Reader Mailbag #22

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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.
How I build and use a price book
Money merge accounts – my thoughts
Some signs of dodgy personal finance writing

And now for some great reader questions!

What are your thoughts on the Gerber Life Grow-Up Plan? Since having a baby two months ago we have received three applications in the mail from Gerber. We are already planning on starting a 529 as soon as the enrollment period begins. Thanks!
- Angela

The Gerber Life Grow-Up Plan is a whole life insurance policy targeting children. I generally don’t recommend it for two reasons. First, your young child doesn’t have a need for life insurance. If he or she passes away, there are no significant costs that will be incurred. Second, you’re far better off, in terms of the investment aspect of the policy, to just sock the money away elsewhere.

We were quoted $16 a month for the policy for our daughter several months ago. If I put $16 a month into a savings account bearing 3% interest, she’d have $5,240 cash on her twentieth birthday, a big boon for college. If I put it into a long-term investment account that returned an average of 8% a year, she’d have $9,200.

With the Gerber Life Grow-Up Plan, things aren’t quite so good. After twenty years of paying in that premium, according to Gerber’s literature, “the cash value is equal to or greater than 100% of the premiums that have been paid.” That means on her twentieth birthday, she’d have a cash value of $3,840 under the Gerber Life Grow-Up Plan.

You’re better off just putting the $16 a month away in a savings account somewhere safe.

One question related to Office Space: have you seen this film? Do you like it? What films do you like about the workplace, if any?
- Lola

Office Space is one of the funniest movies I’ve ever seen – it has frightening accuracy in the way it depicts office life. Along those lines, both the British and the American version of The Office fill that same niche, with the British one being a bit more subtle in the humor.

I think all three of these do an excellent job of showing the realities of an office environment with an appropriate level of humor and uncomfortable moments. In fact, it’s the uncomfortable moments in all three that really make them click – the ones where someone says something painfully inappropriate in the office or makes a horrible mistake and you’re torn as to whether to correct them or just let it go.

I do not understand the idea of giving all children exactly equal monetary gifts. I come from a large family, and I am pretty sure that my parents helped out a couple of my siblings much more than they have helped me out, financially. I am totally fine with that. I am thankful that I have the common sense, luck and intelligence to manage my finances without as much help from my parents.
- SAB

You’re lucky that you’re from an understanding family – many families do not weather inequality nearly so well. Often, one or two children are outcasts – they either succeed more than the other siblings or are failures compared to the other. Often, they’re treated differently by the parents as well – sometimes better, sometimes worse.

The end result is that there are many families that I know of where the siblings simply want nothing to do with each other. Quite often, it’s the result of the attitude of the parents – one child “deserves” more help than another child, when it’s often the first child asking and taking while the second child stands by, wishing only to help the parent.

I’ve seen so many situations of sibling inequality and parental overcompensation wrecking families that I simply won’t let it happen to mine. The best solution I can think of is aiding them all equally – or at least offering equal aid to all of them.

How is your 101 goals in 1001 coming? Are you still actively tracking them?
- Nate

For those unaware, I created a list of 101 goals I wished to accomplish before Friday, January 29, 2010.

So far:
+ I’ve completely accomplished 1, 5, 7, 11, 12, 17, 19, 21, 28, 33, 34, 35 (close enough), 40, 42, 43, 67, 75, 89, and 90.
+ I’ve partially accomplished 10, 14, 22, 23, 24, 30, 36, 49, 58, 59, 60, 61, 62, 63, 64, 66, 69, 71, 72, 78, 79, 91, 92, 96, 97, 98, 99, 100, and 101.

I still have roughly 600 days to go, so I’m feeling pretty good about it, actually.

I am 21 and always have trouble figuring out how much to withhold and what to claim on the W4’s. Any advice or sites you could reccomend?
- Sonya

For those unaware, Form W-4 is a document that employers in the United States require their employees to fill out so that the employer can withhold an appropriate amount of money from their paycheck for income taxes.

If you’re only working that individual job, the best strategy is to simply list your number of dependents and have nothing else withheld. If you’re having multiple jobs, use the tax tables to figure out how much you’re going to owe and also use them to estimate how much they’ll be taking out for each check. If that sounds too complicated, call a tax preparer and ask for help.

Curious- How do you make your money? It’s clear this blog takes quite a bit of time to write and organize. Are you able to support yourself with this bog? If so, how? You don’t have many ads. I know books don’t pay a lot…
- KLevy

I make solid money on The Simple Dollar only because it gets a lot of traffic, over a million page views a month. This allows me to keep the ads down (or at least unintrusive) while still earning a solid amount. I try very hard to balance things, which basically means I keep a firm control over the number of and the ethics of the companies that advertise on the site, but in exchange for that I don’t earn nearly as much as I could from the site.

For example, I give an immediate and firm “no” to any organization that wants to buy a spot in the content I write. I give an immediate and firm “no” to any organization that wants to run an ad that disrupts the site (something that flashes across the screen, for example). I give an immediate and firm “no” to any ads I think are unethical, like payday loan ads. All three of these stances have cost me a huge amount of income.

My income is earned by getting a very tiny amount per page view for each ad – a tiny sliver of a cent. It’s only because I get a significant level of traffic – due to the support of a lot of wonderful readers – that I’m able to both support my family and keep the ads unintrusive.

This isn’t a giant cash-in for me. If I wanted to use this platform to cash in quickly, trust me, I have opportunities every day to do that. I say no to all of them because I actually want to help people with every article I write, and I think it’s that desire to want to help that comes through and has brought enough readers to The Simple Dollar to make this crazy thing work.

If you don’t think walking away from mortgages is okay, what should a person do if they’re way upside down in their mortgage?
- Jen

They should go to their lender and simply state that they’re not going to be able to continue to pay the mortgage – their financial situation makes their escalating mortgage payments impossible. Then, they should work with the lender to come up with a solution that works for both parties. This might involve refinancing into some sort of fixed rate mortgage. This might involve short selling the house. It might involve some other creative idea.

The key is to not just walk away. Not only does it hurt the lender severely, undermining the lender’s liquidity and damaging the national economy as a whole, but it also damages you. You’ve effectively dropped a nuclear bomb on your credit, and that means you’ll have a hard time passing a credit check for anything for many years. Car loans will be impossible. Your insurance rates will skyrocket. All of your credit card rates will go through the roof. In short, your day to day life will cost more after walking away.

Working with your lender to come up with a better plan is not only the more honest solution, it’s also often the more financially sensible one, too.

What is your general approach to proofreading; articles, emails, letters, etc.?
- ontguy

For emails and other personal correspondence, I don’t sweat it at all – a little grammar flub-up isn’t worth worrying about.

For posts for The Simple Dollar, I usually complete the article, let it sit on ice for most of a day, then read it again and correct any big red flags, then I post it. I find it much more urgent to make sure I’m writing in a conversational tone and also that I’m presenting interesting ideas – good grammar is important, but grammar perfection wouldn’t be a productive use of my time.

For articles and book proposals I’m submitting for publication, I sweat over them a ton just to make sure everything is right. I want to make sure everything is grammatically correct while also striking the exact tone and presence I want. I’ll revise these articles and pieces dozens of times before submitting.

How much cash is reasonably safe to carry in my wallet?
- Mel

I think it depends on what you’re doing, because in some situations it is a risk to not be carrying any cash. For example, if you’re traveling in a rural area, having a reasonable amount of cash available to you can be really useful in a pinch.

I tend to think the closer you are to home, the less cash you need to carry, and the higher population density in the area you’re going to, the less cash you need to carry. For me personally, I don’t keep much more than $20 in cash on me if I’m on foot in a populated area fairly near my home. On the other hand, if I’m in a rural area a very long way from home, I might be carrying as much as $300 in cash.

What’s more important than anything is that you’re comfortable with what you’re carrying (so that you don’t act nervous about it) and that it’s not all centralized in one place. I usually keep at least a couple twenties hidden somewhere else on me if I’m in an unfamiliar place – in my shoe, for example. This way, if my wallet were to get pilfered, I at least have some resources available to me.

You talk a lot about gardening. Let’s see a peek of your garden!
- Louis

Here you go.

Our garden

I heavily annotated this picture at Flickr, so you should jump over there and check out all of my notes about the picture. I’ve pointed out all kinds of little details.

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

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53 thoughts on “Reader Mailbag #22

  1. Ah, I love those reader mailbag posts! I’ve seen my own family prefer my own brother to me, gift wise, on some holidays, several years ago. When I was a kid, it was a big deal for me and my brother and it did indeed move us apart. Now that we are adults, we laugh at it and write to each other.

  2. Regarding being upside-down in your mortgage, I think your advice applies only when you are actually experiencing hardship. Many people are not experiencing any sort of hardship, and yet they still walk away from their mortgages. I read about several people whose primary residences were completely paid off. And yet, they tried buying investment properties. These then lost value since the top of the bubble, and so these investors simply walked away from them. They were more than able to pay off the houses if they chose to. But they walked away, simply because they could.

    This was the problem with the housing bubble. The lenders shouldered 100% of the risk, and the buyer took on none of the risk (except for the risk of a lower credit score).

    These are the people for whom it is unethical to walk away from their mortgages.

  3. #67 . . . you have ALREADY read all those books? Well, YAY for you! Congrats! But of course, I hope you continue to read to him. Change your original challenge up and read another 1000!

    Wonderful list . . .I’m glad you updated with your progress. Your list sounds wonderful and I think you are on a great start to completing it 100%!

  4. Just a compliment: I really like how you handle advertising on the site. It’s quite obvious that you could make more, but put integrity first. Well done.

  5. Here’s a question for you/the readers: We just bought a used chest freezer for $50 to help us stock up on refrigerated/frozen deals, meat and otherwise. Many of our friends have opted to buy a “freezer pack” of beef (for a family of our size, 1/4 of a cow, or about 100 lbs) from a local farmer. This guarantees getting local, organic, grass-fed beef, and a variety of cuts that will last us a year or more.

    The catch: this 100 lbs of beef works out to about $4/lb- which is very expensive for the (albeit high-quality) ground beef in the pack, but a great deal on the steaks and other cuts. Under normal circumstances, we’d only buy ground beef, limit our meat consumption, and stretch what we do buy.

    So, is it worth the price for high-quality, low-carbon-footprint meat? Or should we stick to filling the chest freezer with only meat on sale, regardless of the origin? Obviously we’d save up for the freezer pack purchase, and it would theoretically lower our grocery bills the rest of the year. What do you think?

  6. Joanna – I’d say if you have the money to pay for the higher quality beef then it is probably worth it. I’d still stretch out its usage like you would normally. Sometimes quality food is worth it – I buy organic milk – almost twice the cost of regular, but I can afford it and its worth it to me (taste better, lasts longer, hormone free). If I couldn’t afford it, though, regular milk would be just fine.

  7. As for actually carrying cash I usually have about $40-$50 in my wallet, but I’ve carried up to a few hundred dollars. I live in a large city with one of the highest crime rates in the country. But most of the crime isn’t people being robbed on the street – its home invasions, car thefts, things like that. But I can’t let the possibility of crime (which is still very small regardless of where you live) control how I live my life. If I have need to have a few hundred dollars on me then I carry it. I just don’t flaunt it – leave it in your wallet when you are counting it, don’t pull out the entire wad of cash to pay for something.

  8. @Joanna: I’d go for the high-quality meat. My motto is “eat less, but eat better.” With good quality food, you’ll probably need less of it to feel satisfied and it is more nutritious as well. You may also want to cook it in ways that stretch the meat so it goes further (like in stir-fries, salads, and soups). When it comes to food, I’m willing to pay a little more for better quality and nutrition. My body is too valuable to be penny-wise, pound-foolish in this area.

  9. Just a thought on the whole-life insurance – Its a good idea to have a small life insurance policy on your kids that would be enough to cover the cost incurred by a funeral – maybe around 20k. My parents did one for each of us kids, that was not whole-life, but converted to whole-life when we turned 18. (or 20, or 22, not sure which?) – The premiums were low since it was term life insurance when we were younger…

    On the unfortunate case of having something happen to your child, the last think anyone would want to think about is “how am I going to pay for this”

  10. I just want to point out a couple things people don’t seem to realize (Trent, not an attack on your, I promise). When people walk away from their mortgage, the lender is not necessarily hurt. I know that doesn’t sound at all logical. However, most lenders have already packaged these loans off and sold them to investors. So when individual A defaults, lender A is not necessarily hurt, since the mortgage was already sold off – the individuals and/or banks holding the “bonds” that are backed by the mortgage are the ones hurt. If this sounds complicated, it’s because it is, and these financial instruments (namely CDOs) are fairly new. They are what helped spur the credit crisis and explain why SO many people are feeling pain in the current environment.

    I wish lenders were cooperating with individuals, but they are not. The New York Times series about debt does a great job showing just how awful some lenders are being. They are not accepting mortgage payment that are not for the full amount due, are tacking on excessive fees for people falling behind, and are pushing people into foreclosure unnecessarily. This hurts ALL of us by lowering property values EVERYWHERE when homes go into auction. Ouch all around.

  11. Joanna, I live in a cattle farming community and sometimes I can make a deal with a neighbor to split a cow and can arrange with the butcher for the type of meat I want. This could allow you to choose your preferred cut at a lower price. If you would not normally use other cuts of meat, all the inexpensive, valuable cuts are not worth what you are paying.

    Another thought – you might be able to buy just the ground meat for a lesser price from a neighbor who prefers the other cuts.

  12. Wow, your garden isn’t as big as I thought it was. My parents have this HUGE garden, and I’m always intimidated at the thought of trying to take something like that on. Yours looks a lot more manageable.

    I do have a tomato and pepper plant this year, though, and also a LOT of basil.

  13. I like these.

    My parents have spent much more time/money helping my little sister than either of us older two. Not because she “deserves” more help, but because she truly needs more help.

    While they might choose to help her with college and other issues, they simply can’t afford to hand my other sister and I the same. They don’t have the cash. Besides, it would be a little silly, because at 25 I’m financially stable and will likely end up in a better position than my parents.

    Your idea is sensible at first glance, but I imagine it would be adjusted, if that made more sense at some time in the future.

  14. If you’re child suddenly died, you would take on much financial debt – paying for the funeral, time off work for greiving, any outstanding bills (such as medical) that may be incurred. These are all reasons why you would have insurance on yourself; your child is no different. However, you can purchase a child rider on your policy, and normally it can be converted when your child becomes an adult. Whether you feel this is adequate or not is up to you.
    My sister died at the age of 20 from a very sudden illness. My mother was an emotional reck for almost a year. It took longer than that before she was able to work and life insurance helped. Think about what you would do if your child was gone before you – the parent. I have 2 children and I can tell you, my life would be in ruins if anything happened to either of them.

  15. Question: I have read a lot about setting up blogs from a content aspect. What I am wondering about is the business structure you recommend or if one is even needed.
    Should a blogger establish himself as an independent contractor and reflect any income on a Schedule C?
    If a blogger accepts advertising, is he or she subject to any local or state tax liability? Also, do you get W-2s or other tax documentation from the advertisers or other potential revenue sources?
    Is a federal tax ID or local business license required?
    I am a business student and am wondering about how the blogging business model works. Thanks!

  16. @Katie: Actually, property values need to fall a lot more to get back to levels that people are willing and able to pay, and they’re going to do it eventually, one way or another. Prices right now are artificially high due to the relaxed lending standards of the last several years, and they can’t be propped up forever. Let them fall back to normal levels sooner rather than later, so we can all get on with our lives.

  17. Regarding child life insurance, this year I decided to spend $80 a year for a policy for my child (not Gerber, another company). You wrote that “First, your young child doesn’t have a need for life insurance. If he or she passes away, there are no significant costs that will be incurred.” But of course, there will be funeral and burial costs, which supposedly average more than $6,000 not including burial expenses. Even if you choose to go with an inexpensive option, I believe that amount is significant.

    Personally, at this time, I don’t have emergency resources that would allow me to pay those costs and pay for any therapy, help, time off, etc., that I would need. And at a time like that, I would not wish to be having to nickel and dime over the ultimate penny-saving options. So even though it might not be a good buy, and I hope (and odds support) that it will never be necessary, and thus be a waste of my $80 a year (other than that my child can keep the policy as an adult if she desires), having that policy in place is one less thing I need to ever think about.

  18. Where do you get your data?
    In your response to the “giving all children exactly equal monetary gifts” question you mention a number of times statements including the phrase “quite often” and similar derivatives. Where are you getting this data? Are you merely speculating or do you actually have experience with hundreds or thousands of families that act as a fair sample to the millions in the US?

  19. Katie’s right re. the bondholders being the injured party. The problem banks are facing is the secondary mortgage securities market have dried up so they’re limited to lend what money they have in the bank (so to speak) but the problem for homeowners is a bit more complicated than that. Mortgages were bundled together into Mortgage Backed Securities (MBSs) and sold off to bondholders. At this point, all the mortgages in a MBS are still intact so a homeowner in foreclosure might be able to convince a bondholder to work out a deal through the lender (who’s probably still servicing the loan). Then traders bought MBSs in the secondary market, sliced and diced them into various tranches and repackaged them into Collaterized Debt Obligations (CDOs). At this point, a homeowner whose mortgage has been CDO-ed has little chance of a deal because his mortgage is now owned by several bondholders. To make things worse, nobody’s really sure which bondholder owns what slice of which mortgage. Bondholders, including investment banks, who’re holding the riskier tranches are likely the ones in trouble today. This stuff is well explained in Ira Glass’s “The Giant Pool of Money” episode of his “This American Life” series from Chicago Public Radio and well worth a listen.

  20. A few other points about whole life insurance for children:

    1. A policy on a child guarantees at least *some* insurance if they are later diagnosed with an uninsurable condition.

    2. Might as well lock in a cheap premium early on, because it only goes up with age.

    3. Whole life insurance is generally a terrible investment vehicle and should never be marketed as such. However, it is sometimes considered collateral in financial dealings, as it has a cash value.

    4. The Gerber plan is well known, but probably not the best. An independent insurance agent can find a better deal.

  21. How does your audience look like – States vs the rest of the world? From Google analytics? From email sent to you perspective? Whatever you’ve got on hand. I wonder how many of us, foreigners, enjoy your blog. (Greetings from Poland.)

  22. Your thoughts on being equal with your kids are nice, but I would be careful in telling them you are being exactly equal. My parents told my sister and I that all the time and they weren’t. They help my sister out a lot more than myself, even with things like gifts, they gave her more. It didn’t drive a wedge between us, we are fine. Both of us acknowledge the unequality of the situation and while she has felt some guilt over it, I assure her I am fine with it. I am the first born who never asks for anything. My s.o. is the first born as well and he doesn’t ask for anything either. He is one of many and a sibling has asked for a lot and it has created some tensions in the family. Especially when he refused to pay back his downpayment on his house his parents “loaned” him.

  23. Trent,

    Do you have any advice on being effective and efficient on social media sites like Twitter & StumbleUpon?

  24. Regarding everyone’s further comments on mortgages, you’re all essentially correct. But I think the argument over whether it hurts the lender or the bondholder is still irrelevant. By not paying your mortgage, you’re hurting *someone*. Any maybe you won’t do a lot of damage if you don’t pay, since your mortgage is split into a thousand pieces with those CDOs, but when the martket as a whole feels they don’t have to pay, we’re in big trouble. Think of it this way, if one person stole a pack of gum from Walmart, the company won’t feel a lot of pain. but if every one of Walmart’s ~100 million customers stole a pack of gum, the company would feel it.

    Going back to the original point, if someone runs into a bit of hardship and honestly can’t pay their loan, that’s one thing. The risk of such defaults is priced into the cost of doing business and the price of the loan. But when people default simply because they don’t want to pay, that’s another whole ballgame. These people are *en masse* driving up the costs for everyone else, and these are what have caused the whole credit crunch in the first place.

  25. Re:Child life insurance
    I’m licensed life agent worked 10+yrs, and I do not recommend or suggest that. I was asked more often if I can write the policy for kids. I only issued the whole life policy paid-up in 7~15yrs, so that policy can be gifted/transfer to the grown-ups without any further premium. I don’t see any 20yr old “given” Gerber Life and continue to pay “just $16 every month” out of his/her pocket. They are more likely withdrawn for cash, or not enough amount of coverage by then.

    Emotional pain as a parent to lose your child is beyond imagination, and lump sum may help for difficult time. But also we face many life events without “insurance”-Divorce,job loss,increasing cost of raising kids… You should have more than enough coverage for your own life insurance. $16 more can increase your coverage by $50K~$100K, or increase your 401K contribution.

    Before your teenager go through smoking, drug, driving… These risks are real. When you know it’s coming, It is wise to consider a policy before those behavior make those teens become high risk or uninsurable.

    I have paid-up $50K for my 15yr old son. I will transfer ownership only if I see he is “adult”.
    That may be 18 or 30. When you bought your life policy?

  26. Trent, here’s a question:

    What are some of your favorite fictional “poor and making it” books? (IE: A tree grows in Brooklyn)

  27. @Joanna,

    I’m not disagreeing with you. I’m just saying that walking away does not necessarily hurt the lender. There is also a huge problem with people not having access to mortgages to buy properties – if otherwise financially healthy people were not facing job losses and really impossible credit barriers, more buyers would be able to snatch up homes and investment properties, and more people would be able to sell. I’m not saying there wasn’t a bubble – I’m just pointing out that the lenders already passed along the pain, and are really acting irresponsibly about the whole thing. It’s not just homeowners who let this thing happen.

  28. Hi Trent,

    Back to the Vegan argument from last week. You frequently state that the sign of a good book is one that makes you think repeatedly about it after reading it, even if you don’t agree with the main premise of the book. I just finished Gary Francione’s book “An Introduction to Animal Rights” and I think that it would qualify as a good book under your criteria. I’m guessing that based on your reading speed you would be able to read it in a day or so. It’s worth checking out from your library if they have it.

  29. Hi Trent,

    In regards to the Vegan question/comments from last week: You frequently state that the sign of a good book is one that makes you think repeatedly about it after reading it, even if you don’t agree with the main premise of the book. I just finished Gary Francione’s book “An Introduction to Animal Rights” and I think that it would qualify as a good book under your criteria. I’m guessing that based on your reading speed you would be able to read it in a day or so. It’s worth checking out from your library if they have it.

  30. For example, I give an immediate and firm “no” to any organization that wants to buy a spot in the content I write. I give an immediate and firm “no” to any organization that wants to run an ad that disrupts the site (something that flashes across the screen, for example). I give an immediate and firm “no” to any ads I think are unethical, like payday loan ads. All three of these stances have cost me a huge amount of income.

    Actually, I doubt they’ve cost you income in the long run. I think you’d lose a fair amount of your traffic if you said “yes” to either of the first two, costing you a lot more money in the long term. Not so sure about the payday loan ads, though. That stand may very well cost you money since I’m guessing most of your readership never even looks at the ads (I know I don’t) and wouldn’t even notice if you allowed payday loan places to advertise.

  31. Great site.

    However, re: payday loans. I’m seeing an advert for a UK payday loans company in your google ads – I guess that you can’t see this.

  32. I have a question Trent.

    What do you think of the coupon use at drug stores like CVS and Walgreens, which bring about free items with their Extra Bucks and Register Rewards programs.

    Some people seem to do very well with them and have a stockpile of items, but it seems to me that they are spending money that they would not ordinarily be spending. Any thoughts or comments?

  33. I recently got a new job that offered a signing bonus of 15,000. It’s actually a loan that is forgiven a bit each year that i’m at the job. What is the best way to tuck this away and not spend it, but make it part of long term investing strategy?

  34. @Karen (#32)
    Google ads are context sensitive. I don’t think can change the ads that are received easily, and from Iowa he can’t actually see the ads that British viewers see, so unless people tell him he won’t know anyway.

    @all:
    How does Trent make money from The Simple Dollar?
    More people are interested in personal finance than you think More people read this site than you think.

  35. Trent,
    Since you have reviewed a lot of books on your site have publishers started to send you books hoping that you will review them?

  36. If your child were to develop a serious disease or be found to have certain congenital abnormalities, s/he would be unable to get life insurance as an adult. In that case, or if they get into drugs, etc. that insurance policy could be the only thing they have available to them. From that standpoint, it is worth it.

    I also agree about the points about being unable to work due to emotional suffering.

  37. Hi, I enjoy your daily email. I am interested in paying off my student loan. I went to college to be a “court reporter” and wasn’t able to reach the wpm (225) in order ot graduate. So unfortunately I spent more time in college than in the military…now I have a $25,000+ college loan that I have defaulted on twice and regained my footing…now I am serious. I want to pay it off, but unfortunately I have one child who is in 3rd grade, living in Madison, WI where it is EXPENSIVE to even live and own a house (which I do). Do you have any tricks to pay my student loan off quicker. thanks, Christy

  38. Re: child life insurance. Insurance is about managing risk vs. consequences.

    If you are a healthy 30-year-old who supports a family, the risk of your death in the next 10 years is pretty slim. However, the financial consequences of your death would be catastrophic for your family. Thus, you purchase life insurance.

    The risk of your child dying before adulthood is even smaller. And, in the cold world of numbers, the financial consequences are, in the long term, positive. You no longer have to pay child care, extra food, clothes, college, wedding. For the funeral, use the kid’s college savings that now won’t be needed. That’s a very harsh assessment I know. But buying life insurance for your child is a purely financial decision.

    Yes, there’s a very small risk that your child will develop a condition that makes him/her uninsurable as an adult. But to mitigate that risk, you have to keep paying for the same policy without fail for the rest of the child’s life. The risk of you (or your adult child) failing to make all those payments is probably greater than the risk that your child will end up uninsurable.

    Life insurance sales brochures present you with the problem: how much would it cost if your child died? But… was that problem already on your mind? Would you have ever thought about that cost in detail if you weren’t presented the opportunity to buy a product?

    The short-term costs of a child’s death are roughly equal to the costs of replacing a vehicle after the sudden loss of yours (mechanical failure or uncovered loss). The latter is much more likely to actually happen.

    Save your money for a new car and enjoy your child’s life!

  39. Loved the post, and thank you, everyone for your great comments!

    Trent, I jumped over to Flicker and read all about your garden. I laughed at how the fence is not 2 year old proof. I love your newsletter the most out of all of the ones I receive. Thank you.

    Re: Sibling Equality: One of my sisters is a hand surgeon (I am so proud of her, and throw it into conversation whenever possible.) Apparently, there is a note in my parents’ will that she receives nothing, “and she knows why.” We all laugh about it, and I am sure my folks have helped her out quite a bit. I am ok with that.

    Re: Mortgage Crisis: I think I read in the NY Times about a town in Europe that was in big financial trouble (no money for schools) because of some of those bad bond purchases. Not to defend the lenders by any means, I did see an interview with the president of some company stating that the mortgage companies are not set up for customer service and helping those who are defaulting. They were unprepared for the deluge of calls – did not have enough staff, and no training. I do think the added fees, that commented on here, are terrible.

  40. Bluntly, we just paid for my Mom’s funeral ( with her money). It was over 8000 dollars and that was for closed casket, cremation, no flowers, no limo and a two hour wake.
    Whole Life insurance on children is not a waste…when I got married, my Dad handed me a 10,000 whole life policy that he had purchased when I was a baby. It’s cash value had grown to over 6000.00 and it had a clause that I could borrow against it for 4% interest. Eventually I cashed it in and used it to help pay off my mortgage but during the first few years of my marriage it was a nice security to fall back on. Just remember what insurance if for…it fills a need in case something happens…it is usually not a good investment vehicle.

  41. RE: Giving siblings equal financial support

    My sister is 30, I am 25. She is not married, lives with my parents and has not stayed at a job for more than 3 years since graduating college. Since each of us graduated from college (respectively), we have both received financial help at different times from our parents, who fortunately have the ability to help us out. The money doled out is recorded in the back of a notepad in a central location in my parent’s house. Whenever I want to know how much I owe them or how much my sister owes them, I can go there an look. My sister’s amount is much higher than mine. It has gotten to the point that when they give my sister money, they simply subtract that from what I owe them. I like this idea since it works in my favor and I’m not in a position of needing the support from them.

    I think this works out best. My sister needs to learn how to manage her money, just I had to (or sometimes still have to) learn to do it as well. This has been fairly constant while growing up as well: in high school, my sister went on a school trip abroad so they knew when I wanted to go too, they couldn’t/shouldn’t refuse. There are no hard feelings better my sister and me about money. We were raised under the same set of rules and understand that.

  42. Hi Trent,
    Great garden! It looks like you have quite a variety of things. Have you ever grown Malabar spinach vine (Basella rubra)? It’s a great red and green vine that isn’t really a spinach but produces delicious spinach-like leaves. It loves heat and can reseed and spread, but a tasty and pretty vine sounds good to me. Home gardens are the best!

    I get a lot out of your financial insight!

    Chris

  43. Trent – a question for you. I am saving $2500/month. I have no debt and I’m 26. My question is what do I do with the money – I really want to invest it in index funds and I feel that it is the right thing to do, but with the market being the way it is, I can’t bring myself to do that when my HSBC savings account guarantees a 3.5% return. What would you do with the monthly saving if you were in my shoes? Thanks.

  44. Trent-
    I would like to get away from the materialistic empathesis on children’s b-day parties. I would really rather family donate to my daughters savings. What is the best way to relate this to friends and family? I’ve tried it in the past with not much luck. So, I’m looking for a little insight.
    Thank you for your time,
    tobie

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