Reader Mailbag #20

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Each Monday, The Simple Dollar opens up the reader mailbags and answers ten to twenty simple questions offered up by the readers on personal finance topics and many other things. Got a question? Ask it in the comments. You might also enjoy the archive of earlier reader mailbags.

As usual, we’ll start things off with a few links to older articles that directly answer questions I’ve heard recently.
Does it make financial and social sense to consider moving?
Is a roommate worth the financial benefit?
Using Sunbird to schedule home maintenance tasks

And now for some great reader questions!

Do you use your homemade laundry detergent to wash your diapers? Just curious. I am pregnant and planning on making my own cloth diapers.
- Brandi

My wife spent some time researching what works well for washing cloth diapers. She was interested in a very biodegradable solution, as well as one that actually got the diapers very clean. What she settled on – and what we’ve been using for a while – is three tablespoons of washing soda plus three squirts of Simple Green. We fill up the washer with water, then add both ingredients and stir, then toss in the diapers. We usually wash them once cold, then wash them again on warm, then do a rinse cycle. They come out smelling great, plus both washing soda and Simple Green are biodegradable.

After doing some math, we estimate our cost per load for these cleaning agents is about six cents (this includes both loads). Cheap and environmentally friendly – and it works! We’re happy!

What is the story behind the art element (your logo) at the top of The Simple Dollar?
Did you design it or did you find someone to design it for you and how did that happen?
Does the design at the top of a blog have to be any certain dimension?

- Kate

I designed it myself using Adobe Photoshop. I’ve been teaching myself Photoshop gradually over the years, but I am far from a master. Often, I don’t really have anything in mind when I start with a Photoshop project and I just experiment until I find something I like. While that makes for some neat stuff, it often makes it hard to repeat.

There’s no specification for anything with a blog in terms of size. It’s all about the layout you define yourself.

How are you doing on your 2008 financial goals?
- Tori

For a reminder, let’s jump back to my 2008 goals:

By the end of 2008, we intend to have fully eliminated my wife’s student loans, contributed $1,200 each for the year to our children’s 529 plans, and increased our retirement savings to 1.3 times our combined annual living expenses.

Currently, my wife’s final student loan is on the home stretch and we hope to have it gone by the end of September. I contribute $100 a month automatically to our children’s 529, so that’s well in hand ($700 contributed for each). Our retirement savings is now actually above 1.3 times our combined annual living expenses, so we’ve already accomplished that one.

What will we do in September when our goal has been achieved? We’ll start in with the 2009 goals, of which the big one is eliminating the rest of my student loans.

Do you use Angie’s List? Any thoughts?
- Annie

Yes. For those unaware, Angie’s List is a collection of reviews on services available in various metropolitan areas.

I signed up for Angie’s List during the “grassroots” period as it got started in Des Moines, in which I got a year’s worth of free subscription. Frankly, I’ve not found it to be very useful at all, simply because Des Moines is a metropolitan area not well covered yet by Angie’s List. For most types of service, there are only a couple of reviews available, and most service providers in Des Moines have no reviews at all.

On the other hand, I peeked at a friend’s account covering the Chicagoland area and I was blown away. It was incredibly easy to find well-recommended services in almost every category.

I think if you live in a large metropolitan area, Angie’s List is worthwhile for finding services. If you’re a bit more off the beaten path, it quickly becomes less useful.

Why not seek the highest interest rate for cash accounts? Several on-line banks consistantly pay higher interest rates than the others. The difference between 3% and 3.5% interest rate isn’t 0.5%, it’s nearly 20%! That’s an additional $500 per year into a $100K emergency fund and requires zero time once the account is established.
- Lurker Carl

I don’t advocate for using interest rates for comparing banks because interest rates change very regularly. For most online banks, interest rates are used to lure in customers, and they shift the interest rates around all the time. Plus, whenever the Federal Reserve changes their rates, the online banks follow suit, often at very uneven intervals.

When you mix all of that together, it quickly becomes clear that a specific rate comparison is only useful in the moment, and that comparison will be invalid in a month or two. So I simply don’t bother to use the comparison – I just make sure that the rate is competitive (meaning within a percent or so of the ones on the bleeding edge at the moment) and then look for other features, mostly customer service.

Some people advocate rate hopping. I personally think that if you have enough sitting in a savings account that you can actually earn a good wage for the time invested hopping from online savings account to online savings account, that cash should be sitting in a better investment somewhere. If you have $100K in your emergency fund, that’s far too much, and you’re denying yourself some real opportunities for growth by putting most of that in index funds.

Do you think you’ll ever outgrow video games? Do you want to? Do you think having a system in the house is good for your kids, bad for your kids, or a wash?
- GVR

I don’t think there’s anything to “outgrow” when it comes to video games. I usually view statements like that as being statements by people who have already made a decision that video games are somehow beneath them as a form of entertainment. Personally, I find video games to be substantially more rewarding and intellectually stimulating than television and more than most movies, too.

I think video games are a net benefit for children if played in moderation and mixed with reading and physical activities. My two year old already plays some Wii Tennis on rainy days, in fact, and understands the idea behind Guitar Hero and Dance Dance Revolution (though his coordination isn’t quite there yet). Not only is gaming like this good for hand-eye coordination, it also has social benefits. Many games have problem-solving qualities – I can certainly vouch that the old King’s Quest games helped fuel my addiction to puzzles, as I remember staying up all night at a friend’s house piecing through King’s Quest V and VI.

How much faith do you put in individual stock picks or fund recommendations?
- Lila

Almost none. I don’t think individual stock picks from places like investment blogs, CNBC, newsletters, magazines, or other places are well-researched enough to put my money in.

Before I invest, I want concrete reasons not only why this specific investment is a good one, but why I should be investing in this class of investment, how long I plan to hold it, and so on. Jim Cramer shouting out a pick on Mad Money most definitely does not fit the criteria.

What is success, and how did you arrive at your definition?
- Natasha

I think success is an inherently personal thing. Every person is going to have a different definition of success, and thus when one person has achieved what they define as success, it might not be success in the eyes of another.

So what’s my definition? To me, success occurs when you can spend your time mostly doing the stuff you want to do and earn enough income from doing that (or from investments) so that all of your life expenses, needs, and reasonable wants are covered.

I have not achieved that as of yet, but I’m far closer than I was a few years ago. While I do have the freedom to mostly do what I want, I can’t do exactly what I want. There are a lot of days when I’d rather work on fiction writing, or nonfiction writing on something else entirely different, or just go out and work in the garden or just play all day with my kids.

That’s my goal, and when I reach it, then I’ll view my life as being a success. Thankfully, I’m at least somewhat close to it.

I’m going to be financially advising a person who does not have a home computer. I’m only going to be doing the basics with her—budget, Dave Ramsey’s baby steps, those types of things. I admit, all of my money stuff is on a computer with excel spreadsheets and such, so I’m at a little bit of a loss as to how to help. Do you have some good tips or links to forms I can print out for the non-computer savvy person?
- Angel

My honest suggestion would be to buy one of the very solid personal finance workbooks sold in most bookstores. The best one, in my opinion, is Dave Ramsey’s Total Money Makeover Workbook.

Another option is to contact some groups in your area that offer financial assistance meetings. One great place to start is by stopping by the offices of large local churches. Almost every large church has some form of faith-based financial planning going on, but most of the actual working material is completely secular and can be used without change in non-faith environments. Stop by, find a contact, and see what they have.

If there is interest, I’d be willing to prepare a document like this for download as well.

Who was the greatest U.S. president?
- Nick

For some goofy reason, I loved this question.

It’s easy to give a typical answer like one of the Roosevelts, Lincoln, Washington, and so on. But each of those were led to greatness by tumultuous periods in history – they had powerful opportunities to make themselves great. To me, a great president is a president who accomplished powerful things in a relatively calm time, who did it quickly and efficiently and got out of the limelight.

Thus, I think the greatest American president was James K. Polk. He was president for just one term (1845-1849), but managed to accomplish an incredible amount. Here are seven things he did:
1. He pushed through the Walker Tariff, which drastically lowered the tariffs on all trade. In other words, it became very cheap for the United States to trade internationally, which was the first big step towards the U.S. becoming a global economic powerhouse.
2. He established an independent treasury, which meant that at last the funds of the United States government weren’t held in private banks, as they were prior to Polk.
3. He annexed Texas and convinced it to become a state.
4. He bought the Oregon Territory from England, which included Washington, Oregon, Idaho, and parts of Montana and Wyoming.
5. He signed the Treaty of Guadalupe-Hidalgo, which (along with the Gadsen Purchase) added California, Arizona, Utah, Nevada, and portions of Wyoming, Colorado, and New Mexico to the United States.
6. He opened the U.S. Naval Academy, the Smithsonian, and the Washington Monument.
7. He issued the first postage stamps in American history.

He set all of this down as his agenda upon becoming President and accomplished all of it in just one term. That, to me, is an incredible success – he set some big, giant, audacious goals and got them done in just one term.

Got any questions? Ask them in the comments and I’ll use them in future mailbags.

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47 thoughts on “Reader Mailbag #20

  1. Haha! King’s Quest! I forgot about those games. Loved them.

    I didn’t know Polk was in office for all those accomplishments. I wish I knew more American History, but I only graduated high school 3 years ago… What did they teach me in school?

  2. I like your answer about the greatest president. I don’t know enough about our history to be able to name the greatest president.

    I just want to mention there are good reasons for rate hopping. Perseonally, I use a local credit union (though I’m considering switching to Chase) for my normal banking needs. But I don’t keep any money at all in this account, just enough to meet my monthly obligations. Everything else goes into a high-rate account. For this, I don’t need good customer service. I don’t even need customer service at all. I just need online access to my funds. It also doesn’t take much time to switch to a different account when a better one comes up, since my bills are paid out of my primary account. So, I do engage in regular rate hopping. It really only takes a few minutes to set up a new account at most online banks.

    Also, there are reasons to have $100K in cash. Many people, myself included, engage in credit card arbitrage — that is, pulling money out of credit cards for free at 0% promo rates, and investing the difference. Obviously, with such a short time span (the length of the promo rate), I don’t want to invest in the stock market. So I keep the money in a safe investment. That turns out to be a high yield savings account.

  3. Polk? Wow, that’s very nicely played, sir!

    I have to say the idea of “outgrowing video games” seems to be a generational thing – since video games were something embraced by the younger generation during the ol’ Atari days, video games got an association with children…but I think we’ll see the days when our generation gets older where grandparents are playing the same video games that their grandchildren are, and both enjoying the game.

  4. Thank you for your comments on out-growing video games. I’m 40 years old, and I’ve been playing video games since the original Pong. My 16-year old son and I play games together, both cooperatively and competitively. Our current favorite it Call Of Duty 4 on XBox Live, which adds a social element to the game play. I play regularly with other 30+ year olds who I “met” through XBox Live, and my son has dozens of people that he plays with, including a dozen friends who he goes to school with. Gaming isn’t all they do, they also go to movies, parties, play football, etc. together, the video games are just another thing they do together.

    Some people golf, some people shop, some people sit on the couch and drink all weekend. I play video games on rainy days, or spend time working on my model railroad, both things that I’ve done since childhood, and don’t plan to “outgrow” anytime soon.

  5. It’s interesting that the disdain GVR shows for video games is the same disdain you show for television shows. As you correctly pointed out, video games can actually help sharpen the mind and help in personal growth; similarly, the television can be very useful if used intelligently.

    Just like people can waste hours on mind-numbing video games, people can waste hours on mind-numbing tv shows; it boils down to how you use the tv and video games. I would encourage you to be mindful of this fact.

  6. Thanks for the mini lesson on President Polk. I’m not at all familiar with that period of our country’s history. But now I’m curious: If he accomplished so much, and there were no major crises at the time that got blamed on him, why wasn’t he re-elected?

  7. The reason Polk is my favorite president? He graduated from the University of North Carolina. Go Tar Heels!

  8. James K. Polk is also the subject of a song by They Might Be Giants, which is titled, obviously, “James K. Polk.”

    The song also features a singing saw.

  9. Hey I used to play the aitch-eee-double-hockey-sticks out of the Kings Quests and all the other Sierra quest games! Gold Rush was a favourite.

    Great games until they got rid of the typing interface in favour of the point and click nonsense.

    Count me as one who outgrew video games though. I was a confirmed computer nerd/videot growing up but somewhere around age 23 I just started finding them to be MIND NUMBINGLY boring. It wasn’t a concious choice to get away from something I thought I was now above, I just outgrew them. Ditto for comic books and WWF wrestling – two things I adored for the first 2 decades of my life and now I can’t look at without giggling.

    I did still play the Civilization series on PC until relatively recently, but that’s pretty much it.

  10. Concerning Polk: It is not the accomplishment of goals that makes a person great. Those goals that Polk accomplished can be viewed as good in many respects (though I don’t know about the whole Texas thing ;) I think that there are three easy examples of a single great goal that was accomplished by a president that far outweigh anything Polk ever did. Washington kept the nation together. Lincoln had the guts to do what was necessary to purge slavery from our nation. Reagan was strong enough to stand up to the Soviet block and soft enough to take the fear of full out nuclear war from our nation.

  11. I think that a lot of assumptions have been made about GVR unfairly. Perhaps he’s a young person who plays a lot of video games and wonders if his perspective will change as he gets older, and wanted someone elses perspective on their merits/drawbacks. The assumption is that he is somehow looking down on Trent, which he gave no indication of.

    I also agree that rate hopping is not worthwhile. You have to set up an account at each bank and then link them all to your “home bank,” which takes a lot of time. I’d say the most you need in a savings account is $15,000. Not that $100,000 is too much to have in cash assets, just that they are probably better off in CD’s or treasury bonds.

  12. This post encapsulates what I primarily enjoy about the Simple Dollar. You have an interesting take on many things, and see things from perspectives that many don’t consider. Such as your response to the Greatest U.S. President. Great stuff, and thanks for the brief history lesson!

  13. Trent, here’s my question. I’ve been hearing about using what’s being called a Money Merge Account to pay off a mortgage in half the time. Frankly, this sounds like a product that was developed so mortgage brokers would have something to sell in this depressed market. Have you researched this product? Isn’t it just a line of credit?

  14. Note the games Trent mentions. They are not Wife Slayer nor Beat The Teacher With a Stick. Likewise, PBS’s Nova is not Jerry Springer.

    Wow. I too loved to learn about Polk. Good stuff, Trent.

  15. It could also be viewed that though Polk added most of the west coast of the U.S. through the Treaty of Guadelupe Hidalgo, he also instigated the Mexican-American war that the treaty ended (likely as a result of his Manifest Destiny beliefs).

  16. Polk also committed one of the most atrocious acts of American Imperialism by going to war with Mexico.

    The Treaty of Guadalupe-Hidalgo put an end to the war (which Polk started). The war itself is a black spot on American history. 13,000 American soldiers were lost in this needless bloodsheed, but only 1,300 were killed in combat – the rest perished from diseases (talk about supporting the troops!) The conduct of the American soldiers during the war is also utterly reprehensible – raping and murdering innocent civilians.

  17. I don’t rate hop, it’s not worth the time. But like insurance, I do shop around every year or so for the best rates. Many banks will adjust their rate to match the competition if you threaten to yank the money back. Insist on getting the most for your money! After all, they are using my cash to make money – I want the biggest cut of that action as I can get.

    As far as keeping emergency funds accessible and as cash, you’ll understand the importance when a BIG emergency arises. Think wide spread natural disaster, insurance companies can take months to respond when hit with hundreds of thousands of claims at once. Converting securities to cash tends to be painful in an emergency. Murphy’s Law prevails, and Murphy was an optimist. Being able to initiate repairs to while competent contractors are still plentiful is only practical if you have immediate access to a bucket full of cash.

  18. I also liked the mini-lesson on Polk. You really do get some interesting questions!

    Here’s a question for the next mailbag. Do you understand what two-cycle billing is? Can you explain it in terms that a financial dummy can understand? I’ve read explanations on a couple of websites but I am embarassed to admit that I just don’t get it.

  19. @Kate (#5):

    Polk wasn’t re-elected because he did not run for a second term, having accomplished all of his goals.

  20. Hehe, you’re just like my high school American history teacher. He sang the praises of overlooked Polk as well. For the commenter who wondered why he didn’t serve a second term, it’s because he pledged from the beginning to only have one. Maybe limiting himself in that regard made it all the more a strain on him to accomplish his agenda for the office, as he retired after the one term a sick man and died within a few months. This despite being one of the youngest presidents ever to serve, too.

    Still, I have a soft spot for FDR myself. It’s gutsy to go against everyone in the (very, very wealthy) society you were born and bred in to redistribute money to people who needed it, even if that agenda was forced along by the Great Depression. I guess I don’t feel it as necessary to chalk greatness up to the events surrounding a president, though, as history shows us many instances when the circumstances were ripe but the leader couldn’t rise to the occasion. My history teacher was a fan of George Washington as well as Polk, going on about how important a role he played in setting the precedents for the office that stand still today. Another man in that position might have consented to being called “Your Majesty” rather than the more republic-oriented Mr. President, after all.

  21. How do you go about for writing fiction? Do you take the same “outlining” approach you use for your post? Or do you write fiction on a more “linear” way?

  22. That’s interesting about the Simple Green. Can that combo be successfully used on regular laundry? I’m just wondering if there’s a point to mixing up a batch of liquid detergent if I can just dump washing soda and Simple Green into my laundry.

  23. Trent,

    I think I enjoyed your Polk question about as much as you enjoyed answering it. Great take.

  24. I agree with what you said on the games thing, and I was also a big Sierra On-Line fan when I was growing up. You should check out http://www.sierragamers.com which is run by Ken Williams himself, he still personally answers email, and I was delighted to receive a personal email from him a few years back. I credit computer games for giving me a wide imagination, and King’s Quest for teaching me to type fast.

    My favorite US President was Woodrow Wilson, mainly for all his good intentions towards the world after the events of The Great War.

  25. Trent stated he was a huge They Might Be Giants fan last year, when they released their latest album ‘The Else’.

    So Trent, a follow up question: who is your favourite Belgian painter? :-)

    Adam

  26. This is a great amount of questions and also some great answers. Thanks for posting them all Trent. Your site has helped me heaps with my financial/entrepreneur blog so keep the posts coming

  27. Trent,

    You have said that you and your wife have wills in place already (I think). I am not trying to be grim here, but I was wondering what you have in your will about The Simple Dollar in the event of your untimely death. Would it carry on? Would your wife hire some people to take it over?

  28. I’d be interested in a financial workbook or planning document. I try to implement as many cost-saving tips as I can from this site and others but my most difficult aspect is documentation. Thanks.

  29. #1 Son introduced me to Kings Quest back in the day. I loved that game. Then I found Dune and played the heck out of both versions of it. Never got into any other games (although I play arcade style games). Probably just as well. I remember staying up most of the night a few times, trying to finish.

  30. Sorry, but I’ll have to stick with Lincoln as the greatest president ever. He overcame numerous personal and professional setbacks to take the highest office in the land. Because of his looks, his education, his failures…he never could be elected if he ran today. It’s not the fact that he led the country during the Civil War that made him great, but the decisions he made during the war, particularly when he decided that the South should be welcomed back into the Union as brothers. If he had not been assassinated, he could have also paved a brighter path during Reconstruction.

    My favorite piece of presidential trivia is the fact that there were several other men who held the office of “president” before George Washington. They weren’t referred to as “president of the United States”, but as “president of the United States Congress Assembled”, or “President of the Continental Congress”. They had no executive power. They simply presided over Congress.

  31. Hey, here’s a question that’s affecting this very thread! (Maybe I’m missing a basic piece of internet savvy that someone else can ‘splain.)

    Ok, why do new comments get inserted in the mix of the thread instead of at the end? I’m guessing it has something to do with moderation and getting approved, but it throws me completely off when I’m trying to follow an interesting comment discussion, and I’m sure I miss a lot of comments that way since re-reading the entire thing every time I check back is frustrating. Above, someone mentioned a comment by Mary at #7 and at this time, Mary is not at #7, so when you look back to see what comment people are referencing, it’s often wrong. I don’t use a reader or anything, just the plain ole website, which I thought was best for your ad purposes. So, is that just the way life goes here or what?

  32. I’d love to know how Brandi plans to make her own diapers. Some friends have just had their first baby. They intended to use bamboo diapers but haven’t made the transition from disposables yet. I didn’t realise diapers now came in fitted sizes. I think it sounds like a marketing con. The old fashioned flat diapers could be used from birth to potty training. I’ve not shopped for the old kind yet, but wondered how to make them… Can you find out?

  33. Wow, Polk was more rad than we give him credit for. What I find interesting about presidents in that age was that they truly could make the choice to be extraordinary or to just be some dude in an office. The forefathers and the presidents following them, and going into Reconstruction had to keep America moving through its infancy. Then for a while, you had a period, up through to the Great Depression (for better or for worse) where presidents really could make that choice. So, anyway, I like that you picked Polk. :)

  34. A question:

    If you do meet all of your financial goals, you’re almost certainly going to have a good chunk of cash until both you and your wife pass away. Have you thought about what you’d do with that? Would it be bequeathed to kids, or do you have other thoughts about how to use it?

  35. I am halfway through a masters degree program. My employer pays for two classes a year. I possess a BA in English and am currently pursuing a MA in Organizational Development. I do not need a masters as a requisite for my job, and I am not exactly sure what I will do when I complete the MA program. I am, however, learning a lot of great skills and adding some valuable tools to my professional toolkit so I’m definitely happy to invest in this advanced degree. My question is: Do I double up on classes, graduate a year earlier, but pay for half of it; or do I take one class a semester, let my employer pay for all of it, and graduate at a later date (about a year later)?

  36. I have a question about building credit for my husband. I have *alright* credit, not great, but better than fair. Our credit cards are all in my name – my husband’s only had a couple of store credit cards, both of which have been long paid off & cancelled, since the chains no longer exist. His credit is not great, not because of any major black marks but I’m guessing because of the lack of any major credit cards (we also do not own either a car or a house). When I was in college my mom added me as a cardholder to her Visa, so when I was ready to get my own card I benefited from her good credit. Would adding my husband to one of my card accounts give his credit a boost, or would it be better to just get him his own card and start building that way? As always, thanks! You don’t know what a difference your blog has made in my financial life recently – keep it up!

  37. I want to buy my wife a nice set of kitchen knives – a set that will last forever and will make cooking more enjoyable. Any recommendations?

  38. Thanks for answering my earlier question about microshredder.

    I have another question regarding 401(k). Over the past 8 months my account has lost ~$12000. My investment portfolio was heavily concentrated in non-US markets (mostly EU). Should I panic and rebalance it and move most of the current and future money to US Bonds/Money Market or stay put considering I won’t need this money for the next 30 years and markets will eventually return ~7-8% on average over long term?

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