For the last several nights, our evening meal has been accompanied by a salad prepared entirely from greens cut from our garden within fifteen minutes of serving the salad.

The leaves are crisp and flavorful. You scarcely even want to put anything else on the salad because the flavor and texture of the salad greens come through in every bite.

Gardening is wonderful.

Q1: IRA worry
I have my IRA with [a major investment house]. This plan contains all of my monies and accounts from previous employees that I combined into one single account, to reduce the paperwork and overhead. I don’t currently contribute to this fund as I contribute to an alternate employee plan instead.

The plan is invested in five mutual funds.

I recently reviewed my first quarter statement and noticed some charges. I don’t know if these charges represent fair value or if I am paying too much. Can you help?

The account balance as of 01/01/2013 was approximately $72,000. I made no contributions (I contribute to an employee plan instead). The account balance as of 03/31/2013 was approximately $76,000. This represents an increase of just under $4,000.

In the statement, however, includes Transaction Details with five separate examples of “Mortality & Expense and Administrative Cost Charges”, where I seemingly sold units of each of the five funds for a dollar amount of approximately $55 each.

This concerns me. If I am paying that much per quater, am I paying $1,000 a year in fees? Is that high? Is that a fair price?
- Stephen

You’ll want to call their customer service line and figure this out because there are a lot of possibilities here.

My gut reaction is that these are annual charges that are tossed on your account once per year, probably early in the year. I don’t know this, of course.

If these are quarterly charges, you should really seek out a new investment firm to do business with. I’ve used Vanguard for a long time and they’ve never hung me with anything like that.

Q2: Replacing a toilet
Our toilet in the downstairs bathroom has started to leak around the base and there are also some problems with flushing it. My husband and I turned off the water and have decided to replace it. Is this a task we can handle on our own without a repairman?
- Marjorie

Almost anyone can replace a toilet if they take it slow and have the right tools. This video does a great job of explaining the full process.

There’s really nothing complicated at all about the whole process. You just turn off the water, unscrew the water feed, make sure every drop of water is removed, remove the nuts at the base, lift off the toilet, remove the wax and wax ring below the toilet, put the new wax ring on, put the new toilet on top, put the nuts back on, reattach the water feed, and that’s it.

If you just move through it all slowly, it’s very easy.

Q3: Foreclosure or not?
Can you please offer a direction on this issue? I took out a very high interest rate mortgage before the economy tanked, thinking that I could refinance in three years after paying off bills. Well after the economy tanked I now owe much more on my home than it is worth (about 30,000). I have a 9% interest rate with a second of 6%. The mortgage is not Fannie or Freddie Mae. The mortgage company does not have to deal with me in any way and you can’t get past bill collectors. I can afford the mortgage now but I can’t make any headway since every penny goes into interest. In 3 years I retire and will definitely lose the house.

My question is do I go ahead and let it go into foreclosure or continue to put all my money into a house that I know I will lose? The house is probably going down in value because I can’t afford ordinary upkeep or any renovations.
- Enid

If you can’t afford this house and you know that you’re going to lose it one way or another, then I’d move on now. Make sure you’ve secured housing elsewhere, then just hand the keys to the bank.

There are a lot of steps you can take if you want to try to fight for this home, but it sounds like you are already significantly behind on your payments to begin with as you’re interacting with bill collectors. It also sounds as if you are pretty certain you don’t have a path to owning this home.

If that’s the case, your best route probably is to exit the situation as quickly as possible so you can deal with the bad credit now rather than later.

Q4: Pension or 401(k)
My new job seems to offer a choice to new employees. You can either get into the company’s pension plan or they will provide some matching into a 401(k). Both require some contribution from me. Which is better?
- Danny

Unless there was something exceptional about the pension program, I would virtually always choose the 401(k).

401(k) plans are pretty much always entirely independent of the future of the company. Assuming the 401(k) is run by a major investment house, it’s likely to be pretty secure and is probably insured by the SIDC.

Pension plans have an unfortunate history of sometimes being tapped by companies when they’re in trouble. A 401(k) protects you from this kind of nasty surprise.

Q5: Retirement plan for older folks
My parents are both going to be 60 in the next year and I’m trying to write out a plan for them on what they should withdrawal when, and from what account. I was hoping you could give me some advice on what I’m trying to plan.

Both my parents are eligible for social security, with payouts as follows. Father: 959 @ 62, 1271 @ 66, 1678 @ 70. Mother: 1497 @ 62, 2044 @ 66, 2768 @ 70. My father has $122K in PERS. My mother has $409K in her work retirement account (average 6% return), $11.6K in a roth IRA, and about 20K in a savings account.

I was curious if I should have them live off of their savings/roth/retirement account/pers until they are both 70, and then claim social security?

That way they would be living on $56,341/year until 70 from retirement accounts, and then $53,352/year for the rest of their lives from social security. Am I considering this properly? I want to make sure I write the correct plan for them!

I do realize I’m not including state/federal taxes (Ohio), which I probably should set aside 30-40% of the above just going to taxes (although I’m not sure how to figure this out, and google hasn’t helped me).
- Ellen

That’s probably the correct plan for them, as it keeps them with a pretty steady income stream throughout most of their lives.

However, I would encourage you to set up the plan so that they’re not actually spending that full amount each year, particularly before age 70. You want to make absolutely sure they don’t “run out” before their Social Security kicks in at age 70.

I would design the plan so that their income is below $50,000 until age 70. That way, when they do hit 70, it becomes something of a raise and they still have further backup in their retirement accounts.

Q6: Sell first or move first?
My husband and I want to move to a rural area outside the city. We’ve already started shopping a bit for houses mostly to get a bead on what we want.

My question is whether we should try to sell our home and then move or whether we should move then try to sell. We have enough money in savings for a down payment for this new home.
- Naomi

If you can afford the mortgage payments on two homes at once for a little while, waiting until after you move to sell your house is probably the best option.

The big reason is that an empty house looks a lot bigger when people are walking through. It also looks a lot cleaner and visitors are less distracted by your home decor choices.

Sarah and I want to be moved out of our current home before it ever hits the market.

Q7: Free financial counseling?
My boyfriends student loan debt and small fixed income is ruining our relationship. He lies awake at night sweating because he is so stressed out about it. His health is declining. It is horrible to watch, but he isn’t doing anything about it. He is not organized enough to take control and make up a spreadsheet, and I don’t have the financial knowledge to do it for him. Is there a free financial counselor or other service we could use to help him set up a plan so he can see a light at the end of this tunnel?
- Mary

There are quite a few reputable credit counseling services. I would stick to this list from the Department of Justice.

Different credit counselors have somewhat different approaches, so it’s hard to guarantee what you’ll get, but most of them will set you up with some sort of plan that can help you move toward paying off your debt. Some will try to negotiate with your creditors.

Many of these services will charge you a fee of some form, but that is often wrapped into the plan that they set up for you.

Q8: Trying to understand treasury bills
I recently came into a nice pile of money and I want to invest it securely for several months. My father-in-law has always talked about buying treasuries so I looked online and found that you can invest in treasury bills for short terms. I don’t understand what it means, though. What does it mean when it has a 0.08 discount and a 0.08 coupon equivalent?
- Darren

Let’s say you’re buying a $10,000 treasury bill with a 0.08 discount. That 0.08 means that over the course of a full year, that investment would earn a 0.08% return, which isn’t much at all. They’re about as low as you can go, really.

If you invest $10,000 in this, you’re earning $10,000 times 0.0008 (the actual return) over the course of a year, which is $8. Per month, that’s a $0.67 return. You’d earn $0.67 a month if you put $10,000 in this investment. Not good.

You would be far better off putting any amount under $250,000 – and I’m assuming this amount is less than that – in any FDIC-insured savings account at this point. You should only consider treasury bills if their rates are beating FDIC-insured savings accounts.

Q9: Best use of money post-college
My husband and I will by next month have paid off one of our student loans, freeing up about $130 in our budget. My husband has a pension through work (he is required to invest 7% I think) and I have a SIMPLE IRA (I invest 3% with a 3% employer match). My husband would like to use the extra cash to invest in our respective Roth IRA accounts – we have not been able to make contributions that last 6 months due to having a baby. Should we put $65/month in each of our IRA’s or should we put the entire $130 into his or mine? We also have other student loan debt [$7700] that has very low interest rates [under 2%]. And we just had a baby and are contemplating opening at 529 college savings account. Where is the best spot for our money, paying off the low interest student loans, saving for our retirement or saving for college?
- Pearl

I would split the money between the two Roth IRAs. The reason for that is to protect each of you individually in the event that you’re separated or divorced. While that might not seem likely, the reality is that many marriages end in divorce.

If you do stay together, then it makes little difference where you put the money. All the separation does is protect you against that outside chance of divorce.

I would put saving for college as the lowest priority. I’d probably put saving for retirement as the highest priority due to the very low interest rate on the student loan, provided that it’s a fixed rate and not a variable one. If it’s a variable rate loan, I’d switch my focus back to it should interest rates ever rise.

Q10: Tithing concerns
I am dating a woman who is an active member of a different church than my own. We both tithe 10% of our income to our church. How should we plan for this when we’re married?
- Adam

I’m going to assume that you’re attending different churches after you get married. Otherwise, this really wouldn’t be a question.

If that’s the case, I would tithe 10% of your income to your church, and your wife should tithe 10% of her income to her church.

Still, if you are independently holding religious views that are different enough from each other that you can’t attend the same church, I would be very careful about marriage. The issue of a significant portion of your family income going to a religious organization you don’t believe in is going to grate on both of you over time. There’s also the spiritual compatibility concerns. Be very sure about this before you make a commitment.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Fresh Salad Greens appeared first on The Simple Dollar.

One of my favorite things to do with my kids on a rainy afternoon is to play a board game with them.

We play very simple games with our youngest child – things like Candy Land and Hi-Ho Cherry-O! – and while those are pleasant experiences, it’s clear that their biggest value is teaching things like taking turns and basic pattern matching.

With my two older kids, though, we play much deeper games. I’ve played chess and checkers with them, of course, but they’re also playing things like Settlers of Catan and Ticket to Ride (both of which are great games for adults that kids can also manage to play, too).

Family Game Night – or, in this case, Family Game Afternoon – is a hit with all of us. If you can pick up a good game at a thrift shop, it’s also a very frugal way to have a lot of fun with your family.

Q1: In favor of a smartphone
You seem to be very negative about the cost of smartphones. I think they’re well worth it. I am a 26 year old Kiwi living in Munich, Germany, which has a great public transport system of trains, underground, buses and trams. It actually makes little sense to have a car in Munich as the public transport is so quick and reliable, while at the same time parking is a nightmare to find and costly to use. I have three jobs which leaves me little time at home. We have an internet connection at home, but not a landline (smaller monthly bill). I do use my Smart Phone for business purposes, however I would like to share my reasons below for why I use a Smart Phone also on a personl level. As an extra note, I would like to mention that I have had my current Smart Phone for 3 years now (paid in full) and am only contemplating a new phone now as I seem to be having a few problems with my battery and OS.

+ It’s great on public transport. For someone that does not have a car, but does have the convenience of very good public transport, I spend a large portion of my day travelling by train, underground, tram and bus. A smart phone comes in handy as I am able to check the news and my emails/social media. This allows me to stay informed of whats going on in the world (making me look and feel more well rounded) and saves me time by utilising otherwise wasted time keeping up to date with family and friends which then does not cut into my work time or my private time.
+ Can be used as an e-reader. I can use my phone to read books, just as I would use a Kindle. This means I am carrying less items with me (great for your back) and producing less waste.
+ Interactive Map. Sometimes I get lost. This shows me exactly where I am and in which direction I should continue. LIFESAVER!
+ Shared Calendar. I share my calendar with my fiancé. This way we both know what is going on and evenings don’t get double booked. From a financial point of view, reminders of bill payments can be added to ensure joint responsibility/awareness. Reminders can be set for specific activities that need to be done.
+ Apps. Seriously genius for those on the go and to keep track. My fiancé uses his to track his Iron Man training, which he can then compare with others through his Smart Phone. This helps him train smarter and assists in motivation. Public Transportation Apps also help me to get places more efficiently with less waiting time.
+ Keeping in touch. Whatsapp, Viber, Skype etc. can be used on your smartphone. These applications are free to use (or at very minimal cost) and require the use of an internet connection and a smartphone. With these applications I keep in regular contact with my family and friends across the globe. The cost of the phone and internet connection is far less expensive than if I needed to keep in contact by calling from a landline or by post, it is also instantanious.
+ Photos. The quality is great on Smart Phones. I find it encumbersome to take our camera with us. We went to a wedding on the weekend and I didn’t even bother taking it out of my bag as I could just use my phone. Video qulaity is also quite high.
- Reggie

I agree with you that there are a lot of uses for a smart phone. Still, nothing you mention is life-breaking and all of those things can be taken care of with other items.

It’s the expense that’s the issue here. The smart phone itself is either costing you a premium upon purchase or you’re getting an old one that’s sluggish to use. The real expense, though, is the data plan. It’s another monthly bill that a lot of people don’t need.

If you’re actually using all of these features and many of them are used to help out with your actual professional life, then your company should be paying for the phone.

The only case I can see for paying for your own smart phone is if you’re self-employed and actually need these features to maintain your income. Otherwise, it’s an entertainment expense and you should be cutting your other entertainment spending accordingly.

Q2: Summer break activities
Our kids and I are off from school for the summer. Our parenting philosophy is to wear them out with activity all day long so that they sleep well and feel good, but that means coming up with activities. Got any cheap ideas?
- Amy

There are lots of suggestions out there. Here’s a list of 100 of them.

My big suggestion is mileage club. Mileage club is an activity that’s been a huge hit with our family each of the past few summers.

It’s pretty simple. Each person gets a “punch card” (which is basically an index card) with the numbers 1 to 20 and their name on it. For each quarter mile that they walk or run, they get a punch on that card. Completed cards can be traded for different rewards.

If you set some interesting goals for them that really hit upon their other interests, they will get really into it. It’s also a good way for you to motivate yourself to exercise.

Q3: More money causes stress
First off I should say that I am debt free and have been for over five years now. I rent an apartment by choice, save 35% of my pay and have what I would consider a good paying job. I’ve found more and more that money doesn’t drive me and while I think I could switch jobs to something higher paying it just doesn’t motivate me. And that’s where the realization comes in.

I received a small bonus a couple of weeks ago and caught myself saying “What the heck am I going to do with this money?” When I stepped back I realized that every time I’ve received an unexpected windfall it winds up being a small source of stress.

I’m at a point in my life where I’m buying very few “luxury” items. With every purchase I make a concerted effort to understand what’s behind my desire and to determine if the purchase will be worthwhile long term. Therefore each windfall isn’t seen as an “Oh, I get to buy X” experience.

I’ve also got enough savings to last me 8 months unemployment and stocks that could be cashed in on top of that. Retirement is being saved for at a steady clip and honestly I don’t see the point of retirement in the first place.

So each time I find myself with unexpected cash in hand it stresses me out as I try to figure out how best to use it. Ridiculous, right?

I understand my reaction is absolutely limiting my earnings and ability to grow my wealth. I was wondering if you’d ever noticed such a reaction in your journey through financial maturity and if so how you were able to get through it.
- Jim

I actually find more money to be relaxing at this point because I view it as an even bigger buffer against financial disaster. My goal is to reach a point where I don’t even have to work any more so that the buffer is big enough to last for the rest of my life.

If it’s causing you stress, try to think about it in a different way. What are your really big goals in life? Do you want retire at 45? What is it that you want?

Whenever you’re money ahead, that extra money is another piece in the puzzle of achieving that goal.

Q4: Robert Kiyosaki
What do you think of Robert Kiyosaki? My friend gave me a copy of his book Rich Dad Poor Dad and I was wondering what your thoughts were.
- Jeff

Kiyosaki mixes some really good advice with some questionable things.

He’s completely right when it comes to the idea that you should be investing your extra money into things that will earn a nice return for you.

What I found strange about the book is that he advocates living lean to do this, but then on the next page he basically makes fun of frugality and lauds people driving expensive cars. This never made any sense to me.

He’s also hyper-aggressive with regards to his investment advice. Many of his ideas only really work when you’re capitalizing on a housing bubble or some other investment bubble. If things aren’t zipping along with tremendous growth, it won’t really work.

Q5: Financial stress or paranoia?
I am a fairly long time reader of your blog and greatly enjoy finding new ways to be frugal and save money. My husband and I were pretty foolish with our money as single adults and newlyweds (credit cards and student loans) but we are now completely debt free except for our mortgage.

My husband is a Sgt in the Marine Corp and we have six children. He joined the Marine Corp as a 24 year old married man with a baby on the way and we have expanded our family every roughly ever 18 months since then (I realize this sounds like a lot of kids but we both come from families of six or more children so we knew we wanted a large family also).

My husband works hard and has been promoted on or ahead of schedule for his specific job. Because military pay is convoluted and confusing, suffice it to say that we receive not quite $4,800 a month. We have a $10,000 emergency fund and just under $30,000 in Roth IRAs to which we contribute $300 per month. We also put away a little in a TSP but we don’t need the tax benefits and I am ashamed to admit that I don’t really keep track of it since it only holds a couple thousand dollars at most. We tithe our income at 10% which is the one absolutely non-negotiable item in our budget (for both of us). I KNOW that the benefits of tithing have ALWAYS far out weighed the monetary costs throughout the years that we have faithfully paid it. We are currently getting ready to sell our home since my husband has orders for this summer. We bought our house because of an assignment to recruit in an area without base housing where the rent for a home large enough for our family far exceeded our housing allowance.

Lately, I feel a lot of financial stress and guilt for not doing better and I wonder if it is unwarranted. I mean, we have SIX children. We don’t have any non-mortgage debt. We are not contributing 10% to our retirement but we are contributing SOMETHING (about 6.5% when you count the TSP). Our emergency fund isn’t as large as you recommend but it’s at least 3 months of our living expenses and I actually use the “Rich on Any Income” budgeting method where you put away money each month for car maintenance and Christmas and other irregular expenses. My husband tends to be a little bit more of a spend thrift than I am (although he REALLY is trying very hard and does really well compared to most people I know) so I need to budget “mad money” for him for the sake of a happy marriage.

We only spend about $800 a month on food which seems to be in line with what families with half our children spend (I realize I could spend less here but we love trying new things and it would lower our quality of life). I cut everyone’s hair in our family including my own. We do hand-me-downs (clothes, furniture, &c) and make our own Christmas presents. We own both of our vehicles. We don’t even have a TV, let alone cable. I mostly shop at thrift stores. Our one huge “splurge” category each year is travel. We spend about $3000 per year on plane tickets because I want my children to still be close to their extended family even though we move around so much and generally live far away. I could save more money but I’d REALLY have to scale back our lifestyle which isn’t exactly glamour as it is. I know the future is important but so is the present, right?
- Denise

I think you’re doing fine, particularly considering you have six kids at home.

You have no debt besides your mortgage. You’re contributing to retirement. You have a solid emergency fund. You save for irregular expenses. That paints a very solid financial picture.

Yes, you could do better – but so could everyone. There is no perfection when it comes to personal finance and perfection is the enemy of the good. Don’t try to chase perfect. Instead, stick with the positive progress you’re making right now.

Q6: Parent helping child
My father passed away very suddenly about three months ago. We’ve already taken care of helping Mom with finances and with the beginnings of transition into life alone and she’s adjusting as well as we could hope. A week or so ago, she called all of the kids and told us that she wanted to start giving each of us $1,000 a month to help us out. She has plenty of money – Dad was well insured and they had saved for retirement and own some rentals. She said that she would not take no for an answer with this because she says she has more money than she knows what to do with and wants to see us have great lives without stress.

So, now we’re getting $1,000 a month more in income, but I don’t want to get used to it or treat it as lifestyle inflation. What should we be doing with it?
- Kelly

Your parents raised you right. This entire story is a description of a great parent-child relationship from top to bottom. You’re independent, understand the consequences of outpatient financial support from parents, and there is deep mutual care on both sides. Kudos to both you and your parents here.

If I were you, I’d establish a giant long-term goal for yourself. Maybe it’s early retirement. Maybe it’s a big house in the country. Maybe it’s seed money for a small business. There are lots of possibilities here.

Once I had a goal in mind, I would use all of that money to save specifically for that goal. Put it into a savings account or into a stable investment account. If you can, make this transfer completely automatic so you don’t have to think about it.

Don’t use this money for anything else other than that goal. Deal with your life as though that money didn’t exist and wait until the balance is high enough to launch whatever goal you have in mind.

Q7: Credible consumer credit agency
My husband and I are in our mid 40s, and have been stuck in a cycle of debt for years now. We have accumulated over $100,000.00 in credit card debt. We own our home, with 15 years left to pay on our mortgage which we were able to refinance at 2.95% recently. Our cars are paid for, but getting older, and we have 23 months left to pay off our student loans that we consolidated and re-financed through Sallie Mae for 20 years when we were young parents and struggling to pay them (big mistake). We can manage our debt, but can’t seem to get out of it. We are at the point that about half of our take-home pay is spent on making our minimum payments, and often that doesn’t leave us enough money for regular expenses that come up for us and our 3 teen-aged children. Though we try to budget, we end up continuing to use our credit cards each month to make ends meet: at best treading water or digging ourselves a little deeper all the time. We used to have good interest rates on our credit cards, but most of them have been raised in the last few years to the double digits, and some are ridiculously high (the worst one is 22.90% with an $10k balance). We have a good income, and make sure to pay all of our bills on time to avoid late fees and penalties, but we are getting no where fast. I realize that this is not sustainable. I live in constant fear that we’ll have an emergency that will push us over the edge. We have about $1,500.00 in savings that I try not to touch, but sometimes have to.

I’ve tried calling our credit card companies to have our interest rates lowered, but am told that our debt-to-income ratio is too high an they can’t lower our rates. I have heard that there are consumer credit agencies that could help us get lower interest rates so that more of our payments would actually go toward paying down our debt, and we could possibly lower our minimum monthly payments so that we create a sustainable budget and stop using our credit cards each month. I am afraid of scams and dishonest agencies. I am not interested in a settlement or bankruptcy, as I feel we are morally obligated to pay back all the money we’ve borrowed. Do you have any suggestions?
- Charlotte

I’d start with the list of approved credit counseling services provided by the Department of Justice.

You should be aware that credit counseling services aren’t a magic wand that fixes everything. They may or may not be able to get the credit card companies to lower your interest rates for you.

Before going this route, I’d try playing hardball with the credit card companies on the phone. Simply tell them that you’re in danger of missing payments because of the crushing interest rate. If the first person won’t help, talk to a supervisor. They can change your rate.

Q8: Simple?
Are you familiar with Simple? What do you think?
- Aubrey

My feeling with Simple is similar to my feeling with Mint. This is what online banking should be like.

However, is it worth it to switch accounts and share my personal information with yet another service? They have to be providing some sort of genuine value for me to feel okay sharing my SSN and other such data with them.

As cool as they are, they’re not yet providing anything that’s actually saving me money or doing anything I couldn’t do with a pocket notebook. For me, that’s not enough to share my data with yet another company.

Q9: Career change advice
I just had a phone interview for a job that I see as a step up from my current one in both title (it’s a PR and marketing manager role) and responsibilities. It’s for a non-profit that offers services in which I truly believe. The job itself would be challenging and would take me out of my comfort zone, but I know the woman who would be my boss after having worked as an intern for her at her previous job years ago. I have a lot of respect for her and see her as a mentor. She actually came to me to apply for the position.

So, what’s the problem? Well, the pay. Yes, it’s a non-profit, but I was stunned at the pay scale the HR person revealed to me on the phone (mid to high thirties). Even at the highest end, it would be considerably less than what I’m making now, which is in the mid-forties (not a lot, but livable). I feel like I’ve come so far to even make my current salary, that taking a step back would be difficult both financially and mentally.

However, my current job is not going anywhere. I feel like I’ve hit a wall, skills-wise. The only good thing is the pay and the ability for me to work from home. But management has made it very clear that I have no career path, and if I were laid off tomorrow, I would probably have difficulty finding a job in the same field (editorial) that pays as well in my own city.

I’ve already been asked to come in next week for a face-to-face interview. I feel like my chances are good (I don’t mean to sound cocky), and while I could probably get them to go up on the pay a bit, it still wouldn’t come near what I’m making now, which I would gladly take. I don’t want to waste their time, but I have a nagging feeling I should consider the job because it has more of a future than the one I have now and it would be worth taking a few steps back for the experience and the job title.

(A little financial background: My husband (age 41) and I (age 33) currently make about $85,000 a year. We have about $95,000 in student loan debt, which we are aggressively trying to pay down. That is our only debt. We are also trying to save aggressively for retirement and for a down payment on a house. Taking a pay cut would certainly affect these goals.)

What are your thoughts? I appreciate any advice you can give!
- Camille

If you feel it’s a good career move and the drop in income isn’t going to do anything devastating to your personal finance situation, I’d make the switch.

Your situation is a poster child for why it makes sense to always spend less than you earn. Opportunities like this come up in life quite often and if you’re spending so much that you’re pushed up against the wall all the time, you can’t make these kinds of moves. You’re stuck.

Spending less gives you freedom. That’s something that all the spending in the world can’t give you.

Q10: Pay subsidized or unsubsidized first?
I have several student loans all within a stone’s throw of 7% interest. I know I should pay debts off in the order of interest rate, but should I prioritize subsidized or unsubsidized student loans first?
- Ben

The only difference between subsidized and unsubsidized loans is whether or not they accumulate interest when you’re in school or not. If you’re out of school for more than six months and are currently employed, there’s no real difference between them.

Still, I’d pay off the unsubsidized ones first. The reason is that you might be in a situation where you return to school in the future (you never know…) and, with a subsidized loan, the interest will pause while you’re in school. With an unsubsidized loan, the interest won’t stop.

That’s enough of a reason to pay off the unsubsidized loans first, in my opinion.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Board Games with Children appeared first on The Simple Dollar.

I have this minor irrational fear of fog. Whenever a day is foggy, I do not want to go out in it.

I think it’s because my range of vision is so limited in the fog. I can’t see what’s ahead of me or behind me and I have this strong sense that somehow I’ll become lost, even though it’s ludicrous.

This morning is foggy. I guess I’ll write. Inside.

Q1: Pre-conception college fund
My husband and I have two new nephews who are 6 months old and 9 months old. We’ve discussed the idea of starting a college fund for each of them but we are unsure of how to go about it. We want to be able to start them each with a small amount of money (lets say $100 each) and we want to be able to put a small amount into each account each month. We want the account to have stipulations for each of them (for example, they can only use the money for college and if they don’t go to college then they can use the money towards a down payment on a home at a certain age). We realize these accounts will in no way fully fond college for either of them, but we’ve both been bogged down by student loans and know that even little amounts can help out.

We don’t currently have any children of our own, but plan to start a family in the next year or two. We’ve discussed starting a college fund for our future children now, again starting small and adding a small amount each month. I’m thinking the best way to do this would be a CD until we actually have a child.

Any ideas greatly appreciated (types of accounts to use, brokerages to go through, limits on use, etc.). We are also unsure of how to tell their parents that we’re doing this for them. We know one set of parents will be very thankful, but are afraid the other set of parents will find some way to be offended by it.
- Julie

You can start 529s for your nephews. This article can provide full details on how to do this. If this is primarily for education, then that’s the route I would take.

You can also start a 529 now for a child you haven’t had yet. Just name yourself as beneficiary and then, when the child is born, switch the beneficiary to your child, which is completely allowed.

If you’d rather have a more general savings vehicle, you can certainly use savings accounts or CDs instead of a 529, but if the saving is for education, the benefits of a 529 make it the best choice for most people.

Q2: Using tax refund effectively
This year we received about $5000 back from federal and state combined. Below are some details about our financial situation.

I stay home with our son, so we are currently living off of my husband’s income (which ends up being about $4200/month). I have been able to find odd jobs on the side, but nothing that brings in any steady income. Our debts add up to about $15,000; that breaks down to $8k for a car loan with 6.8% interest rate and $7k for two student loans ($2500 @ 4.75% and $4500 @ 6.8%). We have a credit card with a great rewards program that we pay off in full every month, and about $1500 in a savings account.

My husband has a stable job, but recently applied for his dream job (and is waiting to hear back about a second phone interview), meaning we could end up moving in the near future from Denver to either San Francisco or Seattle (both of which have a higher cost of living that our current city).

So…with all that in mind…what do you think would be the wisest use for our tax return?

I was originally in favor of putting it towards to car loan, which would bring the balance down to about $2000, which we could then pay off in six months or less. With a potential move in our future, I’m wondering if it might be a better idea to build up our emergency fund and put it into savings. If he gets the job, the company will pay all costs associated with moving, but I’m a bit anxious about the higher cost of living.

My husband is in favor of buying us each a new phone (ours are each over three years old and are starting to die), and then splitting up the rest between the car loan and savings.
- Margie

If I were in your situation, I’d pay off the higher interest rate student loan.

From what you’ve posted here, it’s your highest interest debt (it’s tied with your car loan, actually) and, although you do get a little bit of tax help from it, it’s a pretty tiny amount. I’d pay it off for one simple reason: it eliminates a monthly bill.

That way, from here on out, you can take the money you used on that monthly bill and use it for other things – paying off other debts, building an emergency fund, and so on.

Q3: Ashamed of using aid
My younger sister is 25 years old. She has two children. Her husband died in an auto accident about a year ago. She’s trying desperately to make ends meet but she refuses to use things like SNAP or food pantries or things like that because she says she’s not poor. Please tell me how I can convince her to take advantage of these things.
- Brian

Those programs are actually made for people like her. The situation you’ve described is the poster child for why SNAP and food pantries exist. They’re made for people who are struggling in their situation and, ideally, will use that help to boost themselves back onto a stronger path.

Yes, some people use those programs as part of a cycle of dependency, but that’s not the purpose of the programs. The purpose is to make sure that no one has to struggle to get food on the table for their children. She should never have to struggle for that, ever.

You can’t make her go, of course, but you need to make it clear to her that the real purpose of such programs is to help people in her exact situation. That’s why they were created.

Q4: The four percent rule
A lot of books seem to quote the 4% rule as fact. Where does it come from?
- Larry

It comes from statistics, actually.

Let’s say you have $1,000,000 in retirement savings and it’s all in a very broad stock market index fund. 4% of that is $40,000. So, let’s say you take out $40,000 a year to live on. If you then look at every single thirty year period in the history of the stock market, you have about a 95% chance of still having money after 30 years of doing this. That’s the 4% rule – it gives you a very nice likelihood of being able to live out the rest of your life in retirement if you just take out 4% of your retirement balance each year.

You can run those numbers for yourself over at FireCalc. Put in $40,000 as your annual spending, $1,000,000 as your total, and 30 years as the length.

Q5: Dan Ariely
More and more when I read your posts I am reminded of the books Dan Ariely has written (such as Predictably Irrational). Are you familiar with his work? I know he does a lot of TED talks and he teaches a free online course through Duke University. If you haven’t checked him out, I think you’d find his work very interesting.
- Susan

I’ve read both of his books and I’ve included some of his TED talks in my “pieces of inspiration” columns. He’s a pretty fascinating guy.

Ariely’s work focuses on why we make decisions that are sometimes “irrational,” meaning they aren’t the most beneficial choice for us in a given situation. Why do we choose to overspend? Why do we choose to eat unhealthy food? Those are irrational choices.

He offers a lot of reasons for those choices. Usually, it comes down to using the wrong cues and the wrong information as the basis for our decisions.

Q6: Look for job now?
My current job is on really shaky ground. Our boss has told us that a big round of layoffs is coming in October and I’m pretty sure my entire department is getting removed. This is a new situation for me and I’m wondering if I should be job hunting now or if I should focus on getting the best possible recommendation and maybe salvaging my current job.
- Mike

You should be job hunting now.

You’re currently employed, so that gives you a leg up in the process. Your company has known issues that will probably lead to your unemployment soon, so any supervisor that isn’t evil will understand why you’re applying elsewhere right now.

You’re in a great situation to find yourself a new position, so I would do it now. You have until October. Good luck.

Q7: Slow cooker oatmeal recipe
I need your oatmeal recipe. Love the stuff. Need more excuses to be able to indulge.
- Angela

Take some butter and coat the inside of your slow cooker with it. You don’t need a bunch, you’re just looking to make sure that the oatmeal doesn’t stick to the inside of the slow cooker.

Add six and a half cups of water, two cups of steel cut oats, two cups of milk, 1/4 cup light brown sugar, and a teaspoon of vanilla extract to the cooker. If you want any fruit, add up to a cup of it. Put your slow cooker on low, leave it on overnight, and you’ll have great oatmeal in the morning.

I’ve noticed that when the air is drier, it’s better to use a bit more water than that, up to about seven and a half cups. Feel free to experiment.

Q8: State income tax
Why would a person ever choose to live in a state with state income tax?
- Robbie

States get their money one way or another, either through state income tax, local income tax, sales tax, property tax, or something else. Virtually every state in the country is within 5% of each other in total tax burden for their citizens, as you can see here.

Those taxes do affect you one way or another unless you literally buy nothing at all and are homeless. If you rent your dwelling, then the property taxes are affecting you in the form of higher rent. If you’re in a high sales tax area, everything you buy costs more.

Some states use a state income tax and thus have lower property taxes and lower sales taxes. Others don’t have an income tax but have various local taxes. The state will get their money.

Q9: Donating unwanted books
On getting rid of books, the local public library is a good place to drop them off.

Either they will add the books to the collection, or if they are not appropriate, the Friends of the Library will sell them and give the proceeds to the library for new books! And they will send a thank you for [the X number of books] for your tax purposes!
- Trevor

If you’re not selling them in a yard sale or swapping them at a used book sale, the library is absolutely a great place for used books.

My local library will pretty much accept any books. If they can’t put them directly on the shelves, then they’ll put them out during the library sale, as you mention.

My only problem is that if I give away fifty books, I wind up bringing home plenty to replace them from the library book sale.

Q10: Focus
How do you focus when working at home? Whenever I work from home, I find myself constantly distracted by things and I can’t get anything done.
- Danielle

I have a spot in my home where I work. That’s what I do there.

When I really need to focus, I turn off my cell phone, unplug my internet service, and bear down on the task at hand. The fewer distractions there are at hand, the easier it is to focus.

There are usually a few household tasks floating around in my head that can distract me. I try to take care of those early in the day so that they’re a non-issue.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: The Fog appeared first on The Simple Dollar.

I love completing little home improvement projects, like installing hanging shelves. I get this strong sense of satisfaction from finishing little projects like that.

This weekend, I’m planning on installing a wall-mounted bookshelf for my office. I intend to keep about 15-20 books on it along with a few knick knacks.

It’ll take an hour or two to do it right, but when it’s done, I’ll feel good, as though I’ve actually achieved something.

Q1: Newly widowed and worried
I was widowed a few months ago. During my husband’s unexpected illness, we spent down much of our child’s college fund for living and medical expenses. I am 58 and unemployed, I have not worked outside the home for 10 years. I have been looking for work but so far have not found a job. Our only child is currently finishing up sophomore year of college.

I have about $100,000 in an IRA and about $200,000 (life insurance disbursement) in a money market account that earns 3% though that can change. Of course I am living off this money for now, so the total declines monthly. I have cut expenses such as cable, cell phone and so on. The house and car are paid for, though both are in need of significant repairs.

I’m struggling to figure out the smart thing to do in these and other money situations:

1. An old equity line is nearing the end of its draw-down period. I owe $29,000 on this loan which is at 2.98% (the bank tells me this rate could change). Should I pay this off in its entirety, pay minimum amounts monthly, or something else? How does a person figure out–do the math–in a situation like this? There seems to be so much to consider: interest lost in the money market account, interest saved on the equity line, the tax angle…probably other things I have not thought of.

2. As part of the financial aid package, our child is offered both secured and unsecured Stafford loans, along with a grant and a merit scholarship. Is it more cost effective to accept these lower-interest loans that will not come due until after graduation, or to pay when billed out of the $200,000 mentioned above? For figuring purposes, I’m assuming I will be paying back any loans my child accepts. Hope not, but I’m most comfortable privately preparing for the worst while hoping for the best.

3. When I do find employment, what should I do with the life insurance disbursement? Leave all or part of it where it is? The liquidity is a reassuring safety net, but surely it would be better to invest it elsewhere for a better return?

When my husband died, everything about our previous financial plans went out the window of course. Now I need to quickly figure out how to best manage this money, deal with college expenses, and prepare for my own retirement. I’m terrified of making an expensive, irreversible mistake.
- Monica

The question of paying off debt or not is a tricky one because the true “right” answer depends on what happens in the future. Does the return on your investment improve or does it go down? Do you get a job tomorrow or do you not find one for a year? Those factors change the “right” answer. My gut sense is to always pay off any debts that you can afford to pay off because doing so lowers your monthly bills and makes it easier to make ends meet with a lower-paying job.

I think you need to reassess whether or not you want to pay for your child’s full education. Given the change in family fortunes, I would consider it reasonable for your child to take on at least some debt. Right now, covering those student loans is going to very directly impact your retirement plans in a very negative way, as there aren’t many years separating today and your hypothetical retirement date. If your child is thoughtful at all, they’ll understand this.

As for investing that money, I would, at the very least, be moving the money into a Roth IRA as fast as possible. I would move the maximum amount allowed each year, which is $6,500 for you. That way, you can let it grow tax free and invest it in other things as per your discretion. Given your relative age, I wouldn’t really encourage you to put the money into anything very risky at all, as a big dip in the stock market would have a really strong negative impact on you. If you’re really concerned, you can seek out a fee-only financial advisor for help.

Q2: Overwhelmed by money stress
Whenever I start really thinking about our money issues and going through our bills, I get incredibly stressed out. I almost hyperventilate and I start feeling really uncomfortable with my whole life. So I never get to the point of actually making a budget or a plan or anything like that. How do I get past this?
- Olivia

It sounds like you have an anxiety issue when it comes to finances, and that can be tied to any number of things.

Your best bet would be to have some conversations with a trained psychologist to dig into the issues. I tend to be wary of psychopharmacology in a lot of cases, but a person who is trained in helping people conversationally work through their problems can be a tremendous help.

Trust me, though – the upside of getting your financial situation in shape is a tremendous help.

Q3: Money book for late teens
I think a lot of people want to help their almost grown children, or relatives, manage personal finances successfully. They may not have had parents like you who started teaching money lessons early.

Is there a book that you’ve read that you’d recommend for young adults? I am coming from the perspective of being a parent of an 18 year old who will be going off to college this year.

My kid’s expectations are not at all grounded in reality because my ex has no money management skills, and has convinced her that “you can’t walk around with no money” so he carries close to $30k in credit card debt despite having close to $50k in stock and an ING savings account. A real basic book that lays it out step by step would be helpful!
- Lizzie

The best book I’ve read for college-age people is Please Send Money by Dara Duguay. It just hits that late high school/early college age very, very well.

The challenge with that age group is to convince them to learn new things about life skills because, often, they already know everything about it.

Your best approach is to drop that book on them, give them a bit of encouragement to read it, then stand back. If they don’t have the self-interest and personal responsibility yet to learn more about it, any pressure you apply will go for naught.

Q4: Toning down big dreams
My son is pretty much convinced he’s going to be a famous novelist – and sooner rather than later. He does write all the time and has sold a few short stories, but he’s still in school and I don’t think he grasps that it’s going to take a while to even sell one novel let alone become a “famous novelist.” He has no plans other than this. Help!
- Donna

First of all, never crush his dreams of being a novelist. Don’t do it. Encourage that dream.

Having said that, you’d be doing great work if you simply showed him stories of writers who did other things before they were able to be full-time writers. Stephen King was an English teacher. Charles Bukowski was a postal employee. Pretty much every great writer had to do all kinds of things before their writing enabled them to do nothing but write.

Find some of those stories and share them with your son. Encourage him to find some training in something he can tolerate and then spend his spare time writing. That’s what many, many great writers have done before him.

Q5: Emergency fund and debt snowball
My wife and I have an emergency fund that would allow for us to fulfill our monthly obligations and maintain our existing lifestyle (not that we would) for 6 months, were we to have no other income coming in. We’re in our mid-20s, both work, rent (so no mortgage), fund our retirement accounts to the company match, max out our Roth IRAs yearly, have various targeted savings accounts, and only have student loan debt outstanding (we don’t carry a credit card balance, no car payments, etc).

We recently paid off one of our student loans in full, and that monthly payment will be snowballed into further student loan repayment. My question is in how to handle our emergency fund. Should we factor this snowball amount into our emergency fund calculation, or should we “rebalance” our emergency fund and move the money out of the fund (newly-freed monthly loan payment*6) and use that money as a one-time larger sum to continue paying off student loans?

Keeping the money in the emergency fund (which we’ve never removed funds from before) would add more cushion/security, but using that extra cushion for debt repayment would obviously be more attractive from an interest rate/investment perspective.
- Leslie

An emergency fund should be completely separate from your month-to-month spending. It needs to be rock solid and reliable. When things go down, you want that money sitting there.

The situation you describe essentially adds up to spending some of your emergency fund each month and then replenishing it. Let’s say that the day you send in one of those big payments, your car dies and someone loses a job. You’re in a pinch, one that an emergency fund could have easily solved.

Yes, it’s frustrating to see cash just sitting there and not earning much money (it will earn a little, just not much), but the point of that money isn’t to earn a return. It’s to prevent a big loss. It’s protection, not investment.

Q6: Laundry service
There’s a new laundry service in town that’s offering next-day laundry service for $0.80 a pound for the first ten pounds as an introductory offer, and then it’s $1.25 a pound after that. You can also buy a “suds champion” card for $25 that takes the price per pound down to $1 permanently. You drop off dirty clothes and then pick them up the next day cleaned and folded. Is this worth it? I currently live in an apartment with a washing machine that costs $1.75 per load and about $1 per drying.
- Jim

Most washing machines are pretty full when you have a load that weighs 6 pounds or so depending on capacity and so on. So, if you’re using that as your load size, it’s costing you $3 to wash and dry it, plus $0.25 (or so) in soap expenses.

To wash six loads with the service, you’re spending $4.80 per load (at first) and then $7.50 per load (later). It’s clearly more expensive.

However, there’s also a time factor. Having used both quarter-based machines in an apartment building (where, half the time, you go down there and it’s already in use, you’re having to run clear across the building to move loads around, etc.), I know quite well that there’s a real time investment. The effort involved in dropping off laundry and picking it up is about the same as running one load assuming no one else is already using the machine.

So, is it worth it? It depends on how much time it’s really taking you and what else you’d actually be doing with that time. If it’s just freeing up uninterrupted time so you can watch television, do it yourself. If it gives you an uninterrupted hour to build a business, it’s probably worth it.

Q7: No shampoo?
As a frugal guy, I thought you might be interested in the concept of “no poo” – a method of hair cleaning that doesn’t involve commercial shampoos or conditioners. I was a little skeptical at first, but my partner and I have been washing our hair with diluted baking soda and vinegar (what CAN’T you do with these products? ;) for months now and it’s been great. I was concerned that my hair would be greasy or smell like vinegar but neither has been the case – just clean, healthy hair.

Anyway, you’ve probably heard about this already, but in case you hadn’t, I just thought I’d share. I’d be curious to hear your thoughts about it.
- John

Here’s the article on “no poo” at Wikipedia, for those who want a background.

As long as you’re cleaning the excess oils and skin cells (and other things) out of your hair in some fashion, this seems completely reasonable. Shampoo wasn’t a widely used thing in the past, after all.

Honestly, I often just use water in the shower when “washing” my hair. I do have really short hair, but I’ll often just run a lot of water on it and massage my scalp while water runs over it. The reason is that if I use shampoo too often, my hair feels really dried out and akin to straw.

Everyone’s hair is different, though. I don’t think it hurts to try something like this – unless, of course, you’re coloring your hair or using other chemicals on it.

Q8: Freemium
You’ve told us before that you use Evernote and that you actually pay for the “premium” service. Why? Do you use it that much?
- Dennis

I do use Evernote a lot. I’m not sure I use it more than the “basic” Evernote features, but I do use it on a multiple-times-a-day basis.

My feeling is that if I rely on something that’s made available with a “freemium” model, then I know that the continued existence of that tool relies on using at least some of the paid services. If no one used the paid services, the service would fold entirely.

I try new services pretty regularly, many of them using a “free” and “pro” model. If I don’t find the “free” version useful, I don’t pay. However, if I find myself using that tool a lot, I’ll happily kick a few bucks toward the “pro” features. They’re usually useful and, even better, they ensure that the tool I love stays available.

Q9: Frugality in expensive area
What if you live frugally, stick to a budget, and still have to struggle paycheck to paycheck?

My wife and I live and work in Los Angeles. I am a producer for a visual effects studio, and she is an entrepreneur.

We live in a modest one-bedroom apartment, drive a used car that we had to take a $1800 loan out for, are paying down student debt from a modest college, and still scraping.

A big part of the issue is that rental costs in Los Angeles are outrageous and the industry I’m working in is known for being taken advantage of, making budgets and salaries shrink by the day. Our 1-bd costs roughly $2k/month and I only make $40k.

With my career path being what it is, there’s no place but LA to be. I hope for a bright future of pay raises and try to be thankful, but with a brand new baby I worry about living in a one-bedroom for more than the next year or so.
- Leonard

You’re making a career choice that requires very lean living at the start.

If you’re in that situation, you need to live like a miser. That’s just part of the equation. Live cheap, smile, and bear it.

You certainly can live with a child in a one bedroom apartment until they’re several years old at least. I would start to get worried about multiple children, but it works perfectly well with one. I have friends who live in an efficiency with a child, after all.

A final thought: are you still sure that this career path has a genuinely lucrative future? It sounds like you’re pretty uncertain about it. Make sure the path you’re on leads to where you want to go.

Q10: The value of a piano
My daughter is seven years old. She has been taking piano lessons since she was five. We have an old keyboard at home that she practices on and she practices a lot but lately she’s really been enjoying going over to the church and playing the piano in the church basement. I have to admit that the piano sounds a lot better. We have space for a piano, but it’s a huge expense. Do you think it’s worth it?
- Marv

This screams “birthday gift” to me. If your daughter really is passionate about the piano and you have space for it, I don’t see any problem.

That doesn’t mean you need to drop a mint on a new piano. If I were you, I’d learn more about what you’re thinking of buying first. Is a used piano acceptable? Are there any decent used pianos available in your area.

One great way to start is to quietly talk to your child’s piano teacher. Do they have any suggestions or directions? Piano teachers are often great sources for finding used instruments that work well.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Book Shelves appeared first on The Simple Dollar.

Our children have started summer vacation, which means that the house is now a lot noisier and active during the day than it once was.

My children also have a strong tendency to go find Dad every fifteen minutes or so to show me their latest art, the thing they found in the yard, some new idea they had, or something else.

Often, during the summer on days when Sarah is also off of work, I tend to head to a library or somewhere else to work, as it’s quieter and less distracting.

Q1: Helping new college graduate
My 25 year old son graduated from a state school with a degree in English Lit. Unable to locate a job here in the Northeast, he moved to a city down south and is working at a coffee shop. He is able to manage his monthly expenses but is not saving any money for the future. I would like to help with that and can afford about one hundred dollars per month. Am I best off putting the money in a regular bank account so that when he decides to relocate, he has some funds to start off with? Or should I put it in a Roth account? Or just send him one hundred dollars per month to help with his expenses?
- Sandra

If you’re going to do this, you want to do it in a way that doesn’t interfere with his daily expenses. Your best bet is probably to start a Roth IRA for him. Do it quietly and contribute to it on your own.

When he finds work that enables him to start making financial progress, turn the Roth completely over to him.

You need to be very careful when doing this kind of “economic outpatient” treatment of children. They can grow to expect it and that’s a bad position for them – and you – to be in.

Q2: Constant complaints
My husband and I decided to try to turn our financial situation around thanks to much of the advice on your website. It has gone well over these past few months with only one problem: my husband constantly complains about every little thing we used to spend our money on and now do not. So far, my best route is to just say nothing because if I try to discuss it we wind up in an argument.
- Kelly

My guess would be that he’s at least reasonably committed to the plan, but he’s missing a lot of the little perks and complaining is his vent.

If I were you, I’d ignore it and treat it as his way of blowing off steam.

Instead, I’d focus on the good things you’re doing now. It may take time, but those new things will gradually push away the desire for the old.

Q3: The value of trade school
I saw this video on YouTube of Mike Rowe speaking to the Commerce, Science, and Transportation Committee back in May of 2011 (link included). His reason for being there is to talk about the lack of people in the trade skills professions for two reasons. One is because of the push in society for kids to go to college and not to a trade school. And the second is that the people that are in the different trade skill professions are retiring and have nobody to apprentice and replace them.
- Leon

I agree completely with this video. There are many, many professions out there that are understaffed with quality workers because everyone just assumes that the best thing for their child to do after graduation is to head to college.

There are many, many people who would make great electricians, carpenters, plumbers, and so on who are pushed into going to a four year school and end up struggling to fit into a major that’s not right for them.

Trade school should always be a strong consideration for anyone graduating high school.

Q4: Lessons for children
There are lots of different lessons available for children in our town. Martial arts lessons and music lessons and art lessons and sports lessons. Our friends have their kids in a bunch of them, but to us, it just seems like a bunch of money we don’t need to spend. We’d rather have our kids figure out what they like on their own in a less structured environment like the backyard. What do you think?
- Andrew

My feeling is that if your child expresses a specific interest, it’s completely fine to find lessons for them in that area. For example, our daughter constantly plays on our piano on her own, but she’s completely untrained and is just making up stuff as she goes (often to the detriment of our eardrums). She’s practically begging for piano lessons.

On the other hand, if our children show no interest in a sport or activity, I see no reason to enroll them in lessons for that activity.

I would far rather see our children have plenty of free time to explore and think.

Q5: Lending Club thoughts
While my debt load is more than optimal, am able to make more than the minimal payments each month from my disability check. But have recently learned that I need dental work, some now, some that can be postponed but still will need to be done within the next year. That additional debt is still doable for my budget but leaves no wiggle room. And, need I say – there’s no emergency fund. Was totally broke by the time disability checks started. Received a mailing from Lending Club and their offer is very attractive. I would be able to borrow enough to pay off all my debt except for the pre-paid funeral plan, and cover all the needed dental work while lowering the monthly debt payments. What do you think? I know nothing about P2P lending, googling hasn’t revealed any scams related to the company, but, frankly, it sounds too good to be true – this is a gift horse whose mouth I want to thoroughly examine before contacting them.
- Eric

From the borrower’s perspective, Lending Club is just like any other debt. It’s pretty much exactly like getting a personal loan from a credit union or a cash advance on a credit card. You borrow money. You have to pay it back with interest. There’s nothing really magical or wonderful about it.

I don’t have any particular issues with Lending Club, either positive or negative. I see them as just another lender.

My issue, as always, is with debt itself. If you’re in a situation where you’re falling into debt to handle a relatively minor emergency, then you need to seriously re-evaluate your financial situation.

Q6: Selling off part of collection
We have an enormous DVD and Bluray collection. I want to sell off some of it but I am struggling to figure out the line of what to sell and what to keep.
- Alan

What I did the first time is to sort my entire DVD collection into two equal piles. One pile was the “keep” pile and the other was the “sell” pile. My goal was to have the disc count in each pile be equal.

What this did is force me to differentiate between what I actually wanted to keep and what I didn’t. I eventually wound up making three piles – the pile I truly wanted to keep, the pile I was sure I didn’t want to keep, and the “maybes.”

It took me a long while to process the “maybes,” but eventually almost all of them went into the pile to sell because I realized, although I loved the content, I honestly wasn’t going to watch them again for a long while – if ever.

Q7: Finance merging question
My fiance and I are discussing merging our finances. We are both debt free and have a healthy savings. I’ve heard it is good for your credit report to keep your first credit card open, however my first credit card is a visa with a credit union in a different state. My fiance uses USAA, which I planned to switch to. How exactly would I do this? Should I continue to keep my old credit union account open? If so, should I continue to use that card or just leave it open with zero balance? Any other advice for couples starting their financial life together?
- Lisa

Check your credit report to make sure, but if this is your oldest line of credit, it’s probably worthwhile to leave it open with no balance on it.

Why do this? Your oldest line of credit defines the length of your credit history and by cancelling it, you shorten your credit history.

The length of your credit history is one of the factors used in calculating your credit score, as is your debt-to-credit ratio. Cancelling your oldest card tends to hurt both of those factors.

Q8: Rising property values?
When does it make sense to invest your money in buying property? In my area, property values are rising like crazy. I am thinking about getting a low interest mortgage and buying one of the houses on my block to rent out for a while and then sell. If property values are going up, I can always sell it if needed and the rent will take care of the interest and property taxes. What do you think?
- Andrew

Most people who advocate for renting properties would tell you to go for it. I’m pretty ambivalent, though.

My questions would revolve around the downside. Can you easily make the mortgage payment, property taxes, insurance, and maintenance if no one is renting that house? What if someone trashes the house and disappears? I witnessed a rented house recently where the renters stripped the place in the middle of the night and vanished.

You’re not just going to be investing money here. You’re going to be investing a lot of time as well, even if you do hire a property manager. There’s also risk involved in the form of bad renters and no renters. Make sure you’re ready for it.

Q9: Shifting mortgage rates
My friend and I both have home equity lines of credit currently costing 2.75% (they are indexed to prime less 0.5% and have been stable for quite awhile). We are both recently retired. He chose to pay off his 15-year 4.5% fixed rate mortgage out of his equity line, while I choose to continue making payments on my similar mortgage. My fear is the variable rate: it’s been stable, yes, but there’s no guarantee it won’t climb. I’m tempted by the interest savings, however. Your thoughts?
- Charles

It entirely depends on the future of the prime rate.

You’re in a situation where, if the prime rate stays below 4.75%, you’re better off using the home equity line to pay off your debt. If the prime rate goes above 4.75%, you’re better off staying where you are.

All we know is this: the Federal Reserve has pledged to leave rates alone until mid-2015. I would take that as reliable information in terms of making financial moves until then. After that? I somewhat expect them to start slowly going up.

If you think you can pay off most of the debt before the next presidential election, I’d use the line of credit to pay off the main debt. If you’re planning on making minimum payments, I’d hold off.

Q10: Privacy worries
You’ve suggested using a service like Dropbox or Google Drive to back up files, but I’m worried about privacy. It seems that you’re just trusting these companies with your personal information.
- Adam

That’s why I wouldn’t put anything on Dropbox or Google Drive that contains unencrypted personal information.

I don’t mind backing up family photos or other things like that to Dropbox. I would never put things like tax returns up there, not without encrypting them first.

One easy way of doing this is to use TrueCrypt in tandem with Dropbox. That’s what I do with anything I’m worried about.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Summer Vacation appeared first on The Simple Dollar.

On Tuesday, my primary work computer suffered a hardware failure. The only data I lost was two videos and an audio recording. Everything else I needed was backed up in some fashion.

Anyway, I was able to recover everything I needed for professional work pretty quickly. I was actually amazed how fast I was able to recover, to tell the truth.

If you do not have a backup system for your key documents, get one. You can use an external hard drive (pretty secure) or an encrypted off-site backup, but do something

Q1: Elderly in financial trouble
My parents have never saved for retirement and are in their 80′s and living a 1 bedroom apartment, $600/month rent, struggling with trying to get transportation to grocery, laundry and just get out of the small apartment. Between the 2 of them they have $1500 social security and somehow seem to manage. They are on a waiting list for subsidized senior housing but those lists are often a year or longer wait. I wish I could help but live out of state. I have considered purchasing a condo for them but we really do not have the money to do that either. There are plenty of programs for seniors. Find your local Senior Center and they can help. http://www.mid-eastaaa.org/ They will end up relying on the government subsidies but will survive. Don’t be discouraged.
- Ellen

I would also strongly encourage any elderly folks who are struggling to make ends meet to look at their local churches. In our area, the churches are all constantly running “free will” meals, which means that the hot meals are completely free and they have a jar set up for giving whatever you want to pay for the meal.

The churches themselves encourage their members to “give” enough to cover not just a meal for themselves, but at least one meal for someone who can’t afford it.

Not only that, pastors at most churches know of tons and tons of community resources, many of which are helpful to low-income people.

If you’re struggling financially, whether you’re elderly or not, investigate what your local churches have to offer. Don’t cloud your impression of churches with the sometimes contradictory statements and actions of the larger church bodies. In local towns, most churches do great work in the community.

Q2: Crafting projects
I wanted to give you a suggestion for your readers for a cheap hobby: crafting projects. I constantly find little things I can be making that are really useful, from drawer organizers or handmade greeting cards. It’s a hobby that costs me very little and usually ends up either making my life easier or replacing something I’d just buy or making something really nice for a friend.
- Annie

I actually do a lot of crafting myself. Lately, for example, I’ve been making tuckboxes out of card stock to help organize some of the cards for games that I play. I’ve also put together some print-and-play games out of paper and cardstock as well.

I’ve also made tons of greeting cards over the years using bulk blank greeting cards, construction paper, and photographs.

If you can find little things that you can make around your house, it’s well worth the time to figure out how to make them and make them yourself. Not only is it time spent doing something constructive and learning how to do it, the cost is usually really low and it often replaces something you’d just buy.

Q3: After bankruptcy
Due to some unfortunate life and financial situations, I am declaring bankruptcy. What suggestions can you make for essentially starting over with a ‘clean slate’?
- Don

Bankruptcy doesn’t mean a “clean slate.” It does mean an organized and clear path to freedom from your creditors, though.

Your focus should be entirely on following that path. You want to be completely free from all of this and the court system has given you a path. Follow it.

Once you’re free from your bankruptcy settlement, don’t change the lifestyle you were living that enabled you to follow that path. Instead, channel that money into other things: an emergency fund, then retirement savings. Figure out where you want to be in five years and start saving for whatever that vision is.

Q4: Making money with music
My twin daughters are ten years old. One has been taking piano lessons for five years, the other has been taking guitar lessons for three years, and they have both been taking singing lessons. This is not being pushed by me at all – all I’ve told them is that if we get the lessons, they have to practice every day.

Anyway, I don’t know what the first step is in making this into a musical career for them. What should I be thinking about that doesn’t involve expensive recording sessions and so on?
- Marjorie

If I was you, I’d record at home in your family room. I’d find some software for recording audio – nothing too complicated or fancy at this point – and learn how to use it. A freeware package like Audacity is a starting point. A low-cost microphone would be a good idea, as would a good webcam (the one on your laptop is okay, but even a low-end one at the store is better).

Then, just start making some audio recordings and video recordings of them performing. Start a Youtube channel and put up some of the videos, particularly if they are original songs. If you’re doing a cover, you’d need to get a mechanical license for the song, but you’re better off sticking with originals.

The most important thing right now, though, is to keep it fun for them. As long as it remains fun, they’ll keep getting better and wanting to do it. Just encourage them to try recording what they do – at least a little – and experiment with coming up with their own songs. If it’s good, share what they’ve recorded. That’s what I would do with two young musicians.

Q5: College savings or not?
My husband and I are expecting our first child very soon. One of our concerns is setting up a college fund for the child. While both my husband and I have college degrees, neither of us value those degrees much. While college was fun, we both chose degrees based on what we enjoyed only to find out that our respective careers didn’t actually require or quite honestly even respect them. Therefore, we are extremely skeptical of making additional cuts in our current budget to set up a college fund. Instead, we are considering to continue to pay off our mortgage as aggressively as possible (our only source of debt), increase our emergency fund, and then invest in our retirement fund. We would be interested in setting up a trust that can either be used for housing or starting his own business at 25. If our son chooses to go to college, we could take out loans at that time to assist him. What say you?
- Amanda

You’re right that college savings is based on the assumption that your child will seek some sort of post-secondary education, whether it’s trade school or community college or university. If your child seeks any sort of education, college savings will have been the best choice because the income on those savings will be tax free. It’s really hard to beat that.

A trust – or other savings method – has the advantage of being far more flexible, but it doesn’t have the tax advantages of a 529 college savings account.

The problem for you and for every other parent is that you’re attempting to forecast what your child will be doing twenty years from now. If you knew that, this would be an easy question… but you don’t. I don’t think there is a truly right or wrong answer here as long as you’re saving. Don’t skip the savings, regardless of how you do it. 95% of the value is created solely by making the choice to save, regardless of how you do it.

Q6: Changing friends
After college, we maintained the same friends that we had during our college years. For the first few years, this was fine, but both my husband and I have worked hard to establish careers and good financial sense, while most of our college friends seem to have no ambition other than to work at Burger King and go to movies and drink a lot. I am getting really annoyed by and tired of their directionlessness and want to spend more time with coworkers and other people in the neighborhood we moved to. My husband says that those college friends are the people he feels comfortable around and can relax with. With only so many social hours in a given week, how can we balance this?
- Gloria

Balance it! You don’t have to spend all of your social time with new friends nor all of your social time with old friends, either.

I know what you’re getting at here, though. Most people wind up being the average of the people they spend the most time with, and if you spend most of your time with directionless people, you’re going to be influenced to be directionless, so you want to spend time around people with direction.

That’s a great thought, but it doesn’t mean you have to abandon old friends in the process.

It sounds like your husband is uncomfortable with the friends you’re cultivating and you’re uncomfortable with the friends your husband wants to stick with. If I were you guys, I’d split the time. I’d try to find ways to make your husband comfortable with your new friends, but I’d also do what I could to open doors and encourage your old friends to move on to bigger and better things in their own lives.

Q7: Basic investing questions
I’ve been reading a lot on personal finance recently as well as investing. It seems there are a million investment options, with varying degrees of risk. I’m somewhat risk adverse, so things like daily trading and growth stocks are out.

Here is some background: my wife and I have been focusing on paying off our sizable debts (house, two cars, student loans, and some other smaller debts) as quickly as possible. I have also started building an emergency fund which has a reasonable $1200 in it. Within the next 2 years, we should have paid off both cars and the smaller debts, leaving only a mortgage and student loans. I want to start investing in our future, and generating some alternative income sources as you’ve mentioned several times.

I see a lot of articles about dividend paying stocks. These seem like a great investment, especially if I pick solid companies (like AT&T or Coke Cola). From my readings though, it looks like these investments get taxed heavily (full income tax on dividend payments?), but seem to be safer due to the dividend payments. Is this the case?

As a followup, what do you think of this approach to investments, assuming I can invest $2000 a year. Take $1000, buy stock in one strong dividend company, like AT&T, and the other $1000, in a strong index fund (say the vanguard fund you keep mentioning). The next year, do the same with a different dividend company, but the same index fund. Start the cycle over every 5 years. This should leave me with a sizable chunk in the index fund, and 5 strong dividend paying companies.

Finally, do you know of any good resources (books or websites) to explain the various investment vehicles? I greatly appreciate any advice you can give me.
- Brad

You’ve assessed dividend income pretty accurately. Dividend income is taxed as ordinary income (right now – they change tax laws all the time), but if you invest in big, safe companies with a long dividend history, such investments are pretty stable.

Your plan is pretty good, but I would try to get into at least ten different companies rather than five. This is for diversity’s sake – one of the big advantages of the index fund is the automatic diversity it provides. I would be nervous holding more than about 5% of my investments in the stock of any one company.

My favorite book on investing is The Bogleheads Guide to Investing by Larimore, Lindauer, and LeBoeuf. It taught me a ton about investing from a relatively risk-averse perspective.

Q8: Cheap golf
Golfing is my primary hobby, but it’s an expensive one. Got any money saving tips?
- Eric

The biggest expense for me was the constant need for new gear. There was always a new club or something else to buy. You’ve just got to stop doing this. If you want to get better, new clubs are going to have a very tiny impact. The best way to improve is to improve yourself. When I golf today, I use the clubs I have. I’ll also pick up any “lost” balls I find on the course and toss them in my bag for use.

Once you have your clubs, the big expense is tee times. My suggestion is to never overlook the cheap courses in your area. It might be fun to golf on the higher-end courses, but the low-cost courses tend to have a ton of charm and are lighter on the pocketbook.

I find GolfNow to be a great site for finding cheap tee times if you’re willing to be somewhat flexible with your golfing schedule.

Q9: Difficult housing question
I put my house up for collateral $80,000 (it was paid off in 1999) for my son’s business which was pretty successful ( a building contractor with some government contracts and built homes) UNTIL he got involved in selling and using drugs. He walked away from everything and is now cruising the Florida Keys living on a boat with his wife and kids. In the meantime, I am 66, and teaching in a job 1000 miles from home trying to pay off this loan in order to get my home paid off hopefully before I die! I do have a pension of about $25,000 a year. I know I can make the $562 monthly payment but thought taking this job would help me pay it off faster. I thought in a year or two. It has been a year now and I still owe $28,000. I’m tired and want to be at home enjoying my garden and the rest of my life. Although I hate to admit it, I feel resentful towards my son, who has not even bothered to acknowledge that I am paying on his loan while he is scuba diving and having a high time…which is irrelavant to the question. In your opinion, would it be better to work another two or three years here (I figure I’ve only paid about $8,000 on the loan this year with living expenses out of state and maintaining my home in Iowa) or should I just go home?
- Dan

What happened to the assets of the business? Did they get sold? If I were in your shoes, I would sell every remaining asset of this business (if there’s any left) to pay down your debt. This shouldn’t even be a question in this situation.

If that’s not an option, you really don’t have much choice other than just paying off the debt as fast as you can. I don’t know which path will actually get you there faster. If you “go home,” it sounds like your living expenses will be lower but you won’t be employed. Could you find employment of some kind when you “go home” and continue paying things off remotely?

Another question: could you sell your house and buy a lower-cost home to get rid of the debt? Do you need that specific house? Do you need that space? It sounds like you’re single, which means you don’t need a ton of space.

(I don’t blame you for resenting your kid here, by the way.)

Q10: Establishing a reading habit
I’ve been trying to establish a reading habit by reading in the evenings, but I find that every time I start reading, I fall immediately asleep. I don’t find the books boring, I just find myself conking out immediately. How do you read in the evenigns without going to sleep?
- Mark

First of all, if I read a book or a magazine right before bed, I usually get really tired in about ten minutes or so. If I read on my laptop or on something else with a backlit screen, it takes quite a bit longer. So, one technique might be to read a book electronically from your computer.

If that’s not an option, you might want to read at another point in the day. Keep your book with you in your vehicle and look for chances to read. I’ll read when waiting on an oil change or while I’m at the doctor’s office, for example.

Another note: if you’re falling asleep that quickly, it’s probably a matter of not getting enough sleep as it is. I know that I often don’t get enough sleep, particularly during the week (I usually “catch up” a bit on the weekends).

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Hardware Failure appeared first on The Simple Dollar.

Whenever Memorial Day comes around, I think of the millions of lives that have been snuffed out by wars. Most of the wars in human history have not been fought over anything that’s been worth the lives that have been lost to those conflicts.

Memorialize those who lost their lives in war today, but remember them when you think of future conflicts. Think of the youth and promise they held and then multiply that by a million. Is that conflict really worth it?

We owe it to them to always respect what they fought for and try as best we can to avoid the mistakes that led to their unfortunate passing.

Q1: “Rent to own” proposal
We are located in a very expensive and competitive area and for the past 8 years have been renting the house we live in. We are now thinking of buying it and are wondering what is the best way to approach the owner so as to convince him to sell it and do so at a fair price? Should be propose a “rent to own” or make an offer? Should agent(s) be involved?
- Morgan

For starters, it is very likely that, unless you propose something incredible, the owner will simply say no. If you’re in an area with a hot real estate market, he may not want to sell in the least. Hearing “no” will probably have nothing to do with your proposal.

If you’re going to bring it up, the best thing for you to do is figure out exactly what you might propose that he might realistically accept. For one, you’ll probably have to start from ground zero with a “rent to own” arrangement, and the total rent will likely have to at least match the value of the home. Figure out what all of these numbers actually look like.

When you’ve got that figured out, talk to your landlord directly about the idea, starting with the general concept. If your landlord is willing to discuss, run through the numbers you figured out. I’d suggest proposing something a bit lower than what you calculated earlier, but not overly lower – you want the landlord to think about it, not laugh you out of the room. If your landlord is interested, you’ll proceed to negotiation and eventually drawing up a contract, at which point you may want a lawyer to read it over.

Q2: Trying to change routines
Our biggest problem with the financial changes we’re trying to make is to not just fall on old routines. When we think about the changes, they’re easy, but we find ourselves just doing the same old routines without really thinking about them and they’re expensive. For example, I stop to get an egg sandwich and coffee each morning and I don’t even really think about it until later on. How can we break bad routines like this? I don’t usually mind the alternative – I just don’t think about it until it’s already done.
- Geoff

My technique for breaking bad routines was to either make that bad routine much more difficult to continue or else put a Post-It note in a place where I couldn’t help but see it so I would rethink that routine.

For example, if my routine was to grab a bottle of soda from the refrigerator, I would just fill the refrigerator with bottles of water.

Another example: if my routine involved stopping for coffee each morning, I’d stick a Post-It on my steering wheel suggesting that I skip the coffee and get something at work.

Nudges really do work. You’ve just got to set up those nudges in advance so they push you a little at just the right moment.

Q3: Spouse disagreement about retirement savings
My spouse and I have a great relationship and we can talk openly and calmly about anything and everything. The only thing that we really disagree on is whether we’ll have enough funds when we retire. How can I convince my spouse that we need to crank it up?

To give you some idea of where we are financially: I’m 39 and work full time in a stable IT position and bring home about 2500 EUR/mo after taxes. Because we have two small kids aged 3 and 0, my wife stays at home for the next few years bit gets several hundred Euros in government support (Austria is great when you’ve got small kids!). We’re moderately frugal and have one used car that’s low maintenance. No cable TV, magazines and such stuff.

We live in an apartment right now, but in the summer we are moving into a new house. Same size (living/dining/kitchen, 2 kids rooms, 1 master bedroom, 1 bath, no basement) but the house comes with a garden, and it’s brand new with modern heating so it has lower energy costs etc. It will actually not be more expensive than the apartment is now, but especially because even though we’ll have more debt then than now, it will be at a MUCH lower interest rate do the monthly payments are the same, around 1000 EUR/mo.

When all the bills are paid, there’s nearly nothing left to save, but one of the bills is a pension fund that we put around 250 into per month since about 6 years. According to my calculations that’s not nearly enough to get us by, 30 years from now. When we discuss this, my wife’s argument is that we need to ensure a stable home, and and it’s not like we aren’t saving anything.

I’m worried that I won’t have enough funds, and need to work until old age. On the other hand, I don’t really see where we could cut costs. Of course our monthly excess income will be higher once she goes back to work as a physiotherapist, I guesstimate that will bring an extra 700 EUR (no government support anymore) but obviously kids will cost more over time so we can’t simply plan to put all that into savings.

Talking to financial advisors is futile because we have the consistent experience that they will sell us anything they get a commission on so they invariably explain that one can never save enough.
- Kevin

You’re probably not saving enough for retirement to maintain the lifestyle you have right now. You might be saving enough to ensure a reduced lifestyle. The question is what level of lifestyle you’re each happy with in retirement.

It sounds to me like this is the crux of the disagreement. Your wife is happy to sell your home and live somewhere small in retirement, while you’d rather live a life more akin to what you have right now in retirement.

You’ve got to figure out together what your vision of retirement looks like, because if you’re picturing two very different things, then you’re each believing in a different path to retirement and are thinking the other isn’t preparing appropriately for it.

Q4: Local Edward Jones for investments
I’ve read your recommendations of using Vanguard.com and doing it yourself for investments. I have used my local Edward Jones office for investing for a long time and I like and rather trust the guy there. What’s the case for switching?
- Andrew

The quality of Edward Jones, in my experience, depends on the individual broker. I have known some Edward Jones advisors that are very good people and work really hard for their clients to get them into the best investments. I’ve heard long tales of other brokers that seem to do nothing more than steer clients into specific funds regardless of their needs.

This isn’t just true of Edward Jones. It’s true of virtually every financial advisor out there. Most are great people. Some are sharks. You’ve got to watch that individual person and do your best to figure out what they are.

If you’ve had a great experience with that advisor, there’s no reason not to stay there. However, if your advisor retires, then I would be very, very watchful over that person’s replacement.

Q5: Cast iron pot
You’ve mentioned that cast iron pots are the best. I’ve only ever owned the cheap nonstick pots from Walmart. They’re about ready to be replaced, and I want to get pots that will last us a long time.

Do you have any specific pots that you recommend? What should we look for, and what should we avoid? Ideally the pot(s) would be dishwasher safe, but I’m not opposed to handwashing if the pot will last forever.
- Martin

We have a 5.5 quart Le Creuset enameled cast iron pot that we cook almost everything in, from soups to eggs. It goes through the dishwasher without any problems, cooks pretty much everything we throw at it, and looks like new. It was very expensive, but it also has a 101 year warranty.

I can’t speak more highly of enameled cast iron. It’s just wonderful for all kinds of cooking. It’s easy to care for, incredibly sturdy, and you can cook almost anything with it.

The only drawback is the cost. Even “cheap” enameled cast iron isn’t really cheap, and if you get higher end enameled cast iron with long guarantees, it’s really not going to be cheap. Still, you’re essentially never going to be replacing them. We’ve owned ours for several years now and it would basically pass for new even though it gets daily use.

Q6: Hate others thinking I’m cheap
I’m extremely good at saving money when it comes to my own expenses. When I’m alone, I’m perfectly fine spending a day walking on trails or reading a library book – in fact, that’s what I do. Where I run into trouble is when I’m in social situations. When I invite people over or when I go out with others, I really don’t like the thought of them thinking I’m cheap, so I tend to spend more than I should around them. Do you have any suggestions for finding that right balance?
- Ellen

The best advice I can give you is to stop caring what other people think.

No one is going to care if you order a low-cost item on the menu. They’ll probably just think you’re watching what you eat. No one is going to care if you don’t order five drinks after the meal, either.

No one is going to care that the meal you prepare when guests are over is made of low-cost ingredients, as long as it’s flavorful. As long as your living quarters aren’t really messy, they’re not going to care about decorations that much, either.

The best thing I ever did for myself is to realize that 99% of what I worried about when it came to the impressions others had of me really didn’t matter a bit.

Q7: School fees or 401(k) savings?
I have a job that makes about $150/week working part time. I only intend to be at the job for 1-2 years, while I finish the classes I need for grad school. When I’m in grad school, I will not have time to work, but will likely get a stipend. After my first contributions to my 401k (5%), I only have $20 for a month or two or work. I’ve been told that because of processing fees I shouldn’t have a 401k, beause I will end up losing money if I have less than around $3000 in it. Would it be better to wait on contributing to a 401k and instead using the money for my school fees? I’m 24 and have no debt except student loans, and will have to use all of my savings to pay for school this semester. I could use the 401k money for school or an emergency fund, but I know I’m supposed to save for retirement as early as possible.
- Amanda

If the 401(k) is incredibly bad in terms of fees, you should start a Roth IRA for yourself and contribute to that instead of the 401(k). The only exception to that would be an employer match – if your employer contributes to the 401(k), too, you should do what you need to in order to claim that free money.

Setting up your own Roth IRA is easy. I have one through Vanguard and it was about as easy as opening a bank account.

Having said that, if your schooling is leaving you without any emergency fund, you should focus on restoring at least a $1,000 emergency fund before saving for retirement. You need at least that hedge against disaster before worrying about retirement or other choices.

Q8: Cheap dating
I’m twenty five and I live a very cheap life. The only expensive part of my life is dating. Whenever I go out on a date with someone, it ends up being expensive – dinner and a movie can cost between $50 and $100, for example.
- Jim

If you live a cheap life, you’re going to want to eventually find someone who wants that kind of life, too.

My belief is that dates should reflect what you consider to be the best of you, but not a “false” you. If you’re going to movies and restaurants you wouldn’t go to without the desire to impress someone, you’re going to end up with incompatibility issues.

Imagine you’re married and there is no pretense between you and your wife. What kind of date would you set up for the two of you then? What would a pleasant evening together be like? That’s the kind of date you should strive for when dating. The right partner will really click with that.

Q9: Feeling lost with great education
I am a long time reader of the simple dollar. Right now, I feel a bit lost. I have a Bachelor’s from one of the big three (Princeton, Harvard, Yale.) I worked in advertising for about seven years. Then I took time off to raise my kids. It has been five years. Thanks to a supportive and understanding husband, I do not need to work. We live well below our means and saving is not an issue. But I am lost. I feel like if I go back to work, I want something that works with my family. Maybe something in schools. So I have been thinking of subbing or teaching preschool, but I feel like people will look at me and wonder why an ivy league educated woman couldn’t do “better.” And sometimes I look at myself and think the same thing. If I have this great education, should I have come up with some great business idea that is flexible enough to allow me to put my family first and make money? I have racked my brain, but the ideas just don’t come. . .does this make me a failure to my education???
- Denae

No, it does not make you a failure to your education. It makes you a person with your own independent thoughts and your own independent goals.

If you feel drawn to become a teacher, then think of yourself as a very well-prepared teacher who is intellectually ready to really educate those children.

Teaching is no different than any other profession. The well prepared tend to do well at that profession. Whether or not a specific person should be in that profession is up to them.

Q10: Old friends
Not too long ago, one of my best friends from high school moved to my town. She is not a Facebook user so I didn’t even know she had moved to my town until I actually saw her at the grocery store. Anyway, we met for coffee and then we invited her over for dinner. After dinner, she told us that she had left her husband who was abusive and was trying to make a new start but was having a tough time finding a job of any kind. She wasn’t telling us this to ask for any help as I practically had to force this out of her. Anyway, after she left, my husband suggested that he might be able to help her find at least some sort of job at his company. Is that something we should do? I’m really afraid of unintended consequences here.
- Abigail

It’s up to your husband. If helping her get such a job isn’t a big deal in his workplace and she’s not asked you for a thing, I see nothing at all wrong with it.

I would be much more wary if she had asked you for anything, but it sounds more like she’s an independent woman who’s struggling due to some life challenges. A friend offers a helping hand here and it sounds like you’re in position to do so.

Sure, there are some possible downsides to this, but the upsides are enormous. If she takes that job and succeeds with it, not only have you put a huge foundation stone in place for your friendship, but your husband’s employment gains a good worker. Even if she’s not the best worker of all time, it’s still got friendship upside.

If this is a trivial matter for your husband in the workplace and her job performance won’t reflect on his in any way, I would absolutely do this.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: The Tragedy appeared first on The Simple Dollar.

I enjoy listening to new music, but when I’m working, I often spend most of my time listening to albums I’ve heard a thousand times. It’s almost like they fit like an old glove. I can tune them out effortlessly because of their familiarity if I need to. On the other hand, when I actually pay attention to them, I simply feel good, even if the music is downbeat.

I have albums that are approaching 1,000 plays on iTunes. That’s a lot of playthroughs.

Q1: Checking account buffer
Does the “buffer” that I carry in my chequing account count toward an emergency fund?

To be more precise, we always have $3000 in our chequing account at the end of each month when we’re done paying bills and transferring the excess into various savings account. I find that this gives me peace of mind so that the automatic withdrawals that occur early on in the month are covered even if the first paycheques do not come until the second week of the month.

That buffer ($3000) is pretty much one month’s worth of spending for my husband and I (no kids), and we also have one month’s worth as an emergency fund in a savings account (working to build that up to three months’ worth of expenses).

So does that buffer count towards my emergency fund? If it does, then I’m 2/3 of the way to having your recommended emergency fund for a couple without kids or a mortgage, but if it doesn’t, we still have a lot of work ahead! We’re waiting to have that full 3-month emergency fund before we start saving more aggressively to buy a house (we’re okay renting for a few more years yet).
- Eric

It’s really up to you whether to count it.

Personally, since it’s serving a non-emergency purpose, I probably would not count it. You can’t just tap it without adding to your life concerns, which is part of the reason for an emergency fund.

Still, as long as you have several months of cash on hand, you’re in better shape than the majority of Americans anyway.

Q2: Insuring collectibles
I have a number of sports cards and other trading cards that are all professionally graded and would have a value, if I sold them on eBay, measuring well into the six figures. Currently, I keep most of them (the most valuable ones) in a safe deposit box at the bank and a few are framed in my home.

It occurs to me that I might want to insure them, but I’m not sure how to do that. Any suggestions?
- David

My first step would be to talk to my home insurer about that collection. Depending on the policy, you may be able to cover these collectibles under your disaster and/or theft insurance as part of your homeowners insurance.

If that doesn’t work out, you can shop around for collectibles insurance. Many insurance houses offer policies like these that, depending on the policy, are comparable to adding them onto your homeowners insurance.

The safe deposit box is probably the best place to keep the items, but you should still consider theft insurance on them. A bank vault, while very secure, isn’t inpenetrable. Most insurers will insure the contents of a safe deposit box at a pittance because the risk of payoff is so very low, but it’s not zero.

Q3: School now or later?
I’m a 24 years old girl living alone working full time and I live in Montreal, Canada. I decided to apply to university for the next fall semester and I have some worries regarding living cost and loans. Basicly, we have a grants and loans program from the governement which is pretty decent, the thing is, the lower your income, the more you receive in grants and the less you receive in loans. After calculations, I realised that it’s more advantageous for me to get a part time job and reduce my income, since this amount will be given back to me as a grant when I start school.

I’ve already made plans to move with room mates and live more frugally and such, so everything is making sense, except for one thing. I currently have a 5000$ debt with my bank, paying it back is gonna be near impossible once I get into this process, and since the school grant calculates the prevous year, I can’t really pospone school because my full time income is going to penalize me at some point.

Any ideas on how to deal with the debt? Or make extra income that’s not declared to the governement?
- Nina

If I were you, I’d keep working for now, eliminate that debt as fast as possible, then switch to the part-time job to prepare for school.

You do want to sit down and run the numbers to make sure that working part-time is actually the most cost-effective route for you. You might be surprisingly money ahead by working full time and saving a healthy portion of your income rather than working part-time.

An aside: this is really a poor way to decide who gets aid for education. Any situation that encourages people to “game” the system in this way is not a well-conceived system. I’m very much in favor of merit-based aid, but need-based aid is a much trickier proposition.

Q4: Traveling for music
My son is sixteen years old. He’s been in a band for the last four years and they’re very good. They’ve won a few contests in the area and are signed to a small record label.

Anyway, they plan on spending the whole summer traveling, which I’m fine with. The problem is that it’s unclear to me how they’ll be splitting up the earnings and what my son should do with the extra that he earns because they make more per band member per gig than his food and lodging would cost.

Any suggestions?
- Marvin

He’s sixteen and in a traveling band. I would consider anything that he saves to be a positive.

If he’s being really responsible, he should simply get a savings and checking account at your local bank and deposit extra money whenever he can at whatever ATM he’s near. Then, at the end of the summer, he can address what to do with that money.

If he does that – at age sixteen in a traveling band – he’s doing far better than I would have expected from a sixteen year old in that situation.

Q5: Parents helping with home purchase
Currently I am in a very good financial situation. I’m 29, unmarried and am maxing out employer retirement and Roth IRA, with a very healthy savings account. I have a very stable job, but will likely move to another state in 5-7 years with the same company. I have $40k down payment saved for a $200,000 house. That’s the high end of my budget. However, the location I want to buy a house is very desirable (lots of professionals) so you get less house for the money (2bd/2ba, 1000SF). I could move to a less popular area to get a larger house (3bd/2ba 1300SF), but I don’t feel like I need that with where I am (no kids or husband likely for a long time). However, my parents are willing to pitch in some money towards the down payment to help me buy a bigger house (3bd/2ba 1300 SF for $250k) in the location I want because they say it is a better investment and likely easier to resell when I choose to move. It’s possible I might stay permanently but very unlikely; who knows the future though? I can afford the additional monthly payment in any case witha 30yr conventional mortgage, but I want to avoid PMI. Is it worth going for the better future resale?
- Monica

I’d still be wary about this. Let’s say that you buy the smaller house for $200K. You put your own 40K into the mix and get a mortgage for $160,000. Over a 30 year mortgage at 4%, that’s $763.86 per month for the mortgage payment. You’ll also need homeowners insurance, property taxes, utilities, and maintenance.

Let’s say you borrow $10,000 from your parents to buy the more expensive house. In that situation, you owe a $200,000 mortgage. If you get a 30 year mortgage at 4%, that’s $954.83 per month for the mortgage payment. On top of that, your costs for homeowners insurance, property taxes, utilities, and maintenance will all be between 10% and 30% more in this house, plus you’ll owe your parents $10,000.

If everything goes perfectly, the second option will probably be better. That perfect plan involves waiting several years for the housing growth to push your equity up more than you’re losing in extra interest, extra utilities, and extra property taxes, and it involves you not losing your job or having a career shift in that time frame. If that doesn’t happen perfectly, the first house is better as the overhead is lower and the money lost to interest/taxes/insurance/utilities is smaller.

Q6: Piano lessons
We have a piano in our front room because my wife plays it (every once in a while). Lately, our five year old has started experimenting with it constantly and wants to learn how to play it. My wife doesn’t feel equipped to teach her, so we’re looking for lessons. How do we determine what’s a fair price for private music lessons?
- Alvin

Shop around. Ask for quotes from the people in your community that offer lessons. Ask your local social network for recommendations and suggestions.

Different areas have different prices for lessons. In our area, prices are higher than where we grew up for music lessons, but they’re far lower than a friend of mine is paying where they live.

You just have to shop around and see what the market looks like. There’s no national standard for this type of service.

Q7: A messy divorce
My husband and I divorced after 23 years of marriage a year and a half ago. I was blindsided. Without going into too much detail, before I knew what hit me, my husband had an affair. During the divorce, I learned he had cleaned out our home equity and hidden most of the assets we may have had. He makes Around !35,000 a year.

I have moved on emotionally done my best to recover financially. I am debt free other than my mortgage and car. Our divorce took 3 years and during that time, I saved every penny I could save. I bought a small house and this took most of my savings.

In our divorce decree, I signed a quit claim deed (big mistake I now learn) and he has sole financial LEGAL responsibility for the house. As a result my credit has been destroyed. The house was too big and the the mortgage was too large for me to keep up with on my own.

In July of 2012, I learned he quit paying on the mortgage and the house has gone into foreclosure. I went to see a bankruptcy/foreclosure attorney and was advised to try use any savings I might have to make repairs and purchases in case I was faced with bankruptcy. This brought me to almost zero savings.

I have been through Dave Ramsey’s financial peace, read his books and I read your blog daily. I scour the internet and try to learn everything I can about finances. My learning curve has spiked through the roof since the divorce. I knew nothing about taxes, retirement or budget planning pre-divorce. I am very conservative with my money and have always believed being debt free and having an emergency fund are the best security I can have.

I have around $7000 in savings right now…or so I thought. Last year, I went to an accountant to have my taxes done and ask questions about tax planning. She also did estimated taxes for 2012 taxes which I paid. In doing my taxes this year, I found she made a mistake and I will owe around $7500.00. I will also need to PLAN for next year to catch up so I won’t have the same tax bill again next year.

So, here is my question. I’m 52. I have $92,000 left on mortgage. I have about $80,000 in roth IRA, 403b, 457 and ex husband’s 401K. I will also have around $3200 per month in pension (so far).

I make $46,000 per year as a teacher and have $30,000 per year in alimony until I am 62.

I’m comfortable. I am completely satisfied with my income. It is more than enough to live on and pay bills, but I’m scared and worried. I don’t know whether it would be best to pay the tax bill and completely have NO EMERGENCY FUND or set up payments with the IRS or split and do some of both with a large payment to the IRS. I’ve never been in a situation where I don’t have money to fall back on.

My second question is how do I plan a strategy to shelter taxes and plan for future taxes? If I max out my retirement, along with other withholdings (FLEX and health insurance, etc.) I will have almost nothing beyond that and my current living expenses (monthly nut). (This doesn’t include anything for future savings, extra house payments, clothing, entertainment or travel).

You may not be able to help, but I would greatly appreciate advice for where to turn.
- Mindy

For your taxes, you should talk to the IRS and set up a payment plan. This is not an emergency worth emptying out your e-fund for.

As for planning for future taxes, I’m guessing this is the result of the alimony income. You should ask a good tax person what you should be doing to prepare for it.

I’m uncertain about the $92,000 mortgage. Is it on the house that has been foreclosed on or did you buy another house? If that mortgage is on a home that isn’t your primary residence, you should be selling it as quickly as possible.

There’s nothing here that says your situation is desperate. It just needs a little focus and planning.

Q8: Hiding a credit card
I recently found out that my wife has been hiding a credit card from me. I found an entry for it on her credit report when I was pulling them up. At first, I thought it was identity theft, but then she left her wallet out on the table and I saw the card in there. I’m now kind of annoyed when I see money being taken out of our checking to cover the bills on that credit card and I feel like I can’t trust her as much. Any thoughts on our way forward from here?
- Andy

You need to sit down and talk about the credit card.

Most of the time, people get credit cards in situations like these because there’s something about the spending situation at home that they’re having a problem with, whether they feel they can say so or not. Their response is to just get that card rather than having a hard discussion.

You need to have that hard discussion. There’s really no way around this. This is a trust issue, and it’s also an issue of your shared finances.

You might want to look at the book Difficult Conversations, which can really help in situations like these.

Q9: Target Retirement Funds still good?
I just read your post from 2007 about Vanguard’s Target Retirement Funds. A lot has changed in the financial world and economy since then. Do you still feel this is a good choice for your retirement savings? I am considering the 2030 fund for myself.
- Roger

Target Retirement Funds are still a great choice for retirement savings within a Roth IRA, a Traditional IRA, or a 401(k)/403(b). I wouldn’t invest in them outside of those retirement accounts.

Essentially, those funds just constantly rebalance themselves so that earnings are high well in advance of the target date, but that the money is more secure as the date arrives. It’s a good philosophy that eliminates headaches for individual investors, usually at little cost.

If you invest in one, choose the one with the target date closest to when you expect to retire. I’m assuming you plan on retiring close to 2030, so Target Retirement 2030 would be a good choice.

Q10: Replacing TV with reading
Just wanted to share with you that my husband and I decided to give up television for a whole month and replace our hours of evening television with reading and personal projects and some board games. It has been a wonderful month and we are now seriously considering cancelling the satellite subscription and just getting rid of the television. Thanks for encouraging us to try it!
- Jenny

We don’t quite do this, but we’re pretty close to it. We spend most evenings either reading or playing games. I watch perhaps one or two television programs a week, while Sarah watches maybe one or two more (usually as background noise when she’s working at home).

Books are less expensive than television, especially when you utilize the library. You don’t need a subscription service for programming. You don’t need an expensive device to watch them on. You don’t need lots of energy to power a book, either – an LED clip light will give you all you need.

The average American spends 34 hours a week watching television. If you can shave just ten of that, you have enough time to read a ton of books or learn a musical instrument or take care of countless projects that you’ve left for “someday.”

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Favorite Albums appeared first on The Simple Dollar.

For us, May often means graduations, which means going to a ceremony and watching young people celebrate the end of one chapter in their life and the start of another, one that will often go in a very different direction than they expect.

Most of the time, when lives reach a crossroads, we don’t see the opportunity to shift paths until the opportunity is gone. Graduation is one of those chances to shift directions where the opportunity sits right there in front of us.

There are moments when I wish I could find myself at that kind of crossroads in life again, with that many open highways in front of me. There are so many different directions to choose from.

Q1: Difficulty estimating freelance income
I have a full time job but I also do some freelancing gigs on the side. They’re kind of consistent – I probably do fifteen a year – but they’re really unpredictable in terms of pay and in terms of frequency. I might do five in a month and then do nothing for half a year. Anyway, I’m supposed to pay estimated taxes on this income but I have a hard time estimating how much I’m making a year. How can I do this?
- Roger

It’s pretty easy. Just figure out how much you’d owe in income taxes on the amount you’ve earned in the last three months, then pay that. Just repeat that pattern each time you have to pay estimated taxes.

It’s pretty much impossible to do this perfectly because of uncertainty in your income for the rest of the year, but the IRS actually gives quite a bit of leeway in doing this provided you’re making a reasonable attempt at doing so.

Not paying those quarterly estimates will do nothing more than ensure that you have to pay extra fees and interest when you do file your taxes, so your best approach is to just give it your best possible shot.

Q2: Graduation gift
It seems so meaningless to put $20 inside of a card and give it to a graduate. What does that $20 even mean? They forget about it before the ink is dry on the thank you note.
- Barry

If you don’t feel as though your gift has meaning, seek out something that does have meaning. There are many, many things you can give as a graduation gift. It does not have to be cash.

If you want a gift to have meaning, the best route is to put some serious thought into the gift, pick something that would actually mean something to the recipient, and include a handwritten note explaining it.

Virtually anyone with a thoughtful bone in their body would appreciate that type of thoughtful gift. The challenge is that it doesn’t come ready-made. It requires thought and effort on your part, which is what creates the meaningfulness of the gift.

Q3: Never wanting retirement
I love my job and I fully intend to keep doing it until I can no longer do it. If I am not functionally capable of doing anything of value, I don’t want to live. I know enough of myself to know that I would quickly become massively depressed and would probably not live much longer beyond that point as my motivation to thrive would be gone.

I don’t know why I would ever save for retirement. Why should I be socking away money for that situation?
- Adam

Picture this scenario: you’re sixty eight and your company decides that they no longer require your services. They give you a retirement party and a golden watch. What do you do then? You’re still of able body and mind but your employment window is likely closed. How do you make it?

If you save for retirement now, all you’re doing is creating a nice insurance policy against that. If it turns out you don’t need it, use your retirement savings for travel or whatever else you might want to do in your sixties and seventies and beyond when you’re not in the office.

It is never a bad idea to have money in the bank to protect you against the unknown.

Q4: Why buy a premium car?
Most of the time, when you pay extra money for a high-end version of something, I understand what you’re getting for it. When you buy a high-end car, though, I don’t really understand what you get. The reliability data on many of the most expensive cars is pretty bad, as is the fuel economy (except for something like a Tesla I suppose). The interiors are really nice but still it’s just something that takes you where you want to go. Why does someone pay $100,000 or more for a car?
- Edward

For some, driving a car with a certain label on it can make them feel more empowered and confident, and there are some people who are quite wowed by an expensive car. The interior is usually pretty nice. Many expensive cars really accelerate beautifully when you’re driving them.

But is that worth an $80,000 premium? For me, it’s not worth it at all.

I think it has a lot to do with what you value about a car. If it’s just something to convey you from one place to another, then a lot of those elements are pretty secondary and not worth paying a lot for.

In my eyes, it’s no different than asking someone why they wear a necklace with a bunch of precious gems in it. There’s a lot of money invested into an object that looks good and potentially boosts the confidence of the wearer, but what value is actually there? How does that necklace improve your day to day life?

Q5: Prenupital agreement
I am about to marry someone who has a net worth of roughly fifty times my own. When I discovered it, I was shocked because he didn’t seem rich at all. He has asked me to sign a prenupital agreement that states exactly what I would receive in the event of the end of our marriage. I am fine with the terms of it but I feel almost insulted by it, as though he expects the marriage to end down the road and as though I’m just a passing fancy. What do you think?
- Darcy

A prenupital agreement is kind of a “worst case scenario” protection, not too different than an insurance policy, really. My perception of such an agreement is that it’s usually just protection against a marriage turning bad, but that doesn’t mean that anyone involved wants the marriage to become bad.

Reverse the situation here. Let’s say you had worked very hard to build a net worth that was fifty times the person you were about to marry. Although you deeply love this person and want to spend the rest of your life with that person, the reality is that a lot of marriages that begin with the best of intentions end in divorce. Do you want to lose a significant chunk of that net worth you had worked so hard to build in that scenario?

If you’re fine with the terms, sign it and forget about it. You might want to have a lawyer check it over, just to be sure. If you’re troubled by it, ask yourself this: do you consider someone who buys life insurance to be a person with a death wish?

Q6: Road trip dining
I really enjoyed your recent post about saving money on commutes and I wanted your thoughts on saving money on another driving cost.

About once a month, I make a five hour road trip with my two children. I usually pick them up after school and we get to our destination about 10 PM or so and then we drive back in a few days. On the trip, we usually eat a meal and also usually eat another snack, too.

This cost really adds up over the course of a year. What can I do to trim this back?
- Adrienne

Sarah and I actually do something similar to this pretty often, as our children’s grandparents all live about four hours away from us. When we visit them for a weekend, it goes a lot like the trip you describe.

Our best solution is to just pack a cooler in advance of leaving with our meals in it. In the morning before our trip, we’ll prepare a picnic – sandwiches, finger-friendly sides, and so on – and put everything that needs to be chilled in the refrigerator in one place and put everything else in a canvas bag. When we get home and do our final packing, we dump some ice in a cooler along with the things that need to be chilled. Along the way, that’s our dinner.

Q7: Low interest and minimum payments
How low should an interest rate be before I’m happy just making minimum payments on it? I have a 0.0% debt that will never adjust along with a 2.9% interest debt that will never adjust. Should I be paying anything beyond the minimum on these?
- Walt

With the 0.0% interest debt, I wouldn’t pay anything more than the minimum. Instead, what I would do is set up an interest-bearing checking account at an online bank. I’d then set up a monthly recurring transfer from your current checking into that new checking account that’s equal to just a bit more than your monthly payment – probably rounded up to the nearest $10. Then, I’d set up an automatic bill payment from that new account to your lender that recurs each month for your minimum payment. When your loan is paid off, you’ll have some cash built up in that account.

As for the 2.9% debt, it really depends on what kinds of interest rates and investment returns you can easily get with your money. Five years ago, I would have told you to put your money in a high-interest savings account and do much the same thing as above, because such accounts were earning much more than 2.9%. Today, that’s not the case.

Even so, with ultra-low interest rates below 3%, I would probably lean toward paying the minimum payment provided you were also saving and investing elsewhere. If you’re just making minimum payments and then also struggling to save anything at all, any extra payment you made on that debt would be a positive.

Q8: Does college choice matter?
My daughter is just finishing her junior year in high school and we’re working through the process of figuring out which school to attend. The question I have that no one ever seems to give us a straight answer on is how important the undergraduate school is. Does it matter that much whether someone goes to a state university or a private school or even a community college? How much does it matter?
- Joan

My honest take is that it matters some, but what matters more is getting strong grades and filling out your resume with other achievements, internships, and so on.

Obviously, I think an employer is going to pay more attention to an undergraduate from an Ivy League school than someone who went to a community college, but I think the differences between the institutions in the middle of that sandwich really aren’t all that big. If you’re comparing one state university to another and neither of them are really exceptional ones, it’s probably not going to make much difference at all.

Your daughter’s focus should be on seeking out any and all extra opportunities related to her major and to leadership and personal growth opportunities. Those types of resume boosters do make a difference when hiring. It shows that the person is in this for more than just a degree and is willing to work very hard.

Q9: Interest rate first?
I have two loans outstanding. One is a $1,000 loan with a 8.9% interest rate. The other one is a $22,000 loan with a 9.9% interest rate. Which one should I pay off first?
- Jenny

You can make a good argument either way.

If the goal is to minimize the total amont you’re going to pay over the course of the next several years, you should start on the $22,000 loan. Making extra payments on the highest interest loan is always the best route to minimizing the total interest you’ll pay. In this case, the difference isn’t going to be too much, but it will be measurable.

If the goal is to minimize your monthly bills as fast as you can, you should start on the small loan. You’ll eliminate it pretty quickly and find yourself with one less monthly bill to worry about, which might be very helpful if you have uncertain income and employment in the future.

Given the very small size of the smaller loan and the very small difference in interest rates, I’d probably pay off the small one first to improve my monthly cash flow. If it were much larger or the interest rate were much lower, I wouldn’t bother.

Q10: Student loan question
How much extra should a college student take out on their student loans in order to cover living expenses and books? The student loan I have lets us take out a lot more than our tuition to cover those extra expenses, but doing that makes for a very big student loan after graduation.
- Jeff

The answer to this isn’t the same for everyone. It really depends on what your own expenses are and whether you’re earning any income to cover those expenses.

Ideally, as a college student, you should be doing everything in your power to minimize your expenses at the very least. Many students work to earn additional income.

If I were you, I’d probably live in the dorms for the first year and take out just enough in loans to cover all of it. If you want spending money beyond that, I’d find a job (preferably an on-campus one).

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Graduation Season appeared first on The Simple Dollar.

I’m always amazed how I can go through an entire winter without even having a hint of a cold, but when spring truly blooms, I end up feeling miserable, with a sore throat and a runny nose.

I know that it’s just allergies because it happens every spring on the dot. As soon as the nice weather starts, I can wait about four or five days and I’ll wake up with a sore throat and a runny nose that persists for a couple of weeks and then vanishes.

It’s the price I pay for the beauty of spring.

Q1: Mortgage tax deduction calculator
My fiance and I are buying our first home. We rent in NJ just outside Philadelphia and we’re considering the city or a NJ suburb. I grew up in FL with only federal income tax so all the new taxes are confusing me, making it hard to compare apples to apples. We’re 99% sure to get a 30-yr fixed mortgage around 3.5% (pre-qualified). I know you can deduct mortgage interest (pretty much the first 10 years are interest from what my mortgage broker brother and accountant sister-in-law tell us) and just recently found out we can deduct property taxes! Here are my scenarios:

1. Buy a condo or townhome in Philadelphia. Here we would have state income and city income tax. Property taxes will probably range anywhere from $150 (new construction tax abatement) to just around $2000. Philadelphia is also in the process of reassessing all property and chances are taxes, except for the abatements, will go up about $1000 – $1500. We can look on a website to know the final figure.

2. Buy a single family home in Camden County, NJ, known for having some of the highest property taxes in the country. Taxes could range anywhere from $7000-$11,000, on average. Here we would have state income tax but no city tax, unless I get a job in Philadelphia, then I would have to pay the Philly tax regardless.

My question is: How do you go about estimating how the deductions will impact your taxes? Fiance makes about $56k a year and for now he’s taking the standard deduction. We plan to marry this year but I don’t know how that affects taxes. I could secure a job making anywhere from $35k to $55k.
- Emily

You have several different layers of taxes to worry about here. First, of course, there’s income tax deductions on a federal and state level. You can calculate your federal tax deduction here. For state and local taxes, you’ll have to seek forms in the specific areas where you’re considering moving to.

The same goes for property taxes. You’d have to check with the various tax assessment websites to try to get a bead on the property taxes for the specific properties you’re looking at.

Your best route is to assemble a spreadsheet for all of these things. Have a column for each property you’re considering and a row for each different kind of tax. Almost always, property taxes and mortgage interest are deductible from your federal taxes, and they’re often deductible from your state income tax as well. However, it’s not just pure savings – in order to get the interest deduction, you’ll usually have to forego your standard deduction.

Q2: Private school worth it?
My wife and I live in an area with poor public schooling. We are trying to figure out if private school is a worthwhile investment for us or whether things will work with after school supplements which are far less expensive. Do you have any insights? Is this something you’ve thought about for your own children?
- Brenda

I’m lucky to live in an area with a very good public school system, so I haven’t had to worry about this.

If I were in your shoes, it would really come down to my financial situation above all else. Would the cost of private school put my family in a genuinely precarious financial position? Or is it something that will work if we cut back on some of the non-essentials in life?

You would also want to make sure that the private school you’re looking at actually reflected your values. One private school in our area revolves around a curriculum that Sarah and I would be uncomfortable with, for example.

Q3: Advice on inexpensive business clothes
I worked for years as a prof in [a well-known university]. This is a group of very well dressed people, mostly suits, even for women. It took me a while to figure out what I can modify to add funk to my wardrobe. Now, it’s not a problem at all anymore. Here is some advice:

- Learn to do small sewing repairs: buttons, hems, fixing an undone seam. When you get better, you can take in pants at the waist (I have a shape that needs this). This gives you a much larger choice of clothing.
- Sandra

Sometimes, a reader will drop a great email full of good tips on me. Although it’s not a question, I certainly feel like it deserves to be shared.

Sandra’s email is exactly that. If you’re struggling to maintain a business wardrobe because of the cost, those techniques will save you some serious coin.

The techniques work pretty well for men, too (other than the suggestion for pumps).

Q4: Is home ownership necessary?
My family is pushing us to buy a home, but we really don’t think it’s the best move for us right now. We’ve looked at a few in our area and they all seem very expensive. We pay less in rent each month than the mortgage payments would be and we aren’t paying for property taxes or insurance or anything. Are we right here?
- Andrew

You are, with a few assumptions.

The big question is whether you are actually saving money each month. Yes, your rent might be lower than the monthly cost of home ownership, but it makes no difference if you’re just spending that money on unnecessary stuff. If the money you’re saving from renting is just going to pay for eating out every night, you’re not really ahead.

For renting to actually beat out home ownership, you should be saving/investing the difference between your monthly rent and the total monthly cost of owning a similar home. That way, you’re actually gaining far more in the bank each month than you would ever be gaining in home equity.

Q5: Fantasy writing progress
A while back you mentioned that as an experiment that you’d create a blog that would oultine your experiences writing a fantasy novel (except you’re not going to mention it on TSD). Is this something you still work on a regular basis? If so, how is that doing, do you have a following?
- Sean

I am working on a fantasy novel. I have a first draft I’m happy with that’s largely complete. I have shared large portions of it with test readers. Portions of it are out there anonymously on the internet.

I am currently searching for a literary agent to help me sell the thing to publishers. If I am unsuccessful in that search, I’ll consider self-publishing it.

If I do reach a publishing arrangement, The Simple Dollar will be one of the first places I talk about it.

Q6: Learning about neighbors
My wife and I are looking at several houses that we like. For us, the big deciding factor is the neighborhoods. What will the neighbors be like? What kind of place is the neighborhood? How do we figure that out?
- Adam

We were in this same boat when we were shopping for houses. Our solution was to simply talk to the neighbors of the houses we were interested in. If we saw neighbors around when we looked at a house, we introduced ourselves, chatted, and asked about the neighborhood.

We drove around the neighborhoods at different times of the day, even at night, to assess what levels of activity and noise we could see. Were people out doing yard work? Were there children playing? Was everyone in their homes? Was it noisy at night?

Also, we took into consideration how well kept all of the properties were. Were the properties all reasonably well maintained? Or were there a lot of messy properties?

Those clues helped us figure out which areas were better for families and which ones weren’t.

Q7: Expatriate estate worries
I am from the US but I’ve lived in both Europe and Hong Kong in the past couple of years. I figured that I needed to compile an estate plan due to the number of bank/pension accounts I have in these different countries. I went to HSBC in Hong Kong yesterday and they said that my accounts would have to go through a 6 month probate process if I didn’t have a will but things could be shortened to a few months if I had a will and/or trust. I’m trying to determine the best way for my loved ones to control my assets if I were to pass away prematurely. I could just provide them with a sheet with all of my login information/passwords and then they could transfer funds online to the US after I’m gone to mitigate the hassle of dealing with the Hong Kong or UK governments. If I go down this route I wouldn’t want them to know the amounts in each account or the login information until I pass away. I could also get a trust drawn up but I’m not sure if I would need separate trusts drawn up in each country where I have assets. What is your suggestion for dealing with a situation such as mine?
- Angie

Giving them all a sheet with your login information would get them the money the fastest but would also result in the messiest legal situation for them. I would probably skip that unless you want to also hand them all a legal headache.

If I were you, I’d probably keep all of my funds in the country that I anticipate living in for the longest time over the next several years. I would also probably contact an estate lawyer who can help you get all of this set up the right way.

Regardless, it will probably be most convenient for you to have all of your funds in one place or at least one country, then transfer those funds to other countries as needed. This is assuming, of course, that you’re not wealthy enough to have your own full-time money manager who can handle all of this for you.

Q8: College summers
My oldest child has an unpaid internship for this summer. It’s not entirely unpaid as they are providing living quarters and food. It seems to be related to his career path and he’s excited. My concern is that he’s earning nothing this summer, as I figured he’d work this summer to earn tuition.
- Donald

It really depends on the internship. Some unpaid internships look great on a resume when a person graduates, while other internships are largely useless.

If this is truly an internship that matches his chosen career path, it’s probably worth it in terms of making himself marketable in his field upon graduating.

If I were you, I’d research the details of this internship and figure out whether it’s actually a valuable thing or not. It’s really hard to tell from the bit you’ve written here. I had what amounted to internships in college and those were usually paid via a tiny stipend.

Q9: Big changes needed
My problem is personal change. I agree with everything you say, but I don’t even know where to begin. Every day I think ok, tomorrow I will make changes; stop wasting money on $5 lattes, stop buying items I don’t need and so forth. I have been pretty good about talking myself out of items, and I’ve cut back from a daily $5 drink to a weekly. But there’s still so much waste.

We made $164k last year combined and saved only 2% of my husbands earnings in a 401k. No other money was saved! We spent $50k traveling, took a second honeymoon to Bora Bora, took the kids to California 6 times, went to Ohio and splurged on my husbands “poor” family, went to Vegas for some shows. We did a lot of traveling.

But it makes me sick we don’t have the $7000 for the IRS. We live paycheck to paycheck and as I read your articles, it occurs to me, we make a lot more than the “average” American family. We have a modest house based on our income, we owe $178k. Only my Honda Pilot is financed at 1.9% but it’s still $507 a mo. Our house bills aren’t bad. I could see our dish network bill of $90mo is a waste since all we watch is reruns or nonsense and now I wish we hadn’t committed to 2 years. We got it in Dec, prior to that we honestly hadn’t paid for cable in over 5yrs. But my husband and I had an insane impulse shop at Costco in December and bought not one, but 2 amazing giant flat screens, one for our family room and one for our room. We were always teased by friends for “doing so well” but having 1 older clunky TV set. So once we upgraded, well obviously we needed cable right? Wrong! The cancellation fee is insane so it seems like keeping it now would make more sense. Idk.

Anyway our only other big expense that could be cut is a $440 mo Kumon bill for our 2 kids tutoring. We feel public schools don’t provide enough and though this money isn’t tax deductible, it’s worth it. They’re much smarter, well I should say faster and more fluent, than their peers, and maybe even us, when it comes to math. But our monthly “bills” are only about $3500 and Idk where the rest goes? It seems there’s always a birthday party, baby shower, bridal shower etc; heck there were 5 total just this month! But even spending between $30-50 each, that doesn’t account for the thousands that disappear.

When it comes to food I think we waste a lot of money. We eat out way too much, buy expensive meats & other foods; I spend an average of $400 a week at Costco then make a few trips to Frys or Whole Foods for specialty items midweek. There are 5 of us, my mom lives with us to nanny, saving us on childcare. A friend of mine recently hit by hard times found herself on food stamps and her family of 5 gets $605 from the state of AZ. It makes me wonder how I would manage on such a small amount but she’s doing fine. So I know not everyone must spend $1600 a month on food.

I would like to add aside from the Amex we have no credit card debt. We pay cash for everything. But we are major over-consumers. Obviously. I need serious help and just don’t know HOW to fix myself. My husband leaves it all up to me. He actually spends an allowance while at work and I kill the rest so it really is “all my fault.” 17 years of me deciding everything (yes since high school) and he still just hands over the paychecks and I do as I see fit. So I need the help!

Two weeks ago we was told that this fall he is to expect a major promotion which is salaried at $315k a year. I just took a full time position at $72,000 a year. We will be in a horrific tax bracket. But the scariest part is knowing that we could be living the same way! How can successful people be so stupid when it comes to money?

Just tell me exactly what to do, please! From day 1 tomorrow until I can be like you and Sarah. I’d appreciate ANYTHING you can offer, and I will continue to read your emails as financial gospel….it’s applying the knowledge that’s tricky.

Oh, and how do I explain it to my kids, ages 11 and 14? We just took our family, plus my mom, and a real nanny (to give my mom a break) to Hawaii for 9 days to celebrate our 14yr olds bday last month and spent $10k. So now our 11yr old expects that in June for his bday. He keeps talking about Costa Rica. How do I explain we are making changes meaning “Hey son, we love you as much as your sister, but here’s a playstation 3 instead?” How do I put a positive spin on that?
- Rebecca

It’s pretty easy for me to tell where the money goes each month. You spend $400 a week at Costco, then make another expensive grocery stop mid-week, likely jacking it up another $100. That’s at least $2,000 a month on food alone. You state that you also have $3,500 per month in additional bills – that, I assume, includes your mortgage, your child’s tutoring, and your utilities. So, between just those bills, you’re looking at $5,500 a month, which adds up to $66,000 per year. What about property taxes? What about income taxes? You just took a trip to Hawaii that cost $10,000 for your child’s birthday. You’re adding up very quickly to your pre-tax income here.

You need to sit down right now and figure out what it is you actually want. What is your goal here? You seem to realize that spending so much isn’t a good thing, but what would you do with the extra if you were spending, say, half as much each month? What would you do with $5,000 unspent each month? What kind of goals do you have?

At the very least, you should both be putting 10% of your income into retirement. That’s an immediate thing. Beyond that, you should strive to have no debt, because with that income level, you shouldn’t have any. You should also have a pretty good cash reserve in the bank in case of emergency.

Aside from that, it’s really all about what you want out of life. What I want, more than anything, is to simply leave behind the need to work for income as early in my life as possible. I do not want to be working until I’m 70. What is it that you want? Security? Children that are successful in adulthood? Your money should be working toward whatever it is that you most want from your life. It may be that you most want travel and other such amenities. If so, your financial planning should be all about making them as stable as possible.

Once you have a goal, it becomes much easier to attack the areas in your life where you’re overspending because then you have a focus.

Q10: Door-to-door salespeople
How do you handle door-to-door salespeople or religious people? I feel really rude just closing the door on them, but if you just let them talk they’re usually convincing.
- Adrienne

If I don’t recognize the person, I’ll usually just say, “Thank you, but I’m not interested,” and then I just close the door and walk away. I do that for pretty much everyone who might be considered a salesperson, and I don’t feel guilty about it in the least. They’re on my property without invitation, after all. If you wish, you can put up a “no solicitors” sign.

Sometimes, I’ll end up debating religion with missionaries. I have some knowledge of the teachings of some of the groups that go door-to-door for missionary work and I actually enjoy discussing things with them, though they have zero chance of recruiting me. I just enjoy the discussion.

If I know the person, I’ll listen. If it’s a child from the neighborhood trying to sell something on behalf of their youth group, I’ll usually buy an item.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Spring Allergies appeared first on The Simple Dollar.

One of the most amusing parts of parenthood is teaching your children how to groom themselves. They make such spectacular mistakes along the way.

My daughter, for example, has learned that de-tangling spray makes her hair easier to brush. When Mom or Dad use it to brush her hair, we use just a squirt or two.

Well, she wanted to try to use it herself this morning. I watched her at first as she used a couple of sprays and started to brush. Everything seemed good, so I went to help my youngest find his shoes and put them on.

When I came back to her, she had sprayed her hair so many times that it was almost dripping. I actually dried her hair with a towel after that and it had a bit of an unusual smell… but there were certainly no tangles in it.

Lesson learned, I suppose.

Q1: Quality of life in retirement
I’m turning 60 this year & thinking about retiring & where I will be living in the future. [...] I have to tell you quality of life is a BIG issue. My friend retired last year & saved a ton of money in purchasing & insurance costs & so forth. She is fairly central to family, but not really near anyone she knows. Saving money was her main consideration, yet she is never home, has put many miles in her car visiting friends & family. What is the use of saving in one end if you are going to spend in in another? My mother had an expression “penny-wise, pound-foolish.” She was from Scotland where they knew that value of a dollar (or pound or shilling or pence).
- Angela

I agree that living in one location when you are traveling to another on an extremely regular basis is never a good idea. It’s not too different than what commuters do when they live in the outer suburbs of a city and drive into the middle of the city every day.

Commuting is a major cost, no matter how you do it. Even if you’re able to commute via mass transit, it often adds up to $100 a month. If you’re driving a new car in from the suburbs on a daily basis, that’s easily $1,000 a month in total commuting costs.

I don’t know how often your friend drives back and forth, but if she stuck in one place and then sold off her car, she would be in much, much better financial shape, even if she stayed in an area with a reasonably higher cost of living.

Q2: Angry relatives over estate
When my aunt died, I knew I was executor of her estate, so the first thing I did is I went to her house, opened it with the key she gave me, and had a locksmith come and change all of the locks. My cousins and other relatives were very mad at me because they said I was keeping them from the things that belonged to them in the estate, but I was pretty sure that some of them just wanted to grab anything that wasn’t bolted down. Did I do the right thing? How can I fix it?
- Erica

As far as I’m concerned, you did the right thing. You are the executor and it is your job to make sure everyone gets what they’re supposed to get from the estate as stated in the will. If you’re worried about the security of the items, then changing the lock is a strong first step.

I assume that there will be (or has been) a public reading of the will. When that happens, then you should personally hand out every item described in it. You should also do your best to follow any other directives you were given by your aunt. If anything is conflicting or problematic, consult a lawyer.

Families can (and do) get very nasty during processes like these. Your best chance at maintaining family unity is to be as transparent as you possibly can during this process.

Q3: Credit score challenges
I have a question about my little brother, who is 21. He works full-time in construction (not sure about his income), and just sold his pickup truck for $8500. He still owed a little under $3000 on the truck. He’s now looking to buy another truck for around $6000. He would like to buy a house in the next few years, but being so young he doesn’t have much of a credit history. Other than the loan for his truck, he doesn’t have any other debt, and he could have paid that off earlier, but he has been told that making payments on that loan is helping build his credit history. To my knowledge, he has a credit card which he pays off monthly, and a monthly cell-phone payment, but otherwise he isn’t making any payments on anything. Additionally, he has begun to save for a down payment on a house (though I don’t know exactly how much).

Any advice for him? He is mature for his age, understanding that debt is not a great idea, but wants to put himself in the best position he can to buy a house sooner rather than later.
- Rick

He’s actually doing pretty well for his situation. His truck loan likely established his credit enough to qualify for the credit card, and his regular payments on that card are maintaining his credit report. I don’t think he has a thing to worry about.

If he’s saving anything at all toward a house down payment, that’s a good step. If he’s saving anything at all for retirement – yes, even at 21 – that’s even better. If he puts away $1 at age 21 into retirement and it earns a 7% annual return, it will be worth $27.53 at age 70.

If he truly has no other debt, he is in far better shape than most 21 year olds in the United States right now.

Q4: Neighborhood culture shock
We just moved into a new house in what seemed like a wonderful neighborhood. One of our neighbors had a cookout and invited us along with some other families nearby. Everything was great until the conversation started and I discovered that there were some rather extreme and in my opinion rather sickening political views held by most of my neighbors. I want to be friends with the people around me but whenever I see them I think about the crazy things they said.
- Rachel

First of all, politics is usually a terrible subject to talk to a neighbor about unless you already know them well. The last thing I’d do is talk politics with a neighbor with any more detail than a yard sign supporting a candidate unless I happened to have built a strong friendship with that neighbor.

Now that you’re in that situation, though, you’re going to have to deal. If I were you, I’d maintain cordial relations with the outspoken ones, but not build anything too close with them. It does not hurt to be polite and kind to someone you disagree with, but you can still keep them at arm’s length.

At the same time, I’d try to reflect on that cookout. Were there any people who just didn’t say anything at all? Those people might hold stances closer to your own or, at the very least, have enough tact to not bring up polarizing political views in that kind of situation. If you can recall any, build stronger relationships with them.

Q5: Odd bank behavior
The bank in question was bought by a new financial institution. Out of curiosity, I clicked on their online account button, and sure enough the information that I thought had been closed down a couple of years ago was still on there. I called about it, and a manager got aggressive, told me that they had changed my gender on the account, and subsequently flagged it with fraudulent behavior. So while the account is still open and accessible with personal info online, it has a flag on it (I never had any problems before I asked them to close it). Because of this flag I cannot use the old account but I cannot get them to shut down the personal info online either. I got pretty freaked out by that and closed another account I had with the current financial institution before the merger. That closing appeared to go OK. The second rep told me that the first institution has a lot of problems.

Is this type of situation common? Will it affect my ability to open accounts with other institutions in the future, and can I do anything about it?
- Eric

No, this is not common. This is very strange behavior, and you should get to the bottom of it.

When you ask to close an account with a financial institution, that account should be closed, period. All deposits and withdrawals regarding that account should be denied. The information on that account should be put into long-term storage and not regarded as an active account.

It may be that someone attempted fraud on the account after you closed it, which may explain some of what happened. The changing of the gender may have happened due to some sort of account theft attempt, and when they look at that record, they may be seeing that fraud attempt. When you called, they may have viewed it as another sort of fraud attempt on the account. Still, I think they handled it very poorly. The account should have never been accessed in any way after you closed it.

I’d check your credit report just to make sure that there’s no mention of it. Aside from that, I’m not sure how this would affect your other financial needs.

Q6: Pyramid scheme addict
My sister seems to constantly jump from one pyramid scheme or network marketing business or multi-level-marketing business to another. One week, she’s selling soap. A month later, she’s trying to get me to buy children’s books. She’s been involved with every one I’ve ever heard of. I tried a couple of these in the past and I know that she’s probably losing money on each one. What can I do to get her out of these?
- Ed

I’ve known a few people like this and they all have a few things in common. They’ve seen the celebratory nature and the rah-rah “you can do it” attitude of the people high up the chain in these groups and they really buy into it. They see people who have made a lot in the organization and dream of themselves being there. What they don’t see is what kind of effort it takes to go from someone starting out to getting to that location. They start out, see it doesn’t work really easily, then they become disenchanted… until they see another rah-rah pitch.

This is a lesson they have to learn for themselves, unfortunately. Eventually, they’ll realize either that it takes more sustained work than they are willing to put in or it takes a different skill set than they have to offer.

It can take a lot of time, though, because those organizations tend to feed on people’s dreams. When someone wraps up your hopes and dreams into an easily-digestable package, it’s hard for some to turn away.

Q7: Loan payments and emergency funds
While building a 6-month emergency fund, does one need to include EMIs also?

Example:
total monthly expenses = X Dollars.
total monthly EMIs = Y Dollars (includes all loans: home,car,education,credit-card everything that has a monthly payment)
So, for the 6-month emergency fund, should it be 6*X dollars or 6*(X+Y) dollars ?

Presently, I have an educational loan EMI that is 23% of my monthly take-home pay. And I have saved an equivalent of 3-month EMI and kept in a separate bank account.
And, I have saved 3months of my living expenses and kept in 2 Fixed Deposits (includes everything: rent,utilities,food,basic travel, etc essentials).
- Roger

For those unaware, EMI refers to “estimated monthly installment” or “equated monthly installment.” It’s a term used in some parts of the world to refer to the monthly debt payments that person owes.

An emergency fund should include everything you would need to pay your bills and maintain your way of life for whatever number of months you intend to save for. It sounds like you have a three month emergency fund in full, as you have money to cover your loan payments for three months and your living expenses for three months.

The biggest reason for such a measurement is because emergency funds are often used for that biggest of emergencies, the unexpected job loss. If you have a few months of living expenses and bill payments sitting in the bank, you don’t have to move into outright panic mode when you lose your job. You can focus rationally on a job search.

Q8: Trusting Wikipedia
I notice that sometimes you link to Wikipedia for specific information. Why do you trust that site? It’s edited by anyone who wants to edit it.
- Amy

Wikipedia is a great way to get a grasp on a basic concept. However, it’s not rigorous enough to use as an actual source on an academic paper – it’s not meant to do that. It’s meant for people to get the basics of a topic before they move onto more advanced material.

I pretty much entirely agree with Harvard’s stance on using Wikipedia:

“There’s nothing more convenient than Wikipedia if you’re looking for some quick information, and when the stakes are low (you need a piece of information to settle a bet with your roommate, or you want to get a basic sense of what something means before starting more in-depth research), you may get what you need from Wikipedia. In fact, some instructors may advise their students to read entries for scientific concepts on Wikipedia as a way to begin understanding those concepts.

Nevertheless, when you’re doing academic research, you should be extremely cautious about using Wikipedia. As its own disclaimer states, information on Wikipedia is contributed by anyone who wants to post material, and the expertise of the posters is not taken into consideration. Users may be reading information that is outdated or that has been posted by someone who is not an expert in the field or by someone who wishes to provide misinformation. (Case in point: Four years ago, an Expos student who was writing a paper about the limitations of Wikipedia posted a fictional entry for himself, stating that he was the mayor of a small town in China. Four years later, if you type in his name, or if you do a subject search on Wikipedia for mayors of towns in China, you will still find this fictional entry.) Some information on Wikipedia may well be accurate, but because experts do not review the site’s entries, there is a considerable risk in relying on this source for your essays.

The fact that Wikipedia is not a reliable source for academic research doesn’t mean that it’s wrong to use basic reference materials when you’re trying to familiarize yourself with a topic. In fact, the library is stocked with introductory materials, and the Harvard librarians can point you to specialized encyclopedias in different fields. These sources can be particularly useful when you need background information or context for a topic you’re writing about.”

The broader a subject is and the more editors are involved with it, the more accurate it’s likely to be.

Q9: Roth IRA as savings account?
A friend of mine recently suggested something that really set off some alarms in my head. He thinks that it is a good idea to use a Roth IRA as a savings account for longer term, low-priority goals. His argument is that even very conservative funds have much higher returns than savings accounts and there is no tax penalty on removing the contributions from the IRA, as long as I’m not contributing more than the IRS limits I should be fine. This flies in the face of my conventional thinking that once money goes into a retirement fund I can’t touch it without some serious penalties. If I’m aggressively funding my retirement through my work’s 401(k), is it ok for me to use an IRA in this manner?
- Jill

You can use a Roth IRA in this manner if you so choose, with a few catches. For starters, you can only withdraw up to the amount you contributed without penalty. So, for example, if you put in $5,000 and it grows to $8,000, you can only withdraw $5,000 without incurring a penalty. The rest must wait until retirement.

If you want to have access to those gains before retirement, you shouldn’t be using a Roth IRA – you should be using a taxable investing account. That way, you can access the money without penalty, merely paying taxes on the gains, which is what you would do with the Roth IRA except that you’d also have an early withdrawal penalty.

Which way is better? It really depends on what you intend to do with that money. If you’re focused more on the retirement savings, then the Roth is better. If you’re saving for a non-retirement goal, then an ordinary brokerage account is better.

Q10: Changing role of motherhood
I really enjoyed this great article at the Atlantic on the changing role of mothers and how it affects family finances and more. What did you think of it?
- Marjorie

I enjoyed it, too. Almost every chart in that article revealed something interesting to me.

For example, mothers are spending more time on child care per week than in the 1960s through the 1980s, but the amount of time spent on housework has gone down by almost 50%. Does that mean that fathers are picking up a lot of the household work? Yes. Does it also mean that the average house is messier than it was thirty years ago? I’d bet yes on that one, too.

The mothers of this generation of babies are far more educated than previous generations. What will that mean for the babies? We’re going to have far more children growing up this generation as the product of two parents with college educations. What will they be like?

Also, I found it fascinating that the only group of women who are getting married more often than in the past are the top 5% of wage earners. All other women are getting married less often.

That article has tons of interesting stuff in it and is well worth reading. What does all of it mean for the next generation or two? I guess we’ll find out.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Child Grooming appeared first on The Simple Dollar.

I’ve had the privilege this week of eating lunch with a different lunch companion every single day.

This simple act has led to the formulation of a lot of great ideas, a lot of laughs, and a lot of stronger relationships.

Eating lunch with a friend or a person you want to know better doesn’t have to be expensive. Most of my lunches have been leftovers or peanut butter and jelly in a brown paper bag.

Even if it had been expensive, it would have been worth every penny for the great lunchtime conversations.

Q1: Catch-22 with home loan
I’m in a catch-22 position and I can’t figure out what to do. I am due with our first child this summer. Currently, my husband and I both work but I will stop receiving paychecks in August. I’m a teacher, and my ultimate plan is to start an in-home daycare/prechool to supplement our income while I stay home. The problem is, we live in a small apartment and I cannot do the daycare situation there. We need to have a house with space to do this.

Problem is, how to qualify to get the house with one income? We live in a very high cost of living area (DC) so I’m worried about qualifying for a loan. We have great credit scores and no debt at all, and about $20,000 in the bank, but my husband only makes about $46K which means we’ll have a hard enough time finding a house much less getting a loan for it. Once I’m not longer making my salary, we will be able to cover all our current bills but will not be able to save any money every month until I’m making some type of income as well. We’re fortunately in good shape besides this (great retirement savings, we live very cheaply and have no debt. We each own a car in good condition and have been saving 2/3 of our income every month for the last 2 years) but soon with half the income, that security will disappear.

If we can’t get a house, we can continue renting, which is basically throwing money away considering how expensive it is around here, and it would keep me from my potential income source. I’m confident that if we have a house (even a small one) with a decent space for this daycare, that I would be able to make at least as much as my current salary. I’m a trained teacher with a master’s in education, and there is a lot of demand in my area for childcare. I think within a year I could work up to making a decent supplemental salary, and we’d have no problem affording a house but it’s the initial qualifying process I worry about.

Any suggestions? Should we go ahead and start looking for loans/talking to a realtor and trying to buy a house, or are we unlikely to qualify? And if it turns out we cannot get a house, do you have any other suggestions for making it over time? My husband is already looking for better paying work, but not having a lot of luck. We really can’t swing moving to a lower cost of living area without any job security, connections, etc. Continuing my current job is not an option, though I could do some smaller-scale babysitting. I feel like the daycare is all I want to do, and it’s our only good option for making it financially, but I am so worried we won’t be able to get a house. I’m not that familiar with the entire home-buying process and don’t know how to move forward with it.

Any advice would be greatly appreciated. Is there something I’m missing here??
- Jenna

First of all, renting isn’t “throwing away money” in a lot of situations. Let’s say you’re buying a home for $300,000. With a reasonable thirty year loan, you’re paying almost $1,000 a month in interest. What about property taxes and homeowners insurance? That money just vanishes into thin air – $1,500 a month, at least. If you can rent for less than that, that’s what you should be doing. In fact, if it’s even close, you’re better off renting because then you don’t have to deal with the cost of maintenance and repairs.

“But I’m building equity!” If you’re spending more on interest, property taxes, homeowner’s insurance, maintenance, and repairs for your home each month than you’re spending on rent, you’re not building equity – you’re losing it. The only reason you’re not building equity in the apartment in this situation is that you’re not investing that money you’re saving over the costs of home ownership.

I can’t assess what your likelihood of being able to earn signficant money with an in-home daycare actually is. To figure that out, market research would be in order. You can’t simply assume you can put out a shingle and people will beat a path to your door. Is there a competitive market for daycare providers? Are the ones near you all full to the brim or are there spots available at them?

If it is clear that you have a genuine business opportunity in the area after the market research, then I would simply find any kind of work until you get the home loan secured, then reassess what you want to do. However, I don’t think switching to the home situation is the financial no-brainer that you’re making it out to be, though.

Q2: Haircut value
What is the value of a good haircut? The barbershop I always use does a great job, but it costs $24 per cut. A new shop across town charges only $11 per cut. I get my hair cut twice a month, so that adds up to serious coinage.
- Ryan

There’s no harm in trying the other place. If you’re not happy with the cut, you can return to your regular barber in two or three weeks to get it fixed.

Very few places produce genuinely bad haircuts. Some might produce cuts that aren’t exactly what you want, but they’re rarely disastrous, particularly on men.

I have found that a barber that can repeatedly produce exactly the cut you want is a valuable thing to have. However, for me, I am that barber. I can get the cut I want with a pair of clippers pretty efficiently.

Q3: Quality of school matters?
I’ve decided that I want to pursue my MBA. Is there a caliber of business school (maybe the “sweet 16″ or a top 10 institution) for which you would be willing to quit your job to attend fulltime? Most elite programs don’t have part-time degrees anyway. Is the degree worth the cost (including opportunity cost of not working for 2 years)? Would you pass on a top 10 school and go for a part-time in order to keep your current job?
- Evan

It really depends on what your current job is and your financial state before you make that leap.

If you’re debt free but you’re working at McDonalds, then going to business school is a no-brainer. If you’re making $100,000 a year as a software engineer and you’re carrying a $200,000 mortgage, then there’s probably no business school out there that makes sense.

The question you need to ask yourself is whether you can make ends meet while going to business school. Can you pay your monthly bills? If you can pull it off, then a good school is probably worth it.

Q4: Making quadruple batches
I’ve read many books and articles and stories where it is suggested that people make quadruple batches of meals and store the left overs. Whenever I do this I usually wind up with some freezer burnt food that has to be thrown out. It seems wasteful to me.
- Jill

Most people that I know that make double (or more) batches of meals have a schedule where they eat those double batches quickly.

For example, let’s say I make a quadruple batch of lasagna on Saturday the 1st and a quadruple batch of stew on Sunday the 2nd. I would probably pencil in lasagna on Monday the 8th and every other Monday after that, and I’d pencil in stew on Wednesday the 10th and every other Wednesday after that until the food was gone. (On Tuesday, we’d eat leftover lasagna.)

If you’re making quadruple batches of food you don’t want to have that often, then you shouldn’t be making quadruple batches of that particular meal.

Q5: The value of commute length
you make good points in the financial decisions and quality of life regarding the location of your home. however, a huge deterrent to a good quality of life is the length of a commute. in the area of st louis MO, mass transit is almost nonexistent. we have lived here for many years and our kids live here, so we will not relocate. even before i married, if my job changed, i moved close to it because i couldn’t stand a commute of more than about 15 minutes. now, i see the terrible price many of our children pay by having their parents’ arrival home after work delayed by long commutes or worse still, younger kids who are picked up from latchkey programs, get a drive thru McD dinner during their one hour evening commute, and have almost no family time. riding in the car with mom or dad just doesn’t qualify as quality time in my book. further, i believe there is a positive correlation between the length and time of a commute and the terrible divorce rate in this country. people are buying humongous houses in which they seldom get to do much since they are working full time or more and commuting long distances.
- Jimmy

I agree with you to some extent. It really depends on the commute, though.

When I was first working out of college, I had a 25 minute commute to work, but it was entirely on a mass transit system. On that commute, I would read and get caught up on emails. My commute was either part of my productive day or a bit of pleasurable reading time. I didn’t really mind this time at all. I didn’t have the cost of a vehicle, for one, and I could spend that time actually doing something I wanted to do.

On the other hand, if I had to drive for forty five minutes through a crowded metro area, I would consider that a big negative. When I did drive for a commute, I considered the time on the way home to be a mild relaxation from work, but I was still focused on driving (and on the questionable driving behavior of those around me).

There’s also the family considerations. If you’re commuting for 45 minutes, there’s an hour and a half each day that you’re not spending with your family (or engaged in something personally fulfilling if you’re single).

Q6: Uses for vegetable remains
What do you do with, say, half a carrot that’s left over from making soup? Most of the time for me it just sits in the fridge and gets brown and I throw it out which seems like a big waste.
- Mal

I save all of that stuff in a bag in the freezer. I just mix all of those spare vegetables together.

When I have a gallon freezer bag full of those scraps, I get out a big pot and toss all of the vegetables into it with a few gallons of water, a dash of salt, and some ground black pepper. I then boil that mix for hours and strain what’s left, saving the liquid.

That liquid is vegetable stock, and it is a fantastic starter for any soup that you want to make. Store it in quart containers in the freezer and pull one or two out whenever you want to make soup (or other dishes that use stock as a base).

Q7: Cash for emergency fund
Is cash the right way to go for an emergency fund? An emergency fund is supposed to be money that is easily available to you in an emergency which in my mind means that it should be cash. I know that you do not earn interest on cash that is just lying around but having easy access to money is more important in an emergency than the little bit you make in interest. The only thing that worries me is the risk of having money just lying around somewhere in my house. Perhaps half in an account and half in cash is also an option. What do you think?
- Roger

I think there’s a balance. I keep a few hundred in cash in a hidden spot in my home, but the rest remains in a savings account earning interest.

There are rarely times where I would need to immediately have more than a few hundred in cash in my hand in an absolute emergency. Virtually everything I can think of could wait until I could visit my bank or an ATM at least.

The only scenarios where that isn’t enough are scenarios where having thousands of dollars in cash probably wouldn’t be enough, either. Given that, I’m fine with most of my emergency fund in a savings account.

Q8: Professional dress
Recently, I got a great new job that pays more than double what I’m currently making. When I talked to the HR person about it she told me that professional dress is expected. I am a software engineer and I’m not sure entirely what that means. What should I be expecting to spend on a wardrobe?
- Dan

I’d call your office and find out exactly what’s expected in terms of attire. You need to know what people wear during their day-to-day work.

Most jobs like this do have a startup cost where people get their wardrobes into gear, unfortunately. It’s part of the hidden cost of having a higher-paying job.

The change in wardrobe might not be a perfectly comfortable one for you, but it’s a change you’ll get used to.

Q9: Returning to the workforce
I have been a stay-at-home mom for about 12 years and I am trying to reenter the workforce with no success. I am in a rocky marriage with no way of getting out without going to live with my elderly parents,who live in an area that does not have an jobs (if I could find one) that would pay me enough to ever live alone. I do not want to be a burden on them, but I am at a lost for how I go about getting someone to give me an opportunity.

I do not have a college education (1-1/2 years at a community college studying business). My last job was as an Administrative Assistant for a pesticide company. I do not know how much longer I will be able to stay in my marriage. Can you give me any advise on what I could do to increase my skills and to make myself marketable again?
- Mindy

First, if you are in an abusive relationship, there are resources you can use that will help you get out of your situation safely. I don’t know what’s going on with your relationship exactly, but it sounds like you really want out of the situation and that it might be an abusive one. If it is, you need to leave now, not later. Abuse should not be tolerated.

Having said that, if it’s just an incompatibility problem or something else, I’d try to pursue work in an area that directly follows your previous employment. Start quietly applying for administrative assistant positions anywhere that you can find them. If you manage to get one, then that’s your chance to change things at home.

Do you have any single (or even married) friends that you could live with for a while? If you have someone that knows what you’re going through, they may be willing to help you more than you expect.

Q10: Move first?
My family is about to move to another state and we need to sell our home. Is it a better move to try to start selling it now before we move out or should we wait until we’re gone?
- Angela

Generally, a house looks better and is easier to sell if no one is living there. It’s much more available for people to visit, appears to have much more open space, and is devoid of other people’s personal property and clutter.

If you have a financial need to sell before you move, then that choice is pretty much made for you. It sounds like both options are available to you, though.

If that’s the case, I’d get out of the house and make sure it was ship-shape for selling before putting it on the market.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Lunch Companions appeared first on The Simple Dollar.

Whenever we choose to spend our money or time on something, we choose not to spend it on something else. To make one vine in our garden of life grow, we have to let another one wither. If we split our attention among a bunch of different things, we do them all half-way.

Everything has a cost. Even if we figure out secrets of greater productivity, we’re still just practicing methods of better selection among all of the options in our life.

Q1: One-time retirement savings drop
I am thinking of reducing my retirement contributions by 90% for one year and use the money to do some maintenance and improvements on my home. I am 42, married without kids. Our debt consists of a 20-year mortgage and a $30,000 home improvement loan from a family member (we repay $150 per month). We used this for a new roof ($25,000) and some structural repairs. We have no other loans. We have to fix some drainage problems, rotten window sills, and a back door that is rotting due to exposure to weather–we want to add a gable roof over that door. All told, we probably need $7000 for the maintenance, repair, and improvement work.

We currently have $44,000 saved for retirement in Roth IRA and 403(b) accounts. Additionally, I have a defined benefit retirement plan through my employer. For every year I work, I receive 2.2% of my final average salary. I already have worked there 7 years, and anticipate working there an additional 25 years. I also fall under the windfall elimination provision of social security. Each month I contribute a mandated 10.5% towards my pension, and 8.5% to my other retirement accounts. We have a $10,000 emergency fund, and we add about $100 to that each month. On average, we spend less than we earn, and our net worth grows by about $1000 each month.

If I divert $5100 from my retirement savings over the next year, I am reducing my nest egg by about $27,000 in 25 years time. My other alternative would be to use a home equity line of credit. To repay the line of credit, I would need to reduce my retirement savings by about half until the loan is paid off. I could also defer the home maintenance, but that seems to be a supremely bad idea. Do you have any advice?
- Bill

What you need to do is sit down with a good retirement calculator and see whether or not it’s realistic to swing this.

Part of the problem here is that I simply do not trust pension plans. I’ve seen too many companies offer a pension plan to their employees, then pillage the contents of that plan when they ran into business trouble, then get a legal injunction so that they don’t have to ever pay out those pensions. I want my retirement in a separate account that is not tied in any way to my company’s future.

It is very hard to accurately assess your pension based on what you’ve said above, though. Given the information in this note, it looks as though you’re behind the overall pace you should be on to retire at age 65. Skipping a year of savings will put you even further behind. The only way you can catch up is by putting away tremendous amounts of money.

If you want to make this move, you’re mostly betting on the viability of that pension plan for the next fifty years or so. That is not a bet I would make.

Q2: Challenging gifted child
Our daughter is advanced intellectually for her age. She is in first grade and scores at sixth to eighth grade levels in reading and math. She gets bored at school and reads in class and gets lost in books and ignores what’s going on in the classroom which frustrates her teachers. Her teachers want her to skip a grade level or two but I really don’t feel good about her being that much younger than her classmates, and the other option they give me is to send her to a private school, which we can’t afford. What kinds of cost-effective options do we have here?
- Jane

It is really easy for a gifted child to become totally complacent in a school system that does not challenge them. They get bored with it and can sometimes fail to see the point at all, which can cause them to actually get poor grades even though the work is almost trivial for them. They can learn terrible habits because of that, too.

I would have some conversations with private schools in your area to see if there are any scholarships or other endowments that can help out children in your situation. Many private schools will give drastically reduced or free admission to truly exceptional students in financial need and your situation sounds like a prime case of that.

At home, keep pushing and challenging her. Make sure she has access to plenty of books that are on the upper end of her reading level (not the bleeding edge, where reading becomes a struggle, but enough of a challenge so that it’s rewarding and fulfilling). Look for projects that expose her to topics and intellectual challenges appropriate to her cognitive age and do them at home.

Q3: Dogs of the Dow
How do you feel about applying the Dogs of the Dow technique in ones retirement portfolio?
- Reggie

The “Dogs of the Dow” strategy refers to buying the ten stocks out of the thirty in the Dow Jones Industrial Average that have the highest dividend yield – they pay out the highest dividend compared to their stock price – at the start of the year, then rebalancing into the ten highest each year thereafter.

If you want to try to do this, your retirement account is probably the place to do it so you’re not financially penalized for buying and selling.

Of course, like any well-known strategy, the “Dogs of the Dow” seems to keep pace with the market. It has had a few good years as of late, but it wasn’t spectacular during much of the 2000s. Sometimes it will work well, sometimes not so much. I would expect it to roughly match the overall stock market over the long term, nothing more, nothing less.

Q4: Handling loss of business income
I have sold [marijuana] to coworkers and friends for twenty years or so. My wife has always kind of looked the other way at the business but now with a child on the way she says we can’t afford the potential damage an arrest would do. The problem is that I made about $15K a year doing this and it would really damage our family’s income. What strategies are there for making this loss in income work?
- Roger

You have to treat it much as anyone would when they face a loss of income. You’re in for some challenging choices. You now have $15K less to spend each year, so what are you going to cut?

Your best approach is to start looking through your spending and figuring out what things can easily be tossed to the side. Given that you have a child on the way, situations where you go out on the town will probably go down drastically, saving you money there, but the child will be expensive and eat up more than that.

Instead, I’d look at your regular bills. Can you live in a less-expensive location? Can you drive a car for as long as it lasts rather than trading it in? What about your phone services – do you need both a landline and a cell phone?

I don’t exactly know how you’re spending that extra money. You are implying that both you and your wife work full time and you have the extra business income, plus you’re really worried about the negative impact of losing that income, so I’m pretty sure you’re spending quite a bit of money each year. You just need to figure out how to trim it back.

Q5: Part-time jobs
What you wrote [about part time jobs increasing a person's income] is true – but the actual amount earned changes dramatically depending on one’s tax bracket – and just because one makes a good income doesn’t mean that there aren’t higher expenses that accompany that – say, self employment tax which is a rip off. with my husband a self employed, solo private practitioner (physician) earning the majority of our income (about $100,000) our effective tax rate is about 37%. our accountant has discouraged my getting an outside job because i would take home only about 50% of what i was ‘paid’. even if i earn $40/hour for part time – and i could do that for about 10-12 hours each week as a tutor – i would earn only $20/hour and that does not factor in transportation, work supplies, my homework time, and other work related expenses which would not seem to offset the additional time i would work at a second job (primary job is office manager for my husband which means uncle sam has us taking money out of one pocket and putting it in another so he can get his cut).

I find it far better to be frugal in my spending than increasing income in a way that may not bring in enough money to offset the increased workload.
- Diane

I agree, but frugality only takes you so far. If you’re living on beans and rice and you still can’t make ends meet, you flat-out need more income, and the most effective way to immediately generate that income is with a part-time job.

The question I always ask when it comes to part-time jobs is what would you be doing with that time without that job? Would you be doing things that would be costing you money? Would you be completely idle?

If you’d actually be spending money, then the job is gaining you more than just your wage. If you would be completely idle, then the job is better than just sitting around doing nothing at all.

On the other hand, if you would actually fill those twenty hours with something genuinely productive, I’m willing to bet you have no need for that part-time job anyway.

Q6: Spouse’s religious donations
My wife has joined a church and has become very involved, which is okay with me. She wants me to join, too, but I’m not a believer. The problem I’m having is the donation checks she’s writing to the church, which are adding up to about 10% of our take-home. We can afford it, but I don’t like our money being spent in that way and I don’t know how to approach this discussion without it turning into a big fight.
- Dave

Tithing is a pretty well-established and well-known religious tradition. People are often called to donate 10% of their income.

If I were in your shoes, I would have no objection to her tithing 10% of what she brings home. I would have a problem with her making a unilateral decision to also tithe 10% of what you bring home.

That’s where I’d start this conversation. It has nothing to do with her religion and she should feel free to practice it, but tithing beyond 10% of her income is disrespectful to you and to your beliefs. It’s not a partnership if she is going beyond that.

Q7: ING Direct becomes CapitalOne 360
Are you still happy with ING after the merger? I hadn’t heard of it until I went to ING to find out about opening an account.
- Marsha

I haven’t seen a single change to ING that I’ve been unhappy with since the transformation to CapitalOne 360. I’m certainly watching for changes, but I haven’t seen a thing at all.

My understanding was that ING Direct was actually a pretty strong performer for ING and the only reason they dropped it was because of unrelated business requirements that basically forced them to sell off ING Direct.

CapitalOne may decide to make changes in the future, at which point I’d reassess. At this point, though, it mostly just looks like a color change on a website.

Q8: False political views at work?
Everyone in my workplace seems to subscribe to the same political philosophy. They’re all members of the [same] party and most of them seem to volunteer for that party or [that party's] candidates. I don’t agree with their philosophy and it seems wrong to fake it, but I’m afraid if I don’t fake it I will be hurt in my career.
- Jim

First of all, if I were you, I’d just stick to a line of not wanting to talk politics in mixed company. If a political issue comes up, just completely avoid the conversation and, if pressed, simply say that politics is something you don’t feel good discussing in the workplace.

Most people will respect that stance. If they do not respect that stance, then there is a problem in your workplace and you should look for work elsewhere.

If you do feel drawn into this, look for specific areas where you do have common ground and focus on those. Most thinking people have common ground on a lot of issues.

Q9: Student loan repayment versus investing
What’s a good rule for prioritizing student loan repayments versus investing elsewhere? The general overview of the situation is that my fiance and I are starting out under masses of student loan debt.

I have about $60,000 and am a little more than halfway finished with my masters degree. He’s got a little more than $50,000 in student loan debt with a bachelors. We’re both working full-time, and making a combined income of about $70,000. We bought a small home a couple years ago and, aside from the wedding, don’t foresee any major purchases. We are working furiously to pay off the last $10,000 of our consumer debt, and it should be gone within a few months. We’ve already cut up the cards.

My question is: With so much student debt (nearly DOUBLE what we owe on the house) which do we prioritize: paying off the student loans as quickly as possible, or contributing up to the limit in my Roth IRA or his 403(b)?

I know that investing early will allow our money to grow a lot in the long term, and I feel like we may never pay off the student loans — this is complicated by the fact that we have a mix of public and private loans, some that will be eligible to be written off after ten years of payment, some after 30, and the laws keep changing. I feel completely competent with our finances in many ways, but with student loans I am constantly frustrated by trying to understand which program is which, which servicers our loans keep getting transferred to, and what I ought to be focusing on, or whether I ought to be making minimum payments until everything is forgiven.

Is there a formula to all this? Or debt experts who specialize in student loans — not just the finances and math, but all the new laws?
- Monica

There is no straightforward formula to follow because, as you mention, it all keeps changing. Similarly, you’ll get different suggestions from different advisors because different philosophies apply here.

I’m of the belief that you should be saving 10% of your income for retirement and every dime over that should go toward minimizing your debt load. This assumes that you don’t have any high-interest debts, in which case you need to get rid of them first and foremost.

So, sit down and figure out what 10% of your income actually is, save that much each year, and then throw every extra dime toward the debt. 10% per year will put you on a great pace toward retirement.

Q10: Live music for cheap
My biggest passion is hearing live music. There is nothing I enjoy more than the energy of a live concert. The problem is that tickets are really expensive. I have spent way too much money on tickets! I don’t know how to make it less expensive either and a life without that experience in it for me is a sad life. Do you have tips on how to get free or cheap concert tickets?
- Deanne

There are a lot of things you can do.

One technique is to join a “street team” for the musicians you like. You spend some time spreading the word about their concert in exchange for a ticket (and maybe some other goodies).

Another technique that works well if you go alone is to show up at the concert site about an hour beforehand with a small amount of cash in your pocket and try to buy a single ticket. People are often outside of a venue looking to get rid of extra tickets, so you can often get a cheap one that way. People will sometimes just give you their ticket.

Don’t be afraid to ask your music-loving friends, either. They may know ways to get inexpensive or free tickets. If someone gives you a ticket, thank them immediately, then, after the event, write a very nice handwritten thank you note to them. You’re likely to wind up on their list of people to toss extra tickets to.

You might not get into every concert you want with these techniques, but you’ll get to see an awful lot of shows without spending an awful lot of money.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Everything Has a Cost appeared first on The Simple Dollar.

For me, spring allergies usually affect my eyes the most. I usually get a bit of redeye along with a lot of watery eyes and blinking.

The best solution I’ve found for spring allergies that affect the eyes are long, hot showers. I turn the water up to the upper end of my tolerance and spend quite a long time in there. It helps better than almost anything else I’ve tried.

If spring allergies affect your eyes, give this a shot.

Q1: Free shipping and handling question
when i buy online, i like to take advantage of free S&H. to do that, often i must purchase one or two items to cross the $ threshold for the free S&H. i am willing to do that because i will often purchase one or two items that way that i will stash in my gift closet to have on hand. it’s an easy way to have gift items on hand and to save overall. i’d rather spend the money on a real thing than postage. is this worth it?
- Jim

If you’re sure that the gift will actually be enjoyed by the recipient, this makes complete sense to me. In fact, I often do this myself.

I usually find that having some good ideas floating around for gifts for people close to you really helps with this. I keep notes going that list items that I have observed my children or my wife or my parents having an interest in so that, if I’m in this situation, I can just order them.

The problem comes in when you try to “push” this too much and order things that don’t make for good gift ideas. If that’s the case, I’d rather just pay the shipping.

Q2: Hopeless debt
My husband and I currently owe about ten times our annual salaries in debt. Much of that is in student loans, which basically seem impossible to get rid of. What can we do to have some semblance of a life that isn’t just indentured servitude?
- Joanna

Honestly, I feel that large amounts of student loans amount to the same thing as the old practice of indentured servitude.

How do you get out of it? Make it your overarching personal goal to get rid of that debt. That is your focus. Get a second job. Sell stuff you don’t use. Find anything and everything to earn a bit more money and throw every dime of that extra money at the debt. Whittle it down.

If you haven’t consolidated your student loan debt, that’s usually a very good way to cut down the monthly payments, which means you can throw more each month at the balance.

Q3: Handling real estate windfall
What to do with a real estate windfall?

I am selling a townhouse where I was living in heart of my city. (It’s in escrow) I realized I wasn’t really an inner city resident after a year. I will net around $70K if the current deal goes through. I am in my mid-fifties, divorced, employed as an adjunct at a community college and have a fairly low income. I also own a house that used to be my residence but has been a rental property for the past 5 years. I owe approximately $84K on that house and it’s worth around $150K. I have a positive cash flow with it.

I moved in with a friend and, at this point, only pay half of the living expenses (under $300/month). I may live here a long or short time, it remains to be seen. I don’t have any money saved for retirement and had thought my rental property (which will be paid off in 15 years at my current re-payment rate — a bi-weekly plan where I pay an extra $100/month in addition to my regular payment) would generate retirement income or be a “free” place to live.

So far, with this real estate profit, I plan to pay off debt — around $2,100 left on a 10+ year old car that I bought used, plus $3,000 credit card debt…and put $6,000 in the bank as my emergency fund. That leaves me with approximately $59K.

Should I pay my rental/retirement house down? Or should I buy another small house in a more suitable area to live eventually if this living arrangement doesn’t work out? Or should I put it in the bank as money to fund my retirement? (I would have to put it into some sort of ironclad account or I’m afraid I’d get tempted to dip into it).
- Chris

I’d pay down the rental house. If you find yourself in a situation where you want to live elsewhere, then examine your options at that point. You may find that a small apartment is the right answer for you, for example.

If you do end up needing equity from that home for some reason, you could sell it or take out a home equity loan. That could mean forfeiting the asset you planned to base your retirement on, but it’s often hard to predict what our future path holds for us.

I don’t think you’ll ever regret owing less on that house.

Q4: Friends convince me to spend
At the start of the year, I decided to get serious about my money and I have seen a little success. My big challenge is that whenever I see my friends they always want me to spend money. They’ll suggest something expensive to do like clothes shopping or going out on the town and if I balk, they’ll bug me about it until I give in. Short of dumping most of my friends, I don’t know how to break out of this.
- Jenna

Start seeking out other friends. Don’t dump your old ones, but just start looking for other people to hang out with.

What do you enjoy doing that doesn’t cost much money? Make a list of those things, then try to think of ways where you could meet other enthusiasts of those things in the community.

You may find yourself building new friendships that reflect your adjusted values. If that’s the case, it’s perfectly fine to change up your social circle a little.

Q5: Package internet deals
My bill runs around $140 per month for AT&T phone, Uverse Internet, and Direct TV (one step above the very basics so I can watch Fox News, etc. So, my question is this: I see these advertisements like Vonage on TV and so would love to save money (Saving $ is why I read your messages) on the phone bill, but I have no idea how to get high speed internet without being an AT&T landline phone customer. ANY TRICKS TO FINDING A WAY TO HAVE THE INTERNET AND DIRECT TV WITHOUT THE HIGH COST OF AT&T PHONE?
- Reginald

It depends entirely on where you live. Different services are available in different areas with different packages available.

One strategy you might want to consider is contacting the satellite TV providers directly and see what kind of relationships they have in your area. Give a call to both Dish Network and DirecTV and see what they have.

You might also want to ask around in your community to find out what services others are using. Most people will gladly help a neighbor find a better deal.

Q6: Reporting tax cheat
Each year my neighbor tells me about all of the “tax loopholes” and other things he does to avoid paying much income tax. It really irritates me that he’s getting away with paying little while everyone else pays more. I have considered reporting him to the IRS.
- Maven

First of all, you don’t know whether your neighbor is just telling tall tales or not. You have no evidence of that person’s actions.

Second of all, the actions they’re describing might actually be legal ones and they’ve simply invested the time and effort to find any and all legal tax credits and loopholes that apply to them.

This really isn’t worth reporting. Of course, I’m one of those people with the philosophy that if someone isn’t causing direct injury to me or my family, I’m just going to let them be.

Q7: Federal budget and housing
I am in the middle of searching house, found the one we love and about to make an offer. But some close friends are saying “deep budget cut” might effect the housing market. What do you think? Is it going to go down again? Is it going to affect the interest rate? Thanks.
- Rosalyn

I don’t think interest rates are ever going to get significantly lower than they are right now. For mortgage lenders to make much money at all, they really can’t go down much more.

As with the big housing bubble last decade, I think individual markets will have very big differences. Some will go up like a rocket, some will stay steady, and others will drop a bit or go up just a bit. You really have to study your local area and see what the trend is.

For most of the country, I think right now is a perfectly reasonable time to buy a home.

Q8: Jug of water
I’ve started keeping a bunch of water at my desk to drink during the day. I keep it icy cold. Whenever I feel hungry or thirsty, I drink a big glass of it. I think it’s helping with weight control (except my weight went up quite a bit when I first started – about six pounds in the first week – but then it’s dropped about two pounds a week).

Anyway, I’m trying to figure out how much money this is actually saving me. How would you even begin to figure that out?
- Gordon

The best approach you can take is to compare your “before” and “after” food spending. The problem is that you likely don’t have a good example of “before” with which to figure this out.

If you can, go back and examine your food spending for previous months, then compare them to a month spent with your water routine. That’s probably the best way to see the results of this change.

You can probably tell mostly by seeing how your lunch routine has changed. Do you skip lunch now (or eat a smaller one)? What about dinner? If you’re eating less at those meals, you’re saving money in the long run.

Q9: Why not credit unions?
I work for a credit union consulting firm. Honestly though, why would anyone not choose a credit union? Credit unions are based on 7 cooperative principles that promote the health of the member over making money. When banks stopped lending during the recession, credit unions continued to do so. Since credit unions are cooperatives and members are part-owners, it makes sense that they put members over profit. With virtual branching technology being what it is today, even credit unions with fewer branches can operate just as well as a big bank…or even ING (now capital 1).

I’m a longtime reader of your site, and I always thought you were pro-credit union. I actually hadn’t heard of a credit union before I read TSD. I was just curious what you would think.
- Joe

I am completely fine with credit unions and I often suggest people try them out, particularly if they’re in a mediocre credit situation.

However, the differences between credit unions and normal banks were much more pronounced twenty or thirty years ago than they are now. Credit unions have copied a lot of practices of ordinary banks because, frankly, they make sense.

My experience has been that the advantages of credit unions really varies from union to union. Some unions are much better, while others are essentially identical. It never hurts to shop around.

Q10: Self-improvement versus self-loathing
Whenever I read your articles about improving myself, I get all excited and try something new and then a week later I fail at it and I end up hating myself because of it. Why does self-improvement turn into self-loathing so often?
- Marjory

A self-improvement project that ends up failing isn’t necessarily a failure. It’s only a failure if you give up entirely on making that change in your life without real reasons for doing so.

Many self-improvement plans fail for various reasons. That’s fine – it’s part of self-improvement. What you need to do after a failure is look at the failure and figure out why it happened. Why did it fail?

If you can take away some reasons for the failure, you can use them to build the next plan – one that’s more likely to be successful.

Remember, even a small step in the right direction is a huge success if it’s sustainable.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Spring Allergies appeared first on The Simple Dollar.

In my area, quite a few parents seem to enjoy having rather expensive birthday parties for their children. I’ve seen parties where a circus seems to have been set up for the purpose of a birthday celebration.

Other parties are much more casual. I prefer the ones that take place at a park where the children run around in the fresh air and play together. My son attended one a couple of years ago where all of the participants dressed up as superheroes using pieces of cloth and construction paper chest badges.

Give me the latter style of party any day of the week. The children seem to have just as much fun, the parents seem a lot less stressed out, and the bill is a lot smaller.

Q1: Financial account security
How can one protect bank accounts from hackers and identity theft? I feel vulnerable with my savings (and checking). Would you suggest having several accounts? There is miniscule interest, of course. I do not do bill-paying online, but I have accounts online. I also wonder about my ETrade account security. Short of putting our nest eggs under mattresses, what do you suggest?
- Evan

Frankly, no one can protect you from industrial identity theft – things that take place at the bank, in other words. Your best blanket protection against that is to carefully read your bank statements, but you should always do that anyway.

Spreading out your savings and checking accounts increases your risk of a compromised account, but reduces the impact of a single intrusion. Seven accounts with $100 each means seven times greater likelihood of an attack than one account with $700, but the effect of each attack is only one-seventh as bad. It really depends on what you view as a bigger concern.

Your best approach with online banking is to use a very complex password and non-intuitive answers to security questions. For example, you should never have a security question be “What was the color of your first car?” and have your answer be “blue.” An identity thief will try that very quickly. The more complex your passwords and security question answers, the harder it is for an outside person to access your account.

Q2: 401(k) and company stock
At my company, the company’s contributions to our 401(k) is in the form of company stock. These shares are fully vested once you’ve worked there for five years, meaning before that you can’t sell them within your account. I’m at the five year mark and I’m wondering if I should sell them.
- Mitch

If selling them means that you’re simply changing them within your account into a different investment and does not mean actually taking money out of your 401(k), then it’s probably a wise move to sell most of it.

I would be hesitant to have more than 5% or so of my retirement in the stock of a single company, regardless of how much I trusted that company. It’s just not good in terms of diversifying your investments.

Should you be at less than 5%? I probably would. Again, it really depends on your sense of stability in terms of the company’s long-term future.

Q3: Closing credit cards
I have a question about one of my credit cards. I have had this credit card for about 8 years. It has had a zero balance for about 4 years (I, never touched it after I got married and joined my husband’s account). I don’t like the idea of having an open line of credit out there (thinking of hackers and the like) but will closing the account affect my credit score?
- Tessa

Do you have any other credit cards that have been around for more than a few years? Do you already maintain a low balance on the other cards you have?

If the answer to both of those is yes, cancelling the card will have only a negligible impact on your credit score. If your answer to those questions is no, then cancelling it will have a bigger impact.

Essentially, you need to evaluate what your credit situation looks like without that card. Do you still have a long history? Do you still have a low percentage of your total credit limit used up?

Q4: Credit card rewards
I’ve had [a rewards credit card] since 2008 and I have yet to cash in any rewards on it. I have been saving up the rewards points for a travel package. My boyfriend says this is a mistake and I should just cash it all out now for other stuff like gift cards. What do you think?
- Erin

If your card gets cancelled, it’s likely that those rewards will just vanish. You may or may not get a window of opportunity to use what you have left depending on the agreement with the card issuer.

In other words, you might sit on the rewards, get close to your total, then have the card cancelled and lose all of it.

If you can get other items that you can easily liquidate for those points – like Amazon.com gift cards – then I’d get those right now. Use them for the equivalent amount of nonperishable household supplies, then put that same amount into savings and save it for the trip you’re dreaming of.

Q5: Videos on personal finance
Are there any good videos on Youtube on basic personal finance? My brother doesn’t like to read but seems interested in the topic.
- Leon

The best starter is probably Dave Ramsey’s ten part video series on his money makeover. It’s a great little start.

My favorite one-shot personal finance video is Warren Buffett’s single best personal finance tip.

This is another good video series on the personal finance basics. It has a bit more of a “classroom” feel.

The Khan Academy has some great videos on finance in general, though they don’t apply directly to personal finance. I just like to give a shout out to Khan Academy as often as possible because I consider it perhaps the best source for video learning on the internet.

Q6: Credit card debt after death
I’ve been working two jobs for over a year, putting every spare dollar towards my credit card debt. I intend to keep doing this until my debt is gone, but I have a question. As a single person with no dependents, if I should die before my debt is paid off, what happens? I have a 10-year old car that’s paid off, a house that will be paid off in 2016, and a few hundred in my savings. Would these assets be taken by the bank? And then what?
- Nathan

It depends on your will, basically.

Your estate’s total assets and debts will be brought together and either a court or your estate’s executor will resolve all of it, making sure all debts are paid. The remaining value of your estate passes to your next of kin or whoever you specify in your will.

If you don’t have enough assets to cover your debts, then the creditors will just take as much as the court gives them (assuming the debts are only in your name).

Q7: Company loyalty
I’ve worked at my job for six years now. I have great relationships with all of my coworkers and I love the work. Another company contacted me and has offered me almost three times as much salary to join their company. I went in and talked to my boss about this and he gave me a raise but said that they simply can’t afford to match the offer, but he stressed how loyal the company is to its workers. They really are. I can’t remember anyone ever being let go unless they were either doing nothing at all or were causing real workplace issues. I am torn between loyalty and cash.
- Deann

It really depends on a lot of things you don’t address here.

What is the new company like? Do they have a track record of treating their employees well or are they a meat grinder? Do people like working there or are they stressed out all the time? Has the company been stable for a long while or have they had to purge employees in the fairly recent past? Doubling your take-home doesn’t mean much if your life becomes miserable for it.

Also, do you need the extra cash? Are you actually having difficulty making ends meet right now, or are you just hoping for some lifestyle inflation?

A bird in the hand is worth two in the bush. Unless there’s another compelling reason to move, I would stay put.

Q8: Expressing non-financial gratitude
Through careful planning, some smart career moves, and a bit of luck, my parents (both in their early 60s) have become more than comfortable financially over the past decade. Over that time, they’ve been more free to travel and sometimes invite my sister, me, and our spouses along–and they often take on a significant portion of the cost for the trip, paying for our hotel rooms and/or airfare. As a young, cash-strapped grad student, I happily (and gratefully) took them up on the chance to visit places I would never be able to afford otherwise and spend time with my family at the same time.

As I’ve gotten older, I’ve started my career, gotten married, and bought a house, and my spouse and I are expecting our first child. After some initial struggles, we’re in fairly good shape financially and working to rid ourselves of debt, and with a baby on the way, we’ve been paring our spending down even more. My parents have invited us on a last pre-baby trip to a beach town with them; they’d pay to rent a condo for the four of us, and my spouse and I will use airline credit to fly there, minimizing our costs (and with a full kitchen, we can eat a lot of meals in to save some money!). It’s a trip my parents had already planned to take themselves, and they’d love for us to join them. I feel bad, though, because while we *could* afford to take such a trip on our own (it would be tight but do-able), we’re trying to be good and not spend the money. My parents understand this, I think; I offered to send chip in our half of the condo costs, but they decided to pay for it as a gift in lieu of, say, birthday and holiday gifts that they might otherwise give–and, I think, as a way of supporting our financial choices.

My question is this: When a friend or family member enjoys “treating” you in this way (over and over again) and you can’t return the gesture on the same scale, what are some good ways to express your appreciation & gratitude? My spouse and I have generally done things like treating them to a nice meal or two while we’re away or doing as much of the grocery shopping & cooking as possible for meals eaten in (my spouse is a great cook). I’m also planning to take lots of photos on the trip and present my parents with a photo book afterwards; I did something similar for a family trip years ago, and they loved it. I just feel like it isn’t enough sometimes! What else would you suggest?
- William

You’re already doing the right things to show your gratitude. You’ve got to remember that the people doing this are doing it because they want to do this and they enjoy your companionship on trips like this.

A heartfelt handwritten note also helps. It can be hard to express what it means in words, but find a way to write the words down yourself in your own handwriting. It really means a lot. Just stick it in their luggage at the end of the trip.

I don’t think you really need to do more than you’re doing, though. You’re already doing the right stuff.

Q9: Lifestyle inflation as reward
I am sick of you and other personal finance bloggers talking about how lifestyle inflation is such a bad thing. Lifestyle inflation is my reward for working my tail off for fifteen years.
- Austin

If the reward you truly want for fifteen years of hard work is lifestyle inflation, have at it.

I experienced huge lifestyle inflation from about 2003 to 2006. I spent like a madman buying all kinds of things. I had a shiny vehicle to drive, nice clothes, lots of gadgets, every DVD or video game I wanted, and on and on and on. After buying all of that stuff, do you want to know what feeling I was left with in 2006? Emptiness. Fear. Entrapment.

Having nice stuff is wonderful, but it comes with a price. Every time you buy something, you’re taking money away from something else in your life. Lifestyle inflation means you’re spending your dollars on material things that you lived without just fine before the inflation started, and those dollars are going away from securing a long and stable future for yourself that’s free from the shocks of job loss and opens the door to walking away from work entirely.

To me, there are no material things in the world that I would take in exchange for the low stress of debt freedom and having money in the bank. I’d rather eat beans and not worry about tomorrow than eat steak and have stress. You might find a different trade is right for you and that’s cool. It’s just not the trade I want to make and, well, I’m going to spend my time talking about the trade that has brought the most value into my life.

Q10: How much is commute worth?
My lease ends in a month and I’m looking at two apartments. One of them is about ten minutes away from my job and the other is about thirty minutes away. The cost difference between them is about $200 a month after you factor all of the transportation costs out. Is the closer one worth $200 a month?
- Quinn

Assuming that the trip length is one way, you’re talking about a difference of forty minutes in commute five times a week, and with four weeks in a month (let’s use that as a baseline), you’re talking about fourteen hours of commute time or so per month.

Now, compare what you’d do with that time on your commute versus what you’d do with that time if you weren’t commuting. Is whatever you would be doing worth $14 per hour?

For example, if you’re taking mass transit and you’d spend that time reading a book… but if you were just going home and reading for a little while anyway to unwind, it makes no difference.

If you’re not getting additional value out of the time you save not commuting, then there’s no reason to pay money to reduce that commute.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Children’s Birthday Parties appeared first on The Simple Dollar.

I always thought it strange that my parents – especially my mother – preferred to listen to the music that was popular when they were about fifteen years old up until they were about twenty five years old. In their case, that meant that I heard a lot of music from the 1960s and 1970s. I can still sing along to an awful lot of songs from that time period – everything from Wings to The Supremes to The Carpenters.

Flash forward to today. I listen to some new releases, but I feel most comfortable when I’m listening to music that I was first exposed to between the ages of fifteen and twenty five. In other words, if it came out between the early 90s and the early 00s, it fits me like an old glove.

The more things change, the more things stay the same.

Q1: Roth 401(k) conversion worth it?
My employer has stated that they will be providing a Roth 401k where previously we had a regular 401k. I currently have about $30,000 in the current 401k and I wanted to find out if it would be be better to convert the old 401k to a Roth one or to leave it as is. I’m 27 years old.
- Emily

The decision to do this conversion is very similar to the decision to convert a traditional IRA to a Roth IRA. I recommend using this calculator. It was designed for traditional and Roth IRAs, but I’d trust the result for traditional and Roth 401(k)s as well.

I’d happily run the numbers for you, but I don’t have nearly enough information. If I used the defaults in the calculator plus the info you gave me,

Unfortunately, the biggest factor in determining which you should go with depends on your income tax rate, both now and then. Of course, you have to make a nearly blind guess as to what the rates are going to be in forty years. My suggestion? Assume that it will be high, because you won’t have many regrets if rates turn out to be lower.

Q2: Convincing myself of better tomorrow
I can see why it makes sense to save ahead if you foresee a bright future, but what if you don’t? My family has a long history of people not living past fifty, so I can’t see why I should save for retirement. I don’t have kids either. Why should I save?
- Andrew

This seems incredibly fatalistic.

If I were in your shoes, I’d hold back on the personal finance advice for now and spend some time talking to a mental health professional. An incredibly bleak future perspective has a tremendous negative impact on your life right now.

If there are recurring health problems, you should talk to medical professionals to see what you can do to minimize their impact.

Again, I don’t know the reasons that are causing you to feel this way, but I can say that feeling that way leads down a very dangerous road.

Q3: Loan considerations
When banks or credit unions are considering whether or not to give out a personal loan, do they look at your overall net worth (including assets you have with different institutions) along with your credit report or do they just focus on your report and your holdings with them exclusively?
- Mark

It depends on their process. Usually, a big part of that process is the application you fill out because, along with your credit report, that’s most of the information they use to determine your loan.

Some banks and credit unions use automatic underwriting, which means that computers analyze whatever data they have on hand. Others do manual underwriting, which means that a real person looks at your information.

Generally, I’ve found that manual underwriters are better if you have an unusual case – not much credit, an identity theft issue, or something like that.

Q4: Suspected theft
I’m pretty sure that someone in our house is taking items at a slow rate and selling them off. I initially figured it was my teenage son but I’m pretty sure it’s not him after watching carefully. This leaves my ten year old daughter or my wife. How do I figure out who is doing it? How do I handle it?
- Andrew

I don’t know how you figure this out other than using security cameras or other similar investigative tools. You could set up security cameras in the areas where you expect things to be stolen, then review the video after you notice more things missing.

Regardless, there are trust issues going on here. It may be that items have simply moved to another location or been placed in storage. You seem to immediately be jumping to the conclusion that someone is stealing from you.

Before you believe that about your family, make absolutely sure that you’re not blaming innocent people.

Q5: Long versus short term investing
How do you feel about the strategy of investing for the long term (401K and IRA using fundamental analysis) and trading for shorter term gains (discount brokerage account using technical analysis) as a way to have a funded retirement and side source of income now?
- Jerry

It is very hard to make significant money on short term trading unless you are very well funded and are able to take on the financial risk of trading on leverage (meaning the brokerage is essentially extending you credit to make short term trades).

If you don’t have those things, you’re taking on a ton of risk. Actually, you’re taking on a lot of risk even if you have that.

If you really want to trade for short term gains, use only money you can completely afford to lose because it is extremely likely that brokerage fees will eat up most of your gains and you’ll end up taking a lot of losses on the chin.

Q6: Partner possibly evading taxes
I just learned that my boyfriend has never paid income taxes. He’s earned a freelance income for the last several years. What should I do?
- Alex

I would contact a tax attorney to figure out the appropriate steps.

Assuming he provided an accurate taxpayer ID to his employers, the IRS is likely aware of much of his income. They may not have taken action on him because of their backlog of issues, but it’s very unlikely that he’ll get away with it over the long haul.

His best approach is to deal with it now, as it will keep the interest he owes as low as possible. He also may be able to negotiate it down.

Q7: Experiences over stuff
Over the years (been reading since 2010, I believe), you and others on your blog have talked a lot about prioritizing “experiences” over “stuff”. However, I don’t understand the difference. The only reason people buy “stuff” is to have experiences. If I purchase a movie, game, or book, the “stuff” doesn’t matter– what I’m really purchasing is the ability to have an experience (watching a movie, playing a game, or reading a book). Further, raw “experiences” are typically one-offs; a trip to Washington DC is a great experience, but can only happen once. “Stuff” usually allows for recurring experiences– for example, if I purchase a television show, I can experience it multiple times with all sorts of different people.

So, it seems to me like the difference is buying an actual experience (what you call “experience”) versus buying potential experiences (“stuff”). It seems to me that “stuff” is a better long-term investment, since it usually allows for recurrence and a greater mix of possibilities. Am I right, or am I missing the point?
- Ronald

If you’re buying a book just to have the experience of reading it, why not just check it out from the library for free? The difference between those two situations is “stuff,” not “experience.” The same thing happens when you’re comparing renting a movie for $1 from a Redbox versus buying one or playing a board game at a local community game night versus buying one.

You would have to read a book you purchased many, many, many times to make up for the “cost” of a library trip. You’d have to watch a program a lot of times to make it worth buying it.

Also, a lot of experiences are free. I look at my local community calendar all the time in order to find free things to experience. It doesn’t cost anything to play disc golf at the park or to go to a community concert or… well, thousands of other experiences. “Stuff” is very rarely free.

Also, stuff requires storage space, which eventually means larger living quarters. Experiences don’t take up any space at all.

Q8: Idea journal?
I’ve been reading The Simple Dollar’s archives from the start and I had a question about the “idea journal” you’ve mentioned many times. What kind of journal do you use for that?
- Geoff

Right now I use an Evernote Moleskine that I was given as a gift. Whenever I fill a page with random ideas, I take a picture of the page and save it in Evernote. Since I usually write my notes in big block letters, it just translates the words into searchable text which I can refer to easily.

Most of the journals I use are gifts at this point. Family members have figured out that I always like nice journals and they often give them to me as gifts.

As for what an “idea journal” is: it’s just a journal I try to keep with me all the time to jot down notes as they come to me. If I don’t have it nearby, I’ll use an app on my phone, but I prefer to just use a journal.

Q9: Paper product comparison
Recently I have begun trying to compare the prices of Bath Tissue and Paper Towels between various retailers and on-line. I have found the brand I like, the problem is it’s not a straight-forward comparison. Bath Tissue contains standard rolls, double rolls, mega rolls, big rolls, etc. I have counted 7 different sizes of 1 brand! Paper Towels is the same, with single rolls, Big rolls, etc. I believe the manufacturer purposely does this to confuse shoppers and make comparing prices difficult. What is the best way that you have found for shopping around for these 2 items?
- Ellen

Count the sheets, not the rolls.

Let’s say you’re comparing a 9 pack with rolls that have 120 sheets each with a 36 pack that has rolls with 90 sheets each. Just multiply the number of rolls in the pack by the number of sheets per roll.

In this case, the first pack has 1,080 sheets and the second pack has 3,240 sheets. Then, you divide the price by the sheet count and go for the pack that has the lowest price per sheet.

I agree – it’s often hard to interpret at a glance what the best deal is. My solution is to just keep a calculator on hand. If you can save even a fraction of a cent per sheet, it adds up to dollars when comparing large packs.

Q10: Figuring out used bookstore
Theres a used bookstore across town that I have started using but when I go there I don’t recognize any of the books. I have asked for help finding ones I might like but the people working there just seem lost. How can I find good books there?
- Jill

I’d do some homework in advance.

I’d start off by making a list of authors whose books I’d be interested in reading. List authors that you know you like, then look for the well-known authors in genres you like and write down some of those names. Try to make a list of at least twenty authors.

When you go to the store again, just look for books by those authors. I can’t imagine a used bookstore that would have zero copies of any books by such a list of authors.

If you need help when there, just tell the person you’d like to find books by these authors. It might be that they have no idea how to answer you when you’re asking for generic book suggestions, but they might be really helpful when they’re given a more specific request.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: The Music of Our Youth appeared first on The Simple Dollar.

One of the most powerful indicators I’ve seen in terms of figuring out one’s job responsibility is how much extra planning and effort they have to take on in order to carve out time for a vacation from that job.

Most jobs that earn a low income have very little planning for vacation. On the other hand, jobs with a significant income often require a ton of planning for personal time.

This has almost perfectly matched the jobs I’ve had in my life. The jobs where I made minimum wage required basically no planning at all for personal time. I had to tell my boss or fill out a form and that was basically it. Other jobs where I earned significantly more required a ton of planning ahead for time taken.

With greater income comes greater responsibility.

Q1: Debt piled up – what’s next?
We both went to college and graduate school and have student loan debt for both. We both have ok jobs. We were doing great until we got married, spent too much on the wedding/honeymoon then bought a house. The house has turned into a bit of a money pit with emergencies like the heater having to be replace and putting it on a card. We have about 25k in credit card debt in addition to our student loans and mortgage. Now we want to start a family but don’t feel like that is responsible now that we have all this debt. We have tried calling our credit cards to try to consolidate payments onto one card. None will agree to do so – we have one card that has a balance of 10k and 29% interest that they refuse to lower. We cannot balance transfer because no companies will give us a higher line of credit. We are just able to make all our payments every month. We have already cut back on some items and limited our budget to minimal spending (gas, groceries etc) Are student loan consolidations a good avenue to pursue? They are about a quarter of our monthly budget which is huge.
- Kelly

You are in a position where monthly cash flow is a significant problem. Debt consolidation might help, but it really depends on two things.

One, does it lower your monthly payment? If you consolidate several debts into one, is the monthly payment for that one debt lower than the combined payments of the other debts.

Two, does it lower your overall interest rate? You don’t want to consolidate your loans if you’re not getting a better interest rate out of the deal. If you’re not sure whether you’d be better off, just multiply the interest rate by the balance of each debt you’d want to consolidate and add the results together, then compare that result to multiplying the consolidated loan’s balance to that interest rate. Whichever number is lower is the better deal.

Consolidation can hit both of those things, but you may need to shop around to find the best deal.

Q2: First steps for small business
I’m a thirty three year old single female. I’ve been the manager of a large and popular bar for eight years and have basically been running the place from top to bottom for the last five. I would like to open my own place because I’d rather keep some of the profits of this work for myself. I don’t have a lot of money but I do have a lot of knowledge of how to make this work. Where do I start?
- Jill

The first thing you should do is head down to your local library and check out some books on starting a small business, particularly any that focus on service businesses. I don’t have specific book recommendations for this aside from browsing through several and picking one that is clear enough for you to understand. As you’re reading those books, try to apply what you know about bar management to what you’re reading.

Once you’ve read through those, you’ll want to write a business plan that clearly explains how you intend to run this business. What will it cost? Have you done market research and have you clearly identified places where such a bar might succeed? What licenses will you need? What sort of business is this (LLC, etc.)? You need to have clear answers to these questions and many more. The books you’ve read should help you work through these questions. A business plan isn’t just something you make to show banks or investors. It’s ideally something that will help you really figure out all of the challenges of this business as you write it.

Once you have a good business plan (and, ideally, revised it a few times and had people help you revise it), you can start shopping for investors and for small business loans. Again, the books should help you with this process.

It’s a long road and it’s a much different road than just managing an established business, but if this is a step you’re wanting to take, this is the path you should follow.

Q3: Challenges of working from home
My husband and I are in our early 30s. After I completed Grad School, we both had good jobs in the New England area (we’re engineers). In early 2011, we accepted jobs we couldn’t refuse in the deep South. The past two years have been very beneficial for our careers and have allowed us to get GREAT jobs back in New England. Both my husband and I are used to working office jobs. When we move back to New England, I will be working a 8am-6pm job and my husband will be working from home.

We are ready to settle down and buy a house as soon as possible upon return, and we hope to start a family. We are in excellent financial standing (i.e. contributing 10% to our 401ks, have a 1 year safety net in savings, and will be able to put down 25% on a house).

What can we claim on taxes with my husband working from home? I’ve read that we have to figure out what percentage of our house is used for his work and then we can claim that percentage of our insurance and utilities. Can we claim equipment and tools he needs to purchase? Should be be keeping receipts for everything?

Secondly, I suspect each day when I leave for work, he will still be sleeping, and that when I return he’ll probably be done for the day. His job will be based more on deliverables than working 8-hr days. How do I not get mad at him? How much of the household duties should he be doing if he’s at home and working 4-hr days? For the past several years, I’ve been doing all of the cooking and the majority of the cleaning, is it fair to expect him to do more if his work days are shorter?
- Jill

Yes, keep receipts for every purchase related to his work. If you use part of your home for work, make sure that a specific part is used only for work and know what the square footage of that area is along with the rest of your home. A good tax software package will help with this.

As for balancing work-life issues, you’re going to just have to figure that out as you go. It’s a hard adjustment and it’s one that still sometimes causes conflict with Sarah and myself. I suspect the time issue you mention isn’t going to work out exactly like you think it is from this angle. There are lots of challenges and hidden time traps that come from working at home, not the least of which is household tasks that the out-of-the-home spouse begins to expect from the stay-at-home spouse. There’s also a complete loss of office interactions and workplace camaraderie, which can be surprisingly hard to deal with. I consider it much easier psychologically to work in an office outside of the home, actually.

These issues really deserve their own full article (which I’ll write at some point), but I will say that you guys owe it to each other to talk through these issues and figure them out together. If you’re angry that he’s asleep when you get up for work, you need to express that clearly and figure out what’s going to work that makes everyone happy.

Q4: Inflation’s impact
How much should I worry about inflation’s impact on what I do with my money?
- Erica

I think you should be aware of it, but I think it’s not very useful to obsess or stress about it.

It’s basically impossible to predict what will happen with inflation rates in the future. People constantly predict everything from hyperinflation to deflation, but we’ve mostly seen very low inflation over the past several years. What will we see in the next decade? No one actually knows. If I were to guess, I’d guess that we continue to have inflation at a rate somewhere close to the historical average, but that’s a guess – no more, no less.

Your best approach is to just seek the best possible return on your money regardless of inflation and to diversify that money into a number of different investments to protect yourself from volatility as you grow closer to the time to withdraw that money.

Q5: Wills through LegalZoom
I need to set up a will for our family. Should I go to a lawyer or would it be worth it to use a online will maker like Legal Zoom?
- Sean

LegalZoom will work perfectly fine for setting up a simple will and most other straightforward legal documents. Most of these types of common tasks are really straightforward and a process like LegalZoom really works well for them.

This assumes you’re not doing anything too unusual, of course. If your will or living trust is going to be complex and go far beyond a direct assignment of elements of your estate, you may want to talk to a lawyer.

My experience with LegalZoom is that they mostly move you through a simple questionnaire for things like this and if you have plans that can’t easily be described in answers to those questions, a meeting with a lawyer is appropriate.

Q6: Piracy as frugality
It seems to me that a person just wastes money buying media content when you can just torrent it for free.
- James

If you don’t want to spend money on media, enjoy the many mountains of public domain and free content already out there. It’s not like there’s nothing free to read or watch or listen to.

Someone who creates something should have the right to decide how it’s distributed to others. I’m much more likely to support people who are very open with the sharing of the content they create, but I respect that other people might make more restrictive decisions. It’s up to them because it’s their creative work.

There are a lot of creative works I’d love to enjoy and to own a copy of but I’m unwilling to pay the price for a copy of it in a form that’s maximally useful to me. That’s fine. There are plenty of other things to enjoy for now and maybe someday the price will come down.

If it’s something you just can’t live without, then that means the creators of that content have created something of value and deserve compensation for it. If the price is too high for you, then go without it.

Q7: Is stock market a scam?
My husband is convinced that retirement accounts, (like 401Ks, etc.) are “just a big scam.” He things that the stock market is just “a con” and that the only way that one person profits is at another person’s misfortune. He thinks that if he gains money in, say, a retirement account, someone else has to suffer (because a stock we own has gone up because another person’s has gone down.) He is very adamant in his viewpoint. What could I recommend that he read? Or do you know of any good podcasts? Anything that caters to his viewpoint (i.e. suspicious of the stock market) would be particularly good.
- Olivia

The stock market is just a giant flea market where people are constantly buying and selling items. On a day where there’s a lot of people buying a particular item, the price on that item will go up. Everyone selling it at a low price – say, $7 – will get sold out, leaving only the people willing to sell it at a higher price – say, $8. On that day, the closing price is $8. On another day, there might be more sellers than buyers, meaning that people only willing to sell at $8 won’t sell any. On that day, the closing price is $7.

Stocks go up when there are more people that want to buy them than people who want to sell them. As long as there are more buyers than sellers, the price will go up. As soon as that balance shifts, the price starts to go down. This is basically what goes on on the floor of a stock exchange.

A share of stock has value in that it represents a piece of the corporation that issues it and, quite often, corporations pay a little dividend each quarter to each shareholder. So, someone holding a share of that stock might get $0.50 every three months just for holding it on a certain date.

I don’t really see where “misfortune” comes into this. The price of one stock going up or down has very little impact on what the price of another stock is doing (there might be global events that affect both of them, of course).

I don’t know of any resources that address this particular perspective directly. I would start with a very elementary book on how the stock market works.

Q8: Budgeting around bulk purchases
My husband and I finally have a budget that we’re happy with, but now we’re struggling with a bit of a different issue that I hope you can help me with. We have a certain amount set aside each month for food and household items ($400, to be specific) and most months we come in just a little under that.

The problem is that I’ve really begun to see how much money bulk buying could save us over the long run, but if I buy a bunch of stuff in bulk right now, I essentially blow up our budget. How can I get into a pattern of buying bulk nonperishables while staying within our budget?
- Karen

The challenge with bulk buying is the startup cost. Your initial bulk purchase is expensive and you don’t see any of the savings for a few months. It only appears when you find yourself not buying those items.

Your best approach would be to raise your monthly food/household budget for the next few months – to, say, $500. Use that extra money solely to afford items in bulk.

After a few months of this, you will have purchased bulk versions of most of the nonperishables that make sense to buy in bulk. At that point, you can easily reduce your monthly spending back down to $400 – and likely less than that – for good.

Q9: Spending compulsion
I have a wonderful boyfriend with a major spending problem. I am 29 years old and make 38k a year. He is 34 and makes 5x more then I do, He has about 40k in credit card debt, two mortgage payments, two car payments. He has a savings/401k/retirement plan. At the end of the day, we are both pretty much, leaving paycheck to paycheck. We both recently divorce. I have a daughter, he has no children.

I managed to pay off my car, credit cards, open a savings and provide fully for my daughter in the last year without receiving any financial support form my ex husband. Since, I started my new relationship I have been a financial mess. I am spending money on meals/trips/items I normally wouldn’t. I do it because I don’t want him to always pick up the bill. Even though I am only picking up 10% it is actually hurting my pocket. I have tried bringing this issue and his response is, “I work a lot, I need to splurge to keep sane” and/or “I don’t like talking about finances, that was an issue that I had with my ex wife, I make plenty of money to spend it how I would like”.

I really love him and actually see a future, but his spending compulsion is scaring me and affecting my finances. I don’t know how to help him and at this point my self as well. Can you please advise me?? Thank you.
- Marcia

You have an incompatibility here – a strong difference of opinion on a key marital issue.

Now, no two people are always on the same page about everything. It may be that this is simply an area where you disagree and you’ll come up with a compromise that works for the both of you so you can move forward. On the other hand, it may just be something that is big enough to prevent this from working.

Explain to him where you’re coming from and your feelings on the rampant spending. If his response doesn’t involve some sort of talk of compromise, then there’s a very deep relationship problem that’s either going to need some counseling or it’s going to need to end.

Q10: Unwanted gifts
Whenever my birthday comes along or Christmas comes along, my in-laws always buy me a nice gift, but it’s virtually always a gift that I have zero interest in. A great example: for my birthday this year they got me a set of really nice Nike golf clubs, but I have never gone golfing in my life and have basically no interest in ever going. Do I need to keep these gifts or should I sell them and get something out of them?
- Thom

How does your spouse feel about this? That’s where you should start with this discussion.

Start by making it clear that you appreciate the gifts, but that they’re just almost always completely incompatible with what your interests are and what your life is like. What should you do with them? Present what you would like to do – sell them – but your spouse’s perspective is vital here since your spouse is the connection to your in-laws.

There may be family history or other issues going on here that you’re not privy to yet. I’ve been married for nearly a decade and I’m constantly learning new things about my in-laws and their family traditions and foibles.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Vacation Planning appeared first on The Simple Dollar.

April showers bring May flowers in theory, right? Does that mean that lots of April showers bring lots of May flowers?

Or, in the words of a friend living in Colorado, “April blizzards bring May confusion.”

Q1: Check expiration dates
I wrote a $5000 paper check to Investment Firm A to contribute to my IRA for tax year 2012. Problem is I wrote it on Dec 1 2012 and as of today the check has not cleared. Investment Firm A told me that they through their internal bank, Bank C, has already gotten funds and has already invested my $5000. Investment Firm A electronically deposited that check to Bank C. I have reached out to both Investment Firm A and my local Bank B teller and no one has helped me other than to say do not close the bank account and give it 90days. Well March 1st would be that 90days mark. The reason why I wanted to close out this checking account was because there were issues with those who had bank accounts opened in SC and there was a hack into the Bank B systems recently. Bank B rep who called me back after talking to my local teller, also told me that because they are a third party, they cannot call Bank C bank on my behalf and that I would have to do the work to get this internal issue resolved. What other means can I get this resolved? I feel like somewhere along the line, $5000 was taken out of somebody’s account, but it was not mine. If you could shed some light, that would be wonderful. Are there such a thing as expiration date on a check, even though it was claimed that it was already deposited? Investment Firm A still has a copy of my paper check in their file. I was told by Bank B to contact Bank C’s small claims domestic dispute department, but of course they failed to give me that number despite promising it to me on the phone.
- Lily

I replaced the names of the businesses Lily mentioned so that this note couldn’t be easily traced to her.

If I were you, I’d go to your bank and request a written policy on how they handle situations like this. Speak to a manager if you have to and get the exact policy in writing. Then, make the sensible move based on that policy.

Another step I would take is to open an account at another bank, attach your investment account to that new account, then close the old bank account and transfer the balance. If the check ends up being found as uncleared, then they can pull that money from your new account. I’d check with your investment firm and make sure that’s what would happen in this case.

If you want to contact the bank’s small claims domestic dispute department, call their main customer service number and ask to be connected to them.

Q2: Handling salary bump
I’m about to take a new job that will roughly double my salary. My plan is to do as you suggest and live on what I was earning before, but I have several costs before I make that switch such as a serious wardrobe upgrade as I’m switching from t-shirts and jeans to business casual (for which I have no clothes). Got any suggestions for a game plan?
- Mark

Figure out exactly how much you’re going to spend on your new wardrobe and other new job-related expenses and take exactly that much out of your first paycheck or two – no more, no less.

Aside from that, do exactly as you planned and continue to live on half of your income.

You’ll find that in a few years you will be incredibly glad you did things this way. Your banking and investment accounts will have very nice balances.

Q3: Cash stash
My personal finance is a disaster but I’m finally heading in the right direction. The first thing I started doing was to store a $20 bill a week in a coffee jug under the sink and after about six months there’s a lot of cash in there. I’ve been using it as an emergency fund and replacing any money I take out along with the new $20 each week but what else should I be doing with it?
- Donald

Most people keep an emergency fund in a savings account or checking account at a local bank. There, at least, it’s FDIC insured and it will earn you at least a bit of interest.

If you have any debts, I’d keep building the emergency fund until you have $1,000 in there (about eleven and a half months of total savings at your current rate), then I’d start applying that $20 per week toward an extra debt payment.

If you don’t have any debts, keep saving and building so that you’re prepared for whatever the future may hold.

You’re headed down the right path. The act of putting aside money for tomorrow is the hardest part of personal finance.

Q4: “Umbrella” insurance policies?
Can you please address these type of policies that include cancer, disability, nursing home, etc. and if you don’t need them, upon your death, they are used as life ins. ?
- Gwen

There are a lot of these types of policies floating around that combine long-term care policies with life insurance policies. In almost every case, they’re just a specialized form of a universal life policy. An example of this is Lincoln National Life’s MoneyGuard universal life plan.

I’ve looked at a few of them and in virtually every case, it’s cheaper to buy separate long-term care insurance and term life insurance than it is to buy this combined policy.

It feels more secure to buy a combined policy like this because you can be confident that you’ll eventually cash in on some of it, but the amount you pay in each month is usually far more than separate policies. If I were you, I’d buy separate policies for the needs you’re concerned about – long-term care and life insurance – and invest the savings.

Q5: Why bother?
Some days well actually a lot of days I just don’t see the point in keeping up with my finances. I don’t feel free and I feel like I have to be careful with every tiny move I make. This isn’t fun.
- Mavis

If it’s not an enjoyable situation for you, then you’re approaching it in a way that doesn’t work with your life.

For me, saving money is very enjoyable. It makes me very happy to see my savings and investments go up. It made me happy to watch my debts go down until they disappeared. With every dollar of debt that vanished and every dollar that has built up in savings, I’ve felt more and more in control of my life.

Part of the challenge was figuring out what was worth giving up and what wasn’t worth it. There were a lot of things in my life that I realized I didn’t mind giving up. There were other things that I really didn’t enjoy giving up – some of my hobbies, for instance – so I tried to find ways to retain what I enjoyed about them without spending as much money.

It takes work to find the right balance, but if you go too extreme with it, the enjoyment of saving money and having financial security is eroded. It sounds like you’re out of balance, so spend some time figuring out what it is you’re missing out on and find a way to bring it back into your life.

Q6: Is this frugal tactic safe?
When the local grocery store in town has non-perishables that go past the date, they put them on deep discount. You can buy things like jars of pickles that are perfectly fine for a quarter. My girlfriend says this is disgusting and not safe but I’ve been doing it for fifteen years and haven’t ever been sick.
- Jim

Is this a “use by” date or an expiration date?

A “use by” date is put on a product by manufacturers as the final date at which they “guarantee” a quality product. That doesn’t mean the product has gone bad after that date. It just means there’s some chance it’ll be stale.

In other words, those items might have dodgy quality, but they’re as safe to eat as they were yesterday. If there was a contamination issue, it would have been discovered long before then.

Q7: Comparing cell phone plans
My husband and I have Android phones through Sprint. We pay $156 per month to cover both of our plans (joint plan). Each time we have to pay that bill, I get frustrated at how expensive it is. Maybe it just seems expensive to me because I remember the days when I paid $20 a month for that Nokia!

I’ve heard from a few friends that prepaid phones through Walmart are a cheaper way to go. Do you know if that is true? And would we have to drive to Walmart every month to purchase the next month’s minutes?

I’m having a difficult time finding comparisons on pricing and features of cheaper cell phone options. I am “old school” and would be perfectly happy with an old flip-phone that solely makes calls. My husband needs access to the internet at all times because of his job, so his story is a little different. Our Sprint bill is mostly a reflection of the charges on his phone, mine only costs about $30 of the $156. However, when I went to Sprint to try and downgrade my Android, they revealed to me that it would be more expensive for me to do so, since my rate was grandfathered in years ago. We are eligible to cancel our Sprint plans at any time as we have been customers well past the contract commitment time.
- Denise

It is expensive, but you’re paying for more services now. Texting and particularly mobile data usage add on to the cost of your phone.

It sounds like your husband needs those things. You can shop around a bit for a service that will give him what he needs at a cheaper monthly rate, but if your husband is constantly utilizing internet access through his phone for work, you may not be able to find a “pay as you go” service that matches what he needs as they’re often strictly capped on minutes, texts, and particularly data usage.

For you alone, a pay-as-you-go might be a perfect fit, but given what you’ve described of your husband’s usage, it might be trickier for him.

Q8: Missing a 1099
I filed my taxes last Tuesday. On Friday I found a 1099 that I didn’t include on my taxes for just $8.83 in interest. Should I file an amended return for this?
- Joe

If you can do it for free, it’s probably the best move.

The worst scenario out of this is that the IRS notices it and sends you a small bill for the taxes – on the order of $2 or so. It is extremely unlikely that a 1099 for $8.83 would trigger an audit.

You can file a 1040X yourself manually with ease if you don’t have the software for it.

Q9: How is tax return bad?
You’ve said before that getting a big tax return is kind of a bad idea. I don’t get how it’s bad to get a big check from the government.
- Andrew

You should strive to have an income tax refund as close to $0 as possible. Why? Your income tax refund is just made up of money that you overpaid to the government over the course of the year. It’s not a “check from the government” – it’s the remainder of an unpaid loan that you gave to the government.

Let’s say, over the course of the year, that you have $5,000 taken out of your check for taxes. That’s money out of your pocket. When you file your taxes, you only owe $3,500, so they issue you a check back for the difference – $1,500. That means you essentially loaned the goverment that $1,500 interest free.

A better way of doing it would be to only have $3,500 taken out of your check over the year. This means your paychecks get $1,500 bigger over the course of the year, but you don’t get a refund check.

Of course, if you’re not diligent with your money, you might just waste that $1,500 spread out over the year. If you are diligent with it, you can use it to make early payments on debt or save it, both of which will add up to more money for you over the long run than just lending it to the government interest free.

Q10: RPG expenses
I hear you often mention comics, board games, and electronics in your posts. I’ve been wondering for some time now, do you play DnD (pathfinder, etc)? I do, and I know that that hobby can chew up a budget quickly.
- Dave

I have dabbled in D&D in the past and I own a gifted Pathfinder Core Rulebook. It is definitely an expensive hobby to keep up with, particularly if you feel like you must have all of the supplements.

My suggestion is to just share a lot of the books within your group freely. Establish an “owner” of each book (in case they leave the group so they can take their books with them), but essentially make all books owned by everyone in your group borrowable by anyone at any time. That way, there’s no need for duplication.

If you’re lucky, you’ll find yourself in a group with someone who’s really obsessed and buys all the books (I have a friend that does this – being a DM is his primary hobby). That way, you can essentially just borrow from that person.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

The post Reader Mailbag: Rainy Season appeared first on The Simple Dollar.

Today, April 15, is the day income taxes are due in the United States. If you haven’t filed yet, you need to file. If you can’t get it done, file an extension as soon as possible. Here’s Form 4868 if you need that extension – it’s really easy to file and gives you an automatic six month extension to file your taxes.

Q1: Selling gifted art
In the late 90′s my parents gave me two pieces of art that as a child I always admired. One of the pieces has minor water damage from hurricane Hugo back in 1989, the other one had damage only to the frame.

Years later, after the hurricane, I noticed that those two pieces were no longer hanging up in my parents house. I asked them and they said that because of the frame damage and the minor water damage they did not want to hang them up and also wanted to make room for new art they had purchased. I asked them if I could take the paintings off their hands. They agreed.

To this day I am not sure what actually happened. What I mean is I am not sure if they gave them to me to keep, to use temporarily or if they were a gift. We never really talked about it. Fast forward to 2013 and I still have both paintings hanging in my house. Not only do I still love both pieces but I love that they make me feel mature and sophisticated, as if i’m an art collector and I feel very cultured.

It never really occurred to me to find out how much they are worth but I the artist’s work featured in a gallery and it made me curious. Turns out that the smaller piece ranged from $3,000-$5,000 (with minor water damage maybe less). The bigger piece (I replaced the frame some years ago) ranges from $6,000 to $12,000! I was shocked! These were taken from the internet and not from an expert appraiser, although I am thinking about hiring one.

My questions are these: 1, how should I approach my parents about this? I mean to this day they never ask about the paintings. Should I even tell them? I doubt they would ever notice if I sold them? Of course I would feel bad if I tried to sell them without their permission.

And my second question is, should I sell them or hold on to them? Just knowing that I possibly have $17,000 hanging on my walls right now is very exciting!

My wife and I could really use that money for a nice vacation, new furniture for the house that we’ve been wanting (such as a king mattress and frame / headboard, new couch, new carpet), plus it would just be nice to have some extra cash to have for everyday use.
- Reggie

I’d have a conversation with your parents about it. Unless no one actually has any sentimental ties to these paintings, they probably would notice if you sold them, particularly if they visit your home with any regularity.

I don’t know enough about the art world to be able to identify what kind of investment these paintings are in their current form, but I do know that art needs a buyer before it can actually earn the value that it’s appraised at. It’s not like the stock market where you can reliably sell most publicly-traded stocks whenever you’d like and find a buyer almost instantly.

Should you sell them? That’s really up to you and what kind of artistic and sentimental ties you have to these paintings. If the cash value and what you can do with that is worth more than the artistic and sentimental value, then I’d seriously look at selling them.

Q2: Money and anger
Whenever I have a conversation with my wife about money, we’re both angry within a minute and nothing gets resolved. I don’t know how to make this work.
- Adam

If an issue is bringing you both to anger immediately, then there are some very serious unresolved issues that you need to work through. I highly suggest marriage counseling, as you may need help working through this.

If that isn’t an option, I suggest starting with goals. Each of you make a list of things you’d like to see happen in your life over the next, say, ten years, then sit down and compare them. Agree to focus on the goals that you share above all else. Then, try to figure out what you’d need to do – not what you would have to change about what you’re doing right now, but what would need to happen – to make that a reality.

Goals are a positive thing and are easier to talk about. Mistakes are a negative thing and can lead to anger.

Q3: Stock performance question
My stocks are currently +13.66%. I am using Sharebuilder and I am currently not actively investing because I am trying to refund my emergency fund after a medical procedure. How do I take advantage of the uptick in my stock picks or should I just sit tight? At one point they were -4%. I am 29 and as I said I am not actively investing at this time. I am working on my emergency fund and saving for a downpayment. I live on Long Island so that means I’ll be working on that downpayment for a long time. I have also increased my 403(b) contributions because I can use up to 40% on a first-time home purchase. But my question for now is should I do anything to take advantage of the rise in my stocks or just hang on to them as a long term investment, which is what they are meant to be in the first place.
- Jim

Right now, stocks are definitely high, and if you use the “buy low, sell high” maxim it makes sense to sell them right now. Of course, it’s unknown how much higher they might go. Is tomorrow going to see further gains or the beginning of losses? We simply don’t know.

If you took that money out and put it into savings earning you about 1% and then continued saving at your current rates, how long would it take to reach your down payment amount? If it’s less than ten years or so, I’d probably take the money out of stocks. If it’s longer, I’d probably stay put.

In truth, that decision has virtually nothing to do with whether the stock market is high or low right now. It has more to do with protecting yourself against volatility.

Q4: Entertaining children without television
How do you manage to get anything done during the day without just plunking the kids down in front of the television? I have lots of ideas for things for them to do but they all require my time, which I don’t mind giving, but it makes it impossible to start building a side business or keeping up with many household tasks.
- Roger

I can get some things done during the day with all three children here without having them glued to the television. The key is to get them involved in open-ended creative projects.

We have a giant end roll of newspaper (which we bought from the local newspaper office). I’ll cover the whole kitchen table with it, put out a bunch of crayons, and say, “Can you guys draw me a zoo?” This will keep them occupied for at least a half an hour and usually longer.

I’ll get out a giant bucket of LEGOs or other building toys and sit them on the table. I’ll ask them each to build a castle or, collectively, build a mega-castle. Again, this keeps them occupied.

During that time, I try to get household tasks done. I save the more focused tasks like business-building and writing for times when they’re in bed or at school.

Q5: Value from used books
I have hundreds of books sitting in my basement. I don’t know what to do with them. I really only read ebooks and library books now so I don’t want to trade them. How can I liquidate these books?
- Marvin

A yard sale is certainly one option. Put them all out there for a dollar each, then drop it to a quarter each on Sunday.

You can do the same thing on Craigslist. Make a giant list of all of your books. Sell them for $1 each, 7 for $5, or 20 for $10. Tell people if they’re buying a bunch to make an ordered list because you may have already sold some of them.

If they still don’t sell, take the remainder to Goodwill. If they’re in good condition, Goodwill will take them.

Q6: Old medical debts
My boyfriend recently got a letter in the mail saying he owes over $2,000 for some medical stuff that happened when he was a teenager. We’re still in our early twenties and don’t have a lot of money, so this is a big deal for us. His aunt insists that he should ignore the debt because his credit score isn’t important (her logic was “well you won’t be buying a house anytime soon!”). I really think she’s wrong. Right now he doesn’t really have any credit to his name (I have great credit – all of our bills are in my name because I’m the one who keeps track of our finances). I feel like even though this debt shouldn’t be his problem, somehow it is, and if he doesn’t deal with it, the only thing on his credit report will be bad. He called the people and they said he can pay $100 per month but he really doesn’t want to give them any money. For the record, we have no other debts and we’re currently working hard on our emergency fund. Is it worth paying off or should he listen to his aunt and not worry about it?
- Sally

The honest thing to do is to pay it off. The debt is in his name and it was incurred to pay for a service. Not paying it essentially means someone is taking the loss on the cost of the doctor’s services and any and all equipment and material used.

Your aunt is correct in that if you don’t make any payments on a bill, it will eventually disappear from your credit report. It usually takes seven years from the last payment for the bill to disappear. If he’s 22 and the medical stuff happened when he was fifteen, it’s probably close to vanishing.

If I were you guys, I’d check his credit report. Use the federal government’s tools at AnnualCreditReport.com – that’s the site run by the Commerce Department to give people one free credit report per year.

Q7: Community volunteer opportunities
I’ve decided to spend a few hours a week with my nine year old son doing charity work as per your suggestion. How can I assess whether or not the charities are kid-appropriate?
- Annie

Call them. That’s the route I would take.

You’re right in that some charities have useful and safe roles for children while others do not. It really depends on the work that the charity does. For example, I’d have no qualms taking my seven year old to a food pantry to help stock the shelves, but I don’t think he’d be of much use on a Habitat for Humanity build site.

If you use some common sense, you can probably filter out some of the charities in advance before ever contacting them.

Q8: Breakfast recipes
I know from reading that you like warm cereal for breakfast and I love your overnight slow-cooker steel-cut oats. That recipe changed my breakfast. Given that, this new one also changed mine and it was something I didn’t see online so I wanted to share with you. I ended up combining techniques of several cooks to add fruit to oatmeal in a simple but delicious way.

Choice 1: I roasted a whole butternut squash in the oven for 90 minutes at 425. When you’re done, you get that nice squash pudding type substance and just have to scrape out the seeds. After it cooled, I put the squash into silicone muffin trays and froze it. Then, for oatmeal, I just heated the squash cube in the bowl by itself for 2 minutes and then added oatmeal and milk and heated it all together. Voila! It was so much heartier than just oatmeal and seasoning.

Next, apples. I’ve been getting more apples from my CSA than I could keep up with so I chopped them in the food processor then in a skillet combined apples, almond butter (maybe 1/4 cup?) cinnamon, nutmeg, ginger and a splash of vanilla. Cooked just long enough to thoroughly mix the ingredients. So good! It combines perfectly with pre-cooked oatmeal and a little milk for a filling breakfast that’s bigger than the sum of the parts. Both dishes have no added sugar and you wouldn’t want to add because the apples and squash are both so sweet.

I know you agree with me that automatic breakfasts are best, and these are so easy once the fruit is prepared beforehand. I have yet to freeze the apple mixture, but I expect it to work the same as the squash. Have you frozen pureed apples before?
- Shelley

Freezing apples should work completely fine, especially in the processed form you’re describing. We’ve made many batches of applesauce using a food processor and they’ve been fine after thawing.

Both of the ideas really sound delicious. I particularly like how they both go so well with steel-cut oatmeal.

I really enjoy steel-cut oatmeal for breakfast. We’ll often put it in a slow cooker and let it very slowly cook overnight. It makes for a great breakfast the next day.

Q9: Book recommendations?
I love your book recommendations that you give every once in a while in the reader mailbag. Got any new ones? I need to fill up my library reserve list!
- Denise

Three books I’ve deeply enjoyed recently:

Ubik

Why Does the World Exist? by Jim Holt is a nonfiction work where Holt attempts to answer the titular question. He interviews scientists, philosophers, theologians, and many others in an effort to answer that question. Expect some dense reading (at times) and expect to be challenged and read things you disagree with.