Reader Mailbag #26

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.
My thoughts on Dutchmen buying tulips in the year 1637
What’s compound interest?
What does compounded monthly mean? What’s an APR and an APY?
And now for some great reader questions!

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?
– Joanna

If you’re up to date on current food prices, the $4 a pound rate for top-grade ground beef isn’t really that bad, either. You can get it for lower, but will you be able to get top grade ground beef for $4 six months down the road? I’m not sure.

The real question is whether or not this purchase raises your overall food budget and food quality, and that’s one that I can’t tell from this question. If you typically did not consume higher-end cuts of beef (steaks, et. al.), it’s quite possible that this did raise your overall food budget. However, if a prime steak is substantially healthier than what you were eating before (like preservative-laden box meals, for example), especially since it’s grass-fed beef.

One concern, though, is the rate of consumption. If it will take you a year to get through it, some of the meat near the end may be getting old from the time in the freezer – the taste may be a bit off. Eat the prime cuts earlier and save the roasts and other lower-quality cuts for later.

How does your audience look like – States vs the rest of the world?
– Nefertete

Approximately 80% of the site’s visitors come from the United States, with roughly another 7% coming from Canada. The other 13% is distributed all over the place.

It’s worth nothing, though, that those percentages represent fairly large numbers. For example, my non-US audience adds up to about 120,000 visitors per month, so there are a lot of non-US readers out there.

My company is expecting to merge with another company in the next few months and as a part of the merger, we employees will be issued stock equity in the new company upon closing of the merger. The newly issued stock can be held or immediately sold. Since I’m relatively young and have never really held any equity, especially under these circumstances, I wonder what you suggest. My industry is a relatively volatile one and the company’s stock price can fluctuate fairly wildly within even just a few months, so it’s hard to project where it will be at any time in the future. Also, my industry is facing potential bankruptcies of several of our competitors within 1-2 years unless the market dramatically changes.

So, long story short, what would you recommend I do with my soon-to-be acquired equity in my company? Sell it immediately and pay off debt? Keep it as a “nest egg”? Something in-between, more likely?
– Derek

It comes down to one thing: do you believe in the merger? Is this just a merger of two flailing companies who will flail together, or is one or both of the companies bringing something compelling to the table?

As someone working inside the doors, you should have something of a grasp on this. If you don’t, start asking a lot of questions around the office and see what sort of feel you can get for the merger.

If you don’t believe in the merger, sell. Dump most if not all of the stock. If you do believe in the merger, don’t sell – hold onto the stock until you have genuine need for the money. No matter what, though, your stock investments should be diversified. If you look at all of the investments you hold and more than 20% of those investments are in the merged company, trade away from it until it’s down to

I really enjoy hearing about your marriage. As a single woman in my 30’s, I’d like to find a partner that is able to think about things and who is able to communicate as well as you do. It’s hard to know from what I’ve read if you and your wife have always had this kind of relationship, or if it’s something you’ve developed and cultivated. I’d love to hear your ideas about singles meeting and dating and talking about life goals – without being overly creepy.
– Mary

I really believe the best way to find potential singles is to get involved with social opportunities connected to things that deeply and personally interest you. If you’re passionate about something, get involved with it and see what happens. You’ll become exposed to people who are also passionate about that very thing.

If I were you, I’d sit down and think about your true interests. What things fill you with the most personal joy? That’s your starting point, right there. Follow that interest and you will find some like-minded people.

For me, at least, most of the “singles”-type places were a waste of time. Everyone was there trying to find their “match” and in their rush were overlooking interesting people.

You mentioned that you did computer repair as a way to generate some additional income. Do you have any resources that you could recommend on doing computer repair as a side business? I have two sons who are on the Autism Spectrum, and a large part of our income goes towards their needs. On top of that, we have medical bills and such that we need to pay down. Fortunately, we have no credit card debt, but we just recently had to take out a car loan (though we were able to make a large down payment). I would really like to do something to make some extra money, but am at a loss on how to get started.
– Kris

All I did was hang up some flyers around town (the post office, city hall) with some number tags, stating that I’d help people with computer repairs, tune-ups, and figuring out what computer was right for them. I also tapped my social network, sending out some emails to local people I knew.

That’s really all it took. I spent a lot of time on customer service, talking to people and answering some simple questions on the phone for free. Before long, I had a pretty wide network of people who’d call me up to have me look at their computer or help them pick out a new one. It was pretty steady, except I usually got a business burst close to Christmas and often the two or three days after Christmas.

Most of the questions I dealt with were extremely easy – things like plugging in monitors or making sure power was going to the computer or simply de-installing crummy software.

My question is where can I find a reliable emergency radio that does not depend on electricity?
– Glenda

I’ve seen several models, but the one I was most impressed with was the American Red Cross FR150. It’s an AM/FM/weather radio with a flashlight and a cell phone charger that operates on solar power and a hand crank. It’s got a small footprint (it’s about the size of a dollar bill and about an inch and a half thick) and it doesn’t take much winding time to get the radio or light working (about a minute of good cranking gets you about thirty minutes of radio).

Just put it on a sunny windowsill somewhere in your house and it’ll be good to go whenever you need it.

How can I bring myself to let go of saved money??

I have about $5,000 in CC debt (nothing extravagant, accumulated living expenses while I searched for a job) and about $3500 saved up…but I can’t bring myself to take large chunks of saved money to pay off my debt! I’m worried that the second I send like $1500 to the CC company, I will have some emergency and need the money.

I’m super cheap already, so parting with money is always difficult, but I’d really like advice on how to pay off the debt and feel comfortable about it.
– Dee

If you feel comfortable with your emergency fund now, but the thought of getting rid of some of it for a non-emergency purpose makes you nervous, don’t spend it. Seriously. The point of an emergency fund is not only to help you take care of emergencies, but also to make you sleep better at night, not having to worry about how you’ll handle some unforeseen emergency.

Alternately, you could be expressing a general problem you have with saving money, in that you are psychologically fixated on saving more and more. If this is the case, you should start thinking about your real goals in life – what are you saving this money for? What kind of life do you wish to lead? One of my closest friends saves the majority of his income, but he’s doing so so that he can basically walk out the door at age 40 and do whatever he pleases.

You often mention that everyone should strive for continued self-improvement, something I think as well. However, can’t this lead to people thinking they’re never good enough? At what point to you say “I’m happy with the way I am?”
– John

I think it’s psychologically healthy and normal to be happy with they way you are right now – if you’re not, you’ve either got a very specific problem that you should bear down on right now or you should seek professional assistance to help you through your situation.

Being happy with the way you are, however, doesn’t mean there’s no room for improvement. I’m happy with the way I am, but I’d like to lose weight and become more well-read in some certain areas. To do this, I set some personal goals for myself. I don’t feel bad about where I am now, but I know that there are always things I can be doing to improve my situation.

I don’t want to ever retire. Retirement sounds really boring – I want to be doing stuff until I die. What should my investment plan look like?
– Joe

Just because you’re not going to retire doesn’t mean you shouldn’t take advantage of the tax sheltering made available by retirement plans, particularly a Roth IRA. A Roth IRA allows you to make tax free withdrawals at any time up to your total contribution, and when you turn 59 1/2, you can withdraw the investment earnings tax-free as well. I’d definitely use a Roth IRA for part of it simply for the tax benefits.

Since you never plan to actually retire, you should spend some time figuring out what your long term goals really are. Do you want to be self-employed? Do you want to start your own business? Or are you just pretty happy where you are right now and you just want to save so you can do interesting traveling when you’re older or follow up on other interests?

The real question is how far down the road are these goals, and what sort of dollar amount will you need? The further down the road they are, the more risky your investments can be – you should be putting most of your money into a stock index fund if the goals are more than ten years down the road. If things are closer, keep money in bonds, treasury notes, or even just in cash in a savings account – this is so you don’t lose any money (but you won’t have the potential for big gains, either).

My brother is working for a political campaign for a state senator running for the House of Representatives. The candidate is likely going to lose the race, but my brother absolutely BELIEVES victory is going to happen and that he’s going to get a nice job working for that guy. How do I clue him into reality?
– Will

I don’t think you need to “clue” your brother “into reality.” Most likely, if he’s a paid staffer for a House campaign, he’s probably strongly committed to a life in politics and is building up a network of connections as we speak. No matter what happens from this campaign, he’ll likely be able to move on to some sort of position, perhaps with a PAC or maybe with a lobbying firm, or maybe even in the office of another politician if his candidate is putting in some good words for him.

Your brother, especially if he’s young, is doing the right thing for his career right now. He’s building the lifelong contacts he’ll need for a long career in politics. If he’s skilled enough to be a paid staffer for a Congressional campaign, I’m pretty sure he’ll find some worthwhile work even if his candidate loses.

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

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  1. Amazing that 80% of visitors come from the states.
    Love how you answer so many questions. Some are useful for me, some not so useful. I haven’t had the opportunity to answer many questions on my blog yet…but hopefully soon

  2. Susy says:

    Definitely buy the local meat!!! You’ll like be saving money in the future on medical costs if you buy healthy local meat (read about the healthfulness of grass-fed beef). I’m sure there are places in the food budget that can be trimmed to accommodate a higher quality healthier option (fewer packaged unhealthy items, chips, crackers, cookies, snacks). Not to mention, the environmental impact of buying local vs. CAFO beef. Often when you buy higher-quality more expensive you eat less as well. Read Animal, Vegetable, Miracle and you’ll be a convert to the local food chain!

    Supporting the local food structure is important enough to spend a little extra on it. If the food structure of the US has problems these small local places will be the saving grace of many communities. Developing a relationship and local food sources is not only healthier for your family and your community. It will also be a good hedge against possible food shortages in the future and food price increases. I’m sure there are plenty of things in the budget that can be trimmed to make room for healthier food (which is more important than clothing, TV, and most other things).

    It never ceases to amaze me when people say they can’t afford healthy food, but have enough for cable tv, new clothes & shoes, prepackaged food (which is usually more expensive per calorie) and all those little unnecessary things. It seems like we only care about the things others see, and not what really matters.

  3. Eric C says:

    Just to second Trent’s discussion about posting flyers…I teach at a community college in the Information Technology program, and I encourage our students to do the same thing – hang flyers. They hang them on campus (which is a great place to do so – advertise “cheap computer repair” and watch the students flock to you). Other places my students report some luck with include places like laundromats (people are always just sitting there for a while) and local supermarkets (some local ones here have “community boards” for this purpose). Always ask, of course – at our college, they require flyers to be stamped (but that’s just so you don’t hang up 500 flyers). Most local businesses are fine with a flyer in their location.

    If you speak multiple languages, even better – put that on the flyer. I also recommend listing both an email and a phone number, in case your potential visitors are not very computer savvy.

    Just remember that you have the advantage that you are dealing with mostly local people in your neighborhood, and if you can travel to them, it is a huge cost savings for them compared to the rates for “the Geek Squad” or Staples. Be sure to advertise that you can travel locally as well, if that is in your means.

  4. Beth says:

    Your reply to the person thinking about holding or selling their company stock was cut-off. I’m not sure what your answer would be but everything I’ve read is that you don’t want to hold more than 5% of your portfolio in one company’s stock, even if the company is rock-solid.

  5. guinness416 says:

    To the guy that never wants to retire – more power to you, but bear in mind that as you get older health issues, whether your own, your partner’s or your parents’, may make that decision for you. Don’t let yourself be caught out!

  6. David says:

    I do not understand the question about “low carbon footprint” meat? Is she saying that herd of grass fed cattle farts less than cows that eat corn and other feed?

  7. Your Friendly Neighborhood Computer Guy says:

    Helping people with computer problems is a great way to earn extra money part time if you are even moderately computer savvy. Trent is right though, it is important to spend some time building a network first. Because it has been so lucrative for me, I am currently saving money in order to turn my part time computer repair hobby into a full time consulting business.

  8. crystal says:

    Trent, You didn’t completely answer Mary’s question (maybe done intentionally! :~) But I want to know the same thing (not that I’m single). Were you like this when you met your wife? Or is it something you became interested in after….and how did you meet!? Ignore if it’s just that we are two nosey women asking for more info than you want to share! haha My frugal theory – you were at a free community meal & flea market…she was sitting there enjoying her stack of pancakes reading the “Tightwad Gazette” and you were immediately smitten! So you picked some free flowers, took her some wrapped samples of chocolate…and a .75 vinyl copy that you bought from one of the vendors of “You are so beautiful to me.” BAM! Love at first thrift!

  9. Christine says:

    So, 3 things…

    1 – buying a used freezer is dumb, and you didn’t address that part of the letter (especially since she addresses “carbon foot-print”)! I looked into this last year and according to my research a used freezer that’s just 5 years old can cost upwards of $200 a year to run (based on 10 cents/KWh)… a new one is about $30. These things degrade unbelievably quickly and for the price differential (a new one is about $300 where I live), you’d recover the difference in less than 18 months. Plus, you’re more environmentally friendly.

    2 – How come you never talk about available credit as being part of an e-fund? Not all of it, but part of it. I think that this fellow who has $3500 in savings but $5000 in cc debt SHOULD plunk some of that savings against cc debt. I learned a long time ago when I had massive debt and a small e-fund that good credit is worth more in an emergency than cash in the bank. More so nowadays. Case in point – Zoom Airlines passengers stranded an ocean away from home… you try withdrawing $1,000 for a new ticket home in a strange country. Your bank account locks up faster than anything you’ve ever seen. Happened to me. :(

    3 – This fellow who never wants to retire… that’s cool, but what about if he has no choice? You didn’t address that option – whether it’s forced retirement or illness that takes him out of the work place, odds are against him in that regard. How do you feel about disability insurance for people who want to work their lives this way? I do like that you pointed him towards figuring out what he wants to do ‘for the rest of his life’… too many people think of retirement as sitting in an easy chair! My retirement will be filled with the things I currently do on weekends only – stitching, travelling, spending time with friends, volunteering. I can’t wait!

    4 – (OK, I said there were 3, but this is a bonus) Fantastic advice on that last one! I like that you tend towards putting people in their place when they want advice on how to rain on someone else’s parade. Helping someone else? You’re good at giving them the tools. Being a tool? You tell them to stop it! Love it!

  10. Jenzer says:

    Mary, my husband and I met through a web-based personals service back in 1999 (before eHarmony existed). What made his profile stand out to me was his emphasis on VALUES. He explicitly stated that he valued hard work, good physical health, continual self-improvement, and lifelong learning, among other areas. Most personals ads read like a long list of leisure-time interests (travel, dining out, sports, yadda yadda yadda), which tell you zero about your long-term potential compatibility with someone.

    Whether you go the route of face-to-face social activities, online personals, or some other means of meeting like-minded potential soulmates, think about your values and be prepared to broadcast them. If you value debt freedom, intellectual discussions, charitable giving, frugal living … whatever … don’t be shy about saying so! The wrong person will probably furrow their brow and give you a funny look. The right person will light up like a sunrise.

    Me, I still recall my delight the first time DH (then DBF) and I went grocery shopping. First I witnessed him compare prices on jars of grape jam, and then later pile 20 cans of frozen orange juice in his cart when he found out it was on sale. “Woo hoooo – I caught a frugal one!!!” (*grin*)

  11. Derek says:

    Trent, thanks for answering my question about holding/selling my expected “windfall” of company stock!

    To give a little more information, I don’t have a whole lot of investments. I currently have no stocks or mutual funds (the amount allotted to me after the merger would be my first) and I have only a relatively small amount in my 401k plan. The amount of stock I will receive has the potential to substantially exceed the amount I’ve invested through 401k, so I may not have any choice to have more than 5% (or 20%, etc.) of my investments in my company’s stock. If that’s the case, should I still sell enough to get down to that magic ratio? And if I do sell, do I use it to pay off some significant debt or use it to buy into other investments?

    As I stated in my question, I’m relatively young and pretty new to the workforce, so that’s why I’m looking for some advice about this situation. :) Thanks again!

  12. Aryn says:

    Even if you don’t want to retire, you may not want to be working 40 hours a week when you’re 75. You might want to volunteer or take up painting, or you could be the victim of a stroke and spend several years in a wheelchair requiring care. Planning for retirement isn’t about when you stop working, it’s about giving yourself options later in life when your interest or needs may change.

  13. Lisa says:

    Carbon foot-print on beef is about the transportation related to the care, feeding and butchering of the cow. It takes more fossil fuel to feed corn – which is harvested, planted, etc. with tractors and then then driven to the cattle “ranch”. Then, because cows are NOT designed to each corn, there is the additional carbon related to the increased medical attention required to keep the cow healthy until slaughter. And normally, the meat is trucked to the butcher site and then to the store.

  14. gr8whyte says:

    I vaguely remember (or think I do) reading about McDonalds getting their beef from South American farms created by clearing/burning of the Amazon forest and believe this kicked off the whole carbon footprint discussion on beef.

  15. Louise says:

    Two comments – definitely buy local meat. Better for your health, the health of the planet and the health of your local economy. The chest freezer will end up saving you both time and money. Start making meals in bulk and freezing them. It takes no more time to make twelve serves of casserole or curry than it does to make four. Fewer takeaways when tired and less time spent cooking. Win Win.

    To Dee – regarding CC debt. Take some of the money from your savings, pay off the CC debt but keep your credit limit the same. That way you are saving interest but still have a line of credit for an emergency. Worst case scenario is that you have an emergency, have to use your remaining savings to pay for it, plus put some of it on your card. You will still have saved some interest in the meantime.

  16. Andrew La Barbera says:

    Forget about quantity,buy portions! Two pork chops for two people(thick or thin) when you are going to eat them (the same day) and not before!No big freezer,less electrical,less everything and nothing goes to waste.
    “Eat it up,wear it out. Make it do or do without.!”

  17. j m says:

    I just graduated from law school and pending bar results will hopefully be getting a raise in the very near future (not much as I’ll be working as a public defender). My partner is in school and has her own small business that doesn’t generate much income for us, but is a labor of love so we enjoy it. We’ve both made credit mistakes in the past and have poor to fair credit, debt, as well as student loans. We’d also like to buy a house soon as we have a 7 month old, a dog, and a cat.

    My question is, where to start? Pay down debt in hopes of rebuilding our credit? Start saving so a down payment may help our credit situation? When I lie awake thinking about it, all of it seems too insurmountable that I don’t really know where to start. My law school and undergrad debt is astronomical, so it’s a given I’ll be paying that for the rest of my life, but what about the house? Is that a viable option for the 5 or 10 year plan? I realize this is a bigger question than a mere blog can answer, but a start might help. . . Thanks.

  18. gr8whyte says:

    @ Dee : Re. “How can I bring myself to let go of saved money??”, you can do so by looking at interest rates. If your savings rate is significantly lower than your CC rate, you should pay down your CC debt. The bigger the spread, the harder you should try to pay it off. But only do so if you’re comfortable with a small-to-zero savings account; you need to be able to sleep nights.

  19. reulte says:

    Derek – #10 . . . I think that you should keep things in perspective and view this as your introductory course in stocks. It is, after all, a windfall and not something upon which you are basing the necessities of life. I would say don’t worry about any magic numbers at the moment, although as times goes by, you will want to diversify for your own comfort. At the moment, time is on your side so use the time to do research. A ‘mistake’ at this point is pretty much guaranteed whether you keep or sell all, some or none. And a ‘mistake’ is totally redeemable over the course of the next 20 years or so which you appear to have.

  20. Mol says:

    I am considering purchasing a deep freezer, but I am only 20 and still familiarizing myself with cooking. I have very bad judgement on the experation of different types of foods. Do you have a good reference for how long some common foods/leftovers are good for?

  21. M says:

    I found this very interesting and wondered if you would consider giving this a try.
    http://www.sj-r.com/news/x801999915/Tamara-Browning-Food-bank-offers-hard-challenge
    I found some of the example prices high and if you were to go to stores that price match and use coupons you may be able to do better.

  22. Andrew La Barbera says:

    To Mol,read comment #15. Forget a big freezer,buy food when you are going to eat it! Forget about bulk.If steak costs $4.00 a pound and you can get it in bulk for $2.00 a pound for 50 pounds,that’s still $100; not only will you need a place to put it in but that’s what you will have to eat for a couple of months.
    Again”Eat it up, wear it out. Make it do or do without.”

  23. Sarah says:

    Were people in comas during Enron? Don’t hold stock in your company unless (a) you’re required to by the restrictions on the distribution or (b) you’re wealthy. If your company goes down the tubes, not only do you lose your job (and your pension if you have one), but your stock may become worthless. It’s the ultimate anti-diversification.

  24. Jim says:

    Derek, if you have no other investments then I would sell 80% of that company stock. As Sarah points out if you have all your investment dollars in your employers company stock then all your eggs are in the same basket. In the unfortunate situation where your company might go bankrupt in the future you could lose both your stock and your job at the same time, effectively wiping you out financially and leaving you unemployed.

    RE: #8 Christine’s comment about the chest freezer. It is definitely a good idea to compare the energy usage of an old used frezer versus buying new. Freezers that are 10 years old or more use significantly more electricity than today’s models. A typical smaller chest freezer from the 80’s will use $70 more per year than a new one. The Energy Star website has a calculate to estimate the difference:
    http://www.energystar.gov/index.cfm?fuseaction=refrig.calculator

    Jim

  25. Sara says:

    I am buying my first home this month and will qualify for the $7500 tax credit/interest-free loan. Even though I don’t need it, would it be a good idea to take it anyway and invest the money? Or is there some catch I haven’t realized?

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