Reader Mailbag #35

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. I’ve received quite a bit of chatter about video games lately (probably because winter is coming on), so here are some of my best posts about smart shopping on video games.
A general plan for cutting video game spending
How some video games are actually very thrifty purchases
A Wii buyer’s guide

And now for some great reader questions!

Between my husband and I, we have 3 cars (2 SUVs that get roughly 19MPG and a small 2 door car that gets about 35 MPG). All three are completely paid off. I’ve been thinking for a while about whether it would make a big difference financially to go down to 2 cars. The question has become, which car would we get rid of? Or, do we trade in 2 and get one new one? We live in Wisconsin and both commute (my husband’s drive is roughly 35 miles round trip and mine is roughly 50 miles round trip…unfortunately we travel in opposite directions, so carpooling is out of the question), so having vehicles that handle well in snow/ice is vital. I have the longer commute and currently drive the 35MPG car for as long as weather permits….
- Cathy

You probably don’t need three cars. You’re paying for insurance and license on all three cars, after all, so you’re paying good money for one car to just sit there.

I’d probably stick a “for sale” sign in the window of one of the two SUVs and see if you get an offer. If you don’t, wait until one of the three vehicles begins to show problems, then trade two of the vehicles in on a replacement.

Who are you going to vote for tomorrow?
- Levi

I believe I could actually get in trouble for saying, because I’m going to be a poll worker tomorrow. I like to volunteer to do that, because it’s a great opportunity to meet a ton of people in the community, shake some hands, and ethically support the voting process. I’m about as non-partisan as a person can be, as I’ve caucused for both parties at different points in the past. I’m one of those theoretical “swing voters,” I guess.

I will say I’ve already made up my mind on who I’ll vote for for President. I’ll also say I’m voting a mixed-party ticket, and there’s one vote that I haven’t made up my mind about – the state representative from my district. In that election, both candidates have come in person to my house and answered several questions that I’ve asked, plus they both have strong points that they’re in favor for. I’d like to vote for both of them, actually.

Please, go vote. Take some time today to learn about the candidates (most of you have probably already made up your mind about the President question, but look at your Senate race and House race). Don’t just vote party lines, either – actually look at what the candidates stand for. And tomorrow, vote! I’ll see you there (at least if you’re in my precinct)!

I’d like to start a home daycare. Home-based business books advise consulting an accountant, but I’ve never done so–I’ve always done my own taxes and checkbook-balancing. I’m unclear when I should contact one, and the best uses of an accountant going forward. What can I do myself, and what should I leave to the professionals?
- therov

I asked a friend who runs a small business and he said that his business hires an accountant for about five hours a week to help keep the books straight – you honestly probably wouldn’t need that much. He suggested just calling around to a few accountants and ask them how they could help you. They should be heavily involved at first, helping you set up a system, then back off and let you do most of the grunt work, only stepping in to audit, help you with problems, and help you with taxes.

That makes quite a bit of sense, actually. You’ll likely wind up using an accounting package like Peachtree or QuickBooks to help you keep track of this stuff, with an accountant only stepping in when there are problems. Good luck with your business!

Have you always posted 2 articles a day (1 on weekends) or when you first started was it more erratic?
- Nate

I used to post quite a bit more, but the articles were usually shorter. I decided to slow down so I could write articles of higher quality.

I’ve always stuck with a schedule, though. I find that sticking with a tight posting schedule keeps me from slacking off. I know I have to get articles finished and up by a certain time, and that keeps my nose to the grindstone.

I highly recommend that new bloggers try coming up with a schedule. Try a “three posts a week” schedule – one every Monday, Wednesday, and Friday. Make that schedule paramount, and you’ll find yourself working to make it and becoming more consistent, too.

I graduated from college with a bachelor’s in May of 2006 and I will be graduating this fall with a Masters’ degree. I find myself in the hunt for a job and as I’ve been searching, it occurred to me that I never took any time off. I’ve been in school continuously since kindergarten without any breaks.

I’m considering taking some time (maybe a month?) to travel. I live at home so I have no rent payments. My only debt is a monthly car payment and a relatively small credit card balance. I have some money saved up (a few thousand), but it’s not a huge amount and it makes me feel comfortable to have it in the bank.

I’m trying to decide if taking the time off before throwing myself into a career is worth it. I fear I may not have this opportunity again for a long time! What do you think?
- Lauren

Absolutely. One month? Don’t question it. Go and do something deeply personally fulfilling.

I start to question it when people suggest traveling for a year or so after college, but a trip for as short as a month, especially if you can afford it, can be a valuable break before you get started on your career.

Work hard before you leave to get a job lined up, though, so that when you get back, you can walk right in the door and get started. That means spend a chunk of your last semester really pounding the pavement for work.

I live in Egypt and I just can’t get it why in the US there is always ads saying “retire early”? why would a person want to retire as long as he still have the ability to work and produce?
- Reem

I think the biggest reason for ads like that is that many people aren’t particularly happy with their jobs. I know many people who chose to do something they really didn’t like in order to earn a little bit more money.

The end result is that people often have plenty of money, but are left unhappy with their career, and that’s a perfect target for an ad that talks about retiring early. It translates that extra money into a wish to be free of that career they don’t like.

The fact that such ads exist are evidence of this phenomenon, and it’s why I encourage people to choose a career they actually like or are passionate about right off the bat.

When they say “Americans are saving x% of their disposable income” where x=depressing, does this include contributions to a 401k (or similar)? Does this include employer matches to a 401k(orsimilar)? Since most definitions of ‘disposable income’ are roughly equivalent to ‘what you take home in your paycheck,’ how do you factor pre-tax savings into this? How can one calculate their own savings rate to see how they compare to the rest of America?
- waldo

There are a lot of different ways to calculate that savings rate, and there’s no “standard,” really. Quite often, when you see negative savings rates quoted, they’re using a method where they take the total amount of money saved in a year by a person, then subtract the acquired debt from it.

I don’t put a whole lot of weight into that number. I’d rather see, honestly, the average change in net worth adjusted for changes in the stock market each year. For example, I’d bet that 2008 (after adjusting for the stock market dip) would be a pretty good year for net worth increases, since people are buckling down.

Are you ever afraid of revealing too much personal information on The Simple Dollar?
- Ginny

In terms of just me, I don’t mind that much. I’ve revealed a ton about myself on The Simple Dollar and a lot of my friends and relatives have read it. I’m quite sure that most of my friends and relatives know far more about me at this point – and I don’t really mind, to tell the truth.

I am much more nervous about revealing information about others. I usually tend to do lots of little things to blur exactly who I’m talking about when I talk about friends and family members so I don’t “out” anyone on The Simple Dollar. It’s not fair to them for me to write about their money issues on a blog with several hundred thousand readers a month. So I usually change names and change some ancillary details to protect their privacy. This does include my wife and children and issues relating to them.

My privacy? No big deal. The privacy of others? It’s not fair of me to violate it, so I balance the need to relate good personal finance advice with their specific privacy.

What individual stocks would you buy right now?
- Annie

I don’t believe in market timing, especially in terms of buying individual stocks. I would buy individual stocks if I believed in the company, and I’d hold those stocks until I either needed to sell them or I stopped believing in that company. The state of the market doesn’t matter, really. If I’ve chosen good companies to believe in, they’ll be fine in the long run.

I usually encourage people to buy broad-based index funds, which basically allow you to buy a tiny sliver of tons and tons of different stocks all at once, and then effectively ride the market as a whole instead of an individual company.

Do you actually tithe 10% of your income?
- Fred

I don’t automatically give 10% of my income to the church I attend. My wife and I give to a variety of charities and among those charities is the local church, which does a lot of great work in our community. I view supporting the local food pantry or Habitat for Humanity or the public library as tithing, since they’re in line with helping the poor and disadvantaged.

We also view giving our time as a part of tithing. I view it as my personal obligation to donate my time to different groups. I voluntarily serve on committees and often give my time freely to other community efforts. That, to me, has as much value (or more) than tithing a few dollars.

I don’t believe that an automatic 10% tithe without thought or careful consideration is even a good idea. Instead, I believe each person should give what he or she has decided in their heart to give, not reluctantly or under compulsion. Don’t give because you think you have to – give because you want to see a good deed done.

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

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35 thoughts on “Reader Mailbag #35

  1. Trent,
    I know tithing can be a touchy subject, and it has been for me. However, I have always had the saem view as you. I want to give to a cause that I believe in and, for me, it’s not always just one cause or one church.

  2. Kim says:

    I’d like to add one small piece of advice to the person who lives at home and would like to use savings to travel for a month. Please, please consult your parents about the decision. If they are currently supporting you as you transition from (I’m assuming) an educational life to a working, self supporting life, they may have some strong opinions on how you spend large chuncks of cash while living on their dime. If they support you…go for it and enjoy. If they have reservations, please do not overstep their kindness and wait until you are completely self supporting to take the trip. You never know, they may be putting off their dream trip while they help you!

  3. Perhaps the best summary and advice I’ve seen on charitable giving – of both money and time. I couldn’t agree more.

  4. Nick Dunlap says:

    I know this seems like splitting hairs, but the way that I think about tithing is a little different. As I understand it, the idea of tithing is not giving to your church, but giving back to God through the church. It is an attitude that says, “I know that everything good I have is from you. And to show that I love you more than your gifts, I am gratefully giving back the first fruits of what you have given me.” I give to other charities each month, but it is always on top of what I tithe at church. Just a thought…

  5. BIGSeth says:

    To Waldo’s question about the U.S. savings rate – this rate is based on savings (CD’s, bonds, etc) and not investments (stocks, mutual funds) so is fairly misleading now as so many people ‘save’ in stocks.

    So, if you put 50k in the market this year (hopefully later rather than sooner) and did nothing else other than put a dollar on your credit card you would have a negative savings rate even if your net worth went up X thousand dollars.

  6. JonFrance says:

    I’m surprised to hear that you describe youself as “about as non-partisan as a person can be”, given that you have more than once talked about holding elected office as a goal you have.

    Granted, party affiliation matters less on a local level, but do you see yourself always running as an independent, even though that will inevitably limit your potential to gain office? Or are you just leaving off partisan politics until such time as your political career is developed enough to warrant it?

  7. Jen (the other one) says:

    Have fun working the polls! I wanted to be an election judge this year, but the requirements here in Chicago are ridiculous.

  8. Cara says:

    Question:
    Hi Trent,

    Due to a company-wide reorganization, I will be losing my job at the beginning of February. I am only 24 (with no dependents) so this isn’t absolutely devastating. As part of my severance package, I will receive 4 weeks of pay and a lump sum of about $7000 (after tax). My goal is have another job lined up come February so I can save my severance package and eventually put it towards a down-payment on a house or a new(er) car in 2-3 years. Given the lackluster job market, this may or may not be realistic.

    Currently, I have around $10,000 in my savings/ emergency fund and no outstanding debt. I take home around $2275 (after tax and insurance deductions) per month and automatically put $500 in savings. I have around $850 in fixed monthly expenses which include rent, utilities, cell phone, etc. and have already take action to reduce my spending and expenses. However, I feel like I am not doing enough.

    What else would you be doing in this situation?

  9. Your Friendly Neighborhood Computer Guy says:

    @ Therov – I definitely recommend at least an initial consultation with an accountant before starting ANY kind of business. One of the worst things that can happen to a new business is being blindsided by finance and tax issues that you were not expecting. Best to get started on the right foot, even if you plan on doing the books youself.

  10. Gretchen says:

    I know everyone and their brother recommends to hire an accountant and how wonderful it has been for their small business. If you want a contrarian view, though, I have always done my own taxes and books for my consulting business that I’ve run for 7 years now. I use TurboTax Business and I keep spreadsheets and a log next to my desk for income and expenses. I happen to enjoy doing my own taxes so I’ve read a lot about it and occasionally ask my relative, who is a CPA, a question if I am absolutely flummoxed. I’ve found the software is very comprehensive and virtually fool proof (except last year when they had a glitch but they offered all my money back as a result so I am sticking with them).

  11. Michael says:

    I disagree you’re so open about yourself, but the kind of information you keep private also protects your family, so I understand.

    Also, I think one should charitably compel uncharitable family, friends and neighbors to give, even if they give reluctantly. Also, I think it is better to not think about charity as one does it.

  12. Kevin says:

    Trent – tell therov he/she can email me and ask me questions about hiring an accountant. I’m a CPA in Missouri but most of the questions probably aren’t state-specific.

  13. Matthew S says:

    In reply to: “Don’t give because you think you have to – give because you want to see a good deed done.”

    I agree that you should give in a way that will be helpful to others and maybe not necessarily to your church so they can buy another plasma TV for a Sunday School room, but I don’t necessarily agree with all of the statements.

    If you are a follower of Jesus, then hopefully you are giving joyfully because you know how much it helps others and shows the love of God to those in need. I still think that if you are a follower, then you SHOULD give because you think you have to. I believe the Bible commands it. Malachi 3:10 for one example.

    You should do what is right even if you don’t feel like it in every situation. Sometimes I’m in a bad mood, but I should still read the Bible, pray, help others, be loving even if I’m not in the mood. I should tithe even if don’t know exactly the end result. I should tithe even if I don’t think I can afford to this month.

    If I didn’t tithe, I could have new cars and a bigger house, but I choose to obey and I haven’t run out of money, clothes, food, etc yet.

  14. Brad says:

    My mother in law donates to the church (tithe) 10% because she doesn’t want to go to hell. I guess that’s a decent retirement plan if you believe in all of that.

  15. Seth says:

    Didn’t you already say you were supporting Obama back in Mailbag #4. Unless you’ve changed your mind, of course…..

  16. Teri says:

    RE tithing: I’m a pastor of a church. I don’t tithe to my own church, I do spread the love, as it were, and as most people do–partly because I feel odd paying my own salary.
    However, when deciding how to divide up your giving, please remember that a church is not just another charity, not the same as any other organization you might give to. Sending $500 a year to Habitat and $500 a year to the church may seem equitable, but there are millions of people sending that $500 to Habitat and only a handful (relatively speaking) at the church. Also remember that non-religious non-profits have many other sources of income (grants, government funding, large donors, etc) that churches don’t have. Churches are ENTIRELY funded by the people who attend, and the amazing work churches do (ours is involved in/sponsors/hosts/etc at least 20 different ministries to help those in need, troops and their families left behind during deployments, people with disabilities, elderly people who want to stay in their homes, hungry/homeless/etc…) still costs money even though we’re a church, and we have far fewer sources of income than your average charity.
    (getting off my pastor soapbox…)

  17. Lisa says:

    Hi Trent,

    re: tithing.

    I think you should have attributed “should give what he or she has decided in their heart to give, not reluctantly or under compulsion.” to the Bible (2 Cor 9.7)

  18. Nick says:

    Oh seriously? We have two vehicles and are wondering if it would be a good financial decision to get rid of one?!?! Must be a nice position. You shouldn’t have answered that one.

  19. Nate says:

    Trent you’re a machine. You used to write MORE!? I have trouble writing 5 posts a week. I guess I don’t have any excuses if you can do it with kids and a family. :) Keep up the good and hard work!

    -Nate

  20. Jillian says:

    Thanks, Teri. I never thought that hard about tithing to the church vs. secular charities – some good points there.

  21. PF says:

    Regarding the 3 vehicles. We have three vehicles with a similar commuting situation and evil winter driving (9000 ft elevation in the Colorado Mountains). I often wonder if we should sell one of them…..and then one breaks down. The additional expense seems worth every dime when I don’t have to use vacation because my car broke down and I can’t get to work. I’m a very dependable employee and I’ve been rewarded for that financially.

    @Nick….why so judgmental? We all have our own situations that are different from other people. I haven’t had television in 15 years, so does that mean that I should judge everyone else who does as wasteful and below my consideration? That isn’t really fair. –Paula

  22. sbt says:

    Trent,

    I think you missed something in your answer to the couple with three cars. She said she lived in Wisconsin. Now, depending on exactly where that is in Wisconsin, that could mean levels of snow and ice we seldom see in Iowa. She is obviously concerned that her small 35mpg car can’t handle the winter roads. I would advise selling 1 SUV and the small car, and buying something that gets more than 19 mpg and feels safe in the winter.

  23. L.S. says:

    I am so glad you didn’t tell us who you are voting for. Thank you! Every other blog I have read today said they weren’t going to say, and then they did anyway. I would prefer that people kept it private, unless I am talking face to face.

  24. Steven McCollum says:

    re: Starting a small business and having an accountant

    The Small Business Administration (www.sba.gov) has a program called SCORE. They SBA will help you get a mentor for any type of business problem you may face. It is free. When I started 20 years ago I had no idea about accounting. I met with a SCORE volunteer who was a retired CPA. He spent hours will me showing me what records to keep and how to keep them. Then he showed me how to prepare them tax time. He was extremely helpful and helped me get on the right track from day one. I urge you to check out SCORE at your local SBA office.

    Cheers Carpe diem.

    m

  25. Amber C says:

    Best answer I have ever seen on tithing.

  26. Sharon says:

    The chances of getting a decent price from one SUV and the small car, enough to get another one without additional money is small. If all 3 cars are paid for, and the insurance is reasonable, it seems to me to be a reasonable thing to maintain for security in nasty weather. A reevaluation of the auto insurance coverage may be in order, to see if those costs can be cut some, but I find having 2 cars is well worth the cost because if something goes wrong we have an alternative. And with Wisconsin weather, I think they both need a SUV for safety. In good weather, save some money on the gas by driving the little car.

  27. Katie says:

    Re: hiring an accountant for a daycare provider. I have always done my own taxes, I actually worked for one tax season for H&R Block. However, the accountant who did my taxes for the years I ran a daycare from my home knew all the ins and outs of what was deductible. If your daycare is in your home a portion of your mortgage, heat, lights, and insurance are deductible. An accountant who knows your type of business can be invaluable.

  28. Chris says:

    Where do you purchase your Certificates of Deposit (CDs)? Are the online banks reputable?

  29. @Chris

    I’ve recommended CD purchases from various online banks, I usually prefer ING Direct but do not own any CDs currently. So long as the CD is FDIC insured you might as well look for the best rate. Brick and Mortar banks can rarely compete with the online rates.

  30. princess_peas says:

    What do you think about splitting savings up for different purposes? This is the system my Mum and Stepdad have (they have no debt other than morgage and possibly car loan but I doubt it):

    Several savings accounts, one for car fund, one for household jobs, my sister is at uni and they pay half of her fees so one other account for that and maybe a few others. At the beginning of the month, along with paying the bills etc a certain amount goes off into each of these accounts (not necessarily much, I don’t know. But adequate to cover most things that will need doing.) They have a general savings account too. But no ‘investments’ or anything outside of that.

    They also have sweeps on their account… 27th of the month, anything over 300GBP gets put aside in the savings (either generally or into the different ones – they are all held at the same bank). This leaves enough money if food-shopping day falls between then and when they get paid at the end of the month or for any other expenses. And they also sweep in reverse… if their current account ever goes below 50GBP, it automatically tops it back up (I think to 300 again but it might be less) from the savings. So, they don’t have an ‘emergency’ fund as such, because they have enough cushions that they shouldn’t ever need it.

    They don’t particularly attempt to live frugally but they try not to be wasteful. They like their treats and their holidays but they budget for these treats every month aside from all of these savings, and of course have a holiday account alongside all the others. Some of their money at least will probably be in the bank for a long time and I was just wondering if you thought they’d be better getting investments and such or sticking with their current plan? They don’t have specific retirement savings although they do have company pensions I think (my stepdad is older than my mum, there will therefore be quite a period where he retires and she is still working). But they are trying hard to bring the morgage down and to cut back on some of their treats so that he can retire on time in a few years if he wants to (currently undecided but they want the option) – he earns quite a bit more than she does. Do you have any other tips for when he does retire, or for when she eventually does as well?

    (Currently I live with them and pay rent but don’t have to manage these kind of finances for myself, so I am just an interested observer with an eye to the future. And obviously if there’s anything that you think may specifically benefit them I would be glad to pass it on. :-) )

    Thanks.

  31. AK says:

    Trent,

    Please summarize, what are your investment plans for 2009. Thanks

  32. Nick says:

    @ Paula

    You’re comparing apples and oranges. It’s asinine to even discuss whether or not getting rid of your THIRD car is a good financial decision or not. OF course it is! I think it’s belittling readers who are struggling with layoffs, huge medical bills and other financial hardships to answer such a question.

  33. Shelley says:

    The word tithe means “to pay or give a tenth part of especially for the support of the church; to give a tenth of one’s income as a tithe (Merriam-Webster Dictionary). In Deut.14:22, a tithe is one tenth of your increase, which is the gross. In Mal.3:10 we’re told to bring all the tithes into the storehouse, that there may be food in God’s house. God gave 11 tribes of Israel a portion of land in the promised land, but made the tribe of Levi priests, to whom a tenth of the other tribe’s increase was to support, to do the work of God. If we haven’t given 10% of our gross increase to our church we have not tithed, and have robbed God. Mal.3:8 We can give any amount above that tenth anywhere we choose, but the tithe goes to the house of God. Mal.3:9 says that if we do not give God his tithe, we’ll be cursed with a curse. Mal. 3:10 says that when we do tithe, God will open the windows of heaven and pour out for you such blessing that there will not be room enough to receive it. God also says to try him now in this. It’s the only place in the Bible where God says to test him to see if he’ll do what he promises. I don’t know about you, but I sure would rather be blessed than cursed by giving God his tithe. When you tithe, you have tither’s rights. God says that by tithing, he’ll rebuke the devourer for your sake. Mal.3:11. Knowing my tither’s rights have been huge in asking God to keep his word to rebuke Satan when items of mine (one was a car), have been stolen. God has always been faithful to get my things back.

  34. almost there says:

    Shelley@ Your post about one imaginary being rebuking another was all about man writing about the huristic concept of religion. I think you would do well to watch a man by the name of Pat Condell to see how the non-thieists see everything. Here is a link:

    http://www.youtube.com/profile_videos?user=patcondell&p=r

    I do not tithe to a church but my heart is not black. I give plenty to the less fortunate.

  35. anjeee says:

    Trent, I agree with Lisa. When you wrote
    “I believe each person should give what he or she has decided in their heart to give, not reluctantly or under compulsion” you lifted a direct quote from the Bible without attribution – you used the words directly as if they were your own.

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