Updated on 03.20.17

Questions About Retirement, Cookbooks, REI, and More!

Trent Hamm

Reader Mailbag

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Upside-down on older vehicle
2. Buy house now or later?
3. REI annual dividend question
4. Common knowledge versus perspective
5. Parents without any retirement planning
6. A very hard choice
7. Retiring with less than $3M
8. Eating in airports
9. Side gig brainstorming
10. Unwanted storage locker contents
11. Value of cookbooks
12. Whiteboard uses

Yesterday, I spent several hours doing a “spring cleaning” of the garage. It’s still not in tip-top shape, but at least now you can access everything in there.

Our garage isn’t heated, and during the winter months, it often becomes a clearinghouse of “things to deal with later,” which means that there eventually comes a day in the early spring where those things to be dealt with later have to be dealt with.

Thankfully, that means that such things get done on a nice spring day where it’s a pleasure to be outside. It just looks overwhelming when you open up that garage door and realize the number of things to be done.

Q1: Upside-down on older vehicle

My boyfriend is a sales rep and spends the day seeing clients. According to company policy, his vehicle must be above a certain price point (currently $26k) and because of the equipment he must have on hand, it needs to be an SUV type vehicle. He averages 35,000 miles each year. He does receive a monthly travel stipend to cover expenses (car payment, mileage, insurance) however, it’s not quite enough to cover the entire amount.

He currently has a 2012 Honda Pilot with 162,000 miles. He is considering trading it in because of the high mileage but he is upside down in the vehicle.

Because of company requirements, I don’t ever foresee a time when he would not be upside down on a vehicle but we’re not sure what the solution is.
– Lisa

With those kinds of requirements, you’re basically forced into a pretty rapid replacement cycle on an expensive vehicle. There’s nothing you can do about that.

The thing is, if you buy such cars used, you’re going to be at the trade-in point within just a few years. Even buying such a car new will put you at the trade-in point in five or six years. That’s just due to the requirements of that job.

So, what can you do about it? For your immediate problem, you have to throw every dime you can to get out from under this upside down loan. At the very least, when you get rid of this car, the remaining loan has to go away, and the only way you’re going to get there is with some belt-tightening on your spending.

For the next car, get one with a very short term loan – as short as possible. That means high payments, of course, but that’s the only path you really have to avoid being in a constant underwater situation with the job requirements involved. Once you pay off that car, start socking away an amount equal to that car payment into savings and try to hold out on a replacement. Ideally, you’ll be able to pay for most of – if not all of – that replacement in cash.

Q2: Buy house now or later?

My wife and I currently own a 2 bedroom house and have a one year old daughter with our second baby due in July. We want to upgrade to a home more suitable for a larger family but have a pretty large amount of debt. Our original plan was to pay off debt completely (with the exception of our mortgage and auto loan) and then sell our house and use the money we make from the house as a small down payment on the next house.

With that said, we are also concerned with all the “experts” expecting interest rates to go higher. My question is, would it be smarter financially to continue paying down our debt and miss out on lower interest rates or would it be a better idea to sell the house now and purchase our next house before rates go higher but still have our debt?

Our debt is as follows…

Mortgage: $218,000 (could sell for $260,000)
Auto Loan: $26,000
Student Loan: $8,000 @ 5%
Personal Loan: $5,000 @ 10%
Credit Card 1: $7,400 @ 0%
Credit Card 2: $2,000 @ 0%

– Mike

Never, ever make a financial move you’re not equipped to make right now out of some fear of “higher interest rates” predicted by “experts.” Don’t buy that house until your financial situation is ready for it.

But what about “higher interest rates”? Here’s the thing – if mortgage rates go up, then it’s going to have a large cooling effect on house prices. People can only afford so much for monthly payments and if interest rates go up, that doesn’t mean monthly payments on new mortgages are going to rise to match. What it means is that housing prices are going to drop somewhat to make up the difference.

Housing prices are so high right now because they’ve adjusted to handle 4% mortgages. Current prices can’t and won’t hold if mortgages are at 6%, because people won’t be able to make the payments. Prices on almost all houses will drop at that point.

Q3: REI annual dividend question

I got about $24 for my annual REI dividend. I used to shop at REI regularly for hiking stuff but now I have pretty much everything I need. What’s a smart way to use it?
– Tony

For those unfamiliar, the outdoor supply store chain REI offers a “dividend” program to its customers if they become members of their coop. Lifetime membership in the coop is $20, but REI often offers special programs where you get a $20 coupon if you buy a membership, so it’s essentially free.

The big perk of this membership is that they give you an annual “dividend,” which usually amounts to store credit equal to 10% of the amount you spent there in the last year. This would mean, of course, that Tony is sitting on $24 in store credit at REI without anything he really needs or wants and is unsure how to spend it.

The first thing I’d point out is that REI’s dividends don’t expire until just after the new year two calendar years after you receive it. So, if you have a 2017 dividend, it doesn’t expire until January 3, 2019. You have plenty of time to decide what to do with it.

If I were you, honestly, I’d just let it ride for a while. Do your usual outdoor stuff this year and watch for something that you might need, particularly an item that you use up or break. Use that credit to replace or replenish that damaged or used-up item.

Q4: Common knowledge versus perspective

I first started reading The Simple Dollar back in 2008 and 2009. A friend sent me a long list of money saving tips from the site and I really got some use out of them. Back then, I hated your articles that weren’t specifically practical. If it didn’t include things to do to save money I skipped them and thought they were a waste of time.

I just realized that now I am the complete opposite. I hate the specifically practical articles and skip them and I like the ones that are about psychology and philosophy and setting goals.

I think it has to do with maturity. At first all I cared about was things I could do right now to make my situation better and I really didn’t think beyond the bills at the end of the month. If I could pay them everything was good. Now I want to build a life where I don’t think about bills ever again and you just have to think differently.

Thank you for writing both kinds of articles and stuff in between to guide me through that journey. You have a reader for life!
– Tim

I don’t think it’s a matter of maturity so much as it is a matter of time that you spend thinking about personal finance. The more time you spend thinking about it, the more that the basic money saving tips seem almost obvious. They jump out at you. You also begin to realize that when you do those things, you end up with more money left behind and you begin to think about what to do with that money.

That’s not a maturity thing, really. That’s just about consistent focus. That same exact thing happens when you focus on anything for a while. One of my closest friends is a pastor and has studied the bible for many, many years. When I ask her what stands out to her when she reads some scripture, she’s thinking about things in a completely different way that I do, but when she starts talking about it, I realize that she’s completely just assuming an understanding of things I’m just now discovering for the first time.

For most people, the first time they focus on money is in a moment of need and they’re focused on tactics that get them out of that moment of need. For some, that’s enough, and that’s okay. For others, there’s a desire to replicate that success and see where it leads, and I think it eventually leads to a more philosophical approach for everyone.

I try to write articles that hit every step in that journey, from practical tactics to save money on your food bill and how to escape from near-bankruptcy due to your debts to philosophical approaches to building the life you want and altering your mindset, and everything in between. I don’t always succeed in that regard, but it’s something I think about every day when I write and every time I brainstorm article ideas. I wish I could magically help every single person in the world achieve whatever their financial goal is, whether it’s just being able to pay the bills this month or achieving financial independence, whether it’s being able to buy their kid the thing they want most for their birthday or having a secure retirement, whether it’s being able to figure out why they never have any money left over or figuring out what career would bring them more personal peace and security.

We’re all on a journey. The journey isn’t the same for everyone, and we’re all at different stages, too. Hopefully, everyone can find something that helps them take that next step.

Q5: Parents without any retirement planning

I’m hoping you can help me give my mom some financial advice. She and her husband have always been awful with money. She’s 66 and collecting social security after barely working enough in her life to even qualify. My step dad is 56 and I doubt that he has a penny saved toward retirement. He works a very physically demanding job that he won’t be able to continue doing as he gets older. My mom inherited about $150k from her aunt who passed away recently, and she’s asking me what to do with it. I’m pretty savvy when it comes to my family’s financial planning, but I don’t know what to tell someone who is in/close to retirement and doesn’t know whether they’re investing for the long or short term. I’ve toyed with the idea of encouraging her to put it towards paying off her mortgage, bringing the total they owe down to about $90k, but I don’t know if that would be her best bet. Any thoughts?
– Kevin

First of all, both paying off the house and putting it away for retirement are good moves. Neither one is a misstep. What you’re essentially asking is what the “better” of the two moves is, and that’s very difficult to tell without a crystal ball showing us the future. Since we don’t have that, we have to guess.

Given their situation right now, my feeling is that the best thing that could be done with the money is to put aside enough for a few months of living expenses in a savings account somewhere, to be used only when your step dad loses his job and has to either fully retire or find other work, and then use the rest to pay down that house.

The best thing that could be done for them before your stepdad retires is to eliminate as much of their debt as possible so that their monthly bills are as low as they can possibly be when retirement comes around for them. Saving for retirement won’t increase their monthly income enough to cover a house payment.

Q6: A very hard choice

I am struggling with the pros and cons of a disruptive expense and I hope that you’ll shine some light on this.

My older sister and I have talked about going to France together for many years, since we were little girls in fact. We wanted to spend a week in Paris and then a week touring wineries together.

As dreams like that go, it didn’t happen. She got married, then I did. We sometimes go on vacations together but nothing outside of places we can both drive to.

My husband and I are on a very strong financial path. We have no debts, about $180K each in retirement savings, and about $100K in additional savings. We spend far less than we earn and intend to retire somewhat early. We are both in our early 40s.

A few weeks ago, my sister told us that she has stage IV breast cancer. She’s 48 years old and her husband is 47. She estimates that she has about nine months to live, of which six will be pretty healthy.

My husband immediately said that we are going to go on the trip to France as soon as humanly possible and that we’re paying for the whole trip. I was okay with that until I began to see how much it would cost. To do things in the way we’ve always talked about and paying for all four of us would eat up a significant portion of our additional savings and almost definitely postpone my future plans.

I feel like my practical and sentimental sides are at war here. I don’t want to lose my sister. Aside from my husband she is the best friend I have ever had. I also don’t want to lose the future I have planned with my husband that we have been working on for so long.

What should we do?
– Mary

You go on that trip, no question. That’s the entire point of saving for the future. If you don’t do this trip, you will regret it for the rest of your life. This is one of those key life moment things.

I normally offer the sanest, most down-to-earth financial advice around, but the entire point of following such practical financial advice is so that when life puts you in situations like this, you can simply do what your heart is telling you to do. And I can tell from this note that your heart needs this trip. Go. Have the time of your life. Laugh with your sister and go to fifteen wonderful little Parisian cafes and drink too much wine in Burgundy and see the most beautiful things you’ve ever wanted to see together. Do it while she can still do it with as much health as possible.

You can make up that savings later on. Yes, you might have to work another year. Guess what? That year is well worth it in comparison to the feeling of leaving something like that undone in your life. This is one of the big things that you can’t skip.

Go. Call your sister now and tell her that you’re doing this, no arguments. Start getting the time off from work now for all of you. Get on a plane, go, and forget the rest of your life for two weeks. This is something your sister needs and something you need, too, and something you will be glad you did every single day for the rest of your life.

I changed a few details of the above letter to obscure some privacy aspects, but left enough intact for the core of the story to be clear and for my answer to perfectly match the original question.

Q7: Retiring with less than $3M

I am 29 years old and make $45,000 per year. I have been playing around with retirement calculators and I am trying to figure out my target number that I would need to retire. My math is that it is somewhere around $3 million. However I talked to my older brother about this and he says I am insane and anyone should be able to retire on $1 million. Thoughts?
– Jim

I think you’re both right and that you’re merely talking about different timelines. Your brother isn’t factoring in the 36 years of inflation that will happen between then and now.

Right now, a person should be able to retire on $1 million with a modest lifestyle. I would happily do this. However, 36 years from now – when you are 65 – $1 million won’t cut it. We will have gone through 36 years of inflation and the purchasing power of a dollar will have declined.

If we assume 3% inflation, $1 million today is worth the same as $2.9 million in 36 years in terms of purchasing power. The lifestyle that a person could have today with $1 million in retirement is about the same as the lifestyle that a person in 36 years would have with $2.9 million in retirement.

It’s pretty obvious here that the “$2.9 million” matches up to the $3 million you’re talking about, while your brother is spot on with the $1 million today.

Q8: Eating in airports

How do you keep food costs low for a family of five in an airport? About once a year we fly across the country to visit family and the food costs add up so fast! We flew back in December for a week and wound up spending more than $200 on food!
– Jeremy

I have flown with my children just a couple of times, but each time Sarah and I planned ahead for food. We simply packed a whole lot of inexpensive snack foods and water bottles in our carry-on bags.

Before we left each time, we packed five empty water bottles, a few small flavor additives for the water, several simple sandwiches (I think they were peanut butter and banana), a bunch of granola bars, some applesauce packs, and some cheese sticks and cured meats. We basically filled up one pocket of my backpack with these items. We filled the water bottles at a water fountain after getting through security.

Then, whenever a child indicated that they were hungry, we gave them one of the items in there. Whenever someone was thirsty, they grabbed their water bottle and had a drink.

We probably had $20 in food items in the backpack when we left and the items got us through two flights (with a layover in the middle) without buying any more food (the flights we’ve done were from Des Moines to Seattle).

Just pack a lot of little snacks that people will like and that can be stored at room temperature, and don’t forget plenty of empty water bottles.

Q9: Side gig brainstorming

Really inspired by your article on side gig business planning! Great stuff and has inspired me to think about my own ideas! How do you pare down a big list of side gig ideas before writing full plans for each? I have a list of 25 or so ideas and not sure how to cut them down!
– Susan

My first pass would be to eliminate anything I didn’t feel very passionate about. Often, it’s passion for some aspect of the side gig that will get you off the couch and working on the project.

My second pass would involve initial clarity about what you’re going to make and how you’re going to sell it. If the path isn’t quickly clear to you, eliminate that idea.

My third pass would be to trim any ideas that rely much at all on the performance and choices of others. If it relies a lot on some kind of gatekeeper – like someone at a publishing house deciding that your book is awesome or someone at a record company signing your act – then I’d skip that one. Stick with ones where as much of the project is under your control as possible.

Q10: Unwanted storage locker contents

When my grandfather died, we put all of his possessions into a storage unit with the intent of going through them later in the summer once the house was sold. Well, as things happen, the stuff has been sitting there for two and a half years. I just got another bill for the storage unit and I talked to my relatives about it and none of them wanted to do anything with the stuff. They all said it was mine. I don’t really want any of it either. What’s the best way to just get rid of the stuff?
– Sara

If you just want to get rid of the stuff, just post on Craigslist that you’re giving away the contents of a storage locker from 9 to 10 AM this Saturday and give the address and locker number. Show up there about 8:30, unlock it at 9, and get out of the way. After an hour, there won’t be much left. People will take practically anything if it’s free.

You might want to do a “first pass” through it first to see if there’s anything you’d really want to keep or anything that might have significant value that you’d want to handle selling on your own.

If you’re wanting to make maximum money off of this… you’re going to be investing a lot of time, and unless there’s a bunch of treasure in there, it’s not worth the time. You’re probably better off just doing a first pass, then unlocking the door and letting people have at it.

Q11: Value of cookbooks

What are your thoughts on the value of cookbooks in an era where there are millions of recipes online? Are they still worthwhile?
– Andrew

I think that a well-curated and well-written cookbook, especially one with technique and other ideas beyond mere recipes, is incredibly worthwhile, at least as compared to the value of a random recipe from a site like AllRecipe. Many of the recipes on those types of recipe clearinghouses are of questionable quality.

That doesn’t mean that every cookbook is great. It just means that great cookbooks still have a role.

I often find myself buying cookbooks at yard sales and the like. If it doesn’t click with me, I’ll pass it on, but I’ll be the first to admit that I have a pretty healthy cookbook collection.

In general, I view cookbooks as reference books and I don’t mind having reference books around. There still isn’t a digital version of a good reference book that matches the convenience of having a cookbook with a bunch of bookmarks in it spread out on a table as I make dinner.

Q12: Whiteboard uses

You have mentioned before that you have a whiteboard in your kitchen. What do you use it for? Meal lists?
– Stephen

We have a large whiteboard on a wall right next to our kitchen. On that whiteboard is a meal plan and rough calendar for the week.

On Saturday or Sunday, Sarah or I will plan out the coming week on the whiteboard. We’ll basically just make a weeklong calendar and in each day slot, we’ll mention what we’re having for dinner that night along with everything that’s on our family calendar for that day/evening, along with any special meal prep notes or other important things that need to be remembered on that day.

We basically live by this whiteboard during the week. Sure, this could be done electronically, but this format enables everyone in the family to see it easily and use it without worrying about apps or calendar syncing. It just works well for us.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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