What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Retirement savings in interest checking?
2. Pain management and financial discipline
3. Credit card purchasing program?
4. Family or financial security?
5. Cubs
6. GTD tasks
7. Vinyl siding concerns
8. Getting away frugally
9. Roth IRA versus down payment
10. Life insurance sales pitch concerns

Over the weekend, I got a chance to see several of the newest LED bulbs in action. I was impressed.

For those unaware, LED bulbs are light bulbs made out of an improvement on the same technology as, say, the little light on your television remote. I’ve tried them in the past and been reasonably happy with them. They are incredibly energy efficient and last practically forever (on the order of 20,000 to 100,000 hours), but up until now, they’ve all seemed to put off a bit of a bluish tint in the light.

This past weekend, I witnessed several LED bulbs that were pretty comparable to incandescents, using about 15% of the power. They also have about 50 times the lifespan of an incandescent. The only problem? The price tag per bulb is around $60.

I really look forward to trying out one or two in my home, just to see if they really last that long and really work as suitable incandescent replacements. (While CFLs are cheaper in terms of total cost of ownership than incandescents, I’ve never been 100% happy with the lighting.)

Q1: Retirement savings in interest checking?
My husband & I are in our mid fifties and do not have the standard IRA type retirement savings accounts. However, we have a fair amount of savings in high interest checking accounts. I realize that saving for retirement the way we have done is extremely unsual. So the question is, is it too late to start an IRA and deposit a good chunk of money that we’ve saved at this point in our lives? Is it better to keep the money where it is although the interst rate is only around 2.5%?
- Lauren

The reason most people use IRAs is for the tax benefits. For example, Traditional IRAs usually feature a tax deduction for the contributions now (but withdrawals at retirement are taxed as income). Roth IRAs, on the other hand, don’t give you a deduction now, but you don’t have to pay any taxes in retirement, not even on the gains.

The problem with IRAs is that, in order to collect on those benefits, you do have to follow some rules that limit at what age you can withdraw the money.

It might not be a bad idea to start putting some of your money into a Roth IRA, simply to enjoy the fact that you won’t have to pay taxes on the returns. However, you will have to go through a “seasoning period” of five years before you can make those withdrawals (you’ll also have to be 59 1/2, but you should be there in five years).

Unfortunately, it really won’t save you that much, particularly if you use conservative investments comparable to what you’re using now. If you use cash as your primary investment vehicle (as you’re doing now), you’ll likely barely save $1,000 in taxes over the entire use of a Roth IRA, because you’ll be limited by the annual contribution limit and by the fact that you’re only saving on the taxes on the interest on that contribution, which will be pretty small. Plus, that savings will be spread over a lot of years starting only when you’re retired.

In other words, in your current situation, I wouldn’t worry too much about it. It’ll help a little, but it won’t be a game changer.

Q2: Pain management and financial discipline
I have a chronic condition that causes me to have a pretty strong constant baseline of pain. I have learned to not rely on meds to manage the pain. Instead, I live with it most of the time at home and only use a painkiller when I go out of the house, which is about once a week or so.

Anyway, the painkillers take away a lot of the pain, and they also leave me feeling fairly euphoric. So when I go out of the house and do normal things like grocery shopping, I’m feeling great and a bit… almost out of it.

That’s when the problems set in. I usually end up buying a bunch of stuff I don’t really need when I’m riding that euphoria. The next day, when the pain has fully returned, I look around and think, “Why did I buy all of this stuff?”

Any suggestions for how to keep financial discipline here?
- Charlie

First of all, you’re doing really well in figuring out a workable solution to your chronic pain. That’s fantastic.

My suggestion to you would be to shop only with a friend. See if there’s someone who would go to the grocery store with you and help you stick to the grocery list. Then, prepare your grocery list before you take your pain medication.

My mother and my grandmother shopped together for years like this, both for the carpooling convenience and to help keep each other’s spending in check. It helped them both, I think.

Q3: Credit card purchasing program?
I have a credit card with a major credit company and they frequently send me offers via email and regular mail to monitor my purchases, then refund me if the price drops by at least $25 within 30 days of purchase. It’s listed as a complimentary service, but I would have to register for it by creating an account outside of my already-existing online account with them. What’s the catch? What do they get out of it? Is it worth signing up for? My best guess is that I’d be giving them permission to track my purchases for advertising reasons, but I can’t find anything concrete in the FAQ or Description of Services. Where can I find what they do with my data?

Overall, I don’t think I would get much out of it (I mostly use the card for services and consumables like food and gas which are excluded from the deal) but I’m curious to know what the underlying purpose of it is. They also frequently make another offer– double bonus points– but again only if I sign up for it. Why not just give me the extra bonus points? How does the company benefit from me separately signing up for bonus services?
- Julia

Since I don’t know the exact specifics of the program, I can only speculate. My guess is that it’s a combination of things. One of them likely involves data mining and understanding your purchases.

Another one might simply involve a referral relationship with the businesses involved. For example, the lower price might be coming from a completely different business. Let’s say you buy an item at store A for $100. Store B is in this referral program with your credit card company, and they’re willing to sell the item for $75. The credit card company makes the connection. Store B pays a bit of a commission to the company for that referral. They both make money.

I would suspect that both practices are at work.

Q4: Family or financial security?
I grew up in a family with five siblings, and I would love to be a part of raising something similar one day. So I’ll want kids in the future, and probably more than one or two. I love living on a budget, am happy to making my own detergent, don’t need fancy vacations, enjoy making my own coffee instead of deferring to Starbucks, and so on. But I want financial security and freedom. I want such security and freedom to these ends: 1. To have enough money to make visit to family around the US multiple times a year and internationally about once every other year; 2. To have enough money so that the working parent(s) are in a position to take a lower-paying job if makes him/her happier or positively contributes to the overall well-being of the family; 3. To have enough money so that we can become a one-income household if it seems better for our family while maintaining (1) and (2). I want to make this happen, and I don’t know how.

I am not married and am 23, so I think I can make marked progress towards these goals if I act soon by earning and saving substantially more. As I said, I’m in grad school now. Luckily, I’m being paid for it (~$20,000/yr plus full tuition). Unluckily, my post-PhD salary will probably be ~$38,000. I am currently happy at this university, making many good friends and learning massive amounts, both in my field (philosophy) and in things-I-should-have-learned-before-I-went-to-college (time management, e.g.), but I’m not committed to academia. I enjoy it and think it’s important, but I am open to finding a job elsewhere and expect that to be only way I can reach the goals I articulated above. I’m rather smart, though professionally inexperienced and behind the curve in terms of skills like time-management and detail-orientation. I think I could learn almost anything given a few months of training (though I am not comfortable borrowing more money.)

What should I do? I do not know what skills I should focus on developing in my free time or what careers to begin pursuing. I do not know what my salary goal should be or what actionable steps there are between me and meeting that goal. The 3 goals I mentioned above are very important to me, and I would give up academia to meet them, but I do not know specifically what the next step is. Alternatively, do I need to reevaluate my goals or consider more creative ways to meet them?
- Cindy

If that’s the revenue cap of your field and you’re unhappy with that, you’re going to have to find a different career path. The longer you spend in this field, the harder it’s going to be to turn that train around because you’ll have more years invested.

I can’t tell you specifically what to do if you want to start over. My suggestion would be to start studying alternative career paths now and find one that you would reasonably enjoy doing that pays well, then move towards that path. Find someone in that field and pick their brains a bit.

I will say that no matter what you do, working hard on things like time management and being detail oriented will help you. Those are skills that help in almost every career path, so if you have opportunities to hone those skills, even now, do it.

Q5: Cubs
How about them Cubs?
- James

I’ve actually received four or five emails like this in the last week. I’ve been pretty open about being a Cubs fan for a long time, so I shouldn’t be surprised to hear about their 4-12 start.

They’re rebuilding, clearly. I expect that most of their roster (besides a few young guys like Starlin Castro) won’t be around in two or three years. I expect veterans to be traded for draft picks and prospects.

This team feels nothing like the teams that the current management team built in Boston in the early 2000s. I expected it to be dismantled. I just didn’t realize it would be this quick.

Q6: GTD tasks
I’m setting up a Getting Things Done system following your advice. Here’s my question: To what extent does your spouse participate in or share your GTD system, as related to household and family tasks? Can she add things to your inbox? Does she have an inbox of her own where you put things such as her mail? Does she participate in your “larger project planning” sessions, for example, when you decided to plant a family garden or make your own Christmas gifts? In general, I’m wondering how to manage family projects and tasks that need input or participation from both spouses within the GTD system.
- Ronald

We keep separate task systems for the most part. Our professional lives overlap very little, and our hobbies and such only overlap to a certain extent.

We also maintain some specific domains over household tasks that each one of us is responsible for. Unless we need the other person to handle something specific, it’s never really brought up.

Most of our shared tasks are handled via calendars and via a whiteboard in our entryway where we write down things that we want each other to do or that mutually need to be handled.

Q7: Vinyl siding concerns
We have lived in our home for 17 years. We still owe $ 214,400 plus another $18,500 in a home equity loan. We are paying extra on the home equity and that loan will be paid off in 10 years. We are also paying extra on our mortgage payment and that loan will be paid off in 15 years. We had our house appraised about a year ago and due to the economy it is only worth about $250,000. We are not in a position to move right now and just plan on staying here until it is paid off and we are ready for retirement.

Our home is 30 years old. In the time we have lived here we have replaced the roof, windows, furnace, air conditioner, renovated the kitchen and other renovations, including landscaping etc. The home is a two story mostly brick with the exception of the upper sides and back of the house, which is wood as well as the parts under the gutters around the garage door and the soffit which gives us a covered front porch.

We have painted the wood over the years several times, but now it is in great need of replacing. We are considering vinyl siding which will run around $11,000. We have the cash to do the siding, but I am wondering if we should make such a large investment in a older home that’s value is not the same as it once was. Should we consider just replacing the wood or perhaps there are other options to consider that would be less costly.
- Margaret

There are a lot of factors to consider here. How does the cost of wood for that area compare to the cost of vinyl siding there? Is it a close cost, or is the wood significantly cheaper?

If you plan on living there for a long time, you’re going to want to go with whatever is going to give you the lowest cost of ownership over the time you live there. If I were you, I’d get estimates of both types of siding along with estimates on their lifespan. Consider other types of siding as well – I know a person who loves their aluminum siding, for example.

What you’re really going to want to do is try to figure out the cost per year that you intend to live in the home. If you’re going to live there twenty years, let’s say, will it last that long? Will it still look good at the end of the twenty years or will you have to replace it to make the house sellable? Ask those questions when you’re shopping around, then go for the best bargain you can find.

Q8: Getting away frugally
How do you and Sarah get away from it all? My husband and I retain sanity with four little ones at home by occasionally going away on weekend trips and leaving the kids with grandparents.
- Janice

We take short trips, too, on occasion, but we actually tend to enjoy weekends or other short periods where the children are with grandparents and we’re at home.

During those times, we tend to get a lot of things that were “backed up” out of the way. We also tend to spend a lot of time together without the children.

You don’t really need a place to get away. You just need each other.

Q9: Roth IRA versus down payment
My wife and I are respectively 24 and 26. We are nearing our first anniversary of marriage. We are debt free and have just wrapped up our emergency fund with about 4 months of expenses readily available if needed. Currently, we contribute 8% of my salary to company 401k that comes with a 4% match. We live relatively cheaply and have close to $1500 per month of expendable income. We would like to start looking at buying a house while the interest rates are so low. We would like to save at least $15k for a down payment on a house, which would take 10 months if we maintain our expendable income. We are not in a huge hurry to buy a house, but we don’t want to miss out on these interest rates either. We would like to start contributing to our Roth IRA’s too, but that would delay the savings for our down payment. Would we be hurting ourselves if we delayed Roth IRA contributions while we save for a down payment, or should I try to find a healthy mix of Roth IRA contributions and Down Payment savings? What would you recommend as a healthy mix if you think the latter is best?
- Andre

I think that your current retirement savings are pretty solid, particularly given your age. Starting early with that level of savings means not having to worry about it much later on.

Given the rest of your situation, I’d start saving hard for that down payment right away. A down payment of 20% on a home will really help you to get a good interest rate.

If you find yourself at the end of the year and feel like you’re not quite ready to move yet, you can certainly take a chunk of that savings and contribute it to a Roth, which is certainly a good move.

Q10: Life insurance sales pitch concerns
I recently sat down with my life insurance agent. He was trying to explain to me the benefits of whole life insurance. He has tried this in the past and I usually end up confused. I am a little more investment saavy than I have been in previous meetings with him and I was wondering if you could verify/advise on what he said.

He said that the whole life insurance policies that I have, have a cash value that grow in a money market account untaxed. whenever I want the cash I can either borrow it at 8% from the poilcy or cancel the policy. he said that over the last 10 years the average return is ~8%. right now they are giving 5.85%.

He says that this is better than a ROTH IRA because I dont have to wait until i am 59 to get the money. He also said I should not pay down my mortgage (250,000 at 3.99%) if i am having trouble paying the premiums. he agreed that I should be contributing to my 403B to maximize whatever match i could get but after that I should apply to my premiums.

I currently have it set up so that dividends that I get offset the premiums. I am unclear how much this hurts the growth of the value of the funds.

In general I trust this person, but I understand that he is a salesperson. I also understand that this sounds a bit too good to be true. am i missing something? is he correct in his prioritization of savings? if all of this is indeed true, then assuming i can make the payments, should i be reinvesting the dividends and pay into this as much as i can?
- Monica

He’s probably correct with regards to the current state of your whole life insurance policy. I can’t say that for certain without the documentation, of course, but it seems on par with a long-established whole life policy.

Generally, whole life policies are a poor deal at first, but grow into a reasonably comparable deal over the long haul when comparing them to term life insurance paired with an investment account.

You’re likely past that hump, particularly considering that your returns on your cash value are higher than your annual premiums. There are a lot of variations on whole life insurance, so those observations may or may not hold on your specific flavor of policy.

If you’re really concerned about the policy, I would suggest finding a fee-based financial advisor – not one who earns commissions from selling you products – and having them review your situation as a whole.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Handling surprise bonus
2. Reporting suspected crimes
3. Car purchase difficulties
4. Diversification question
5. Protein in diet
6. Investing in vintage sports cards
7. Roth TSP?
8. Recovery in multiple ways
9. How to start selling items
10. Great dryer sheet tactic

Have you ever entered a conversation where your only goal is to listen and completely understand what the other person is saying?

I made a conscious effort to practice this skill quite often this week. I mostly did it by simply listening to what they were saying and then either rewording it in my own words to make sure I understood or ask a clarifying question.

What I found was that people loved to talk to me and they often felt like we had bonded after our conversation.

People yearn to be listened to.

Q1: Handling surprise bonus
My wife recently got a letter saying that she will be receiving a bonus of about $500 after taxes. This was not budgeted into our plan.

My question is this: We have been following a budget for the last several months and have categories built for most of our expenses (We just celebrated our first year of marriage, and didn’t combine our planning etc. until recently as we both have careers mine for the last 12 years.)

We are on a 4 year plan to pay off our c/c debt as well as most of a student loan, and have started an emergency fund. We are renting within our budget about 925 per month. Food costs are pretty reasonable. (we’re Vegan, and have found that eating this way is not only cheaper, but far more energy boosting and sustainable for our local area) Car we paid for in Cash.

Should we take the funds and fund our Emergency fund quicker? Put the extra funds towards paying down a card a bit faster? Or invest in Food/Silver/Gold for the coming Collapse (a bit tongue in cheek, but I am worried about the state of our fiat currency system.) We live in a City and have connected with a community and are learning how to garden etc.
- Alex

If you don’t have an adequate emergency fund, I’d put that money into your emergency fund. You’ll be incredibly glad to have it the next time an emergency happens and you don’t have to bring on additional debt to make it happen.

How much of an emergency fund should you have? I’d target having one that equals two months of living expenses for each dependent in your home once you have your high-interest debts paid off. Before that, I’d have an emergency fund of about $1,000.

I have mixed feelings about the food and gold investments. Gold is a very volatile investment. If you buy it, you’ll probably get some return on your money, but it’s going to be a very bumpy ride as long as you hold it. I personally would not buy gold while I was holding significant debt.

Q2: Reporting suspected crimes
A few days ago, I witnessed what appeared to be the tail end of an armed robbery. I considered calling the police, but I didn’t for a variety of reasons (I was in a hurry, I didn’t know for sure what was going on, etc.). Since then, I’ve been troubled by the whole thing. Is it my obligation to always report anything like that? What would you do?
- Angela

My rule of thumb is that I will report crimes in which someone or someone’s property is being damaged without their consent. No one deserves to be hurt or to be stolen from. I generally won’t report crimes in which everyone involved is consenting in the behavior. In that case, I just don’t view it as anything I need to pay any attention to. People should be left alone.

The tricky area is when someone is engaging in a behavior that could easily lead to damage of someone or someone’s property without their consent, such as drunk driving. I would lean toward reporting these situations, but it’s often a gut call.

In the chaos of the moment, like this one, I think it’s hard to criticize someone’s snap decision to report or to not report something when they’re an innocent bystander. It’s incredibly hard to tell what someone is interpreting in the heat of the moment. In other words, I really don’t think you did anything wrong.

Q3: Car purchase difficulties
My wife and I currently share a car (a wonderful 2007 Honda Civic with 110k miles), but I’ll soon be starting a job where I’ll need a car, rather than being able to rely on DC’s excellent public transit system. We’re currently considering small SUVs (e.g., Subaru Outback, Toyota Rav-4). We’re looking at cars of this size because we’re planning on starting a family in the relatively near future, and need the space when we take long drives (say from DC to Massachusetts) with a child, a 40lbs dog, and a cat (in a carrier). What’s frustrating is that we’ll only need a car that size for, at most, 40 hours of driving per year; the rest of the time, we could get by with a sedan that costs less and gets better gas mileage (Camry, Optima, etc.). Is there a way to get around this, such as renting a small SUV for the long trips, or are we stuck getting a bigger car than we need most of the time?
- John

It depends entirely on how frequent the trips are and whether you’d really use the vehicle at other times.

For example, if you travel twice a year on a long trip and you won’t use the vehicle for much else, the total cost of just renting will probably be cheaper compared to the cost of buying a big SUV versus a tiny economy car. On the other hand, if you travel once a month and will use the size for other purposes, then you’re likely better owning your own SUV.

Your first step is to really figure out how you’re going to be using it, in other words. The more frequently you use it, the more I’d lean toward ownership.

Q4: Diversification question
I am a budget junkie and like to run all sorts of numbers on my monthly expenses and savings. Recently I started looking at the big picture of my investments and am concerned that either I am not too diversified (have too much in stocks) or have too much cash on hand that is earning no interest and decreasing in value over time with inflation.

I am 32 with a single income family. I save 10% of my gross income in 401K and of save approx. 25% of my monthly take home pay each month. Over time I have been able to save about $114K in various investments with no debt. My diversification so far is,
Cash – $31K – 27% – Earning no interest, sitting in bank
FD/CD – $9K – 8% – Earning 10% interest, off-shore account with Tax implications
401K – $42K – 37% – Invested in a Target 2040 retirement fund, mix of traditional 401K and Roth 401K
Stocks – $32K – 28% – Invested in Stocks & ETF

As you can see almost 65% of my money is tied to the stock market directly through individual investments and indirectly through 401K and I almost have a year’s worth of emergency funds easily accessible in cash. How should I further diversify my money or how should I rebalance so I have the right mix.
- Charlie

I wouldn’t consider my 401(k) in this analysis, as it’s invested in a target retirement fund and will essentially diversify by itself.

As for the rest of it, I would spend some time evaluating your goals. What are you wanting to do with this money? Buy a house? Start a small business? Retire really early? Figure out your goal, then diversify based on that goal. If it’s far away, be heavily into stocks. If it’s close, slide things more into cash.

Also, if you’re truly getting 0% for your cash, consider a different bank. You should be at least getting 0.5% for that cash.

Q5: Protein in diet
How do you get enough protein on a vegan or vegetarian diet? You’ve been on both. How do you get your protein?
- Emily

Beans.

That’s the simple answer, anyway. I ate a lot of beans when I was vegan – at least once per day, on average. Chili. Bean soup. Tacos or burritos.

If you’re vegetarian, you have lots of sources for protein because milk and eggs are available to you.

Q6: Investing in vintage sports cards
I’m 70 years old. One of my most treasured possessions is a box of baseball cards I have from my childhood with some of my favorite players on the cards. My favorite players were the big sluggers like Ted Kluszewski and Roger Maris.

I know that the really old baseball cards like these have held their value over a long period of time so that they’re fairly good investments. I just retired in January and my wife passed away recently and so now I have more money than I know what to do with but I do want to leave something of value behind for my kids and grandkids.

I’ve been thinking about investing some of my money into other baseball cards. They would bring me some personal enjoyment now and would hold their value until I pass away and then my kids could sell them. What do you think of this as a plan?
- Larry

Collectibles are a reasonable thing to invest in provided you’re okay with losing your shirt completely on the investment. Quite often, people invest in collectibles because there is additional personal value from that investment, as with the baseball cards in your case.

I would not invest a dime that you would regret not having if you lived another fifteen years. The market for any collectible rests heavily on the presence of willing buyers, and that’s always fraught with some uncertainty. If you are absolutely sure that you have excess money, then use only that excess money to buy.

Given my own experience, I would stick with investing only in professionally graded cards, where the condition of the cards has been professionally certified. Condition is often a big metric in the value of sports cards. I would also stick with vintage cards – the older, the better. I used to collect Goudy Gum cards from the 1930s, for example.

Q7: Roth TSP?
I work for the federal government, so I have access to the Thrift Savings Plan (TSP). Not too long from now they will be introducing a Roth TSP option, which looks to me like the basic TSP with after-tax contribution. Would you agree that this option is enticing? Would I be in any way better off choosing to stick with my normal TSP or by choosing a traditional Roth IRA (assuming that rates are higher when I retire and that I stay with the Government for a while)

For a bit of background, I’m a 24-year-old, fresh out of college, making about 55k/year pre-tax. I currently put 5% (matched) into my TSP, am building an emergency fund, and am paying off about 30k in student loans. I’ve managed to pay off all other debt :)
- Jeffrey

I agree that a Roth TSP is a great option for federal employees. More choices are always a good thing.

From what I’ve read, matching funds that you receive from your employer will go into the traditional TSP, not the Roth TSP. If that’s the case, I would probably fund the Roth TSP fully for the foreseeable future.

Why? I think it’s a good idea to balance Roth and regular TSP money. At this point, Jeff has money already in his TSP and his matching money will continue to go into his TSP. Thus, if he’s trying to balance things, he should put his money into the Roth.

Q8: Recovery in multiple ways
Two years ago, I became a drug addict. I tried something at a party and soon I felt like I couldn’t live without it. I destroyed my marriage. I lost my kids. I lost pretty much every possession I ever owned.

I’m now 29 years old and living with my parents. I’ve been clean for three months, but now I’m starting over financially and emotionally and in every other way. I’ve pretty much bombed my career path, too.

I’ve read a lot of advice books on where to go from here but I still feel lost. What do I do to get my career restarted again? What steps can I take to start a financial recovery?
- Margaret

Get your life right, first and foremost. Don’t worry about your career yet. Instead, make sure your health – physical, mental, and emotional – is as strong as you can get it.

Your options moving forward depend on a lot of things. Do you have a criminal record now? If you’ve been convicted of a felony, you may want to ask for some help in moving forward in the workplace. Is your credit still in good shape? I’d check my credit report (use annualcreditreport.com which is the free site provided by the federal government) and make sure everything on there is legitimate.

If you really burnt bridges in your previous career and can’t draw on references there, you may want to consider a new career path. This may involve going to trade school or going back to college, depending on what you want.

I’d also invest a lot of time in building a completely new social circle. I have had friends that have gone through a similar crisis as you and the best thing they did was ditching virtually all of their old circle and finding new people to associate with. Look in different places than you were looking before. If I were you, I’d think about things that interest you and seek out social opportunities related to those things.

Q9: How to start selling items
I am drowning in clutter. I want to sell things on Amazon, Craigs List and Ebay. But where and how do you start. I literally have one room filled to the rim with stuff. Any suggestions would be greatly appreciated.
- Linda

Your best bet would be to head to your local library and look for some basic books on selling on Craigslist and eBay and Amazon Marketplace. Most libraries will have some wonderful beginner books on the topic that explain, step by step, how to do it.

I’d also start slow. Don’t start out by listing 100 items or you’ll be overwhelmed. Take it slow and list just a few items at a time.

I’d also not get stressed out about the return you expect to get on the items. Many people expect to get maximum dollar for every item, and that’s simply not going to happen. Make sure that your cost of shipping is covered and that you’re earning a bit more, too, and be happy with that. Sinking many hours into a sale just to get $2 more is not worth it, especially when a big part of the goal is decluttering.

Q10: Great dryer sheet tactic
I re-use my used dryer sheets to clean out the bathroom sink, or cut soapy scum in the shower – they are amazing for that easy chore. Try it – you’ll like it.
- Lee

I did try it. I used a pair of old dryer sheets to clean out some soap scum in my shower – and it worked really well.

Obviously, these weren’t as durable as using a scrubber or something like that, but considering that these dryer sheets would otherwise get thrown away, it’s a really good tool.

I’ve started tossing old dryer sheets back into an empty dryer sheet box. I might as well use them for yet another task before I toss them!

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Dried versus fresh produce
2. Gencon
3. Emergency fund planning
4. Figuring out primary focus
5. Baseball on the cheap
6. Spending excess savings
7. Major lifestyle change
8. Boys or girls night out
9. Overspending for work parties
10. Refinance or cash in investments?

One of the surest signs that spring is here to stay is the emergence of rapidly growing green grass.

Few things mark the passing of the seasons quite like pulling out the lawnmower, replacing the gas and oil, and firing it up for some laps around the yard.

Q1: Dried versus fresh produce
My husband and I have recently begun purchasing freeze-dried produce instead of fresh because we never seem to be able to use up our fresh produce before it goes bad. I was wondering if you would be willing to do the math to see if we are actually saving any money doing it this way. The great thing about freeze-dried produce is that it comes pre-washed and pre-cut, so the preparation time is basically zero and the produce lasts for years (instead of days). We’ve had great success using these ingredients in place of fresh vegetables in nearly all of the dishes we’ve made, but I wanted to get an idea of how much extra money this strategy may cost (or perhaps, save!).
- Kelly

This is a comparison that’s extremely hard to quantify because of the wide variability in prices. You will likely be able to find specific instances where dried fruits and vegetables are at an equal cost to fresh and other instances where the difference between the two is enormous.

I prefer using fresh produce, for several reasons. The biggest reason is that fresh produce is generally more nutrient-rich than dried produce, which is something I look out for. Most of the time, I find it to be less expensive as well, and the flavors are sharper.

However, I certainly see value in having dried produce on hand as a backup option. We have several examples of dried produce in our home, from dried tomatoes to raisins, and we certainly use them.

Q2: Gencon
You’ve said many times that one of your splurges is a trip to Gencon with some of your friends. What is Gencon? I read about it online but I don’t get it.
- Andy

Gencon is an annual non-electronic gaming convention, held each August in Indianapolis. Last year, 36,000 people attended. There were people there of all ages, from little kids to college students to parents to elderly couples. It’s mostly just a giant convention center filled with people playing non-electronic games of all varieties – board games, card games, and so on.

I typically drive out there the day before with a friend or two and usually stay in a hotel room with several friends and it becomes very much a “summer camp” type of atmosphere, with lots of joking and talking about what we did that day. I also tend to run into people that I know there from the events of previous years, so there’s a lot of socializing.

In a few years, I plan on taking my son to Gencon with me, and my wife has expressed mild interest in going for at least one year (she’s much more in favor of playing games with friends she already has rather than building new friendships).

It ends up being pretty inexpensive for the time I spend there and the enjoyment I get out of it.

Q3: Emergency fund planning
I was wondering what your thoughts are on when to grow an emergency fund to 4-6 months and when to pay off debt. Our example: My wife and I have a take home pay of $70,000. We both contribute effectively 9% (including employer match) to our 401k. We have 45k of student loans at about 5%, two car loans, both of which are about half-way home, one at 6% and one at 4.4%. We just bought a house, conventional loan, with 7.5% down, and got the sellers to pay the PMI buy-out. That is at 3.75% fixed. We have 5k in the bank and no credit debt.

We are both in our mid-twenties. Our mininum monthly expenses on these loans, plus utilities and necessities, and insurance, is about $3,000/month. We are bringing in about $5,800/month. We spend about 4,400/month realistically. I am confident we could cut that to $3,500 in an emergency. Last year, 2011, we saved $20,000 for the house down payment. I know you wouldn’t recommend it but that also doubled as our emergency fund. We never tapped into it.

Now, it’s time to make a real emergency fund for emergencies only. But, is what we already have enough (5k), and we should tackle debt now, or should we save up to $20,000 again before we tackle these secured debts?
- Danielle

Given that you don’t have any high interest debt, if I were you, I would establish an emergency fund equal to four months of your shared expenses. How much do you spend, together, on everything over a period of four months? That’s the emergency fund I would shoot for in this situation.

Once you have that, I would start knocking down the debts in order of interest, starting with the highest. IN this case, it looks like your highest debt is 7.5%, so I’d start there.

As for your retirement, I’d consider contributing a little more. The generally accepted range is between 10 and 15%. One good way for you to do this would be to open your own Roth IRA and contribute 3% (or so) of your income to it each year.

Q4: Figuring out primary focus
I’m 23, graduated in May 2011 with about $35K in student loans; I have been at my current job for 6 months now making 40K. I recently consolidated my student loans so I have two: a Direct loan for $25K at 6% fixed, and a private loan for 9K at 4.25% currently, variable up to 25%. I just signed up through my company’s 403B plan to contribute 6% of my paycheck, which will max out their matching at 3%, so 9% of my salary will go towards that. I also opened up a Roth IRA with $50 but haven’t done anything with that yet. I have no savings (yet). I have about $1200/month left over after living expenses and other “needs”. What is the best way to use this money?

I don’t know what is more “important” as far as what to pay down or save for first. I was thinking of putting most of it towards my private student loan since the interest rate is variable, but it’s been at 4.25% since 2008 when I got it and I just read on your blog you recommend paying down the loan with the current highest interest rate first. So should I put that towards my Direct Loan? Or should I pay the minimums on both and max out my Roth IRA? Also, I have no emergency savings at all, so should I focus on that first? I don’t know what I should be focusing on.
- Lucy

Since none of your loans are what I would call high interest, I would focus on making an emergency fund first, so you can handle things like an unexpected job loss. I would funnel my spare money into a savings account until I had two months of living expenses stored up (I usually suggest two months of emergency fund per dependent).

After that, I would start hammering away at the debts. I would pay down the debts in order of their current interest rate, starting with the highets. Don’t worry yourself about what they might do. The only time I would worry about it is if a major adjustment were imminent, one that would shift the order of your debts.

I would suggest contributing between 1% and 3% of your annual income to your Roth IRA, starting today. That way, your total retirement savings is between 10% and 12%, which is a good number given that you’re starting relatively young.

Q5: Baseball on the cheap
You’ve talked many times about how you’re a big baseball fan. How do you follow games without spending a ton of money on a big TV package?
- Donald

I usually listen to games on the radio rather than watching them. I find that when I watch baseball, I usually end up in a stupor after staring at the television for that long. If I listen on the radio while doing something, I can follow the game pretty well and still accomplish some things.

The only way I enjoy watching a game is at a ballpark, and there is nothing that compares to that. If I lived anywhere in the Chicagoland area, I’d probably own Cubs season tickets.

My primary way of following the game is through statistics. Yeah, I’m one of those stat-heads. I love looking at stats like WHIP and win shares and such to evaluate players.

Q6: Spending excess savings
My husband and I have nearly $48K in savings. We only need $18K for our 6 month emergency fund, leaving about $30,000 to “play” with. The only debts we have are students loans: mine – $33K @ 6%, his – $1,900 @ 4.5%. However, I recently joined my company’s pension and realized I need to pay back a $20K for the years I should have joined (I know, I know). And of course, being a young couple in our early thirties, we want to have a baby (fertility permitting) next year and save for a home (purchase within 3-5 years). What are your suggestions about what to do? Pay off the pension debt? Loans? Save like crazy for baby? Continue growing the house fund?
- Nina

The biggest reason you would need to save for a baby is if you’re planning on quitting your job when the baby arrives. If you’re simply going to take maternity leave and return to work after the baby’s arrival, you don’t need to save up that much. What will happen instead is a lifestyle change, one that you’ll simply have to adjust to, where you don’t go out as much both for financial reasons and because of the child.

Assuming that you’re returning to work, I would pay off the pension debt before anything else. You need to secure your retirement, and that’s probably the best way for you to do so.

Once the pension debt is repaid, tackle his student loan first. This goes against the usual “pay in order of interest rate” advice, but his balance is really low and with a baby on the way you’ll be glad to have one less required payment to worry about.

Q7: Major lifestyle change
I am 31 and work in a mid level executive position in a firm. I enjoy my job to an extent, but the hours and pressure of the new job are tremendous. Also I have always wanted to be an entrepreneur and that constantly lingers in my brain each day.

My issue is – should I leave my current setup, and move to another city entirely where our Corp HQ (and my boss) is located?

The PROS of moving -
1 – Far more visibility in the job..also will make things easier because of face to face interactions with crucial people.
2 – Very free lifestyle in terms of not having to think of the whole household but just us 3.

The CONS -
1 – Higher expenses – for .e.g I will pay rentals in the most expensive city in India..while I’ve never paid a rent before.
2 – My wife won’t have much to do – we may explore job options but as a Physiotherapist we may choose to look after the kid rather than burn hours at a low paying job.

I know I haven’t done a good job of this question.. there’s a lot of other things at play here..for e.g. the need of my wife and I to live a ‘nuclear’ lifestyle for a while because our marriage is a bit of a rocky one and staying with parents hasn’t remedied that… the fact that we suffered financial losses early in our marriage and I have finally reached a point where I have some ‘extra fun’ money.. or the fact that we haven’t had a ‘couple only’ vacation after our honeymoon in 6 yrs of marriage.. you get the point.
- Roger

I think that this potential career move is secondary to whatever you need to do to get your marriage on firm ground. In our life, any career move that either one of us would make is secondary to the strength of our marriage, because without each other, everything in life would be much harder.

Which avenue is best for your marriage? Which avenue would make your wife happier with the situation? You need to sit down together and talk about this.

You can earn all the money in the world, but none of it is worth much if you had to sacrifice most of what you personally held dear to achieve it.

Q8: Boys or girls night out
Do you think it’s appropriate for members of a couple to spend an evening or two a week out with the “gals” or the “guys”?
- Alice

If both members are happy with it, I think it’s completely fine.

My wife has been involved in quite a few shorter-term projects that have taken her out of the house one night a week (and sometimes two nights). These things tend to come and go – singing groups and so on.

I have one night a week where I get together with two close friends of mine and play board games. We play at the home of the one friend who is a bachelor. Imagine a “guy’s poker night” and you’re probably roughly in the ballpark.

We both value these nights out and we both value how much it means to our partner to have that night of freedom. I know that Sarah really enjoys her singing groups, and she knows that I enjoy playing games with the boys. It works well for both of us.

Q9: Overspending for work parties
I’m an American currently living in Japan teaching English as an Assistant Teacher through the JET Program. Just for background information, the program places participants in rural areas of Japan and we teach English at the local schools (from elementary to high school). My contract is with my city’s local Board of Education (BOE) and I rotate between 5 schools throughout the month teaching English. This job is temporary and my contract will end in Summer of 2013.

My job has many formal work social events. There’s a End of the Year party in December, New Years Party in January, Staff Trip in February (traveling to a nearby prefecture in Japan), Farewell Party for leaving staff in March, Welcome Party for new staff in April, and other various smaller scale parties throughout the year. Each of the formal events costs significant amount of money because it’s usually unlimited alcohol and at expensive hotels or restaurants. It is encouraged (but mandatory if you’re Japanese) to attend these parties because this is how the Japanese bond with their colleagues. But the expenses for these parties add up. I spent about $225.00 (with the current exchange rate) in the past two weeks going to three parties. While I want to participate, I have a hard time justifying the costs. I don’t drink so I don’t benefit from the unlimited alcohol (my coworkers love to drink!) and because there’s so much mingling and talking I don’t get a chance to actually eat the expensive food I’m paying for.

So my question is this: Is it worth attending these parties just to bond with my coworkers? These work parties let me experience Japanese work culture and I’m grateful that they even invite me. But I spend so much on these parties. I want to save the money I make here so that I can enroll into graduate school when I come home. Yet I am also worried my work relations will be negatively affected if I refuse to go to the parties. There are still parties that I already gave a verbal rsvp to and I’m regretting it now.
- Kelly

For me, the question would be whether or not I was developing a career-long relationship with these people. Are you going to be continuing the relationships you are building here in ten years? Twenty?

If you’re doing this just for the culture of the situation, then it sounds like you’ve already absorbed your fill of it and there’s no reason for you to go for that reason.

In other words, I’d drop out of this party scene if you know that your contract is ending in 2013 and you’re sure that you’re going to return to the United States and you know that these relationships are not career-lasting. If you’re hoping to stay long term and build career-length relationships, I would look at the party cost as being an expense of your career.

Q10: Refinance or cash in investments?
I am sending my second son to college this coming fall so I will have two kids in college. Neither child received much financial aid because I have $267K that I inherited 12 years ago. I put this money in Vanguard and it has been growing. I am wondering if I should take money out to pay for college, which will be about $30K for the next two years and then $20K for the next year or two after or should I refinance my home and take some money out that way? Currently my gross salary is $54K and I owe $69K on my mortgage. I contribute to my Roth IRA and have 15% taken out of my salary for retirement which won’t be for another 20 years. I have about 7 years left on my mortgage which is at an interest rate of 3.875% and no other debt. Thank you.
- Connie

Given your low interest rate, I don’t think refinancing will help you very much. If I were you, I would withdraw what is needed to pay for their education from the Vanguard account and, when they’re done with school, use the remainder of that money to pay off the mortgage.

In truth, this comes down to how you want to spend that money. Do you want to cover their full education? If you do, then make sure it’s covered.

I would not do anything to add to my debt load if I had that much money sitting in the bank, particularly given that you’ve also got healthy retirement savings.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Career change conundrum
2. Teaching children chess
3. Home alarms
4. Developing a savings plan
5. Financial advice media
6. 401(k) as mortgage savings tool
7. Book deals
8. Headaches
9. Home buying and retirement saving
10. Handling minor legal issue

My youngest, who is well into his second year of life, has officially decided that he is capable of climbing everything.

Last night, I asked his six year old brother to play with him on the floor while I went into the next room to find pajamas for them. When I returned, the two of them had climbed into the top bunk of their bunk bed.

When I chided the older one for letting him climb, he just said, “It’s okay! I was behind him!” Not exactly a comfort, to tell you the truth.

Parenting seems to involve nightmare visions of children falling on their heads.

Q1: Career change conundrum
My partner (27) and I (26) work in IT management jobs (his is consulting, which he travels for). I make just under 70k, he makes 85k, usually gets at least a 10k raise each year. For the purposes of conservative planning, let’s say he’ll make more or less 85k indefinitely. We both fund our 401ks, he has about 20k in savings, I have about 15k. We live in NYC, so our cost of living is high.

My job used to bring me day to day satisfaction, but no longer does. I cannot get behind the overall goal of my company (retail), and I am very unmotivated to be successful here, although I know I could be. The corporate atmosphere is suffocating. I have health insurance through my partner as my benefits aren’t great, and I have had numerous health issues throughout my 20s that have taken years and upwards of $25,000 to ‘sort out’ (took me a few years to pay off my medical debt, but we have been completely debt free as of Sept 2011). Through this process, I was turned on to oriental medicine. The quality of care is amazing, and helping people change their diets and lifestyle to create lasting health is exciting.

After thinking about it for a few years, I finally applied and was accepted to a great school for oriental medicine in Texas. I am excited about the idea of doing something for others, with others, as my job, something where I am on my feet more (not in front of a computer all day), where I interact with people, a career that could be flexible with a family down the line (most practitioners open their own practice). Additionally, I feel like working in health care is not only an investment in my future health and that of my family, but a reasonably sound business decision with the aging baby boomer population. Here’s the deal: school costs $50,000 (total), plus living expenses, and the program is 4 years long. Additionally, when starting a practice, a few years of hard work is needed without much pay.

We have begun looking at apartments near the school, and the financial implications of going back to school have really sunken in. We like to travel and are lucky enough to have the time and money to do so now. We will need to spend a large chunk of change moving and buying a used car, and after that we will primarily have to live off my partner’s one income. I am overwhelmingly worried about ‘making it work’ under these circumstances. We have been reading Smart Couples Finish Rich for help, and I plan to roll my 401k over into an IRA that I will contribute to as often as possible. We plan to get married in 2013, so I should be ok on the benefits front, provided my partner maintains a job with health insurance. I know I will have to take on loans to do this, but I am so worried about the stress debt will bring in the future. I am so happy debt free and while I know we will likely eventually have a mortgage, I would like to keep our finances as strong as possible, yet at the same time, my job and my attitude towards this kind of work are greatly bringing down my overall motivation and confidence. Do you think I can pursue this career change without greatly jeopardizing our livelihood in our 30s (when we would like to have a family)??
- Dave

For the next decade, you guys are going to be living leaner than you were. There’s no question about this. You’re simply not going to have the funds to live the life you were previously accustomed to, when you look at the addition of school costs and the subtraction of salary.

Having said that, it’s not impossible, and if this is a route you’re passionate about, it will be well worth it. You will still have enough money to eat and have a roof over your head, which is what really matters. One key suggestion: find a mentor. Find someone who is actually doing this for a living and ask them for advice regularly.

As for having a child, you’re just going to have to wait and see where this path leads you. Just remember that there is no truly bad time to have a child if you and your partner are both deeply yearning to have one. You will make it work, as billions have families have done before you.

Q2: Teaching children chess
I’ve been trying to teach my five year old how to play chess. Playing chess with my father is one of my best memories of childhood and I am looking forward to experiencing it with my own child.

However, I’m having a lot of trouble making it work. My son is just overwhelmed with what’s going on with the game.

How do you teach your kids how to play games? I know based on other things you’ve said that you’ve taught your children how to play a lot of games.
- Leon

I started teaching my son chess and arimaa (a chess-like game) when he was four. The key is to break it down into little pieces.

The first time we played chess, we used nothing but a king, a queen, and two pawns apiece. Seriously. We played a bunch of games with just those pieces.

After that, I kept adding pieces to the left and right. One day, we added two bishops and two pawns to the game, and we took that slowly. After several more games, we added two knights and two pawns, then, later, we added two rooks and two pawns to each side.

Doing this step by step made the entire process far less overwhelming for him and now he loves playing both chess and arimaa.

Q3: Home alarms
My husband’s store, which had an alarm system, was recently robbed. This got me thinking about our own home and whether we should invest in an alarm system. I don’t feel like safety is a factor in our neighborhood, but there is always the “what if?” Do you have an alarm system for your home? Why or why not and what was your reasoning? By the way, I’m pregnant. So does having a young child in the home make it our responsibility to get an alarm system if we can afford it? Right now, I’m thinking it’s a want versus a need, so I wanted your input.
- Charity

My feeling on a home security system is that it’s mostly there to make the homeowner feel more secure. A home security system will not completely prevent your home from being robbed, though it does make it more difficult for the less enterprising thief.

In other words, it won’t stop the careful individual who will know how to meticulously clear out your valuables. It will stop the individual who will stumble into your home, grab the two or three valuable things he/she sees right off the bat, knock over a few things in the process, and run out the door.

I think the biggest benefit is that it enables people who really worry about any form of home intrusion to sleep a little better at night, and that’s worth the cost.

Q4: Developing a savings plan
I graduated from Nursing school this past December 2011. I work at a hospital, 36 hours a week (full time). Every two weeks my take-home income is roughly $1,400. I have 4% invested in my employer’s retirement plan (2% employer match) — pre-tax of course. Also pretax is a contribution to my Health Savings Account. My living expenses are roughly $600/month (rent, electricity, cable (which my roommate wanted and never uses), food and fuel). My auto loan is roughly $16,000. Monthly auto payment is $368. My school loans (payments begin this July, but I’ve been making payments since I began my job this February) total roughly $15,000. Monthly payments will be $150 between the two different student loan organizations. Therefore, every two weeks, I make an auto loan and a student loan payment. My budget at this point is set up for every two weeks and I am still getting use to living with my new budget. My problem is, I am having problems paying myself (meaning putting money in my savings ha!) because I want to be debt free as soon as possible. As of right now, I have roughly $4,000. My other financial short-term goal is to live alone (my roommate is bugging me at the moment and my friends are telling me that my emotional happiness is more important than my financial happiness. She’s not bugging me to the point that I am actively looking at apartments. I do plan to stick it out for a while…at least till the end of summer and then reevaluate the situation. But until then, I’d like more in my savings so I can purchase quality products (used is great) the first time. I’d also like to save up to purchase property at some point and go to graduate school (not till about 5-10 years from now).

What is your advice? How much do you suggest I put into savings every two weeks?
- Connie

I think that once you have a healthy emergency fund – meaning you have enough to cover two to three months of living expenses for yourself – you should focus on removing that debt. As long as you still have those debts hanging over your head, you should be focused on getting rid of them.

So, what I would do if I were you is calculate your living expenses and bills for three months, then target that amount as your savings goal. Make minimum payments until you reach that much in savings.

After that, target your debts. Don’t put anything into savings (unless you need to replenish after an emergency has claimed some of the money). Instead, just focus on paying off the highest interest debt as quickly as possible.

Q5: Financial advice media
Do you watch any television shows or listen to any radio shows for financial thoughts and advice?
- Megan

I listen to NPR’s Planet Money and Marketplace from American Public Media pretty regularly. I also sometimes listen to Dave Ramsey’s radio show.

I’m pretty selective as to the media I listen to or watch. Often, I feel like the things I read or hear or watch are just trying to sell me things that I don’t really want, like overpriced mutual funds or luxury goods.

I usually stick to books, because in those instances writers usually have to make the full case for what they’re talking about. On radio and television, they usually don’t.

Q6: 401(k) as mortgage savings tool
After renting for the last 4 years, my wife and I recently decided to start saving for a down payment on a house or condo. Since we intend to stay in our very expensive city, it will take 2-3 years to reach our goal. This savings will be in addition to our retirement savings. Our marginal income tax rate including federal, state, and city taxes is approximately 35%. My 401k program (actually the federal TSP) allows me to take a loan out against the balance.

I’m trying to determine whether it would be more beneficial for us to: (1) save my portion of the down payment in my 401k, and take a tax deduction now, but eventually have to repay the loan back into the account (I have an investment option in the 401k that is very similar to a savings account with a 2.5-3% return); or (2) just save the money outside and not have to pay it back, but not receive the tax savings up front.

I know there is some risk to #1 – if I lose or leave my job, I would need to pay back the money within 60 days, or it would become subject to tax and early withdrawal penalties.
- Kenny

I would not use a 401(k) as a savings tool for a down payment. There are too many chances that you’ll wind up having to pay a stiff tax penalty or not have adequate retirement savings, neither of which is an outcome that you want. The risk-reward ratio is pretty bad.

I would save the money outside of the 401(k). Don’t worry about tax benefits when you’re saving for something like this, because the tax benefits aren’t going to add up to a whole lot and have some risk of costing you more than they’re helping.

Don’t worry – you’ll get there.

Q7: Book deals
Have you ever talked in-depth about the process of getting a book deal, being paid, and things along that line?
- Lawrence

My experience has been a bit different, actually. For each of the books I’ve published, I’ve been approached by publishers who were interested in signing me to a book deal because of The Simple Dollar. In each case, I had a friend in the legal business help me with negotiations for a very nominal fee, resulting in deals I was very happy with.

I have not started trying to sell any of my fictional works. When I move forward with that, I will be seeking out an agent to help me sell it, as I don’t already have a foot in the door.

That’s really the challenge of it, I think. You need to have a foot in the door to begin with. What sort of special attributes do you have that would be appealing to a book publisher? Do you already have some sort of audience? I think things like this help greatly with selling a book.

Honestly, I am looking more and more at self-publishing as an option, using the Kindle store and other e-book stores as a starter and perhaps progressing to print publishing from there.

Q8: Headaches
I get headaches about twice a week. They’re incredibly annoying and usually wind up with me going to bed really early and wasting an evening. Do you have any frugal tips for dealing with headaches?
- Jennifer

Whenever I get a headache, I drink a bunch of water. I drink at least one tall glass of water and sometimes two tall glasses. I usually eat something small along with the water, but nothing too much. This solves the majority of my headaches, as they seem to be brought along by mild dehydration.

If that doesn’t work, I take a nap. Sleep deprivation can also cause headaches for me, and a nap or an early bedtime takes care of the majority of the remaining headaches.

If these tactics don’t work, try a couple aspirin. If that doesn’t work with any consistency, I’d talk to a doctor.

Q9: Home buying and retirement saving
I am 21 and will graduate this May with no debt or loans. I have accepted a full time job in Delaware for $60,000. I am looking to buy a starter home/townhome/condo around March 2013 since rates are so low right now and since where I live is not a “renting” area. As an added benefit, I will be living at home (most meals included), until I purchase a house.

While I am still researching, I have found that a house around $250,000 fits my budget ( What is your advice on this). Thanks to interning through the school year and summers, I have around $37,000 in savings, $5,000 in mutual funds, a $5,000 emergency fund and a Roth IRA that I am currently contributing $2000/year to, but I will contribute more when I work full time. In addition, my company 401K matches up to 6% plus an additional 3%, which I currently and will continue to max out.

Now that you know my background, I was hoping you could give me advice on a few questions.
- What should I do with the $37,000 in cash that is sitting in my savings account. Since I am planning on using a majority of this towards my down payment next March, I don’t want to tie up the money for too long. I was considering a short term CD may be my best bet.
- What price range of house do you think I should be looking at? I am planning on this being a 5-7 year home, and will likely not marry or start a family in it.
- How much of a down payment should I consider putting down?
- Given my financial situation, how much of my salary do you suggest I contribute to my Roth? This is in additional to my company 401k
- Jim

The cash is probably in a pretty good place right now. If you’re going to put it in a CD, I would study the CD rates of a lot of different financial institutions before I made that move, and I wouldn’t do it unless I was getting a substantially better return than any of the savings accounts. Right now, CD rates are just about as low as savings account rates.

If you’re going to be single, you should look for a small home, particularly if you’re not going to live there long. You’ll be impacted less by swings in the local housing market, you won’t have space that you’ll just fill up with stuff you don’t need, and it will be far easier to move when the time is right.

I would stick with a 20% down payment, as that will help you to avoid mortgage insurance (an unnecessary expense often pushed onto people with less than a 20% down payment).

I usually suggest people contribute 15% of their income to their retirement. Your current contributions total 9%, so I would contribute another 6% to a Roth IRA. In your case, that’d be $3,600 a year, or $300 a month.

Q10: Handling minor legal issue
A few years ago my husband and I purchased a home for my mother-in-law to live in (in Michigan 250 miles from where we live). We made the down payment and she makes the monthly mortgage payment. However she has recently been in poor health and can no longer live alone. My brother and sister-in-law have moved in with her and have said they would like to purchase the home from us. Their credit is not good so they can not get a mortgage to purchase the home outright. Since we still carry a mortgage on the house can we legally offer a land contract? Do you have any suggestions? I was thinking of Legal Zoom instead of spending the money on a lawyer.
- Jenny

I am extremely wary of this. I would never, ever sign such a long term contract with any family member, let alone one with questionable credit. You’re pretty much begging for a family disaster to happen where no one speaks to each other etc. etc. I have watched such disasters happen multiple times with my own eyes, where previously close relatives resort to communicating solely through their lawyers due to the financial situation.

If you are serious about doing this, I would contact a property lawyer in Michigan and discuss the options available to you. You’re going to want to protect yourself as much as possible here. There may be a rent-to-own type of arrangement that you can work out with them that will reduce your risk (but still includes a lot of risk for hurt family relationships).

This is just a situation I would avoid. Families are more valuable than land contracts.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Which loan to pay down?
2. Ending naptime
3. Roth or other investment?
4. “Credit” cards as windfall
5. What’s our next financial plan?
6. Moving now or later?
7. Considering starting a family
8. Nervous parents
9. Starting a retirement fund
10. Making case for less overtime

What I learned this weekend: hunting for Easter eggs becomes a lot less fun if you make the eggs too hard to find. When a little girl is entering into her second hour of looking for her eggs, it might be time to give her some help.

Q1: Which loan to pay down?
I have about 50k of consolidated student debt at a fixed rate of 4.5% (half subsidized, half non-subsidized, although that doesn’t matter since I’m now out of school.)

I also have another 40k of private student loans tied to the prime rate. But right now the interest rate on these is shockingly low — 2.5%.

I have some extra money I’d like to throw at my loans, but the question is, “which one?”!
- John

You should always pay down the one that has the higher interest rate at the moment.

While there may come a time where it would have been more cost-effective to pay down the variable rate debt first, you can’t bank your financial plans on that. You don’t know if that will occur or how far down the road such a time would be.

Focus instead on doing your best with the situation at hand. Focus on the debt with the biggest interest rate.

Q2: Ending naptime
My four year old is starting to not take a nap in the early afternoon, which is a problem because that’s when I handle a lot of the busywork for my insurance business. How did you handle it when your children stopped taking naps?
- Jenny

For a while, we held off this shift by having our children do a lot of vigorous activity in the morning. We’d go to the park or play an active game outside. This would cause them to be very tired after lunch, which would often result in a nap even if they had reached the age where naps weren’t always a requirement.

Once they simply had given up on taking naps, we instituted a “rest time” after lunch. They weren’t required to actually nap, but they had to go into the family room with the lights turned down low and listen to an audio CD. If they were awake when the CD finished, they could come back upstairs and play.

I’d suggest trying both of these approaches.

Q3: Roth or other investment?
I’m an international student working in the US, and hopefully about to switch from graduate student to full time instructor. I have a good emergency fund (about 16.000$) and have been wondering for a while about starting investing and/or contributing to a roth ira. The point is, I know I will not be working forever in the US, I know at some point will go back to my homeland, I just don’t know when. This considered, does it still make sense to contribute to a Roth Ira (Especially since, should I not be working in the US in the future, I couldn’t contribute to that), or should I consider a different investment not retirement-related? What would be the advantage (for me and in general) to have a Roth instead than just a regular investing account?
- Arnold

Given that you won’t be contributing to the Roth long term and your residency will be unclear at retirement age, I don’t think there’s a really big benefit for you to contribute to a Roth rather than putting your money into a normal investment account.

One thing to look at is the retirement options available in your homeland, which would likely be a wiser place to put your money (depending on the stability of your homeland, of course). You may want to consider investing there, or putting money in a place where you can easily turn it into a retirement investment in your homeland should there be a good opportunity.

A Roth IRA isn’t a mistake, of course, but I don’t think your projected life path allows you to fully enjoy the benefits of a Roth.

Q4: “Credit” cards as windfall
I have a question regarding getting money in the form of credit cards (like a Visa cash card). This sometimes comes to me in the form of gifts or rebates. I prefer to get cash of course because I always just deposit it immediately into a savings account. I can’t do that with a Visa cash card though. For some reason my usual financial discipline goes out the door when I get handed a gift card. I immediately think about something I would like to ‘splurge’ it on since my internal justification is that I can’t deposit it and it will need to be spent one way or another. Or even worse, I think of something more expensive I want and justify it by saying to myself that at least I’m saving X amount by using the gift card. It becomes a cash-like temptation where it burns a hole in my pocket and I have the urge to go shopping and spend it all, as I feel like I’m not really using any of my own money. In other words I always want to spend it on something I don’t need. In all other areas I have great financial discipline. I never spend more than I earn, I carry zero credit card debt and I save for retirement. How do you handle small windfalls in the form of a gift card? (Ranging from $50 to $200.)
- Juliana

I usually use such things for something like groceries as soon as I possibly can, so that the card (and the temptation) is out of my hands.

For me, it becomes a lot harder to justify an unnecessary expenditure if the money is coming from my checking account than if it is coming off of a gift card. So, if I spend the gift card on a requirement like a normal grocery trip, I’m not nearly as tempted.

My biggest challenge, honestly, is fully remembering to use such rebate cards. I usually stick them right on my grocery list with tape.

Q5: What’s our next financial plan?
My husband I make a joint income of about 163k. We have about 80k in cash savings and about 85k in retirement and 3k in investments. We are both 27.

We don’t have any plans in the next 5 years to buy a house or move (we rent a perfectly cheap apartment in a perfect neighborhood) or a car (public transportation only) or have kids. In general-we don’t spend a lot of miscellaneous items and we cash flow our vacations (we still stay at hostels!) and purchases (mostly food and toiletries) so that we don’t have credit card debt. We fully fund our IRAs and we aim to save more than half of our take home income. However, I do have student loan debt of 45k with an average rate of 7.5%. I overpay my loans by $700 a month and at this rate (and some other random overage payments that I make) I should have it paid off in 5 years.

So what do we do next? We don’t have any concrete plans as to what we are saving for (such as 20% down toward a house or a full purchase of a car) and we now have 2.5 years of emergency cash savings. Should I start applying more of our savings toward the student loans? Or should I take out a lump sum from our savings and pay down/off our loans? OR should we just continue to add to our emergency fund so we can prepare for future changes such as having children or buying an apartment in 15-20 years (we live in NYC). I struggle with how much planning we can do for our future as I don’t know how different our lives will be in 5-10 years (if we have kids-we will need a bigger apartment, babysitting, tuition..etc but do we plan so far ahead for this?).
- Rachael

You are in the perfect position to be rapidly eliminating debt.

If I were in your shoes, I would maintain a sufficiently large emergency fund (about three months of living expenses) and dump the rest into student loans. If you’re done with the student loans, pay off any other debts you have.

Debt freedom is wonderful, as it minimizes your monthly bills and maximizes your future options. It’s also a reasonably good investment of your money because you’re no longer paying interest on your debts.

If you’ve achieved debt freedom and are trying to decide what to do next, I would regularly talk about goals and keep the money in something reasonably safe (like a savings account) until you established what you want to reach for in the future.

Q6: Moving now or later?
My boyfriend lives in a remote area of Washington state. I live in a city in Colorado. He has asked me to move up there to live with him.

Currently, I have a teaching job making 38,000/yr, health insurance and love where I live. He has a military job and is pretty much the best thing since sliced bread.

The issue: If I move up there, the chances of finding a job with health insurance and a decent salary are slim to none. I have student loan debt (about $50,000) and will be dumping all state retirement funds as I won’t be vested for 3 more years. I’ve looked for jobs all over that watery state and haven’t found squat.

Should I move up there at the end of the school year? Or should I stay here another year while I try to find a job? (In any case, the plan is to spend the summer there as I get paid through August)
- Laurie

Be very clear that you want to move in with him, but be patient on the move. Making a leap like this without a good job in place puts you essentially at his mercy, as you’d be jobless and in a place without an existing social network outside of him.

I’d spend as much time as I could trying to nail down a good job in that area, but if one does not present itself, I’d move back to Colorado at the end of the summer and work.

Love is powerful, but there is a huge financial risk in moving without a job in this situation.

Q7: Considering starting a family
I will be 30 years old this year and would like to start a family. We only want one child as my husband and I are not living on a very high income. We just bought a small 2 bedroom home, our monthly payment is very low, only $643 per month. We have no debt. I make about $25,000 and my husband makes $32,000 a year. However, I work in retail, and my store is not doing very well. We could close in a few months, and if we do not close, i have been told that my position will be eliminated and if i want to stay on it will be part time work with a pay cut. I have been looking around for another job, but so far everything I have found has offered me a LOT less then what I am now making. We have $4000 in saving which we want to keep for emergencies. I desperately want to have a child, but I am feeling like it would be wrong for me to have one on an income of only $32,000 a year, the money issue is the only thing that is holding me back at this time. Everyone in my family tells me that we should just go for it, as we will never have the amount of money we want, to have a baby. Should I take their advice and just go for it at this point? Or should I continue to wait and see what happens? Or can you see another option that I am not able to? any thoughts on the matter that you can offer would be great.
- Angela

You won’t ever have enough money until you realize that you already have more than enough money. That’s really what it comes down to.

It’s really about the life choices you want to make. If you value having a child above all else, you will find ways to make it work, even on $32,000 a year. You’ll eat at home a lot and make other frugal decisions. It can work – I know people with multiple children who get by on less each year.

You need to sit down with your husband and decide how important having a child is to you and how important it is for you to be a stay-at-home parent for this child. You need to decide this together. If it’s truly the most important thing, you can do this, but you’ll have to let go of some material trappings.

Q8: Nervous parents
My parents have plenty of money in their retirement account to retire on. I know it’s into the seven figures but I don’t know the exact amount.

What I do know is that it’s driving them crazy ever since the big downturn in 2008. They are constantly – meaning multiple times a day – checking the balances of their investments, and they seem to be changing what they’re invested in on a weekly if not daily basis.

I think they’re being reactionary and that it’s stressing them out. I also wonder if it’s costing them money. Any thoughts on how to handle this?
- Alan

That does seem a bit excessive. I think they’re just really spooked after the downturn in 2008 and this is how they’ve handled it.

This might be a good time for them to talk to the retirement advisor they have in their workplace, who should be able to calm them down a little bit. If they don’t have such an advisor at work, they should talk to a fee-based financial advisor, one who won’t just try to take over their financial planning.

Most likely, their constant hopping around with their retirement investments is costing them long-term money.

Q9: Starting a retirement fund
My husband is 26 and is a full-time student. He served in the Navy and the GI bill currently takes care of his tuition and part of the cost of his books. He has 2 or 3 years of school left, of which only 1.5 more will be covered with the GI Bill. I am 25 and work full-time making pretty decent money. We recently moved into a larger house but did so with another couple, which reduced our monthly rent by $300 and also is reducing our monthly utilities. We have no kids and keep our emergency fund low – $2,000. We are living comfortably on my salary and are putting about $1000 / month towards my student loans (we are aggressively paying them off due to ridiculous interest rates – 12.75%). Over the past year we’ve payed off a little over 13k of my loans and we have about 29k left (7k in one, 22k in another). If we stay on track we can pay off the 7k loan by the end of the year and hopefully start on the second loan. All of this is taking into account bumps along the way and the cost of traveling for family functions/holidays. I would like to start some kind of retirement account – I’ve seen all the charts that show how much of an impact saving early in life makes. My question is how to go about this. My employer does not offer any 401(k) options. I don’t know much about Roth IRAs, but I’ve seen you recommend both Vanguard or Fidelity. What types of things should I be looking for when researching how to start this retirement fund? While we are paying off my student loans we want to keep any contributions to retirement small – about $100/month. Is this an unrealistic amount?
- Annie

The first thing you’d want to look for is what kinds of fees the investment house charges for opening and maintaining a Roth IRA. Do they charge you for each transaction? Do they charge you for keeping the account open? Both of these are things you don’t want, and Vanguard and Fidelity don’t do them.

You’ll also want to compare some of the investments offered. I would look at the Target Retirement funds from each of the companies you’re considering and see which ones had the best average annual returns over the longest time period you can look at as well as the lowest expense ratio (how much they charge for running the fund).

My retirement investing over the last several years has been done with Vanguard, and I’ve been happy with them.

Q10: Making case for less overtime
I am trying to get the company management to realize the cost of hiring new people vs paying the existing workers a little bit of respect/appreciation and maybe some much appreciated overtime. I need to figure out how to break it down into dollars and cents for it to make sense (pun?) to these folks and I really appreciate how you do that so well and communicate it so effectively.

A little background – the job is in manufacturing, is hard hot difficult work, requires heavy lifting, long days on their feet, monotonous tasks and does not pay well. Oh and it is fairly seasonable with the busy season in the spring/summer and a real die down in late fall until after xmas.

Lets say for consideration we have a core group of 50 workers. Most have been with us for a long time and are good/effective at their jobs and fairly productive. They haven’t had a raise in 5 years. Say about 80% of them would welcome overtime. Lets say they make an average of $10/hr.

Starting in January we attempt to hire a bunch of folks, Say we need about 40 additional people through August. We pay $8 per hour. For every 20 people we talk to/offer work to, about 10 actually show up and go through the orientation process. (which includes paperwork and watching of safety videos done by HR manager and then about 4 hours of on the job training with one of our existing workers). Of the 10 people that start to work, 80% quit within the first two weeks. (The job is REALLY hard)

Given the fact that overtime becomes somewhat a diminishing returns issue, production decreases as tiredness increases… there is some sort of sweet spot of OT that existing workers can work without risking quality and or safety…say its 3 hours per day.

Can you help me frame an analysis and identify what kind of data I need to pull to put together a recommendation?
- Julia

Numbers speak more powerfully to management than anything. They need to make sure that their choices are going to have a clear positive impact on their bottom line. Right now, they seem to believe that attempting to acquire new workers is more cost-effective than offering overtime to existing workers. You have to make the case that it’s not true.

The first step is that you’ve got to come up with an estimate of how much it is costing them to get a single new worker on the job, how much they pay that worker over the time they work there, and the average length of time a new hire stays with the company. What you’re trying to do is figure out the average annual cost for the company for a single new hire over the time they’re with the company. Given what you describe, it’s probably pretty high, but I have a hard time estimating this from your note.

Once you have that number, you just need to compare it to offering enough overtime to established workers over the course of a year to make up for that new employee. If you’re paying time and a half over $8 per hour, you’re looking at somewhere close to $25,000 per year. You might want to assume that you need 3 or 4 existing workers to come up with enough overtime to cover for that worker you didn’t hire, and they will probably want data on the quality of overtime work (how many parts are produced in overtime work versus regular work).

Does it cost more than $25,000 a year to hire and retain a worker? I’m guessing that it does, but you have to do the math yourself.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. SAHM finding work again
2. Spouse’s collection habits
3. Prenup concerns
4. Prenup concerns, part two
5. Anger management?
6. Thinking about value of money
7. Paying down a credit card
8. Replacing household items
9. Evaluating my budget
10. Planning a big move

When I was in late elementary school, I went through a two year phase where I listened to little else but the music of Prince. This was at a time in my life when I was first discovering girls, appreciating music, and really beginning to figure out my own ideas and thoughts for the first time in my life.

Every once in a while, I’ll pull out one of those mid-1980s Prince albums, like Sign ‘O’ the Times or Parade, and I’ll listen to the whole thing. In fact, as I type this I’m listening to Sign ‘O’ the Times from beginning to end, and I can still sing along to the vast majority of it.

There’s something about the music that is just intensely nostalgic for me. I find myself remembering old friends that I haven’t seen since the early nineties. I’ll remember countless afternoons where I would be laying on my bed, reading a book and listening to “Kiss” or “Raspberry Beret.”

Some things can just transport you to another time, awakening memories that you hadn’t considered in years. That’s an amazing thing to me.

Q1: SAHM finding work again
I’m a SAHM (stay at home mom) and know that in 2-3 years when my youngest goes off to kindergarten, I’m going to have to get a job (provided I don’t have any more). I didn’t have a career before. I got a BA in Communications, which is just so generalized I unfortunately feel it’s worthless. I worked as a hotel front desk person for a couple of years (didn’t care for it) and then for an after school program and summer camp for several years. When I go back to work, I won’t be able to do the later because I want to be home after school with my daughter. I don’t really have any contacts with anyone I’ve worked for anymore, so I’m afraid with no references or recent experience, I won’t be able to get a decent job. I don’t have any idea what I would or even could do for work after all this time. Do you have any suggestions?
- Jill

The challenge for you is that you don’t have any marketable skills right now aside from your stint as a stay-at-home mother. In all likelihood, you’re going to be looking at an entry-level position when you return to the workforce. You might be in retail or something similar.

That’s not a bad thing. Approaching a retail job with seriousness and work ethic means you’ll outshine the people around you and have the potential to earn raises and promotions to manager. Alternatively, it could mean that you have the job flexibility to do things like pick up a sick child from school or chaperone a school field trip or be home on a snow day.

Another option, of course, is to return to school and earn a degree in an area that could lead into a different career path. This is a harder path, of course, but it does have long-term financial rewards. Plus, while your child is in elementary school, you’ll have some flexibility because you’re in school.

You do have options. Don’t feel that things are hopeless.

Q2: Spouse’s collection habits
My husband collects Blu-Rays and DVDs. At first, I didn’t mind the collecting that much since he was mostly keeping it under control, but lately he seems to be incredibly focused on finishing out certain “sets” of movies and television series. If he gets one season of a series, you can bet he’ll get the rest of them. The same thing is true with certain writers and directors like David Fincher.

I have this sinking feeling that he’s starting to accumulate debt to buy all of these things. He’s getting them far faster than we can watch them. Any advice?
- Jenny

You can’t make people change things that they don’t want to change. Sitting someone down and telling them that they’re going to change doesn’t do much of anything at all and, depending on how you do it, it can create real conflict.

A better route is to simply sit down and look at your long-term goals and your progress toward them. If you don’t have long-term goals, start setting them. Look at your whole financial picture while doing this. The real key is to show how the behavior of today ties to the success or failure of tomorrow. This is what worked for Sarah and myself.

For my hobbies, I have a monthly allowance. I cap my hobby spending at a certain amount each month, as does Sarah. Everything outside of food and shared utilities falls under hobbies. When I realize that I only have a certain number of dollars to spend, it makes me be a bit careful, but I also know I can spend that “allowance” without any stress at all.

Q3: Prenup concerns
I am getting married soon and am considering having a conversation with my fiance about a prenup. I love him with all my heart and truly believe that we will grow old together. However, I have experiences quite a bit of tragedy in my life and realize that if we are dealt a certain hand of cards, we may not be able to survive it. In my head, those ‘cards’ I am referring to are awful, terrible, unspeakable things like the murder of a family member, house-fires resulting in the death of a future child, etc. I hate to be devil’s advocate and consider such awful circumstances, but I have seen marriages crumble because of similar situations and know that life doesn’t always work out like you plan.

We have no money to speak of (though we are working on it), so protecting cash is not the issue. The issue is this : My family has a large farm that we have worked very hard to keep it whole and protected. My parent’s generation did a wonderful job of creating a sustainable structure that should theoretically maintain the farm’s integrity without bankrupting anyone as it is passed down (in the most basic sense, it is a corporation). However, my family is extremely large and it is inevitable that there will be discussions about the farm’s future regarding sale or development at some point in our lives. I will need to be involved in these conversations with my future husband, but if our marriage has ended, I would like to be sure there are no complications with the votes/rights within the corporation. We are very open about our money and I feel comfortable bringing it up (well, as comfortable as an awkward prenup conversation can be). Alternatively, I don’t want him to resent me for this for the rest of his life, so if he says he doesn’t want one I will let it lie. Given these streamlined facts, do you think that I should approach the subject with my fiance?
- Andrea

My suggestion would be that the family does not bequeath spouses of children any voting rights within the corporation. When voting issues come up, the direct descendents vote and receive all proceeds, at which point it is their decision as to what to do with it.

If you want to write up a prenupital agreement that protects such rights, then I would consult a lawyer. This is always the step one should take in such situations. I would consult a lawyer about any prenup. However, I can’t imagine that he would have any rights to money earned from that family farm if you’re divorced.

Andrea has a follow-up question on prenups that deserves its own answer.

Q4: Prenup concerns, part two
If I choose to ask his thoughts on a prenup, I would like to have some facts going in to the conversation. First, what types of lawyers would be the best for prenups? How much should I expect to pay for that document? Are there any safe online services that could provide the documentation I need that are free or inexpensive? Is there a prenup that could be designed exclusively to protect my family’s property and no other financial aspects of our lives?
- Andrea

I would start with a lawyer specializing in family practice. They should be able to handle a basic prenup, and if they can’t (due to some complexities that I’m not seeing here), they’ll point you to a lawyer that can.

The “going rate” for such a document varies a lot depending on your location. Your best bet is to ask for quotes, but I would tend to lean more toward using a trusted lawyer than using the cheapest one.

If you want to create it yourself, services such as LegalZoom can help you with it. It can certainly do the job you’re looking for.

Q5: Anger management?
I love playing basketball. I’m on a team in a local free rec league and it’s a great way to keep in shape and have fun.

My problem comes from anger management. I get really into the game and then when little things don’t go right I get really angry. I start shouting and I’ll punch the wall. Sometimes, I feel like I carry this anger over into other aspects of my life.

You’ve mentioned that you’ve played competitive sports and competitive games before. How do you handle the anger when things don’t go right?
- Jeff

Whenever something doesn’t go well for my team, I usually assume it’s because of my own mistakes. I don’t really blame teammates. I just assume that if I had adequately carried my part, we would be winning, not losing.

Instead, I try really hard to review where I made mistakes. If I lose a game, I don’t hesitate to ask the winner if he noticed any big mistakes I made. I then try to focus on correcting those specific mistakes.

I will say that I only apply this to situations where I want to improve and get better at a specific activity. If it’s just something I’m trying with friends and don’t want to engage as something to build skill at, I just blow off a loss and don’t worry about it.

Q6: Thinking about value of money
I am hoping you can help me figure out the most logical answer to our problem. Our dream is to own and manage our own Bed and Breakfast. Our youngest child will graduate from high school in seven years, after which we plan to sell our home and purchase a B&B in the mountains somewhere. We now have $250 available in our monthly budget that we would like to start investing in our dream but cannot figure out the best investment method.

Our first option is to deposit the money in our savings account. The account earns .80% interest but it is adjustable. The bank hasn’t adjusted it in the last year but it was earning 5.0% when I opened the account many years ago. There is no way to know if it will go back up or continue to go down. This is where our emergency fund is, insurance deductibles and other short term savings such as summer vacation and new vehicle. The balance fluctuates but averages around $25,000 so there is a decent balance on which the interest will be compounded.

Our second option is to open a CD at a local credit union. The 3 year CD is paying 1.0% and allows us to make a monthly deposit. We only incur penalties if we withdraw before it matures. We can hope to get the 1% or better when we renew in 3 years but we don’t have to worry about the rate going down during the next 3 years.

Our third option is to make a payment to the principle of our mortgage each month. We are paying 4.25% interest with no PMI and an outstanding loan balance of $245,000. We recently purchased the house because it will serve our needs into retirement if necessary. Due to medical issues, there is a possibility that we may not be able to pursue our dream. We choose to live life like we can while preparing for the worst. I am vaguely familiar with the Time Value of Money concept but am not sure how to figure out what the value of our investment is for our third option.

We have worked hard to get to a stable place where the $250 is available and want to reward ourselves by actively investing in our future dream. We tried evaluating on the emotional aspect of each but came out pretty even. I should mention that we prefer a more conservative investment approach with this money. We are still youngish and have opted for a riskier investment strategy with our retirement funds. This is a compromise. How can I mathematically figure out which is the best option for us?
- Julia

Of those three options, the best return you’ll get over the next several years is in extra payments on your home mortgage. The other options just won’t come close to that until interest rates rebound, and I honestly don’t see that happening in the next two or three years.

There are a few caveats, though. I would keep enough cash in a savings account to use as an emergency fund, which you already seem to have. I would also spend some time rethinking your choices if rates do begin to rebound and you see savings accounts and CDs begin to approach your home mortgage rate.

If you have a nice emergency fund in your savings account (and assuming other things are taken care of, like retirement savings), I’d start knocking down that mortgage.

Q7: Paying down a credit card
I have a question about finishing out the remainder of a credit card balance, and keeping it at $0. A year ago, my husband and I, who had been living together for several years but just recently married, took a long hard look at our joint debt, took a big breath, and started tackling it. We have a joint credit card that we have used for a few of our monthly bills, as well as trips and splurges…that we also charged a few large wedding-related costs to. We have it almost paid off, but then we took a long weekend trip and we have a few big expenses coming up in the next few months (mostly airfare to see family), and I am afraid it is going to sit there at 90% paid for the next year! Meanwhile, I really want to check this stupid thing off the to-do list and move on to other financial goals (building more savings, tackling smaller balances on the credit cards we don’t use for new expenses).

Actually, re-reading this, I think I can guess the best strategy: stop using the card. Right? We could use our checking account to pay for all of the monthly bills and stop charging things on this. I think I just need someone to tell me that we can do this. We have a decent steady income, and paying down the balance has been manageable, we have enough to eat and can pay our utilities, it just feels interminable at times. It is this last bit of the balance that is killing me — it won’t go away!
- Kelly

You pretty much hit the best strategy right on the head. If you want the card to get paid off, stop using the card.

When you mention “trips and splurges,” though, that sets off another warning bell. If you have a lot of trips and splurges in your life, that means you’re likely overspending. Cut back on the trips and splurges and you’ll find that getting rid of that credit card debt is a lot easier.

Note that I didn’t say eliminate trips and splurges. The key is to cut back so that you have a balance between both the splurges you like and the financial freedom you desire.

Q8: Replacing household items
How do you decide when to replace common household items like hairbrushes? My wife and I haven’t really found the same page on this yet. She tends to replace things way before I would.
- John

I don’t really have an objection to replacing a common household item that you use every day if it’s beginning to show wear.

The hairbrush is a great example of this. My hair is very short, as is the hair of my youngest son. We don’t use hairbrushes. My oldest son’s hair is a bit longer, so he does use a hairbrush a bit, but most of the brush use in our house comes from my wife and my daughter.

Now, I’ve never had long hair and so I don’t have a sense as to what wear means on a brush. I would guess that if a few of the bristles are broken, that might be time to replace it, but I don’t know that for certain. I trust my wife, who uses it far more than I do.

In other words, I think that the person who should judge when an item needs replacing is the person who uses it the most. If someone else thinks that item needs to be replaced, they should check with the primary user.

Q9: Evaluating my budget
Would you mind reviewing my monthly budget and offering your feedback? I obsess over this budget so much, and I’d like to know where I stand.

I net $3450/month (after taxes, health insurance, and my 401K deduction).

Here is the breakdown –

29% ($1000) – Emergency fund
25% ($860) – Rent (includes heat and hot water)
19% ($640) – Food, gas, other essentials
10% ($340) – Gym memberships (rock climbing, Brazilian Jiu-Jitsu, Crossfit, regular gym)
12% ($417) – Roth IRA
5% ($193) – Car insurance, electric bill, tolls, medication, cell phone, random expenses

Could you give me an idea of how I am doing? (Note that between my 401K and my Roth IRA, I am able to save 15% of my pre-tax income.) I realize my gym memberships are a lot of money per month, but it is what I am passionate about (and as a result, I don’t have cable, the internet, go out to eat, shop regularly … I did try to cut out other things!).
- Sally

Other than the gym membership being pretty high, the rest all seems reasonable.

I would suggest that when your emergency fund savings reach three or four months of your living expenses, you start channeling that money into something else, like a Roth IRA.

For the gym memberships, I’d look carefully at which ones you’re actually using frequently. If you use them all multiple times a week, then you’re getting value from them. If one of them is supplanting another one, I’d cut the one that’s getting used less. I would think that the regular gym and the Crossfit might overlap a bit, for example.

Q10: Planning a big move
I am taking all my savings and moving a thousand miles from my hometown. The cost of living is cheaper and more jobs in the area. As I have been unemployed here at home almost a year now. Any suggestions on how to maximize my dollar once I get settled?
- Angie

The suggestions I would have are endless. It really comes down to how you live your life. Let’s say, though, that I had to trim it down to three of them.

First, I’d try to live close to where I work. If you can avoid buying a car, then you’re going to be saving hundreds per month (car insurance, car payments, maintenance, license plates).

Second, I’d try to establish a social network that doesn’t revolve around spending. A good way to do this is to look for pre-existing groups that revolve around an interest of yours that isn’t tied to spending money in any way, like a volunteer group or a book club tied to the local library.

Finally, I’d establish a routine of preparing my own food right off the bat. Pledge to not eat out or get take-out the first month or two you’re in the town. That way, the routine of picking up food doesn’t become an established one for you and you’ll save a lot of money on food.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. 403(b) or Roth?
2. Inexpensive romance
3. Student loans or 401(k)?
4. Paying back an employer
5. Video games and board games
6. Grandmother wants to be helpful
7. Switching to prepaid contract
8. Hair care for shorter hair
9. Hold on to your dreams?
10. Turning my financial ship around

While the basics of our summer vacation have been in place for a while, we’re starting to add details to the trip.

Our plan involves visiting western South Dakota and eastern Wyoming, hitting the Badlands, the Black Hills, and Devil’s Tower. The focus, obviously, is seeing some of the natural beauty our world has to offer. (Our original plan, to extend the trip to Yellowstone, created a long enough trip that we weren’t able to fit all of it between other obligations, so Yellowstone will wait for another year.)

Whenever we travel, Sarah and I both spend a long time looking for interesting things to see and do along the way. We’re both fans of Americana, so a drive-by of the Corn Palace is in the cards, for example. My father wishes to see Deadwood, so we’ll be visiting that, too (we’re traveling with my parents).

Eventually, we’ll wind up with a huge list of things that we can potentially see and do, most of them free. That list will more than fill our days on the trip, making for an awesome (and pretty inexpensive) vacation.

Q1: 403(b) or Roth?
I work for a school district, and they provide a 403b for retirement contributions through Vanguard. There is no matching. I’ve just started contributing, but wondering if my money would be better invested in a Roth IRA instead. I also have the state (Arizona) retirement system that we have to contribute to each month.
- Kenny

The general rule of thumb for retirement planning is that you contribute to your 401(k)/403(b) until you get all of your employer’s matching money. If you want to invest more, open a Roth IRA. If you hit the annual Roth IRA cap, contribute more to the 401(k)/403(b).

There are a lot of reasons for this (diversification, maximizing tax advantages, etc.). All in all, I think it’s a pretty solid way to go.

In your case, that would mean you should open a Roth IRA and start contributing to it. If you find yourself contributing to the point that you’re reaching the annual cap ($5,000 for most people as of this writing), contribute the extra into the 403(b) at work.

The important thing with retirement is to start saving sooner rather than later. Don’t let the perfect become the enemy of the good. Start saving now.

Q2: Inexpensive romance
My wife and I have really been struggling with our finances over the last couple of years. Her patience with all of this and her commitment to making things better has been amazing and this whole situation has actually drawn us closer together, and we’re thrilled that it finally feels like we’ve turned a corner.

I’m trying to think of ways to show her I love her without spending a lot of money, but I’m not good at coming up with ideas like this. I thought you might have a few.
- Leon

There are lots of things you can do.

Write a note telling her you love her and appreciate her and stick it in her car or her work bag. Stop on your way home from work in an open field somewhere and pick a bunch of wildflowers (assuming you have permission, of course). Spend two or three hours making the best version you can of her favorite meal in the world and serve it to her in a romantic setting. Take care of a bunch of household chores for her sometime when she’s not at home (assuming you have a responsibility split like most couples do).

The most romantic things you can do involve giving your time and effort, not your money. My wife appreciates an hour taking care of something that needs done far more than she appreciates a token gift.

Q3: Student loans or 401(k)?
I am trying to decide whether to push extra money towards my students loans, at 6.9% interest, or into my 401k, with an expected return of ~5-7%. I know that the student loans are a guaranteed 6.9% return on investment, so this seem like the obvious choice. However, the 401k contributions are pre-tax, so if I contribute I get an extra 25-35% that is then earning the returns. Is there a good way to figure out which is better? Perhaps a math whiz could give me an equation to punch in different scenarios? My employer does not match, and I max out my roth IRA yearly so it simplifies things some.
- Sean

For starters, you don’t actually “earn” that extra 25-35% on your 401(k). You’re deferring those taxes until retirement, at which point you may actually be paying a higher rate. I recommend not including such deferrments in your calculations.

The problem is that there’s no way to tell which one is better because of the uncertainty of investments. You cannot know where the stock market will be in ten years. If it’s way up, then the 401(k) is the better investment. If it’s down, then the student loans were the better investment.

If I were you, I’d sit down with a retirement calcuator (here’s a good place to start) and figure out how much I needed to be saving to hit my retirement goals. I’d invest that first, then I’d channel anything (and everything) extra toward additional student loan payments.

Q4: Paying back an employer
My husband is switching employers. Up until the day he left, employer A was supplementing his graduate.school tuition. This was a huge benefit as my husband was able to attain his master’s degree and is several years into a phd with very minimal student loans. We knew with the change of employer he was breaking his agreement and that we would owe employer A the money back, so my question is what is the best way to finance the approx 13,000? We have only been in our home for a year and a half so I am not sure we have enough equity built up to borrow against the home. Rolling my husband’s 401k into a private account would give us access to nearly 10,000 he has in an IRA, so we wouldn’t be penalized if we withdraw it (we are in our late twenties) or the bank has suggested borrowing against our 401k. We have 90 days to repay employer A, which appears to be some what flexible. I think we should pay what we can to satisfy the employer until we can file for and receive student loan money in the fall. What are your suggestions?
- Shelley

The first thing I’d do is talk to the former employer and see if you can come up with a payment plan that works for both of you. If you can come up with a payment plan that you can afford and that they’re happy with, then that’s good for both of you.

If you can’t come to such an agreement, I’d visit a local credit union and see what sort of loan options are available to you. I don’t have your full financial picture here, so I can’t say what sorts of assets you might be able to borrow against or what your credit looks like.

I would be hesitant to tap the retirement money for this when there are other options available to you. The retirement genie can’t be put back in the jar – once you take the money out, it’s a permanent hit to your retirement plans.

Q5: Video games and board games
How much time do you waste gaming in a week, for goodness sakes?
- Charlie

This was an excerpt from a rather long rant, but I think it’s worth addressing.

The only time I play video games in the last year or so is during the hour or so after the kids are in bed, when I try to stay within earshot of them and try to be involved in something that I can easily pause in case something comes up (trust me, things come up with a 6 year old, a 4 year old, and a 1 year old). Perhaps once a week or so, I’ll play a game for an hour or two with some of my friends that no longer live around here as a way of keeping in touch with them, in which case it’s basically an online chat with a game going on in the background.

I also have a weekly “game night” with a few of my closest friends, where we get together to play board games or card games. Think of it as equivalent to a “poker night.” Sarah and I will play a board game or a card game some evenings after the kids are asleep and there are no major chores left to do. We also sometimes have several friends over on the weekend and a few board games or card games are played. In this case, the games are mostly part of being social.

They’re both hobbies of mine, but they’re both hobbies primarily oriented around being social.

Q6: Grandmother wants to be helpful
As I prepare to be a grandmother for the first time, I have some questions about what to buy or not. It’s been more than two decades since I became a parent and the number of products now available for babies and their parents is mind-numbing. My daughter and her boyfriend are almost as clueless as I am. How do I make sensible decisions about what to buy and how much to spend on items? Which items must be brand-new and which are okay, gently used? They have a crib, stroller and playpen. What did you and your wife consider essential and/or most helpful when your children were very young? Or should I simply give them stocks, savings bonds and the like?
- Linda

You’ll hear all kinds of opinions on this topic. I don’t think there’s any problem buying most of these items gently used.

However, there are a few exceptions to that. I would buy a carseat new if the other option is more than five years old simply due to the degradation of the plastic that most of them are made of. I would probably buy a crib new unless I had witnessed the previous usage of the crib; the bottom boards of a crib can easily wear and can break at a very bad time, as most cribs aren’t made to handle some of the things people do with them.

The big way to save money is to simply not buy into the maternal marketing hype and avoid most of the items for sale. Most of them aren’t really needed.

If I were you as a grandma, I would only buy a few key items in advance that you know will be needed, like diapers. Instead, hang onto some cash and help out the parents during those first few months by doing things like shipping them some diapers or bringing them a meal (or having it delivered) or things like that. Those actions will have much more impact than buying a wipe warmer now.

Q7: Switching to prepaid contract
My current T-Mobile contract is up, I use the same phone I got two years ago and I pay 68.00 a month for 500 mins and unlimited text, I don’t have a data plan or any internet. I think this price is quite high, but when I look at pre-paid phones without contracts I will still have to buy a new phone or pay a fee to have mine “flashed” or cleared. What are your suggestions?
- June

It’s fairly high for a single line with just those services.

This might be a good time to switch carriers. If your phone is compatible with another service provider, I would look into their introductory offers for people who are switching carriers. Phone companies compete for customers and they’ll often go to great lengths to acquire a new one.

If I were you, I’d look online at what Verizon, Sprint, and AT&T can offer you. Then, if you find an offer you like, stop into a local shop for that company and ask about phone compatibility. If there are “flashing” fees, ask them to be waived.

You’re a customer. Let them compete for your business.

Q8: Hair care for shorter hair
Awesome to hear that you cut your hair short. I do it because it’s low maintenance, but also because it saves money. I don’t buy shampoo. I just put some soap on my washrag and scrub the top of my head. No shampoo, no gel, no anything needed.
- Dave

I do the same thing, actually.

I’ve started a routine where I use clippers with a short comb attachment to cut my own hair every two weeks or so (no barber costs). This keeps it short enough that a bit of soap and water keeps it very clean and soft (no shampoo), I don’t have to worry about styling it or anything (no extra hair care products), and it’s very fast in the shower (lower water and energy costs).

It looks perfectly fine, it’s incredibly low cost, and I enjoy doing it. It’s just a win all around.

Q9: Hold on to your dreams?
My wife and I live in Austria, in a 920 sq.ft. 3-bedroom apartment just outside Vienna, with a toddler and one more on the way. Our plan was to enjoy the apartment for a few years and then buy a small lot of land to build a house on (that’s very common in Austria, and long-term often a smarter move than buying an old house).

By a stroke of luck, a very desirable 4700 sq.ft. lot went for sale Nov’09 and we bought it because the price (€110.000 on bank loan) was only around 70% of the usual market price (seller had health problems). We figured that we would never get a similar chance in terms of price and location (walking distance to train station, shops, and schools, and quiet safe neighborhood). If we skipped this opportunity, we’d only find more expensive lots that are farther from the infrastructure, requiring more vehicle use. This was a rare opportunity and we felt it was smart to grab it. To keep the costs down, we would build a small house (€230.000 bank loan) without anything fancy – 1200sq.ft. with three bedrooms and a dining/living room. Possibly a 1-car garage. Nothing more. The total monthly payments would be less than what we pay today for apartment+property (currently around a third of our monthly take-home pay), so it’s in our best interest to buy the house and sell the apartment sooner rather than later.

So far we’re following our original plan, but here’s the catch. We have now been trying to get a bank to finance the house construction, but that turns out to be nearly impossible. Of course we can only sell the apartment *after* the house is completed. The apartment should be an easy sell because of excellent location, good condition, and the favorable market situation, netting us more than €100.000 which would fully repay the property loan — and yet, the banks won’t take the risk (“what if the apartment can’t be sold, or what if we decide to not sell it”). This is very, very frustrating. I feel that we’re throwing money out the window for every month that we still don’t have the house.

With that background, here’s the actual problem: Yesterday (on my birthday, no less!) our only car broke down. I’ve got an emergency fund for repairs, but it looks like the engine might have a fatal problem so we would have to replace the entire car. We could do that; we would look for another used station wagon, like we did last time. But that would cost at least €15.000 which we would have to take from the pile we had reserved for the house. So if the car is irreparable and we have to get a “new” used car, then the house construction goes down the drain. If we can’t build the house now, then we would sell the property because it’s not sustainable long-term. If we sell the property, we’ll “never” find another property that is both affordable and in a good location. We’d be “stuck” in the apartment, along with our failed dreams, but at least with a better economy than right now.

If I were a spiritual man, I’d be praying to the gods of engine failure. I’ve talked with my wife, and we both feel that we’re not in control anymore — the banks control whether or not we can build a home for our family, and the auto mechanic controls whether or not the car is dead or not, and the car controls whether or not we can fulfill our house dream. This is even more frustrating than the money “lost” each month.

Question: Would you try to hold on to the property, or would you ditch the dream? How would you act in our situation, how would you resolve the frustration?
- Andy

I don’t think selling the property necessarily means ditching the dream. From a financial standpoint, not dumping money into interest each month is probably a better financial move than hanging onto it.

So, yes, I would sell the property, get the rest of my finances as straight as possible, and start saving for the right opportunity again. I think that your current situation leaves you dumping far too much into interest on your debts each month without really gaining you anything, and the payments seem to be leaving you in a place where you’re not able to really make forward progress on this dream of yours. The only way you’ll make it is if you get through several years of almost perfect luck, and that’s probably not going to happen.

Sell the property, get things straightened out, and start saving. There will be more opportunities down the road, and this time you’ll be ready for them.

Q10: Turning my financial ship around
I don’t really know where to start. I think that’s the whole problem. I graduated almost four years ago from a university with high career hopes and student loan debt in the ballpark of $60,000. With the stock market crash in 2008 my degree in finance was almost useless and I couldn’t find a job other than waiting tables for almost three years. Eventually all my loans went into default and were either sold to collection agencies or call me incessantly to this day. I don’t know what the (balance + late fees + collection fees + interest) on all of this is now but I have a feeling it is over $80,000. I finally got a job about a year ago that didn’t even cover my monthly bills (at the time about $2,800/mo). About three months ago I landed a second job to make some extra money for my upcoming wedding in June and I had hopes of paying off some of my debt.

A couple weeks ago I received my weekly check and found out that one of my loans is garnishing my wages and taking over $100 a week out of my check. I realize that I got into this mess on my own but now I know I need help to get out. I am afraid to answer my phone. I am afraid to check my mail. I am afraid I will get sued and have more money taken from me that I can’t afford to lose.

I’ve done a lot of reading about solutions and I still don’t know what I should do. Consolidation sounds like it would be my best bet and I don’t want to declare bankruptcy if I can help it. I would like to know more. I want to get a counselor but I don’t know who to trust and many places sound like they just want my fee money and don’t really care about helping me.

I have cut back on my spending and figured out that my monthly costs are around $1,800 for food, rent, transportation, insurance, and utilities. I make around $700 a week from my full time job but I only get to bring home $450 of that each week and around $150net/week from my 2nd job. My 2nd job has been going to a little safety net savings ($1,000 now) and wedding costs. My fiancee is graduating in May and we don’t know her employment situation so for now I am leaving her additional income/costs out of the equation. I only have one more car payment and then my monthly payment needs will fall to $1,500. That leaves me with about $900/mo to hopefully start turning this ship around. What are the first few steps I need to take?
- Steve

You’re right that the field of credit counseling is full of sharks. My own grandmother was caught by one, ending up in a credit counseling scam that cost her thousands of dollars.

If you’re afraid and unsure what to do, a reputable credit counseling service is probably a good first step in your situation. I would start with the National Foundation for Credit Counseling, which is a network of reputable credit counselors. Find some counselors in your area using that site and research them.

I don’t have your full financial picture here, so my advice would likely be a bit misguided. I would suggest, though, that you not be afraid of bankruptcy. It is an option in particularly bad debt situations. I can’t tell if yours warrants bankruptcy or not, but bankruptcy simply means that the courts help you figure out a plan for repaying your debts. It hurts your credit pretty badly in the short term, but it will recover.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Back to school dilemma
2. Precautions before romantic trip
3. Pool membership dilemma
4. Favorite vegetable garden plants
5. Telling a story to kids
6. Handling massive student loans
7. Spending and saving focus
8. Is having another child hard?
9. Useful IRA tips for education
10. To refinance or not?

When school is in session, my work day begins when the kids leave and more or less ends when they return home.

This is a good thing in that it gives me a set period of quiet time in which to work, which mostly means writing.

This is a bad thing in that it puts a cap on things when I’m in a writing groove. There are days where, if I did not have such an end cap, I’d write until midnight.

In the end, the good outweighs the bad. I’d far rather prepare a snack for my children when they get home than continue to work.

Q1: Back to school dilemma
I am in a position to go back to school for a post-graduate degree using my husband’s GI bill. This could not have come at a better time for a variety of reasons, which I won’t go into here. We are truly fortunate – and here is my dilemma, as I do not want to squander this opportunity:

Do I go back and get the most bang for my buck and get a law degree/MBA or something along those lines, even though neither one of those areas really float my boat (that I know of!), though I think I would be fairly good at either?

Do I totally go the other way and just go back and get say, a degree in music, or theater, or French – all of which totally excite me, but are less….practical, in terms of ROI?

I suspect the answer lies somewhere in between, but I am at a loss as to how to objectively assess my skills/interests/talents moving forward. Do you know of any online assessment tools/books/resources for 40-year old wannabe grad students looking for a subject to study? One that will both be practical with regard to longevity (what if, god forbid, I become a single parent to my son and have to support him on my own) but also tap into my talents and interests (“if you love your job, you’ll never work a day in your life” type idea)?
- Augie

There are a lot of skill assessment tools online, such as this one from iSeek, that can help point you in a solid direction when it comes to pairing your skills with a worthwhile and potentially lucrative career. If you want more, the best book I’ve found for digging into one’s career path is What Color Is Your Parachute? by Richard Nelson Bolles.

I think the best option for you is, as you mentioned, somewhere between the two. I don’t think it’s a good idea to go into a field that you have no interest in whatsoever, because unless you’re exceptionally gifted, you’re not going to make a strong career out of it. From what I’ve seen, most people can make it in a field with natural talent or a lot of passion and drive, and people who really succeed tend to have both. If you don’t have either… it can be pretty tough.

Dig into the assessments above and see if you can find a career that excites you (at least a little) and earns a good income, too. I’m a firm believer that there’s something out there like this for everyone.

Q2: Precautions before romantic trip
Next month, I’m going to fly to Boston to meet a guy I met on a discussion forum. We’ve been talking for months and our relationship has moved to the point where we’re going to meet. I’m really excited!

In that excitement, though, is a little bit of worry. In all honesty, I’ve never met the guy and I don’t know for certain what will happen when I go. Do you know of any financial precautions I should take?
- Jill

A friend of mine did this a few years back. I’ll tell you what I told her.

First and foremost, never go anywhere without your cell phone – and don’t go anywhere without letting someone you know at home know where you’re going. If you need a moment, go to the restroom before you leave to go anywhere and send a text to a close friend letting them know where you’re going. This is a safety precaution, nothing more, nothing less. If the guy seems stressed out about this, then there’s a big red flag for you. He should understand the situation you’re in and, if anything, encourage you to do this. The more info you can share with people at home, the better.

Before you leave, make sure several of your friends have your flights, the address of the hotel you’re staying at, the address of the person you’re going to visit, and info on any other locations you’re sure you’re going to go to – restaurants and so on.

Also, if I were you, I’d try to live on cash as much as possible and leave my credit and debit cards in a separate secure place. If the guy is a good guy, this will work fine. If the guy is just trying to scam you or something, your cards would be a good target. I also wouldn’t take any excessive pieces of personal identification. A driver’s license will probably be needed for the trip, but things like a Social Security card are probably best left at home (or better yet, in a safe deposit box at a bank).

This might seem to lean toward paranoia, but the entire reason for doing it is to keep you as safe as possible. If you do this and things turn out well, it won’t have a negative impact on your trip. If you do this and things go bad, you’ll be incredibly glad you took these steps.

Q3: Pool membership dilemma
A couple of years ago we moved into a new house that we love and don’t plan on moving. This past June our daughter was born. Recently we’ve discussed the community pool that is only 2-3 blocks from our house. The pool is open Labor Day to Memorial day and costs $400/year for a family membership. There is a lifetime membership that costs $4,000. It seems to us that the lifetime membership is the better option but we’re unsure whether to do it now, or wait until our daughter would enjoy the pool more.
- Will

Before I spent any of that money, I’d want to know everything about the pool. Is it crowded during the times you’d want to use it? Is there always a lifeguard on duty (for that kind of money, the answer needs to be yes)? Are there times when the pool is closed? Does the fee include swimming lessons for your daughter? Would you use the pool right now, with your daughter being less than a year old?

The real question is whether that pool provides enough value for your family at a rate of $400 a year. If it does not, then I wouldn’t get either membership.

Now, if you do decide that the pool has enough value for that $400 a year rate, I would buy a single year and see how it went, particularly if that $400 went toward the $4,000 lifetime membership. At the end of that year, I’d reevaluate my long-term situation as well as the value I got from the pool. I’d also look into additional issues with such a membership, such as whether lifetime memberships are transferable and whether or not the $400 invested in a year’s membership can go toward an annual membership.

Will had another question.

Q4: Favorite vegetable garden plants
We just planted seedlings for our garden a few weeks ago. This got me to thinking, what are the best (cost savings or taste wise) items to plant. Here’s my top 3.

Tomatoes (taste)
Green Beans (taste)
Bell Peppers (cost)

What’s your top 5?
- Will

I agree with those three. They’d be in my top three for reasons much like what you name. They’re all rather easy to grow, too.

On top of those three, I’d add cucumbers. They’re similarly easy to grow and can be eaten in a variety of ways. Our family loves to make what we call “refrigerator pickles,” where we put fresh cucumbers in a vinegar and water solution along with some dill and eat them at our convenience over the next few weeks.

If I had to pick a fifth one, I’d choose strawberries. Again, they’re pretty easy to grow (if we haven’t killed them, they must be easy) and they produce such wonderful fruit late in the summer.

Q5: Telling a story to kids
I read my kids a story every night before bed. Some nights, though, they ask me to tell them a story. I manage to make something up and get through it and they seem happy, but it always seems awful to me. I know you tell your children a lot of stories. Any tips?
- Alan

For starters, I usually include my children (and often myself) as some of the characters in the story. My children love tales where they are the protagonists, perhaps receiving help from a grizzled old mountain man known as Dad along the way. Doing this immediately ties the children into the story.

I also often borrow plots wholesale from movies I’ve seen that perhaps they haven’t seen. I’ve reused pieces of The Princess Bride countless times as a general plot guidance, for example. I don’t completely duplicate the story, but I use enough of it so that I know where the story is going when I start.

As I go along, I constantly allow them to add details. In fact, I usually prompt them for it. “The heroes are passing through the forest when they come upon a very unusual tree…. what’s unusual about the tree, do you think?” They come up with some idea and then I just roll with it. It keeps them engaged throughout the story and often adds flavor I would have never considered.

The end result is usually a memorable bedtime story for the children. They often request that I do this.

Q6: Handling massive student loans
My husband of less than two years has quite a student loan bill that we are going to begin paying back now. You would think by the amount he owes, $110,000 that he was a doctor. But no, this is what happens when you have a terrible paying job for years, go into forbearance on your loans and end up paying $40K+ in capitalized interest alone. I think the original bill for his private college education was about $40K…I’m not totally sure based on the paperwork I have seen.

He went to this private school after serving 2 years active duty in the army and 4 years in the reserves. I don’t really know what kind of government discount or benefit he got from that. I do know that he took every cent of his student loan and used it not just to pay for school but also to pay for books and general living expenses. His career is in communications and he was in an extremely low-paying job for at least 5 years. During that time he was outrunning creditors, car reposessors, etc. and paying back his student loan was not a priority.

Today, 15+ years later, he is finally making good money at his alma mater within the last three years. He began taking classes for a masters degree a couple years ago, which delayed the need to pay back these loans yet again, but now they have become due as he is nearly finished his degree.

We have looked into public loan forgiveness options where he would pay it back 120 times in a row and be forgiven on the loan. The trouble I have with that program is that you make 120 payments and there isn’t much in the way of forgiveness…by my calculations, you pay back the entire loan. They gave him a quote of $1600 per month, which would more than cover the cost plus interest.

The loan is approximately $110,000 at 8.5% interest, and he owes $754 per month. It’s certainly do-able for him/us, but slows down our cash savings. I wondered if you have any suggestions as to ways to get this loan down or if we are stuck? They didn’t offer him a lower interest rate, and I don’t even know where to begin to look to try to find one for a student loan. He actually thinks that there is going to be some miracle plan that will relieve him of this debt, whether that is some sort of grant, something from the military, etc. I don’t know what planet he thinks that will come from, especially if he doesn’t do the legwork to find it.

We got a decent tax return back, about $3,500, and he used $2,000 as a payment towards the principle on the student loan. Do you suggest tossing extra money at this loan as often as possible or sticking to the outlined payments? On one statement it estimated that he’d end up paying $220,000 over the course of this loan with all the interest due!
- Shauna

If you’re stuck with this loan, tossing extra money at it is always going to be a good idea. It will mostly affect you in terms of reducing the length of the loan, but every extra dollar you throw at it will trim a couple of dollars (or more) off of the last payment you make on the loan.

Now, are you stuck with this loan? Probably. I wouldn’t expect a miracle out of the sky to fix it. However, you likely do have at least some options regarding the loan. The first thing I’d look at is loan consolidation. I’m unable to tell if he’s eligible for loan consolidation or not from your email, but if he is, it’s well worth looking into as it will significantly reduce your interest rate. Even if you’re not eligible, you may want to talk to other lenders besides your current lending institution to see if they can make a better offer and take over the loan.

How do you begin looking for these types of offers? The first place I’d check is the financial aid office at his alma mater. Given that he attended there and that he currently works there, I’m pretty sure they’ll be able to offer some suggestions for his situation and perhaps find you guys a better lending institution to work with.

Shauna had a second question.

Q7: Spending and saving focus
What is the best way for us to spend our money when we have some left over?

We have a mortgage that is too high to refinance, but we are looking into it anyway. $281K in a 30-year fixed at 5% that we bought in late 2009. According to Zillow, our house is now worth about $259K. The house appraised for $279K when we bought it (we got a seller’s assist hence the higher mortgage). We recently did some home renovations (again, money burning a hole in the pocket plus want versus need…did we NEED to renovate half of the kitchen? no. Are we hoping that this would have added to the value and aesthetic of the home? Yes. Not sure how to find that out…) that cost about $6,000. We took a wall out between the dining room and kitchen, cut a doorway into another wall, bought a kitchen island and installed granite countertops (didn’t need to redo the cabinets or appliances).

We have approx $10,000 in savings at the credit union account we opened together (less than 1% interest rate) that is going to be minus about $3,000 after these home reno bills are paid. I have an additional $4,000 in a savings account that he has equal access to, plus a $6,000 ING savings account (about 3% interest) that he doesn’t know exists (until we do our SCFR worksheet). We don’t have any particular goals for these savings other than having an emergency fund set up. We like to travel, but when we go to pay the bills for the renovation or the travel, my husband prefers to take it out of what he has left in his checking account rather than pulling out of savings, therefore strapping himself for the month a little bit. I prefer to pull out of savings, though it really pains me to do so.

His car has 129K miles on it and he plans to keep it forever. My car has 84K miles on it, only about $700 left on the loan (will be paid off in June), and I plan to keep it as long as I can, or until we have a child. Since I am going through infertility treatments right now (about $150 a month), that means I’ll have the car a while yet (we do not plan to do IVF…if we aren’t meant to have children we are perfectly ok with that.)

As for retirement accounts, I save 5% with a company match of 4% that started in January 2012. I am currently considering changing jobs even though I have only been here a little over a year. I do not know what percentage my husband saves, but I know he does make contributions.

I try to cut my expenses as much as I can. I clip coupons and bring my coffee, breakfast and lunch to work as often as is feasible. I only shop sales and never buy clothes full price. I hardly ever buy new clothes…maybe a few new pieces each season. My credit card bill is not great, however. I have about $1,500 on it and I can never seem to keep it under control. I am trying to use it less and less but sometimes I use it to pay for things I purchase over the internet (like 5K race entries or Amazon.com/paypal purchases), and I don’t count it in my monthly budget as expenses…it just goes into my budget as a Visa payment of around $300 a month. I can definitely do better there.

Should we be saving more cash, investing our extra cash, making extra payments on our mortgage? When my husband’s money burns that hole in his pocket, where should I tell him to put it?
- Shauna

Given your student loan situation and your mortgage, I think the best thing for you guys to do any time you have some extra money that isn’t needed for anything urgent is to put it toward one of those debts, preferably the one with the highest interest rate. Every dollar you put toward such a move will save you three (or so) off of the last loan payment you’ll have to make.

I don’t see anything that you’re doing wrong, though. You have a solid emergency fund when you consider the whole of your cash savings. You seem to have your spending largely under control and are slowly whittling down your debts rather than watching them escalate. You’re doing the right things. It just takes time.

One thing that might be useful is to just sit down together one weekend afternoon and spread all of this out. Together, get a picture of how much you have (savings, retirement, home value, etc.), how much you’re spending each month, how much you’re bringing in each month, and how much debt you have. Talk about where you want to be in the future, and I strongly encourage you guys to really think about debt freedom (trust me, it feels fantastic). Just talk about things. You’ll feel better about everything if you get it all out there on the table together, trust me.

Q8: Is having another child hard?
My husband and I are thinking of having another child. Our first one was a real life changer and our biggest worry is that our second child will bring some disharmony into our life after we finally feel like we have a good balance. Are there any things we should be thinking about?
- Andrea

The biggest change our second child brought into our life was during the first year. Since our oldest was only two at the time and still needed a lot of help with basic things (diaper changes, bedtime routines, etc.), we found ourselves pairing off, with one adult handling one child and the other adult handling the other child.

That wasn’t too much different than what we did before, but with just one child, one parent found themselves free to take care of household tasks or just to relax. That vanished, particularly during the first year, and that was the biggest challenge.

Once our second child got to about nine to ten months or so, we were able to have one parent handle the routines with both of them while the other parent was able to return to housework and other tasks. (This whole pattern, of course, repeated with the third child.)

The first child was the one that caused the real life changes. The changes with the second were more subtle. The changes with the third were pretty easy.

Q9: Useful IRA tips for education
[Y]ou can pay for higher education expenses (tuition, books, fees, and even in some cases lodging) from funds in an IRA without the early withdraw penalty. If it’s a Roth IRA you dont have to pay income tax on the earnings either.

The funds can be used to pay for expenses for yourself, spouse, OR children.

You can see where this will save even more money since you wouldn’t have to pay extra income taxes. Obviously you would need to choose wise investments here, but you could go for some more conservative investments or just buy up some money market funds, but if you went ahead and invested it in a decent portfolio (mine is all ETFs) then you could actually make some money on it and cut that monthly savings requirement by a large amount.

Wish I had known this last year, so now I have to pay off the student loan I got, but at least this year will be much easier to afford.
- Wayne

This certainly works, and it’s one approach to saving for college.

My only hesitation is that doing this shoots your annual window for IRA savings for retirement. You’re only able to save about $5,000 a year in IRAs for retirement purposes and for many people, IRAs can be invaluable retirement savings tools. Using them for the education of your children is going to postpone your own retirement, no two ways about it.

For some, that might be an acceptable outcome, but why not use the IRA for your retirement and start a 529 for your children’s college education? I may use my IRA for education in a pinch, but I’d far rather have it as a retirement asset. The best gift I can give my children is to not be a financial burden on them when I’m old, and my IRA will help to ensure that.

Q10: To refinance or not?
I’m looking at refinancing a condo (I rent it out) using the the new HARP 2.0 program. I’m currently owe around $73K @ 7% in year 11 of a 30 yr mortgage. The loan I’ve been offered is for $78K (closing costs & anticipated spring taxes) @ 4.5% for 20 years. The loan is a $5K difference, but $2K of that will be be offset by exchanging escow accounts between the 2 lenders, which I would sink the payout back into the new loan. If I do the deal, it will save me about $135 a month on my payments. So, I figure the $3K+ on the new loan would be paid off in under 2 years by saving the $135 a month. I’m not looking to keep this property as rental income forever. I’d actually like to get it to the point where I could sell it off for what I owe on the loan, which I hope to be in about 5 yrs. Currently properties in the area go for $45K-$50K. I already pay an additional $150 a month & would continue to just pay that same amount on the new loan since I’ve already figured that amount into my budget. Does it make sense to do this deal? Should I refinance this loan at a larger amount, even though I’m itching to get out as soon as I can? I would love to get out now, but I’m so far under water, I can’t get the funds to cover the difference. What are your thoughts?
- Jim

If you’re going to stay in the home, this refinancing makes sense. It lowers your interest rate, doesn’t significantly extend the length of the mortgage, and reduces your monthly payment. Those are all good things.

I don’t know how much you’ve shopped around for this deal, but depending on your credit, this is either a good offer or a great offer. You could try for a better one (and you might get one), but it won’t be significantly better, as the interest rate is pretty competitive.

There is always the option to walk away. However, when you’re in a fixed rate mortgage that low with that relatively low balance, it’s probably not a really good option.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.