mean we still need to pay VA taxes?
- Monica

In order to maintain U.S. citizenship, you have to continue to file federal income taxes each year, and you’ll have the income tax exclusion you mentioned.

However, it is often very difficult to get rid of your “tax domicile” status in states once you move abroad. You will need to remove all evidence of your residence in the state, including voter registration, addresses, your driver’s license, and so on.

If I were you, I would consult a Virginia tax attorney to help with this process. The cost of it will be more than made up by the taxes you’ll save by doing this correctly.

Q4: Student loan repayment plan
I’m a 25 year old college graduate that took out $29,500 in student loans (no credit card debt). In 28 months of repayment, I’ve gotten my outstanding balance down to $17,925. I’m fortunate enough to be able to afford my payments and even have some money left over to eat and have fun, but I want to start paying down this debt aggressively, and I’d like some help gaming the system. I’ve been running some numbers, but I’d appreciate getting them double checked by someone who knows a bit more than I do about the subject.

Now for the numbers (rounded to the nearest $5):
$3,545 @ 4%
$9,790 @ 4.538% (weighted average)
$3,180 @ 6.55%
$1,410 @ 2.625%

My current minimum payments are $277.53 and I’ve decided I can pay an additional $300 every month (which I’ve been applying to the loan with the highest interest rate). No matter what my minimum payment becomes, I’m going to continue paying $577.53 per month and applying the excess to principle.

The last three loans I listed are serviced by the same company and I’m eligible for an income contingent loan repayment option that would cut my total minimum payment to $173.40 (and possibly extend the repayment term up to 25 years).This seems to be the best option to me because what I didn’t tell you is that I’m planning on applying to graduate school in fall 2012 and will (hopefully) begin school again before my loans are fully repaid (in which case the lower monthly payment will be really helpful). Or should I consider consolidating all my loans and just pay that down aggressively.

Lastly, is there any way I could get in trouble for what I’m trying to do? I can’t imagine that I would, but I don’t want to get blind-sided by something I can’t imagine.
- Lily

You should not consolidate your loans into a loan with a higher interest rate than any of the loans you consolidated. So, for example, unless the consolidation offer is less than or equal to 2.625%, I wouldn’t consolidate that bottom loan.

The reason for this is that the higher your interest rate, the more you’re going to pay over time to that financial institution in pure interest. You want to do what you can to minimize that interest.

If you’re not sure you’re going to be able to cover the payments in graduate school, save that additional $300 a month for now and use it to have a healthy emergency fund.

No, you’re not going to get in trouble for any sort of consolidation that you do.

Q5: Unexpected job offer
I have been at my current job for 6 months and I love it, but the pay is not great but I knew that going in and is enough to support my family especially when my wife finishes nursing school.

Recently though I have been approached by 2 separate companies about working on the private side in the same field for considerably more money. These jobs would require a few more hours and less flexibility. I was not searching for the jobs and had no idea before hand that they were available. They both would have me doing almost the exactly the same things in the same area.

If the money was not a good bit better I would not consider them because I am happy but that kind of pay increase would make a difference. MY main hesitation is I have only been here 6 months and don’t want to burn bridges because the new jobs would interact highly with the people I work with now.

Should I pursue these offers or stay? I would hate to leave and regret it if there is something I do not like. I would also hate to stay and wonder what if.
- Annie

You never have to burn bridges when you leave one position for an obviously better position. If you’re open and candid about your reasons for changing positions, virtually all rational people will understand. If you leave in a way that makes the transition easy for your previous employer, that’s even better.

That doesn’t answer the question of whether the grass is greener on the other side of the fence, though. If you have enough to support your family, is the additional money worth the risk of having a worse job environment?

I can’t answer that question for you, but if I were in your shoes, I would lean toward sticking with the good thing.

Q6: Job change and unfinished mortgage
I’m soon to begin the final semester of my Master’s degree program in Public Administration. With this goal nearly accomplished, I (along with my wife) am facing a difficult decision in looking for a new job. I am interested in entering the field of city management upon graduation. Initially, this change is likely to force us to move to a smaller, more rural community. We currently live in a suburb of the Twin Cities metro area. While I’m not so concerned about the culture change, I do worry about the housing situation in potentially having to continue paying the mortgage for our current property while also either renting or purchasing a home in a new area. Is there any advice you can give on making such a transition given the current housing market? Would we be wise to try to find renters for our current home or put it on the market as soon as we know where and when we may be moving?
- Ron

I would put it on the market now, actually. List it for the price you would like to get, then gradually lower it as your expected moving date nears.

If you get it sold for the price you want, just move into an apartment for the remainder of your stay in the Twin Cities. It will have been worth it because of the extra money made from the sale and the fewer months spent paying interest on your mortgage.

Also, the longer it’s on the market, the more likely you are to simply find a buyer, which can be difficult in the current housing market.

Q7: Reconnecting
Is there really value in reconnecting with people you haven’t seen in a long time? I recently got an email from someone I used to work with but haven’t seen in ten years. She’s coming through town in a few weeks and wants to know if we can have lunch somewhere. I’m trying to figure out if this is even worth my time for my career. Any thoughts?
- Lindsay

If you have no interest in seeing this person beyond a questionable amount of career improvement, it’s probably not worth the time. You’d be better off spending your lunch shoring up a connection you actually value than this one.

Having said that, there is value in maintaining professional connections, even ones that don’t seem to be specifically beneficial to you at the moment.

I’d ask myself if there was something better I could genuinely do for my career during that lunch than meeting with the old contact. If there is, I’d do that. If not, I’d meet that person for lunch.

Q8: 401(k) loan for debt?
I hope you have time to answer this question. Here’s the info: I have some credit card debt. $2500 on one card with 10% interest and $2000 on another card with 8.9% interest.

I am considering taking a loan from my 401K of $2500 to pay off the one credit card. Then I would concentrate on the other one, making $500 payments per month to pay it off.

The 401K loan would be for 6 months. The interest would be $67 and the fee to take out the loan would be $100. The payments would be automatically deducted from my paycheck.

I have $1400 in a savings account and approximately $100,000 in my 401K and IRA.

Part of me thinks I should take the money out of savings, pay down the smaller amount and keep paying monthly until it’s paid off and then focus on paying the other one and NOT take the loan.
- Elizabeth

I would not take out the loan. 401(k) loans work okay if everything goes perfectly, but even in that case, you’re still borrowing money to pay off other borrowed money. You’re not really getting ahead.

If it doesn’t go perfectly, the drawbacks can be pretty bad. The interest you paid already is lost. The loan is taxed as normal income, plus there’s a 10% penalty that you have to pay to the IRS. That’s far worse than the small amount of interest you’re saving.

If I were you, I would keep at least $1,000 in savings, use the extra $400 to pay down the loans, and just focus your energy on wiping them out through small steps and good choices.

Q9: Which insurance policies?
I have recently (November 2011) transitioned from a full-time position to three part-time (online) positions in order to allow me more flexibility (while I complete my doctoral dissertation). My wife is stay-at-home mother to our (almost) six children. We expect to remain in this situation for up to 6 months. Each of the current income streams are considered part-time employment (W2; not 1099). None come with benefits.

I’m comfortable with not contributing to any retirement plan during this short-term situation (particularly since its a 40% pay-cut for the short term). My concerns and inquiry relate to insurance coverage.

We currently have health insurance in the form of a HSA account with a HDHP. That was/is separate from my employer. We lose vision/dental coverage and I’m comfortable with that for the short-term. Life insurance plan (both the base employer-provided plan and the additional rider) are gone (at least I assume they are). Disability insurance plan is gone. I do have a liability policy that was/is separate from my employer but it specifically notes that it is secondary to the policy previously provided by my employer.

During these next 6 months, what sorts of policies should I be getting?
- Robbie

If you have six children, you absolutely need life insurance coverage. You need a term policy that will take care of those six kids in the event that something happens to you. This is without question. Get this now and don’t relinquish it even after you’re employed.

The other plans are more or less connected to the actual state of your finances at the moment. I’m not clear as to whether you’re going to be struggling to keep your head above water during this period or if you’re spending far less than you earn. If you’re cutting it close, the one I’d consider most strongly would be the disability plan.

The biggest thing you need to be concerned about is making sure those kids are protected if something disastrous happens to you. Life insurance is the 800 pound gorilla here.

Q10: Best books of 2011
Over the past few years, you’ve often made a top ten list of the books you’ve read from the previous year. Did I miss it or did you make one for 2011?
- Charlie

I did make such a list for 2011, but I posted the list over at my other blog that focuses on my other writing endeavors and non-personal finance stuff.

Anyway, here’s the list. It’s the ten books I read that were actually published in 2011 that I have a desire to read again at some point. Pretty simple, huh?

Steve Jobs by Walter Isaacson
1Q84 by Haruki Murakami
Moonwalking with Einstein by Joshua Foer
REAMDE by Neal Stephenson
Ready Player One by Ernest Cline
The Information by James Gleick
These Guys Have All the Fun by James Andrew Miller and Tom Shales
A Dance with Dragons by George R. R. Martin
Blue Nights by Joan Didion
In the Plex by Steven Levy

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.

One of the most painful realizations I had when I started getting my financial life in order was that my job didn’t really earn me as much money as it seemed.

My salary at the time of this realization was about $40,000 a year, so let’s use that as a baseline.

Now, on the surface, that’s really good money. If I worked 40 hours a week for 50 weeks a year, I would be earning $20 an hour, right?

Well, that’s not entirely true.

First of all, we have taxes. Federal income taxes, state income taxes, and FICA taxes. Federal taxes would eat about 11% of my paycheck, state taxes would eat about 4% or so, and FICA would eat about 2%.

Second, I had to pay for my commute. This was about ten miles each way, and it was the primary reason I owned a vehicle. So, let’s tack on top of that a monthly car payment of about $200, about $40 a month in gas, about $30 a month (prorated) in maintenance expenses, and about $40 a month in insurance, just to keep that car on the road.

I also had to wear a nicer wardrobe. I spent $200 a year to make sure I dressed appropriately for meetings, conferences, and the like – and that’s a low-end estimation.

There were at least two meals eaten out a week, costing $10 each. There was travel about three times a year where many of the expenses would be challenged, meaning each of those trips set me back about $100 out of pocket.

Not only that, there were a lot of times where I would put in extra unbilled hours to meet a deadline. I easily averaged 50 hours a week there.

Plus, there’s the time spent traveling – another 50 hours spent places where I didn’t want to be per trip. There’s the time spent commuting – about 40 minutes per day. There were also work-related meals and other activities to attend, eating down another four hours per month.

When you start running the math on this, the equation starts to change.

After receiving my $40,000 salary, I’d pay out $6,400 in taxes each year. I’d pay out $3,720 in commuting costs each year. I’d pay out $200 in wardrobe costs each year. I’d pay out $1,000 in extra meals each year. I’d pay out $300 in extra travel expenses each year.

Suddenly, my $40,000 salary became $28,380, just like that.

Now, I’d work 40 hours a week, totaling 2,000 hours per year, right? On top of that, I’d add ten hours of unbilled work a week (over 50 weeks), three hours of commute a week (over 50 weeks), 150 extra travel hours a year, and 48 extra hours of activities a year. This would bring my total up to 2,848 hours, or an average of 57 hours a week spent devoted to my job.

My job is suddenly paying me less than $10 an hour.

Of course, there were other job benefits that had some significant value, but frankly, I wasn’t actually using them. My wife and I sat down and compared the health insurance offerings at our two jobs and her insurance was far better than my own, so we used her insurance. I had no use for their life insurance option, either, and their retirement plan wasn’t particularly strong. These things do have value when you’re comparing jobs in this way, but only if you’re using them.

Amazingly, I was actually earning more money that I could keep with my part-time job as an undergraduate. I earned $12 an hour. There was no travel costs, no wardrobe costs, no extra activities, no unpaid work (I kept a diligent timesheet), no commute (I worked really close to where I lived). I would be left with more than $10 per hour working at this job.

On a per-hour basis, my part-time job in college was more lucrative than my first “good” job after college. It was also certainly less stressful and far less intrusive on my time.

One of my closest friends at the time made $7.50 an hour working at the night shift at a local gas station right after college. The gas station was just down the block from his apartment, and he’d spend most of his time there reading or practicing his sketching, as he’d have a customer maybe once every fifteen minutes. He didn’t have a car and on the rare occasions where he needed to go somewhere, he would just take the bus for a quarter or two.

It often seemed that he had more money to spare than I did. At the time, I thought it was just an illusion, but when you start running the numbers this way, it’s not entirely surprising, particularly if he was paying lower rent and lower utilities than I was.

It was realizations like this one that convinced me to make a scary career leap and start working on my writing full time. Doing that meant that I no longer had a commute (saving on car maintenance and fuel and time), nor any wardrobe costs, nor any eating out costs. My time spent on work was actually spent on work. There was no more travel – I’ve only been tempted to travel related to it once, and that one time was cancelled due to a family illness.

On the surface, my salary dropped through the floor when I made this move, but when I started running the numbers like this, I began to realize that my hourly income really wasn’t going down that much.

Whenever you’re thinking about your next job or your next career move, you need to think through these kinds of things. Often, a job that looks like it earns you great pay or is a great opportunity really isn’t either, and a job that seems like you won’t be earning much actually leaves you with a lot of money in your pocket. When you take into account things like stress and schedule flexibility, sometimes the “low-end” job is just the job for you, particularly if you’re simply working to earn a paycheck and are focusing your energies on making a side business or another opportunity get off the ground.

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. Mess of debt and taxes
2. Renting out a room
3. Settling on retirement philosophy
4. Long games
5. Hotel disappointment
6. Future state retirement benefits
7. Lacking the “spark” for change
8. Taxes and online work
9. Renting for long road trip
10. Caucus thoughts

When I’m writing, sometimes I write in Microsoft Word and other times I write in a normal text editor. There are things about both that I do not like – Word often interferes too much, and the text editor interferes too little.

I’ve tried lots of writing programs over the years and they all fall on one side or the other of that fine line I’m always looking for. There are some online text editors that are very close, but there are a lot of things I write that I don’t feel good saving online.

One day, I’ll find the perfect program. Until then, I’ll just switch back and forth between the two options I have now, depending on my task.

Q1: Mess of debt and taxes
I’m a 29 year old woman. I was in a relationship for a number of years with someone who was horrible with finances. There are a few issues regarding some financial decisions that I made that will result in my tax bill being quite large. The first thing was, I let my desire to make him happy overshadow my common sense and acquired a large amount of credit card debt in my name. I broke things off and he, of course, left me high and dry to handle the large credit card bills alone. I just didn’t make enough money to pay off all of the debt on my own.

There were quite a few credit cards, so I made the decision to stop making payments to the larger cards and paid off the smaller balance cards one by one. Then I reached settlement agreements with the few larger cards. I’m going to have to pay taxes on the forgiven amount, around $17,500 in total, which is the first item that will affect my tax bill.

The second issue is I bought a house, ugh, if only I could go back. Anyway, I ended up doing a short sale and roughly $10K was forgiven by the lender. Also, I got the $8K tax credit and didn’t live in the house for 3 years, so I believe I will be required to pay that back as well. The last piece of the puzzle was a 401K loan. I took it out for the down payment on the house, because I thought my job was secure (I had worked for the same company for 7 years). Then in October my company decided that they no longer wanted me to work remotely and asked me to move back to San Diego, I live in Milwaukee. I respectfully declined, since the reason I moved was to reduce my living expenses and to be closer to family.

No longer working for the company meant I either had to pay back the 401K loan, which I didn’t have the savings to do after dealing with all of the credit card debt and the expenses associated with keeping my house and property in shape while I was trying to sell it. I transferred my 401K into a Fidelity account, the loan was paid back but I’ll still have to pay taxes on the $13K that I still owed on the loan.

In summary, I have to pay taxes on the $17,500 in credit card debt that was forgiven, the $10K that was forgiven by the mortgage lender, the $8K tax credit and the $13K 401K loan. Obviously, this is not a pretty picture but it’s the last financial hurdle leftover from my previous poor financial choices. I’m planning to hire a tax accountant to help me make sure I get every possible deduction, but I know it’s still going to be a hefty bill. I’m still unemployed, so paying it back won’t really be possible currently but I’m hopeful I’ll get a new job before I file my taxes.

My question is about whether you think I should use the money I rolled over into a Fidelity account to pay off as much of my tax bill as I can. I only have about $13K, so it would wipe out all of my retirement savings and I’d still owe more. Obviously, I won’t use the money in my 401K if I’m still unemployed, but assuming I’m employed and I’m able to get some savings together would you recommend I use my 401K money to pay down my tax bill? Or should I just set up a payment plan and not touch my 401K? I recently began a new relationship with someone who makes much smarter financial decisions, luckily, and I want to take care of my financial issues sooner rather than later so they don’t hinder the progress of our relationship (he’s aware of my pending tax issues and the past poor financial choices I made). I just want to make a smart decision in handling this last issue and would like some advice. What do you think I should do?
- Monica

If I were you, I would set up a payment plan as soon as possible so that you’re not paying anything late. The EFTPS program actually makes this pretty easy. You can get started with EFTPS here.

Believe it or not, even though they have a bad reputation, the IRS is often willing to work with taxpayers if they’re also willing to play ball.

It sounds like you’re trying to make this right and being proactive about it. You’ll be fine.

Q2: Renting out a room
I bought my home 2.5 years ago and have rented a room to a friend for most of that time. I anticipate that my friend/roommate may want her boyfriend to move in with her sometime soon. I’m not opposed to this as it would be another person to split bills with and he is a nice guy. What might be an appropriate way to think about how to charge them? The current deal is $500/m plus 1/2 utilities (up to about $120 per person in winter or summer, more like $60 per person the rest of the year). He would be living with her in the room she’s in now, so not really taking up more space in the house but it doesn’t feel right to have him live there for the same rent that just she pays. On the other hand double the rent to $1000 plus 2/3 of utilities seems overly harsh. What should I consider when trying to find a fair middle ground here?
- Jill

I am always uncomfortable with situations where there’s money and friendship involved, particularly when one person is the lender (you, here, in essence) and another the borrower (your friend, in essence). You always have to tread carefully in these situations.

If I were you, I would not double the rent. Are they going to be using any more real estate than they were using when it was just her? How much more? I’d think about that and raise the rent proportionately, if at all. You may also want to think about property taxes and such – if they’ve gone up a little, a slight bump in rent might be appropriate.

If you do raise the rent, I’d explain exactly why in very clear terms. If you’re clear about why you’re raising it, particularly when there’s now an additional renter in the equation, you should be fine.

As for the utilities, I think equal shares among all of you is fair. All of you are going to be using energy, heating, cooling and so forth. Those bills will go up.

Q3: Settling on retirement philosophy
I am having somewhat of a philosophical crisis with regard to saving for retirement in general as well as the specifics involved with being overseas.

First the general: In reading many of your mailbags, you often praise the tax-advantaged instruments (either tax-deferred or those with reduced or no tax on withdrawal) for retirement savings while at the same time pointing out the inherent problem with trying to guess future tax rates, future income and other conditions which would affect the choice. Also complicated the thought process are the various options for actually investing the retirement money: funds, bank accounts, pension plans incl. annuities etc. I was feeling confident with my choice but I feel like the fees are too high to justify the continued investment in front-load mutual funds, not to mention the fact that active funds rarely beat the market. Finding ETFs for retirement funding is next to impossible here. Maybe the correct path would be retirement insurance/pension plan, but they may be too conservative.

The path I am on now is investing in a fund-based “Riester-Rente”, which to summarize is a grant-aided annuity plan. The grant essentially acts as an alternate tax deferment mechanism, but is otherwise similar to a traditional IRA in most respects. The major problem, though, is that if one is not taxed in Germany during retirement, any grants and additional tax deductions provided must be paid back. Since I can’t even guarantee that my family will be in Germany much longer than another 5 years or so (gotta go where the work is ;-) ), I cannot see investing 30 years into a tax deferred instrument only to lose that significant advantage in the end. The other issue is that the invested capital is simply lost if I were to die after retirement, similar to many annuities in the US.

I think, in the end, the major problem is information. I try to approach things empirically and I think this may not be an empirical question, but rather an emotional question about motivation. I am just unsure of the correct way to go. What is the correct general philosophy when planning for the future?
- Carl

I agree with you that the major problem is information, both in the sense that we have imperfect information concerning the world around us and no information concerning what unexpected events will happen in the future.

For my own retirement, I’m hedging my bets. I have money both in pre-tax investments (401(k)s and the like) and post-tax investments (Roth IRAs).

We don’t know what the future holds, so I think that diversity is the best option. If you have retirement money in both pre- and post-tax investments, you’re doing the right thing, in my opinion.

Q4: Long games
Over Christmas break, one of my brothers brought home a board game called Twilight Imperium. We usually play a few games of Risk over break, but he told us that Twilight Imperium was way better. And he was right. It was awesome.

The only thing is that the games took about six or seven hours to play. Most of the time, I don’t have that much time to put aside for a game like that.

Have you played Twilight Imperium or any other game that long? How do you find time for it?
- Luke

I’m in a weekly gaming group that meets at the house of a close friend of mine. He has a spare table in one room of his home that he allows us to leave games on during idle weeks.

Thus, if we were to meet at 6:30 or 7 (which is our usual meeting time) and play Twilight Imperium (for example) for four hours, we could just leave the game on the table and return to it next week, finishing it up.

You could do this in your own home if you have an extra table to spare for a while. Set up a game, play it for a while, and leave it. Once upon a time, my roommate and I would do this with a chess board, leaving an ongoing game in the living room all the time and making moves after giving them sufficient thought.

Q5: Hotel disappointment
The recent new years eve my wife and I went to Disney World at the request of our son. I searched out a room online based on price, location, and reviews. When we got there the room turned out to be less than we had hoped for but served the purpose. We definitely would not recommend it to any of our friends. If we go again I will probably spend the $ and stay at one of Disney’s “value” resorts unless you or your readers have a better suggestion?
- Andrew

Any time you stay in a hotel without having actually visited it first, you’re taking your chances. A hotel might be beautiful in January, be sold in February, and be sort of run down by May if the new owners aren’t committed to it.

I generally give lower value to hotel reviews that are older than about three to six months. There is ownership turnover, staff turnover, and countless other things that can change a hotel’s standards and conditions in that timeframe.

How do you protect yourself against it? We usually chase price, but there have been times where we’ve either just refused to stay at a place or deeply regretted it.

Q6: Future state retirement benefits
I’m vested in the Florida Retirement System (FRS) for government employees. I no longer live in Florida, and am not contributing to the system or earning additional benefits.

I’m entitled to a small monthly pension. I intended to wait until age 62 before collecting it. At my current age (57), I could claim early retirement and receive a reduced pension. (The benefit amount is reduced 5% for each year my age at retirement is under normal retirement age, which is 62. Retiring at age 57 would reduce the benefit by 25% [5% multiplied by 5 years].)

I’m self-employed and don’t need the money for current living expenses. I’m in good health. However, FRS is not completely funded, and its website warns that the legislature may reduce future benefits.

I’ve asked friends in Florida (FRS retirees) whether they think this is likely to happen. One says she doesn’t believe so; the other urged me to file for retirement benefits now to lock them in. I’ve done some searching online but don’t have a good sense of the political climate in Florida.
- Marjorie

If I were you, I’d ask about the statements on that website in more detail. Their phrasing makes it unclear whether or not they would just deny new beneficiaries or they would cut benefits from applicants or both. I would clarify the possibilities of what they could do and then make a decision based on that.

One thing I’ve learned about government is that, if they think they can get away with it and be re-elected, they’ll tap any source of money they can find for their pork projects. I have found it best to never rely on something that is promised to me as a benefit by the government. If I get that benefit, great – it’s a wonderful perk. I plan as though it’s not happening, though.

You’re lucky enough to be in a situation where it won’t break you one way or another, but an awful lot of people aren’t that lucky. My advice is that if you’re older and reliant on such government services, live lean and get yourself in a situation so that you’re as independent from the money as you can be through savings. If you’re younger, fund your retirement.

Q7: Lacking the “spark” for change
I enjoyed your article this week on the motivation to improve one’s situation. In the article, you take the perspective of an individual who is attempting to help or motivate a third party. My question comes at this issue from the point of view of the individual being motivated.

Personally, I feel that I lack the ‘spark’ that you speak of, to instigate lasting change and yet there are changes that I wish to make in my life. I am seeking that spark.

How would you recommend capturing this energy for someone that does not come by it naturally, but wants to make changes?
- Nate

I think there’s a difference between something you’d really like to do and something that’s a life-changing situation.

I struggle with this myself. There are a lot of things that I’d love to be able to do with my life, but when the rubber hits the road, I can see clear separation between the goals that are just ones I’d like to do and the ones that I feel are really central to my life.

The ones that are life-changing don’t come along nearly as often as the others. I usually find that they burst into my life when I finally hit some sort of “bottom” related to that thing, where life grabs me by the chest and demands that I make a change.

Keep doing things and living life. Eventually, the important things will reveal themselves.

Q8: Taxes and online work
I’m trying to pay off my credit card debt and save a large chunk of money this year. I feel like I’ve cut all I realistically can at this point, so I’ve been searching online for ways to make extra money – even an extra $100-200 per month would help out immensely. I’ve come across options like MTurk and usability testing like usertesting.com which seem like they can provide the possibility for some additional income. My question is not around these two examples specifically, but online endeavors like this in general in relation to taxes. Most places put the burden on you to file your taxes, and I’m wondering if you think there is a specific threshold where it actually makes sense to invest the time into these things to make the extra money, or if the tax part of it is not worth the potential of a few extra bucks?
- Jeff

The tax part of it is pretty simple, especially if you use something like TurboTax. You usually enter one line on one form, your total taxes go up by some percentage of what you earned from the endeavor, and you either get a bit smaller refund or have to pay in a bit more.

The challenge with endeavors like MTurk is to recognize that you’re going to – at best – earn minimum wage for the time you invest. The advantage is that you can do it irregularly. You can do it during commercial breaks or when you have insomnia or when you’re using the restroom.

In some situations, I think things like MTurk can be a real help to people who need some extra income very quickly.

Q9: Renting for long road trip
Trent, just read a piece you wrote about renting a car for a long road trip a couple of years back. I liked the math, but how did you convince a rental car company to let you make that long trip? I am planning a trip from Missouri to Florida, where the car will set in a lot for a week while we take a cruise.
- Andy

It was fairly expensive, but the advantage was that it enabled us to take only one vehicle on the trip, whereas without the rental we would have had to take two vehicles. Once we did the math on the gas, maintenance, and wear on two cars, the single rental became the better option.

There really wasn’t much convincing with regards to the long-distance drive and the rental agency. They said “sure” and tacked on another fee.

In your situation, I would run the numbers and see if a flight wouldn’t be a comparable option. In our situation, we had a group of seven uf us traveling from Iowa to Texas, so flights from Des Moines to Dallas for seven would have been cost prohibitive. For two or even three people, the equation may be different.

Q10: Caucus thoughts
You’ve mentioned a few times that you attend the caucuses in Iowa. What is that experience even like? I know that the candidates campaign in Iowa for a long time before the caucus. What are your thoughts on that whole process?
- Will

It depends on whether you’re attending a Republican caucus or a Democratic caucus in Iowa. I’ve attended both.

With a Republican caucus, it’s pretty straightforward. All of the attendees sit in the same room. They announce the candidates, then volunteers are able to speak for five minutes on behalf of each candidate. After that, there’s just a ballot vote, followed by a very open counting of the ballots.

With a Democratic caucus, things are different – and much more entertaining. At a Democratic event, there are no chairs. Instead, everyone stands around while a representative from each candidate gets to speak for a few minutes. After that, you simply go stand beside the representative of your preferred candidate. Then, they dissolve all groups that have less than 15% of the people in the room and those people have to pick another candidate. During this process, there’s usually a lot of politicking and pleading and the room can get quite loud.

The process is really fun, though it does usually feel like the culmination of several months of craziness. If you’re registered for a party that is having a contested caucus, you’re absolutely inundated with political mailers, robo-calls, push polls, and other such things. That’s been our experience, anyway.

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.

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. Investing in light of default
2. Debt eradication
3. Loans or emergency fund?
4. Repetitive questions
5. What’s next on my path?
6. Time for a financial advisor?
7. Polite hygiene advice
8. Wedding and financial planning
9. What are readers like?
10. 2012 predictions

How long does it take for you to stop dating checks and other documents with the previous year after the calendar flips?

I’ll admit that it will probably take me most of January to get used to writing 2012.

Q1: Investing in light of default
I have a small IRA, with half in a mutual fund, which has topped out, and the other half in two stocks which are near to bottoming out, from a lag factor associated with recession and reinvestment.

I anticipate a currency devaluation as an effect of renegotiation or default on national debt limits. Would overseas money markets be a safe place to stash funds from the sale of the mutual while I wait for it to drop so I can repurchase it? If you believe that our debt problems will negatively impact overseas money markets, what is an alternate spot, exclusive of index funds, which will drop as the market does?
- Monica

I don’t think I would trust overseas money markets more than domestic ones, as I think a lot of economies are facing some sort of currency devaluation due to the ongoing economic conditions.

I also wouldn’t bank my entire plan on market timing, particularly when you’re making moves based on a sense of a fund having “topped out” or “bottoming out.” If I were you and I moved forward with this plan, I’d set some thresholds on when to buy back in. For example, you might want to say that you’ll buy back in after three months if either the value of the fund is down, say, 15% or it matches the value you sold it at.

Don’t worry about what the absolute top of the market is or what the bottom is – worry about making money for yourself.

Q2: Debt eradication
I’m a 22-year old student who will graduate with a B.A. in December. I took out some federal and private loans to pay for school. I saved for the past year and paid off the private loans while in school. I’ll be left with $16,000 at 6.8% when I graduate. I have no other debt and a 3-month emergency fund ($6,000). I plan to make payments well over the minimum to pay this balance off in 2 years or less.

Is this a good thing? The more I research credit and credit scores, it seems that a relatively low-balance loan isn’t a bad thing to keep around for ten, even fifteen years. However, having a positive net worth is my #1 priority. Should I be making aggressive payments or simply using that money to pad my retirement and savings while keeping the loan around? While paying the loan aggressively I’ll still be contributing 15% of my net income to an IRA. I have one credit card with a $500 limit; never carried a balance. I pay bills on time every month. I currently rent. A house isn’t on my to-do list, and I’ll buy a car outright if I get one in the future. Is it enough to build my credit without a credit card balance, mortgage, car payment, and (soon) no student loan?
- Belinda

I don’t think the value of having a 6.8% student loan (in terms of your credit score) is worth the financial cost of having to pay 6.8% interest on the balance every year. If it’s within your means without causing other financial troubles, I would pay it off sooner rather than later.

Given that you do have a continuing line of credit in the form of your credit card, your credit report won’t go completely empty after you pay off the student loan. I would consider using the card regularly (and paying off the balance) and being open to moderate raises in your credit limit.

You’re doing very well. Keep along your current path and you’ll continue to do very well.

Q3: Loans or emergency fund?
I’ll graduate from grad school this May with $25,500 in federal subsidized loans (spouse and I also still have $27k combined undergrad debt at 5.3%). I haven’t technically needed these loans for the last year of school but because they’re subsidized I’ve been storing the money in a rewards checking account earning about 3%. It will be around 12,000 total in November when the subsidization ends and 6.8% interest kicks in. This is the extent of our short-term savings/emergency fund right now (my spouse and I are also saving for retirement). So, since we are looking to save for life’s big things in the next few years (car, family, and house, probably in that order), and we don’t have a defined emergency fund amount, I wonder how much of that 12k should we pay back immediately? We’re currently steadily employed though I’m seeking new full-time work in my desired field instead of my current part-time job. We have roughly $1000 extra/month to put to good use on student loan repayment and savings (we’re a pretty frugal couple), but I’m not sure what the best combination would be. We have to pay minimum $400/mo on our student loans. Is it best to pay more on student loans and postpone more emergency/car/baby/home savings? Is it best to pay back the entire $12k “savings” (which is really borrowed money) and start our “real” savings from scratch? I’m lost and confused and would be interested in your and your readers’ opinions.
- Danika

If I were you, I would establish a new emergency fund and fund it with enough money to provide three months or so of living expenses for you and your partner. I would then use the remainder to pay off your highest loan and then use the subsequent $1,000 per month toward minimum payments and whatever loan has the highest interest rate.

I would count that 6.8% loan as already having that rate and make “payments” on that debt to a savings account. Then, when the subsidization ends, I’d pay the entire balance of that savings account to that 6.8% loan.

In terms of balancing emergency protection and a path toward debt freedom, I think this is a very good plan.

Q4: Repetitive questions
I’ve noticed that there are a lot of consistent shall we say themes in your reader mailbag questions. Student loans come up a lot for example and so does retirement. Why repeat so much?
- Shaun

The reason these stories show up so often is because they’re the type of concerns that cause people to really start thinking about their finances and because they are so common among people. A lot of people leave college with student loans and they worry about paying them off.

I use a lot of these types of questions because there are a lot of variations in the story and because it’s a genuine concern that a lot of people out there have.

I try to choose questions that reflect the whole of the questions that I receive. I do often pick out specific interesting ones, but I also see from my email inbox that I get a LOT of questions about student loans, so I cover those questions.

Q5: What’s next on my path?
I’m now fortunate to be in a position where I’m (finally) earning a great wage at a company I have no intention of leaving anytime soon, living in a city (NYC) that I love, and living well below my means.

It’s been drilled into me for years that paying off your credit card(s) and building a healthy emergency fund are the first foundation steps to a healthy financial life. I’ve accomplished both (finally!), and have $0 credit card debt (only one credit card), and $11,000 in savings. I still have outstanding student loans, which I’m paying back and contributing more than the minimum on each month – these are at a very low interest rate, and the total repayment each month comes to $350. Paying off one would save me about half of that amount as the payments are pretty much equal between the loans.

I’m also putting $12,000/year into a 401(k), and am planning on continuing to contribute $1,000/mo into my savings account for the next 9 months – until it reaches $20,000. Since I live in NYC, I plan on renting for quite a few more years and I’m planning ahead for when I’ll want to move (moving into a new apartment here typically costs $4-5,000 upfront in costs for my price range – first month’s rent, last month’s rent, possibly a broker’s fee and a security deposit). 6 months of my bills (if I were laid off) comes to about $15,000, and that’s my emergency fund savings goal since I don’t have close family in the area and wouldn’t want to have to move due to prolonged unemployment. The $20,000 goal for this year assumes that I’ll want to move within the next year, which is a possibility (but not set in stone).

I’m not in a hurry to change my plans right now as I still have a bit of time left to contribute to my savings account, but I’d like to have some solid steps in place when I get there.

So – what comes next? It seems like after the savings account, credit card and retirement account are all healthy (or being contributed to healthily), that any number of options open up. I don’t get an employer match on my 401(k), so it’s 100% my own money in there, and I’d like to max it out for a few years, due to not being able to contribute anything in my younger 20′s (4 years of working w/o the spare $$ to contribute). But, I’ll still have a good amount of money that I’m now putting into savings left over after maxing out my 401(k), and I want to make sure I’m investing it wisely, if that’s even the right first step after this.

Are there any recommended steps after this point, or does it depend on the individual and their goals?
- Jill

It really comes down to goal-setting more than anything else.

Simply put, there is no general right way to invest. There are only good ways to invest to help you reach a specific goal. If you don’t know what you’re saving for, you’re probably going to save in an inopportune manner.

Let’s say, for example, that you decide to start investing in stocks because you heard they have a great return, not because you had any goals in mind. Let’s say you make this decision in January 2008. In December 2008, you decide to buy a house because you got pregnant and you decided you needed a house for that child. Your money has now lost 40% of its value.

You would have been far better off in a savings account had you incorporated the idea of buying a house in the next one or two years into your plan.

Spend some time thinking about where you want your life to be in five years or ten years. Where are you headed? Your investment choices should really follow that.

Jill also had a follow-up question.

Q6: Time for a financial advisor?
At what point does a financial advisor become wise? I’ve never had the need of one before, but is there a certain point that someone should start thinking about consulting with one, if only to make sure they’re on the right track and not missing anything they should be doing?
- Jill

I’m of the belief that given all of the amazing tools available to individuals online, most people don’t need a financial advisor. You would have to have a lot of money in the bank in order for the benefits that an advisor can provide to make up for the amount you’d be paying this person for advice.

For most people, particularly those without a ton of money in the bank, doing it yourself is a much better option.

What’s the dividing line? I think some of it comes down to your gut, but if you’ve got enough money that a percent or two of it is a significant amount of money itself, that’s when I’d get an advisor.

Q7: Polite hygiene advice
How do I politely tell a coworker that they have really bad breath? It’s bad enough that it’s distracting in the workplace. I don’t know how to properly approach it.
- Anna

Unless the relationship with that person is poisonous, I’d quietly bring it up with that person directly. There’s a very good chance that the person does not know this and the vast majority of the time that person will be very glad to have that advice as it helps their career chances.

If you have a bad relationship with this person, then you might want to consider going to their supervisor. I wouldn’t register it as a complaint, but instead encourage that supervisor to have a chat with the employee about it.

The purpose of all of this is to improve the office environment on the whole. Candor without negativity or snark is almost always a good way to go.

Q8: Wedding and financial planning
I am 28 and currently in the process of saving for a house with my fiance who is 25. We both currently work at the same company where I am a full time employee, and he started this year as an intern working 30 hours a week. We are looking to buy a house next year after we come up with the necessary 20% down payment for up to a $200k house. So our goal is to have $40k + closing costs saved by early next year.

When it comes time to purchase, unfortunately the mortgage will be in my name alone since he has bad credit; whereas mine should be immaculate by the time next year rolls around. I have no debt, and pay off my credit card balance every month. He has about $5.2k in subsidized student loans that are currently in deferment until he graduates at the end of 2012. All his other delinquent accounts have been more or less settled.

Right now we have $11k saved in our emergency fund and have $9.7k in the down payment fund. I’ve set the ambitious, but attainable goal to set aside at least $2.5k a month. We would be projected to have saved just about $30k by the end of the year. My mother has offered to additionally gift me $10k which I can use as my “new” emergency fund if I have to dip into my current one.

I earn just under $50k a year, and he is set to make $25-$27k depending on if he works the full 30 hours a week. So our net income is about $4.5k-$5k a month depending how many business days there are in a month. My company matches 75% of my 401k contribution up to 7% of my annual salary which I am currently taking full advantage of, but since he’s not a full time employee, he does not get the same benefit.

Right now all his income (lesser $200/month into another account that will be for when the student loan comes due) goes straight into the down payment fund, and we live off about half of my gross salary. We have a few things in the pipeline that would be advantageous for us to have a house by first quarter of next year. Our wedding is slated for the end of May 2012, and our goal is to have the wedding reception at home with just family and a few friends. This would be about 30 people at most, and the total wedding costing less than $2000 (I hope).

Should I set up a Roth IRA for him and myself now? I had planned on waiting until we purchased the house. But the best contribution for retirement is time, right? Starting a Roth IRA would set back the time frame of when we would purchase our house.

We likely will have additional expenses such as furnishing and/or appliances for the house. Should I use my emergency fund to buy appliances? Should I save for longer, so that when we close, we can pay for furnishings in full? Or should I live using our existing, aged pieces until we save up enough to buy those new furnishings later? My mattress is over 10 years old and is due for replacing.
- Jean

You’re currently contributing about 12% of your salary to your 401(k) including match, which is a very good number given your age. I don’t think you need additional retirement savings when you have other such pressing financial goals. It might be worthwhile for your husband to have one, which could just be routed from the money he’s contributing to the down payment fund. $500 a month would get him past the annual Roth cap. Given his salary, I would probably shoot for about $200 a month, giving him about 10% of his salary toward retirement.

When we bought a house, we used a lot of the furnishings we had at our apartment at first. Supplement that with whatever low-end furniture you need to fill out, then slowly begin replacing it as you need to. This is exactly what we did and we were quite happy about it.

If your mattress needs replacing, replace it, particularly if it’s interfering with your sleep in any way.

Q9: What are readers like?
Do you ever get visual images of your readers or add in more details in your mind than what they give you in their emails?
- Connie

I imagine details about readers all the time.

I usually do that so that I can see them as a person rather than as a dry question. I try to imagine the best picture I can of the person asking the question so that I want to help them.

Sometimes, that can backfire because I’ll put more positive details with the person than there really should be. Most of the time, though, I find that if you make an effort to look at a person’s best side, they’ll step up the plate.

Q10: 2012 predictions
What do you think 2012 holds in store for our world? Got any big 2012 predictions?
- Kenny

I think Barack Obama will win re-election, not because he’s done a stellar job, but because he’s done a “good enough” job compared to what the competition is. I think we will see a significant third party impact in this election, too, because the Republican party’s coalition of social conservatives and fiscal conservatives is becoming more and more frayed.

I think the American economy will show continued signs of rebounding and will look comparatively stronger (economically) than Europe throughout the year.

I think that December 21, 2012 will pass without any significance other than perhaps a few reactionary people overreacting to a quirk in the Mayan calendar.

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.

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. Conflicting messages on spending money
2. Career options in conflict
3. Extreme cutbacks
4. Sports salaries
5. Confusing tax code
6. Saving on a fixed income
7. Best book of 2011
8. Getting started with blogging
9. Getting off the treadmill
10. New Years party hosting

Because our close group of friends mostly has this week off of work, we planned a day where we would get together and just play board games all day long, sharing lunch and dinner.

That day is today. I have some friends to laugh, think, and play with.

Q1: Conflicting messages on spending money
We are encouraged to spend money because spending helps our economy. Then again, we are also told to spend wisely. How can these two viewpoints/ideas be reconciled? Is it possible to believe and act on both of these concepts?
- Megan

Those two viewpoints are coming from two different groups with different goals.

It is obviously good for retail businesses and commercial product manufacturers if you go out there and buy as much as possible. The more you spend in this way, the more jobs are created in the retail and manufacturing industries. On a national scale, the best thing you can do is spend.

On the other hand, on a personal scale, the best thing you can do is save. Spending with reckless abandon does not help your personal finance situation. People who recommend saving are generally more concerned with this end of the economic scale.

Which is right? They both make good points. The solution, I think, is balance. Spend with some sense, but don’t be completely tight-fisted in every aspect of life. Be discretionary and spend less than you earn, but don’t avoid all splurges. Support businesses that make good products and have good business practices. That way, everyone wins.

Q2: Career options in conflict
I am an educator currently at a university 45 minutes away, instructing first year physics students in a laboratory setting two days a week. With the other 3 days I try to substitute teach at local school as much as possible. One of those schools is literally a 1 minute drive from my apartment and will have an opening in February covering for a teacher whose course load is grade 11 and 12 physics along with an upper level math course. Those courses would be my dream to teach if I were to get the position.

Timing is the real issue. The 2nd semester for the university starts in January and they need to know if I will be continuing on very soon and I can not do both the university work and the high school one.

My conflict is this: do I NOT take the university course and HOPE that I get the position at the high school?

I really enjoy the university work and subbing since it allows for a lot of freedom in the evenings but is less pay and more commuting (and more temptation to eat out on the way in). The high school classroom would be wonderful too and would allow for a meatier paycheck, but would involve much more time in the evenings planning and marking.

Do you have any advice or questions that I should be asking myself?
- Ron

A bird in the hand is worth two in the bush. Take the job that’s available to you now, then cross the bridge of other options when you get there.

The worst case scenario if you take the university job is that in February the other job becomes available. In that case, what are your options? Is there any reason you couldn’t walk away from the university job for a better opportunity?

Unless there’s some sort of clause preventing this, I would suggest taking the university job and seeing what happens next.

Q3: Extreme cutbacks
Currently I am working on my 2012 budget. I am very fortunate to be the mother of five children (ages ranging from 3 to 12), I hold a pretty good job for which I am sometimes frustrated but always grateful, but unfortunately, my husband’s business has not made any money over the past three years and has cost a little. Yet, I have made ends meet, saved some and several years before we had paid off all mortgage debt.

This year we need to save for a major improvement to the land where our home is located. We need to put in major revetment to protect the property from further erosion. The project will cost $150,000. Currently, I make pre-tax $75,000. Total expenses have been about $55,000. I track EVERY penny. Expenses include about $5,000 in business costs and $5,000 in work to the house that my husband does each year (our house was a serious fixer-upper, and we’ve worked on it for 15 years).

This year to accelerate savings I have created a budget, but it means we must really cut back on all expenses…including gas and food. The projected budget brings spending down to $40,500 — allowing me to save more for the revetment and also still put money into my ROTH.

I have strange feelings about this budget. It will require real sacrifice, and we already live frugally. We do not eat out, go to movies, take a vacation…we do have indulgences like a sailboat that was given to us that costs $1500 a year for a mooring, but that is our summer fun for the family. I admit that I have spent too much on clothing for work in the past, but not outside the realm of moderate – just not frugal.

Entering this new phase of finance feels like starting a really strict diet…I wonder if it’s realistic, or if I’m setting myself up for failure. The budget would require me bringing food from $688 a month to $625 — which might not sound like much, but I already make most food from scratch — and it’s not like I’ve been buying any expensive items. Also, it will require monitoring fuel for the van carefully…an item that sometimes I cannot control.

Anyway, how realistic is cutting back so extremely, and do you have any recommendations for keeping these goals and remaining positive even when it seems insurmountable.
- Shannon

Without seeing your budget, it’s hard to know whether it’s realistic or not.

However, if your gut is telling you it’s too tight and you already carefully watch the numbers, your budget is probably too tight. A person’s gut feeling is often right in matters like this.

So, what do you do from here? I’d suggest looking seriously at solutions you might not have considered before, like selling the property or selling another asset that you have with significant value.

Q4: Sports salaries
Do you think professional athletes and entertainers are over paid?
- Lucien

They’re paid exactly what the market will bear for them.

Think about it this way. If you knew that your boss would pay you $10 million for your job, would you not accept that $10 million? Very few people would turn down that level of income.

So, should the owners be paying that much? Well, they make more money if they put a competitive and entertaining team on the field. They do this by hiring skilled players that people want to watch. People want to see Chris Paul throw an alley oop pass to Blake Griffin. They don’t want to see Joe from the YMCA. If the owner hires entertaining players, more people attend the games of his team and more people buy their products (like shirts and posters and jerseys and trading cards…).

In the end, it comes back to the fans. As long as they buy tickets, shirts, jerseys, and other materials at the prices charged for them, the athletes will be highly paid.

Q5: Confusing tax code
Why on earth is simply paying your income tax so confusing? Every time I try to read an IRS document, I just get confused. I pay someone else to do my taxes for me and it’s ridiculous that I should have to do that.
- Shawn

I agree with you wholeheartedly.

What we have now is a tax system that’s a compromise between a lot of different interests. You have some who want to make the tax burden lower on huge numbers of lower income people. You also have some who want to minimize the taxes on the rich people who will (in theory) invest their money.

Give these people lots of years to compromise and negotiate and insert clauses to help their groups and you get the tax code as it is right now.

Does it need a reboot? Yes. Do enough people in Congress and in the executive branch have enough courage to make that reboot happen?

You make the call.

Q6: Saving on a fixed income
At the age 30 I became severely disabled with a mental illness and had to go on Social Security disability. Since then I have tried to work several times part time unsuccessfully. Now I am trying to save money just to get a car because, since then, I have developed back problems which make it impossible due to the pain to ride a bus which would have been a good way to save money.

So, saving $400 a month is half of what I live on which is $800 per month. In addition, I am trying to save for an emergency fund. I have been able to save the money for the car and the emergency fund due to ending my eating out, cutting out my cable, finding the best price possible for my car insurance, but retirement savings seems impossible. Is there any alternative for people like me who find themselves on a limited budget at such an early age?
- Ron

Set goals. Recognize that it’s going to take a long time to get there. Celebrate the little victories as you approach your goals.

There’s really not much else you can do. You have to figure out what’s really the most important thing for your life situation and work diligently toward whatever that goal is.

Each person’s life is going to be different, with different needs and different values. The best thing you can do is figure out what you most want and focus on that like a laser beam.

Q7: Best books of 2011
What was your favorite book of 2011? No cheating – just name one!
- Linda

That’s a tough one and it depends on what you’re asking.

My favorite book published in 2011 is Moonwalking with Einstein by Joshua Foer. It’s a great book about the realities of memory and how to improve your own memory, backed by great anecdotes and science.

My favorite book I read in 2011 was A Way of Kings by Brandon Sanderson. It’s the most enjoyment I’ve had from reading a fantasy novel in a very long time.

Q8: Getting started with blogging
My question is how you built such a robust following on The Simple Dollar. Was it largely through the guest posting model advocated by sites like “Blog Tyrant?” Or did it happen more organically through the quality of your writing and posting frequency? The “romantic” part of me would prefer for the second option to occur, but I fully realize that some more active promotion is probably necessary to get my blog to the level I want it to be. I promote it among my friends on facebook, but beyond that, I’m a little unclear on how to approach fellow bloggers regarding guest posting and whatnot, especially in a field (“self-improvement” or “lifestyle design”) that is dominated by a few big names like Tim Ferriss and Chris Guillebeau. Is it better to start as a commenter and work up a repoire that way? Or is cold e-mailing people okay, too? It’s a lot of the little personal interactions on the internet that I could really use some help with.
- D. J.

I did very little guest posting in the early days of The Simple Dollar.

My early success, I think, was due to writing some articles that were heavily linked on some very popular blogs. I did that with some degree of intent, of course. I looked at the popular blogs I read and asked myself what kinds of things they linked to and what kinds of links I clicked through on, then thought of post ideas accordingly, wrote them, posted them, and submitted them.

At this point, you might want to shoot for Twitter mentions from those guys to get the ball started, but you’re going to find that popular bloggers are BURIED in material like this. You reach a point where you absolutely have to filter what you look at and do because if you didn’t do that, you would never, ever get anything done. Keep that in mind and make it very easy for them to see what you’ve done.

I think the sustained success has come from having a large backlog of posts. There are a LOT of terms you can type into Google and find pages from The Simple Dollar as a result. I’ve made a conscious effort all the way along to try to write in an approachable fashion.

So, get the attention (and a link from) big names and write lots of good posts.

Q9: Getting off the treadmill
I am 27 years old living with his mom, lots of experience in different fields but nothing to back it up (jack of all trades, no specialty). I did a mistake 3 years ago (realizing this now) getting a 15 000$ loan for a nice Cadillac & to cover my credit card. I now have 8 000$ left on this debt paying 330$/month, but with interests i am really giving about 230-250$ towards the actual amount.

Seems my monthly bankroll is tied up in car paiments (330$) + insurance (75$), high speed internet (60$), cellphone (70$), a bad smoking habit (160$ more or less), newly acquired Gun hobby.

Any suggestions to help me get out of this never ending loophole? I want to move out and move on with my life without always paying bills and feeling stuck!
- Alan

Get rid of the smoking habit and the gun hobby?

Right there, you have two expensive things that are gobbling down significant chunks of your money. If you want to escape from your never-ending loophole, you have to look for things that aren’t necessary that are gobbling up your resources.

Quit smoking. Enjoy the guns you have. You’ll find yourself with a couple hundred more a month. Apply them to extra payments on your car loan and you’ll get rid of that payment in half the time. At that point, you’ll have almost six hundred more a month than you have now.

Q10: New Years party hosting
I’m hosting a New Years party this year and I’m kind of unsure what to serve to people. What’s appropriate to serve at a New Years party without spending a ton of money?
- Jean

It depends on the type of party you’re having. Finger foods are usually appropriate – at our New Years parties, we tend to serve plenty of finger foods. One way to get started is just to ask some of the people what kinds of finger foods they like and choose frugally from those options.

As for drinks, you really don’t need to splurge. A bottle of bubbly or two is appropriate for the turning of the year. Guests often bring bottles to such parties, though.

There’s nothing wrong with asking some of the guests to bring something simple, either. A simple request to bring a bottle of wine or a simple snack food is completely appropriate and trims costs for you.

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.

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. Adding another credit card user
2. Re-selling debt
3. Figuring out life insurance
4. What makes people negative?
5. Babies and emergency funds
6. Paying for pet medical expenses
7. Unwanted gifts
8. Handling pet cleanup
9. Planning for after graduation
10. Favorite Christmas gift

I’m actually finishing up this reader mailbag late on Christmas Day, after the rest of the family has collapsed in a heap of exhaustion.

There are few things more fun than watching a pile of grandparents, parents, and children all huddled together in a room, sharing memories and gifts and excitement and laughs.

Forget the presents. The best part of today was the people.

Q1: Adding another credit card user
I was thinking of adding my partner of 2 years as an authorized user on my credit card (low limit) to use for gas and household expenses – all budgeted items. The reservation I have is that she just recently walked away from her house (after 3 years of nonpayment and a dismissed bankruptcy). She is unemployed due to a medical condition but is covered under COBRA. Her debts are 4-5+ years old and are considered uncollectable. My credit is outstanding and my only debt is the mortgage. Anyway, do you have an idea of what it would do to the interest rate, credit report, etc for her and myself?
- Veronica

It shouldn’t affect your credit report at all, except perhaps an indirect effect.

As for the impact it will have on your card, it has more to do with the policies of the specific bank you’re working with than anything else. Generally, my experience has been that an authorized user doesn’t impact the interest rate or the credit limit of the card at all, though there are certainly quite a few anecdotal cases out there about limit reductions and the like.

This is where the indirect effect might happen. If your credit limit lowers, this will have a small negative impact on your credit score, but it shouldn’t be enough to drastically impact the loans you might get or other things.

Generally, adding someone as an authorized user has little impact on the main cardholder and a positive impact on the credit of the new authorized user, assuming the new authorized user uses the card responsibly.

Q2: Re-selling debt
I have an old credit card account which was charged-off years ago. I recently found out the debt was sold to another debt collection agency with a “new” charged-off date of 2009. Is it fair practice for creditors to keep re-selling old debt just to remain within the 7 year limitation before the debt must drop from my credit report? If not, what should I do?
- Fred

That’s generally not an acceptable policy. However, actually tracking this down and fixing it is next to impossible. Neither agency involved has any interest in changing this for you – it’s not good business for either of them – and trying to sue them to make them change it will probably cost you more than it’s worth.

Companies that buy and pursue old debts are generally not the most fun businesses to work with. They’re in a business of pursuing debts from people who don’t pay their debts. They’re debt collectors. They’re going to turn what screws they can to get their money.

The best way to get rid of this permanently is to negotiate with the company that holds it. Make them a low offer to pay it off and have it removed from your report. This is the best permanent solution to the problem.

Q3: Figuring out life insurance
I’m 25 years old and make a nice salary but I am really very very tight budgeted. My wife is in college and watches our daughter all day. I want to get life insurance but I’m not sure which one is good for me. I could get 30 year term for a 700 dollars a year. Or i could get universal for $4360 a year. The perk with the universal is that it is like a savings account where after 20 years I’ll have money in the account to use towards my childrens wedding or college. Plus I’m paying for private schooling which is a whole diffrent ball game. Should I get universal and be tight with my money or should I get term and free up my now funds but not have the same security in the future.
- Andy

You should get a term policy, then open up a 529 college savings plan for your daughter. That’s the plan I would follow.

If you lock yourself into a more expensive policy and then lose your job, you have a good chance of losing that policy. If you have a term policy and are contributing to a 529 and lose your job, you can cut contributions to your 529 and not lose your insurance.

Besides that, most of the numbers I’ve seen comparing a universal policy to a term policy and an investment shows that the term and investment combo tends to win out both in the short run and (usually) the long run.

Q4: What makes people negative?
I’ve been dreading my family’s Christmas celebration this year because it’s always so negative. Everyone just sits around and ridicules people that aren’t there, famous people, and when the drinks start flowing they often ridicule each other in a very hurtful way. I don’t enjoy it at all. Why do people do this?
- Emily

Everyone channels their feelings and emotions toward the world in a different way. This is definitely a negative channeling of emotions, but it’s how some people vent.

I generally prefer to vent in a positive way. When I’m frustrated, I work it out alone. Sometimes, I work it out through my writing – some of the characters in the fiction I write are truly deplorable people.

When I’m around others, I try to see the positive in each situation. (The only thing I tend to be sarcastic about is politics, actually.) I find that the more effort I put into channeling my feelings into something positive, the more positive I generally feel about my life and the things around me. Positivity breeds positivity and negativity breeds negativity.

Q5: Babies and emergency funds
We are expecting our first child any day now. We have been very good at budgeting very well so far. We’ve budgeted for or been given all the furniture, clothes, diapers, etc. that we will need, at least for the first 6 months or so. We’ve been good about not over buying everything the baby industry claims you “need.” We have also budgeted for all the medical expenses that we will need to pay for. However, there is still a number of last minute things popping up that we just didn’t realize we would need to pay for. Part of this is probably part of being new parents and not knowing what to expect. Do you think it will be easier to budget better for subsequent children? Is it ok to use our emergency fund to pay for those purchases we didn’t budget for?
- Lauren

It will be much easier to budget better for your subsequent children. The biggest reason is that you’ll already have an awful lot of things on hand, and the second reason is that you’ll actually know what you need through experience rather than the advice of others.

Each parenting experience is different. Some parents find certain things very useful, while others find them useless. It has a lot to do with the house you live in, your neuroses about hygiene, and other such factors.

As for the emergency fund, this pretty much falls under the umbrella of what I would use it for. I would just focus on replenishing that fund as quickly as possible after you tap it.

Q6: Paying for pet medical expenses
We have a 4 year old dog that we love to death and that we consider part of our family. She is going through some health issues and the vet thinks that she may have an auto-immune disease that is very difficult and costly to treat.

We have already decided that we will pursue the treatment (we are not putting her down). The biopsy procedure along cost me $1200 and the treatment (steroids) are expensive and could last for 6 weeks (or for the rest of her life in 25% of the cases).

I charged the $1200 to a no interest credit card (for about a year) and I have $1700 in savings. I am wondering if I should use my savings to pay the credit card and try to pay the treatment out of pocket or if I should keep my savings and hopefully build more until my no interest period is up? My husband is unemployed (has been for a year), but I make enough for us to survive on my pay. The minimum payment on the card is only about $20 a month.
- Monica

It really depends on how much the steroid treaments are going to cost you and whether they’re permanent.

If I were in your shoes, I would probably leave this amount on the zero interest credit card for as long as I possibly could and see what happens with the steroids. If they’re needed permanently, then I’d spend some time focusing on reworking your budget so that you can afford these as a normal monthly expense. This might be a difficult shift and you might find emergencies during that period very painful, which is why I’d keep that emergency fund intact for now.

I’m going to assume that no cost is too expensive for this dog. Given that’s the case, there’s a good chance that this experience is going to push you into debt. If the steroids are a permanent thing, work with your doctor (and with comparison shopping online) to find the best possible price on the maintenance medication. Also, your husband shouldn’t be afraid to seek employment below his station. There are lots of jobs to be found out there if you’re willing to work them.

Q7: Unwanted gifts
What exactly do you do with an unwanted Christmas gift? I’m never sure what to do when someone hands me something weird.
- Ernie

When I open anything, I try to be polite and thankful about it, whether it’s something awesome (making it easy) or something awful (making it hard).

I don’t feel bad about re-gifting if the gift is really appropriate for someone else I know. I view it as simply passing along a good idea.

If it’s something that I don’t want and I can’t regift it, I’ll hold onto it for a while and eventually take it to Goodwill.

Q8: Handling pet cleanup
I have two pugs, and no yard. Both dogs are walked three times a day and each will do their business 2-3 times per day, so I’m using up to 6 bags per day and that gets expensive. Currently, I purchase the generic “Bags on Board” bags, but I cringe at the thought of paying so much for something that I’m just going to toss. I’m wondering if you have any ideas for a more frugal disposal of dog waste. Grocery bags/bread bags are not an option – I don’t buy that many groceries and I already reuse these bags as trash bags. I don’t take the paper, so I don’t have those types of bags either. It needs to be something that I can bring with me on our walks. Do you have any suggestions?
- Jeff

A friend of mine used to use a Dirt Devil type device with a hose attachment for this purpose. She had a small dog and this worked great for her.

Another friend of mine would carry a cloth bag and used a rubber glove to pick the waste up and put it in the bag. She’d then clean the bag at home (I think she had several of them and would just keep them in a bin in the garage and wash them all together).

You could also use the rubber gloves with something like a Rubbermaid container that you use just for this purpose.

Q9: Planning for after graduation
I will graduate in May with my bachelors degree and want to start getting together a plan for financial stability.

After graduation I’m hoping to move to Washington D.C. where I know I’ll probably have to intern for a while to get a full-time position. It’s very likely that these internships won’t pay anything so I’m starting to save up now. At the moment I have about $1,000 saved and anticipate a tax refund of $2,000 will go toward the fund as well. I save about $50 a week. As it stands now, my boyfriend will be moving with me and we anticipate that he will be able to find a full-time position to help support us. But of course we know that you can never bank on getting hired right away.

I will have about $30,000 in loans (all federal but both subsidized and unsubsidized) and no credit card debt (because I don’t have a credit card). A few questions-

1. Should I get a credit card? I’m afraid that if I get one I will start spending more than I’m earning with the mindset of “oh well I’ll pay it back.” I just really don’t want to fall into that trap especially when I know money is going to be tight.

2. How much should I plan on saving up if I anticipate interning until around January?

3. As to student loans- have you ever published a guide for students graduating college on steps to take to start out on the right foot with repaying student loans? What can I do now to prepare for repayment?
- Shawn

Effective credit card use is about willpower. If you doubt your willpower, I’d either not get one or get one and put the card somewhere where you’ll never use it (just to build a bit of credit). If you don’t think you can do it responsibly, don’t do it.

Housing in D.C. is insanely expensive. You need to start looking at housing opportunities right now. If you’re lucky, your internship will help you with this. If not, with your current savings, you’re either going to be building up debt or living in a car or living in a large group apartment.

The best thing you can do right now for repayment is simply to minimize the amount of debt you take out. The less debt you’re in when you graduate, the better. The next most important step is to make your choices toward securing good employment.

Q10: Favorite Christmas gift
What was your favorite gift that you received this year for Christmas?
- Elaine

I received an Arduino.

If you’re confused as to what I’m talking about, it’s a programmable microcontroller.

If you still have no idea what I’m talking about, think of it as a small piece of equipment that you can program with your computer to independently do simple tasks. For example, my first project with it (which I started earlier), was to make an electronic set of dice where all you have to do is touch a button and a dice face lights up, showing a random number between one and six. I hope to eventually build a Christmas light controller that takes the audio from a radio station of my choice and converts it into light patterns on the lights.

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.