Reader Mailbag #6

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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.
On personal finance blogging and bribery
How to prep for a job interview
How video games can be frugal
What to do with old baseball cards

And now for some great reader questions!

How do you handle disagreements with your wife?
- ontguy

Ordinarily, this would cross the line into “too personal for my tastes,” but I think there are some things that I can mention that are useful and illustrative here.

For the most part, when we disagree, we use debate tactics. Seriously. My wife and I actually started falling for each other because of debating situations, so it came natural for us to use those techniques in disagreement.

The most effective technique we use is switching positions. I make a genuine effort to argue the position she’s holding, and she argues the position that I’m holding. We actually just switch into this pretty naturally – one minute we’ll be debating it one way and the next we’ll be switching sides. What does this do? It forces us to see the other’s side on something and we usually find out that one (or both) of us is merely being stubborn, not being right.

The biggest challenge is always checking emotions at the door. If you disagree with your spouse and start getting angry, I try to say something along the lines of “I’m getting angry right now. Let’s talk about this later after I cool off,” and she respects me enough to give me that space. I do the same for her. It doesn’t always work, but it works often enough that it’s worth doing.

When a woman ends a relationship that has been going on for a long time and the man finally starts to fight to keep the relationship going, why is that? She gives us all the clues and we have little fights here and there, but we just do not get it till she is DONE.
- Albeeback

Let’s look at it biologically, because that’s really what it comes down to. Guys are predisposed to trying to keep their options open. Biologically, guys can produce their half of what it takes to make a child at almost any time, so there’s not as much value in focusing in on one mate at first. Gals, on the other hand, are rewarded for being more careful about selecting a mate. They have a limited number of opportunities to produce offspring and thus they are rewarded by focusing in on the best mate available to them.

That’s why in most relationships the guy is less interested in commitment (yes, I know, that’s not always the case). That’s not a lack of love, but just what they’re predisposed to do.

In other words, what you’re describing is actually pretty normal and expected from an “average” guy. He’s trying to keep his options open (that’s how he’s wired), but he also has a relationship that he emotionally cares about (that’s why he’s fighting for it). Another problem is in the signals – quite often, guys simply don’t understand the clues they are given. I confess to being clueless myself – my wife often has to be pretty direct with me because I don’t pick up on hints at all.

Ladies, when you want something significant, don’t just drop “clues.” Say what you’re thinking and make it clear that it’s important to you. Sometimes you may have to repeat it. Be direct – guys want to know what on earth you’re thinking, because often they think everything’s completely fine when you’re fuming and then are completely shocked when you blow your top. If you’re dropping hints and he’s not picking up on them, he probably isn’t realizing you’re trying to say anything at all. It’s not about cluelessness, it’s about not understanding what you’re saying when you’re communicating indirectly.

Guys, if you’re wondering what she’s thinking, ask her. If she seems to just blow up a lot about things and you don’t know why, ask her. Tell her flat out that you don’t know what she’s been trying to communicate and ask her to tell you directly.

What’s the key here? Communicate! If you’re not actually talking or just talking indirectly, it’s hard to have a real good understanding of what’s going on. Just sit down and talk about it.

What is the best strategy for paying back college loans? I’m still in college right now: half way through and about 10k deep.

I’m studying for a BS in EECS (Electrical Engineering and Computer Science — a fairly well paying degree) at Berkeley. I’ve heard estimates that graduating students make from 50-60k a year.

Should I pay off as much as I can early on? Or should I just make the minimum every month? I’ve heard that students who payed too much too early (before the 6 month graced period with subsidized interest) have had their payments started and nullified however many subsidized months they had left. Also, my friend tells me I should invest my left-over money and only pay the minimum on my loans.
- Alexis

The default strategy for any loan is always to pay off as much as you can as fast as you can (unless the interest rate is absurdly low, say, below 3%). So, as a general rule of thumb, the more you pay now, the better. This is especially true fresh out of college, when you don’t have nearly as many entanglements as a married person with kids and an established role in the community might have.

Now, if you have a loan with some kind of grace period (assuming here that the grace period is actually a period with no interest at all on the loan or with the interest paid by the government), it’s worthwhile to retain that grace period. However, that doesn’t mean you shouldn’t overpay. Instead, you should be paying as much as possible each month – but only sending the minimum payment to the lender. The rest of that payment should go straight into a high-yield savings account. Then, the day the grace period ends, empty out that account and make a giant payment.

One more point of advice: live as cheap as you can for the first five years after college. You’ll never regret it for the rest of your life.

Should I spend this year 2008 saving my goal of $10,000 and then paying off debt(which is under $20,000)next year 2009. Or do the exact opposite?

I assume if I choose to save first I will still at least be building credit??
- s.a.

There are several factors here that change the answer. How high is the interest on the debt? If it’s a lot higher than the interest rate on the savings account, you should just save a little bit (say, $1,000 or so for a small emergency fund) first and then start hammering that debt. If it’s all low interest debt, like student loan debt, it might make more sense to save first as that savings will give you a buffer against whatever may come down the pike. Another piece is how strong your family and social network is – could you rely on them if everything fell apart? The more reliable they are, the more you should look towards paying off the debt.

What do I do about the financial disaster that is my in-laws? They have nothing, except for three adult children that still live at home and mooch like mooching is going out of style.

I don’t have too many fears, but I exceedingly afraid that someday I will have to pay for them to exist.

HELP!!
- Chris

The absolute first person you need to talk to about this is your spouse. Sit down with your spouse and make absolutely sure that you guys are 100% on the same page on this issue. If your spouse is hemming and hawing on the issue, then your spouse is probably wanting to at least consider that sort of scenario in the future. If it’s something that’s crucially important, you have to let him or her know about it.

If your spouse won’t agree, you have to ask yourself some serious questions because you have to plan for the scenario where you are responsible for them. Is this a marriage-defining issue? Is it something you can’t accept as part of your life? Is there not an acceptable compromise that works for you?

If your spouse is on board, then slam the door on this issue. Don’t let them borrow money or anything else that will get their foot in the door. You clearly don’t trust them or deeply value them, so you don’t want to give them signs that you do or encourage them to rely on you for support.

Throughout all of this, remember that your spouse is in a tough situation here. You’re asking your spouse to make a decision that involves some level of rejecting someone he or she cares deeply about. That’s never easy, and you shouldn’t expect it to be. But if this is a personal stand that’s vital to you, you need to take it.

Have you ever watched Good Eats or read Alton Brown’s books on cooking, baking and kitchen essentials?
- Missy

My wife and I think Alton Brown is by far the best part about Food Network. Interestingly enough, several people we know and are friends with were featured on the most recent season of Feasting on Asphalt – the season where Alton and gang rode along the Mississippi River. We actually knew people at multiple stops during one of the episodes – it was a blast to watch. My father even appears in the background of one shot looking somewhat dazed by what’s going on.

I would say that at least some of the tone of my upcoming food blog will be inspired by Mr. Brown, and I hope to have the opportunity someday to meet him. He was one of the big inspirations for me to jump into the kitchen for the first time.

Which chain restaurant do you think offers the best value for your money (Both fast food and non).
- Phil A

Keeping with the food theme…

I’ll be frank. When I actually eat out with my wife, something we rarely do, we go for quality, period. A meal out is an experience that I’m willing to pay substantially for, so we usually go to very classy places. Thus, among chain dining establishments, I have to give the thumbs up to Ruth’s Chris Steak House. I’ve been there twice and while the bill was pretty high, the meal was quite impressive with steaks that even made someone like me, raised in the Midwest in farm country, smile quite a bit.

As for fast food, that’s tougher. I would probably have to go with In N Out Burger, as it’s the only one I can think of that’s found in a very wide range of places that gives me a generally positive feeling. There is, however, a very local chain to central Iowa called B-Bop’s that is actually similar to In N Out Burger in a lot of ways but with something of a 1950s theme – if you’re ever in the Des Moines area, they’re pretty good. This just reflects the chains I’ve tried, however.

Overall, though, I really enjoy making food at home and we don’t eat out much.

How do you handle comments you feel are offensive or hurtful?
- Judith

If it’s just an attack on me and nothing offensive to others, I leave it there because there’s usually something that can be learned from it. Most people can read personal attacks for what they are – an inability to hold up an intellectual discussion about a particular point. Besides, I’ve seen so many personal attacks over the last year or so that I’m not bothered by it any more – I only respond to try to clarify for people who are reading later on.

If it’s an attack on other readers that heads down the road of personal attack, or if there’s a comment that’s actually offensive, I delete it without hesitation. No one comes here to be attacked or to face a plethora of bad language or adult references. I’ve been attacked for this, too – apparently, some people believe that anywhere they decide to lay down some insults is a free speech zone. Not the case – this is a place where I want people to be welcome to speak their mind and not be personally attacked for it.

Is there any one resource you’d recommend, whether it be a book or a website that would help me achieve my goal of becoming a much better writer? I’d greatly appreciate it.
- Pawel Mrozik

The absolute best resource for improving as a writer is you. All of the books and websites in the world don’t matter. The one thing that separates good writers from bad writers is practice, refinement, and more practice.

Make yourself write every single day, no matter what. Set a goal for writing every single day. A lot of writers suggest writing a minimum of 1,000 words every day like clockwork – that’s a good benchmark to reach for.

If you’re shy, start an anonymous blog and just post there every day with your thousand words of writing. You can get a simple one for free at Blogger or WordPress.

Being financially savvy after reading pf blogs, I now realize term insurance is the best. But I have in the past, enrolled in 3 wholelife policies, 2 of which are for my children’s education. My question is should I continue or redirect those funds into investments channels?
- Justin Philips

It depends entirely on the policies themselves. In terms of the money you’ve already put in, you have to view that as a sunk cost that you’re not going to directly retrieve.

Now, if you cashed out of that fund right now, took that cash, and put it in another investment, would you end up with more money in the end? I usually use a thumbnail of about 8% annual return over more than ten years or 6% annual over less than ten years on a generic investment.

Some whole life policies eventually wind up being good investments if you ignore how they do over the first ten to fifteen years. You just need to figure out if you’ve reached that point or not.

I’d like to hear more about Dance Dance Revolution. I have been using it as my primary exercise method for two years now, and there’s still songs I can’t beat. What version do you play, and what songs do you find the hardest?
- Danika

I use a mix of DDR and Wii Sports for my exercise motivation (and I intend to add Wii Fit to this soon). Until recently, I’ve been so incredibly busy that I’ve not been able to pencil in a daily scheduled exercise routine, but thankfully I’ve been able to start scheduling a period each day for exercise. Here’s what I do.

First, I stretch for a few minutes, then I run through whichever rung of the lifetime fitness ladder I happen to be on. This takes ten or fifteen minutes or so. I then follow it with about ten minutes of Wii Sports boxing (by far the most aerobic exercise there) and then I play a few DDR songs. Frankly, I’m atrocious – I use the workout mode, play hard songs, and try to burn a set number of calories quickly (usually 300).

I don’t really play competitively or to unlock stuff – I just use it as a method to exercise. For the fun of playing a rhythm game, I much prefer Guitar Hero III. My wife and I play that one for a while about once a week – it’s actually very fun and good at teaching rhythm.

Why did you choose to have children?
- laura k

My nieces and nephews convinced me. One of the high points of my college life was seeing them and doing things with them and watching them grow up. My niece is now almost sixteen, for example, and I got to watch her grow up – I remember her talking to her two imaginary friends like it was yesterday.

Children are beautiful. They’re not locked into seeing the world as adults do. Most of the perspectives that adults have are the results of many, many years of reinforcement, both good and bad. Children don’t have that – they think differently about everything and they make you think differently about everything, too.

For my wife and I, it was a no-brainer. We want to have a lot of kids, actually – one more is virtually a guarantee, and beyond that there will likely be even more.

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

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98 thoughts on “Reader Mailbag #6

  1. Love your mailbags, Trent.

    I found the way you communicate with your wife to be very insightful and will talk to my fiance about that.

    Alton Brown is brilliant. Knowing a bit of the science behind cooking helps out a lot, and his demonstrations on technique are fantastic. I hope you choose to dabble in video a bit for your upcoming food blog.

  2. Now that you are a recognized blogger of all things financial and frugal, I’m wondering if you could get an interview with Amy Dacyczyn, author of “The Tightwad Gazette”. I’d love to hear what has happened in her life since she stopped her newsletter and what happened to the cookbook that was supposed to have been published several years ago. It seems she has dropped off the planet!

  3. My student loans are at 2.7%… and in a few months they will drop another 1% due to on time payments.

    this is what I think Trent would consider “ridiculously low interest rates”…

    In my case, it is in my favor to make only the minimum required payments on the student loans (because the money is very inexpensive to borrow) and invest/spend it otherwise. For example, instead of paying off my student loans, I decided instead to buy a condo and rent out the other 2 bedrooms. It is a much better investment for me!

  4. You often admit to wanted three or more children. Do you ever consider the social and environmental cost of adding to overpopulation? I don’t mean to sound cold (we have children and love them more than anything), but you seem so aware to most other aspects and blind to this one. What do you get from having five children that you don’t get from two? (Ignoring individual personalities because if you are planning children before hand, they have no personalities. My husband is third of four children, so I am not suggesting you “take anyone back, or undo anyone who already exists. I am simply talking about future planned children.)

  5. An interesting “kid” thought for a potential future post:

    “Is having kids kind of like taking out a long-term care policy?” (They’ll be there to care for you in your old age.)

    This hit home recently as I saw my grandmaother dealing with health issues and how my uncles and aunt responded and came to her aid.

  6. Amanda,
    I don’t know much about future population expectations, but I’ve heard that if it wasn’t for immigration, the US population would actually be declining. I actually found a wikipedia entry: http://en.wikipedia.org/wiki/Population_decline

    I’ve been hearing more about this in recent years, with social trends changing to fewer/no children and China’s “little-emperor” situation.

  7. I am a married, soon-to-be college graduate that will be graduating with a BS. in Comp. Engineering and a M.S. in Software Engineering. My wife and I are just starting out, and thus far have managed to save about $10,000 while incurring no student loans. I have two questions:

    1) My wife and I have shared finances, a budget, and try to make all purchases with each other’s input. We have some “blow” money that is set aside that we can spend however we want, but the rest we decide together. While this is has worked amazingly well for us for known expenses, it doesn’t seem to work well for surprises. If I want to surprise her with some nice jewelry, I really can’t, because I think she should know that I am spending money and how much. While this does prevent her from trying to do something similar and overdrawing, it does remove a bit of the surprise. She has jokingly threatened that when she wants to get me something she is going to start stockpiling other monies until she has enough. Any tips on how we can make decisions together, but still be able to get surprise gifts for one another?

    2)I have made it through 23 years with no credit cards, and I haven’t run into any problems thus far. However, as I look forward to buying a house, relatives have told me I should get a credit card to build credit. My normal response is that I don’t need credit and I plan on getting a manually underwritten loan that actually looks at my ability to repay, rather than my my credit score. With a sizable down payment and good income with no debt I don’t believe I will have a problem. The logic behind this is that loans that use just credit scores don’t seem to make sense to me, as I could have millions in the bank, but my credit score would not reflect that. Has anyone tried gotten a manually underwritten loan recently and what are your thoughts? I am against credit, as I don’t see any reason to take undo risk to use someone else’s money when I can save up for things and buy it with my own.

    Sorry for the long questions, but I am just starting out, have read a lot of finance books, though and haven’t found anything that really covers my unique situation.

    If you think I am doing something wrong, or have tips to make things better, let me know.

    Michael

  8. Michael,
    Regarding your question #1, this is what my husband and I do. I handle all of the finances, so I can put presents for him on the credit card and he more than likely won’t notice it. I check our credit card activity online sometimes, though, so this wouldn’t work for him.
    We decided to just keep about $100 in cash in our safe and my husband raids that when he wants to buy me a present.
    The other thing he does is sometimes wait until that day to buy the present (works well with flowers, which you generally give the day you buy anyway). That way, by the time it shows up on the credit card, I already have my gift.
    Just some ideas :)

  9. I’ve got a question,

    What’s your opinion on husband and wife having seperate accounts. I see it as a way to kill a marriage, but I do have an aunt and uncle that have done fine with it. Me and the future Mrs. agree to keep our accounts together, but I imagine there is an argument not to.

    Philip

  10. Always enjoy the mailbag! I’d like to know what your wife does, if that’s too specific maybe just the general field she works in? If that’s too personal no problem, I’m just interested, as you’ve spoken of her satisfaction in her career path.

  11. @Michael- My husband and I also have allocated “blow money”, that gets moved to our individual checking accounts on a monthly basis– a kind of “allowance.” (We have a third, joint checking account). Its a significant amount, but we also have a $1,000 “floor” in each of our individual checking accounts. So if he wants to splurge and get me something nice, or vice-versa, his choices are to either save up for with his “allowance,” or dip into his $1,000 floor, which he then has to pay back with his own “allowance.” Since they are separate accounts, I wouldn’t see what he charged to that account.

    @Amanda B.- I have no children and am still undecided on the issue. There is some argument for smart, educated, responsible people like Trent and his wife to procreate and raise smart, educated, responsible children who will contribute positively to their communities, their local governments, their professions, and the country’s economy. I think we need more Trents having children and raising them to be good citizens. We will run into trouble as a society, a country and a species if we leave all the babymaking to people who don’t take it as a serious commitment and responsibility.

  12. Be careful with your comment “You clearly don’t trust them or deeply value them”. The message sounded like an addict with enablers. Sometimes deeply valuing someone means saying no.

    As you pointed out, the decision is still difficult and the communication between Chris and his wife is still very important.

  13. Margo,
    My comment did not at all doubt what Trent and his wife bring to the table as parents and the advantages to the world their wonderful will contribute. But nobody has every said: “hey honey, you’re stupid and I’m lazy, let’s have tons of kids.” Although the idea of an IQ test and a procreation license is an amusing one, it kinda trounces on everyone’s civil liberties. Because of that, all we can do is take personal responsibility for what/who we are putting onto this earth. But even if great parents guaranteed great children, it would still be a burden to the earth if we all had 100. I personally think the responsible thing to do would be to do the best with the ones you have, try not to exceed two, and allow the adults who choose not to have children to slowly let the population trend downward.

    I also think that the loving and attentive homes Trent and …Mrs. Trent have to offer would be a great option for one of the thousands of foster children in this country that would benefit from a home with a strong, intelligent, SAHD. I am in no way dictating what is right for anyone else’s family; but it breaks my heart to think of all those kids how want nothing more than a home but think that because they are over 6 years old it is too late. Sorry this is so long. I am off the soap box now.

  14. @Michael: Lenders don’t *just* look at your credit score. They also look at your income and assets. To do otherwise would, as you say, not make sense. Have you seen the news stories about people getting into trouble with “stated income loans” a.k.a. “liar loans”? That is what happens when lenders get lax about checking up on a borrower’s financial situation – and you can be sure that they will be more careful about it in the future.

    As I see it, having a credit card is no riskier than having a bank account with a debit card. If you pay the balance on time every month, you pay no interest. Sure, you can incur a penalty if you miss a due date or exceed your credit limit, but that also happens if you bounce a check or overdraw your bank account. And there is the risk that someone could steal your credit card information and make purchases in your name, but there is also that risk with a debit card.

    I guess I just don’t see how you can be opposed to having a credit card but not opposed to having a mortgage.

    I’m not an expert on manually underwritten loans and I haven’t gotten or tried to get one myself, but my understanding is that you will need documentation of a solid history of paying lots of bills on time (ones I’ve seen mentioned are utilities, phone, cable, and car insurance). My thoughts are that having a formal credit history on top of all that can only help you.

  15. Philip,
    My wife and I have separate accounts and it’s been working quite well for us. We talk about our finances on a regular basis and we share the household expenses. We also have one credit card which is technically in my name but we both use for expenses like meals out together.

    I think it all goes back to communication. As long as you communicate well, you can set up any solution you want and it will probably work.

    Gal

  16. @Amanda B.

    I said nothing about IQ tests or procreation licenses. Please don’t put words in my mouth.

    In fact, what I was talking about was: “Because of that, all we can do is take personal responsibility for what/who we are putting onto this earth.”

    Having lots of kids when you do a poor job raising them to have a net positive impact on the planet and human society? A good indicator of a failure to be personally responsible.

    Having more than some made up X number of kids limit and then raising them to have a net positive impact on the planet and human society? A good indicator of a high level of personal resposibility, in my opinion.

    You are entitled to your opinion but I think putting words in someone else’s mouth is a substandard debating tactic.

  17. Environmental concerns about having too many kids?
    Have a bunch, love them all and keep the tv off! I met a nurse recently, he and his wife have 12 kids on his income. 12 of the most delightful kids I have ever met! Oh yeah, she home schooled them all. The oldest three have graduated from college. I only have one and hope I can do as well. He loves to play at their house…can you imagine the fun for an only-child? The frugal can afford to have kids and enjoy them.

  18. Michael (comment #7): a good way to build credit history without getting a credit card, is to take out a small loan (or line of credit) with your bank. The interest rate should be < 8% for this kind of personal loan. Spend 1-2 years paying back the loan, month by month. Your credit report (and FICO score) will reflect that good payment history. Getting a mortgage will be easier.

  19. As far as Alexis question goes, I think you misunderstood what grace periods are on college loans. The loans will still have interest, you just aren’t required to make payments. This is certainly true for unsubsidized loans, and I think also true for unsubsidized. The real answer would depend on the interest rate of the loan, but paying them off early is never a bad idea.

  20. Philip, if you seriously think having separate accounts would “kill a marriage” you probably need a counsellor. It’s only money. Don’t be so judgemental. We have separate chequing and joint savings accounts, and have had for a decade. Like Gal above, we communicate regularly and we respect and trust each other. No big deal.

  21. You have mentioned in the past that you do not watch much TV and do not have cable. However, in your recent article about “Born to Buy” you talk about flipping through the channels to study what was on TV.

    Did you change your mind and get cable?

  22. I technically spend less than I earn, however, I have a monthly cash flow deficit. Let me explain, I consolidated a few private student loans into a personal loan with a 4 year re-payment period, so the monthly payments are very high.

    Each payment I make increases my net worth by reducing my debt, however, I have taken a small hit in income recently and now find myself struggling to cover the basics with my take home pay. That large debt payment is eating most of my cash flow. Once I clear the loan (2 years left) I will have a TON of extra cash flow, but for now I am short.

    Should I refinance the loan to a longer term to alleviate this problem? Or should I push on to clear the debt?

  23. Right… it is clear what you thought/meant, which is good. But I thought it might help alexis/readers to point out that your assumption in parenthesis was incorrect, that isn’t how grace periods on student loans work.

    (One other note on grace periods, interest you pay during grace period is not tax deductable. Not a big consideration, but something good to know.)

  24. “You have mentioned in the past that you do not watch much TV and do not have cable.”

    We’ve always had cable, we just don’t watch much television. We looked into getting rid of cable, but it’s basically free with our internet and voice package.

  25. “You often admit to wanted three or more children. Do you ever consider the social and environmental cost of adding to overpopulation?”

    Overpopulation? If you think we are overpopulated just take a road trip around the country. This country is far from overpopulated. Same goes for the world as a whole.

  26. “Gals, on the other hand, are rewarded for being more careful about selecting a mate.”

    It seems to be quite a bit more complicated than this. There is evidence that suggests women are equally likely to cheat, but for different reasons. For example, a woman may choose a husband who she believes will be a good father to her kids, even if he’s not the most desirable man. She still wants the muscular, handsome, smart, and successful guy though, even though he wouldn’t put as much effort into raising children (and may not stay with her at all, if he can find a more attractive wife). The solution, then, is to sleep with the successful guy once, have his children, and have the less successful but more loyal husband raise the kid, and its better if he thinks its his.

    Of course, when women act in this way, successful men have more opportunity to sleep with more women. At some point, the ability to sleep with more women, and indeed the very act, becomes a symbol of social status. If only powerful successful people sleep around, then anyone who sleeps around must be powerful and successful, right???

    Gotta love evolutionary logic.

  27. I’ve got a question related to blogging. As the owner of a personal finance blog with a highly-rated, highly-indexed product, have you ever received an offer to buy The Simple Dollar? If so, what were your reasons for not selling, and is there an amount out there where you would be willing to seriously consider selling. No, unfortunately I’m not making you an offer, just curious if this is something you have dealt with as a popular blogger.

  28. @Scott

    I remember reading something along those lines a few months ago, and the article purported that there was something like a 1-to-5 chance (I don’t remember exactly) that a husband had a “cuckoo in the nest” so to speak due to this behavior. I find that shockingly high, but it is certainly an interesting facet of human behavior.

  29. “As I see it, having a credit card is no riskier than having a bank account with a debit card. If you pay the balance on time every month, you pay no interest. Sure, you can incur a penalty if you miss a due date or exceed your credit limit, but that also happens if you bounce a check or overdraw your bank account. And there is the risk that someone could steal your credit card information and make purchases in your name, but there is also that risk with a debit card.

    I guess I just don’t see how you can be opposed to having a credit card but not opposed to having a mortgage.”

    Except your bank account can be frozen or closed if you overdraft too much. Debit cards take from money you have (except when overdrawn), while credit cards are based around someone else lending you the money. Credit cards are much riskier that debit cards in the spending category. If I overdraw on my debit card it means I am just broke. If I go past my credit limit it means I am most likely broke and in substantial debt. How are those even close to being the same?
    A mortgage is a loan on an item that appreciates in value. That is a big difference compared to a credit card. Most people do not buy items that appreciate with a credit card.
    As for having your card stolen, many credit cards now days have zero liability, most debit cards I’ve seen have a $50 limit. If my credit card is stolen and charged, I’m out no money because it is someone else’s money. If your debit card is stolen you have to wait for the bank to advance you money to cover the difference. That can take several business days.

  30. @Michael – stick to your guns on the credit card issue. I successfully got a mortgage after having no credit cards for 28 years. I was worried about my credit score for the same reason, but I found out that it was 803! Opening a credit card now could actually hurt your score depending on how soon you look for a loan. If you have been current on all your rent, utility bills, cell phone, etc., your score is probably pretty high and a credit card history is not likely to help much. And I’m speaking from experience.

  31. Jon,

    It takes a lot of acres to grow 1) food to feed the animals that we kill and eat and/or 2) food we eat directly.

    The world is extremely polluted from all the resources we process for food and energy. I am so glad I’ll be long gone before it gets to where I fear it will get.

    And I’m glad I won’t be adding any people to it.

  32. to add to my previous comment, I did not get a manually underwritten loan, I just went with the standard procedure and had no problems because my credit score was so high. I did not need any documentation of bills, etc.

  33. Trent, I have a question.
    I have seen a lot of advertisements lately on television and radio encouraging people to sell their spare gold and silver jewelry to make extra cash.
    I know metals prices are up, but do you consider this to be worthwhile? Can the average person really make a lot of money from this (i.e., even $100)? Or would it be better to wait to see if prices go higher?
    Also, if you cash in any pieces of jewelry that you inherited or otherwise didn’t purchase yourself, is it considered to be a taxable event?
    Thanks for your help.

  34. In past posts, you’ve mentioned that environmental issues are important to you (including reducing your carbon footprint), but how do you resolve that with your desire to have even more children? From an environmental perspective, the worst thing you can do is have children. You are just multiplying the amount of resources needed to sustain those extra humans for their entire lifetimes. (I’m not saying that people are evil for having children, but beyond a certain point, it seems excessive and unnecessary.)

    To address Jon’s comment above (“This country is far from overpopulated”), while there may be space for more humans to fit on the surface of the planet, the resources currently being used are significantly more than what the Earth can sustain. You can’t have 6.5 billion people (and industries to support them) consuming non-renewable energy and polluting the air and water and not have negative consequences.

  35. “It takes a lot of acres to grow 1) food to feed the animals that we kill and eat and/or 2) food we eat directly.

    The world is extremely polluted from all the resources we process for food and energy. I am so glad I’ll be long gone before it gets to where I fear it will get.”

    Your right, it does take a lot of acreage. And we are no where near utilizing all of the space that is available for this. The world as a whole is far from being extremely polluted. Do some real reading on how much we have cleaned up our environment just here in the U.S. Most other developed nations are on the right track as well.

  36. Overpopulation is relative. Are you talking about food, water, shelter, land, what?

    Talk of the Earth’s inability to sustain the number of humans has been discussed since the early 19th century. Many have said we were already at capacity just as many say that now. They were all wrong before and who is to say they are not wrong now.

    As for food, there is enough cereal produced in the world each year to support up to 10 billion people (2000 calorie diet) on that single food product alone. It isn’t a matter of feeding the world. It’s a matter of the wasteful lifestyle of the world’s industrialized countries and the corruption found worldwide.

    As for water, the technology exists to turn saltwater into drinkable water. Yes, it’s expensive but doable. With 70%+ water coverage on the planet, I think we’ll survive.

    Speaking of the other 29% of the world, there’s over 500,000,000 km² of surface. If my math is correct, that means 6.6 billion people could each have 7.5% of a square km. That’s certainly more than I need if used properly.

  37. “I would probably have to go with In N Out Burger, as it’s the only one I can think of that’s found in a very wide range of places that gives me a generally positive feeling.”

    This is so sad, because I adore In N Out Burger, but California and a select few bordering states is hardly a “wide range of places”. They are my favorite fast food burger (only one I enjoy at all really), but I live in Portland and the nearest one is a 7 hour drive to Redding, or a flight to Reno. Not really frugal I guess ;).

    Also, regarding the grace period confusion — the commenters are a little off with their corrections. For unsubsidized loans, interest accrues (just as it does while you are in school), so you would be best paying it off asap. For subsidized loans, however, interest does NOT accrue during the grace period, so it’s best to wait 6 months before paying on it.

  38. Grant,

    Right — there already are negative consequences. People are so puzzled about the autism epidemic … yet we are now finding pharmaceuticals in the water supply, we know that chemicals from flame-retardant pajamas seep into our skin, salmon fishmerman are finding no fish in the ocean this year.

    I guess if someone is extremely driven to be a parent they won’t want to think about this stuff, the cause-effect. I feel guilty if I don’t plan out my car rides (ex: bundle errands to conserve gas). I wonder: If I were a mom, would I be one of those “taxi moms” driving all over the place to practices and activities? Or would I be just as conservative for environmental (not financial) reasons?

    As the owl in that tootsie pop commercial used to say, “The world may never know.”

  39. Intellectually I can understand the ‘one kid per parent’ position, and I try to live my life in a rational manner. But the matter of choosing to have children belongs to the parents, without intrusion of explanations and advice from others outside who are not invested in the relationships involved. We can’t have children but if we could we’d have three or four, possibly more. Once we get into a house later this year we’ll most likely foster/adopt a couple of older kids, at this stage in my life I’d rather have kids the same age as my students, nieces and nephews.

    We have separate savings accounts with ING, I have a personal checking account, and we have a joint checking account. I kept my own credit card, so did he, and we have a joint card for stuff like going out to dinner, clothes, car maintenance, that kind of stuff. We pay off everything every month- what a great way to limit spending. It works very well for us. For a while in our first two years of marriage my husband just paid all my bills which drove me crazy. Why? I wanted to know that the money came out of my own account that I contributed to, not as a gift from my husband. I guess I didn’t want to feel like a pet or something. He shouldn’t pay my hobby expenses especially if I can start earning enough money from selling my stuff to pay for the hobby. Our only real money management issue is that I tend to forget to put the receipt amounts into the software.

  40. how do you feel about the changes ing direct has made to their policies? if you notice, they now state they want customers to limit their transfers to 6 or less a month. Transfering between two ING accounts, paying bills etc. It doesn’t seem likely they are going to enforce this policy when you look at the wording (there are no repercussions or charges yet for going over 6) but i’m still troubled by this change as i like to open up separate accounts for each bill i have and then transfer money to sit in there and earn interest until the bill is due.

  41. “Right — there already are negative consequences. People are so puzzled about the autism epidemic … yet we are now finding pharmaceuticals in the water supply, we know that chemicals from flame-retardant pajamas seep into our skin, salmon fishmerman are finding no fish in the ocean this year.”

    Ok, that may be, but correlation (increase in population) does not equal causation (your comment). That’s one of the first rules of statistics. Perhaps we are just being careless and don’t understand the effects on the environment that our habits and technology have. I firmly believe we have the capacity to support many more people on this earth safely and healthily. It’s up to us to find solutions to achieve that.

  42. Unrelated question:

    What do you think about timeshares – they seem to make financial sense to us, if you buy second hand and use it to trade. Any thoughts?

    Thanks!

  43. To everyone discussing lots of children and overpopulation, I’m always find it interesting that hold these views tend to hold atheistic/agnostic/humanistic views. And it’s true: for those who believe that humans are merely another animal, there is no meaning to life. Some may say the meaning of life is to procreate and continue on the species. Some say the meaning of life is to help others. But any way you look at it, the end result is simply to further the existance of the human race.

    I as a Christian have a different view. The Bible says children are a blessing from the Lord, and blessed is the man whose quiver is full of them. I believe humans are more than just animals. We are made in God’s image. Therefore, having a lot of children is not just a question of saving the environment or not. It’s about raising children and giving them a desire to love and serve the Lord.

    As far as the environment is concerned, God gave us dominion over the earth (Genesis 1:26-28). That is not to say we can be irresponsible, as we are also commanded to be good stewards of the resources God has given us. I might be concerned about the environment when someone has a 10,000 square foot house, drives his SUV every day to work and back (the average commute in Atlanta is 66 miles daily), and is otherwise irresponsible in his energy consumption and pollution. But simply having more kids is the least of my concerns. It’s actually commanded in the verse I mentioned (Be fruitful and multiply).

  44. Rick,

    I am one of those environmentalists you mention, but above that I am a Christian. I am not going to argue here about how it all works for me. Too little time today, and this is too limited a forum for such an important discussion.

    I will say that God gave me both a heart and a brain. It was easy for me to see that the planet didn’t need to put any more people on it. But it seemed to me what was missing was people with time and energy to help clean up some of the mess already here. Hard to do that when you are busybusybusy inside your own house.

  45. Oops!

    I meant to write “It was easy for me to see that the planet didn’t need ME to put any more people on it.”

  46. @the population thread: The people who are worried about overpopulation aren’t generally worried about developed nations. The real crunch is going to be Africa and non-first-world Asia, where a growing population is only going to add pressure to governments, social systems, and economic systems that can barely (or just can’t) handle the people who are already there. The rest of the world’s problems will get around to the US, somehow- through economic problems and world instability if not through direct immigration. It’s hypocritical to say “they” should limit their population while it’s fine for “us.”

    On a personal level, I don’t think a few people having “quiverfuls” of children will really reverse the long-term population effects of educated women with careers, delayed marriage, effective birth control, etc.

  47. I am not going to go into the Biblical discussion here. But as a caring and civic minded person (as most Christian would claim) shouldn’t you be clamoring to fill you “quiver” with some of the innocent souls who are already here, before you create more mouths to feed? The are about 100,000 children (Human, American Children!) today waiting for a home. That doesn’t even begin to cover the destitute, starving, and deformed children all over the world desperate for an 11th hour reprieve from a cruel and painful fate. It boggles my mind that the people who think it is there responsibility to pump out as many children as physically possible are the same ones who want to limit the type of people who can adopt children in need (no same sex partners, no single dads). I really wish it were required that before you have your third child (because at two you have “replaced” you and your spouse) you should at least foster a child for some period of time. Maybe then we could with clear conscience “go forth and multiply” knowing that all of “God’s children” are taken care of. Sorry if that seems harsh, it is a tender subject.

  48. Rick wrote: And it’s true: for those who believe that humans are merely another animal, there is no meaning to life.

    This is absurd. Just because you cannot imagine meaning without a particular religion (and there’s nothing wrong with that) doesn’t mean others cannot.

  49. Because of underpopulation, we are reaching our capacity to not have children. As it is we have to use machines and chemicals to grow food. without the help of children, it’s so expensive and time-consuming to be frugal and self-sustaining.

  50. @Kate

    “I know metals prices are up, but do you consider this to be worthwhile? Can the average person really make a lot of money from this (i.e., even $100)? Or would it be better to wait to see if prices go higher?”

    It is definitely something worth considering. I personally know a couple of people who have gotten hundreds of dollars for what would look to be junk jewelery (old broken chains, hollow ear rings, etc.)

  51. I can’t believe there aren’t more responses to your response to Allbeeback. I take EXTREME offense to what you said. I must say you clearly know NOTHING about the murky pseudo-science that is evolutionary psychology. I despise it when men use biology to explain why men are noncommittal (keeping options open) and more likely to cheat. First of all, women are men are equally prone to cheating (it’s basic math- who else are the men cheating with otherwise?)Furthermore, in animals female are as non-mongamous as males and not being any more selective about their mates than males.

    This stereotype also leads to the cliche that women are all sitting around waiting for a ring on their finger when all evidence points to the fact that men created marriage as a way of controlling women’s fertility. Monogamy means a man knows he’s raising his won children. Women are fortunate int hat they never have to doubt the baby’s maternity.

    Before you write all this off as the ravings of some crazed feminist, you shouldr ead “Woman: An Intimate Geograpy,” the Pulitzer prize-winning book of the NYTimes science writer, Natalie Angier. (My favorite part is when she dispels the myth that hunter-gathering women depended on men for food and resources for their children. Men, yo may all sit around and brag about the meat you hunt down and kill, but we women know that our gathering brought in the majority of the calories consumed by our families.

    Finally, Allbeeback, women just like men, have doubts about relationships and sometimes it takes the risk of losing a good thing to realize how much we value it. But if this pattern repeats in your life, you clearly have problems with the key to happiness, 1) knowing what you want and 2) appreciating it once you have it. (Of course, women are constantly criticized for being impossible to please.)

  52. One thing I love about personal finances is that it is PERSONAL. You should do what works for you and your partner. My husband and I have joint finances. However, my husband’s parents make it work with separate accounts. I think it depends on your personal style.

    The same is true of credit cards. Credit cards work for me because I choose rewards cards (that offer things I can use) that I pay off every month. I don’t get into debt with them. But you aren’t comfortable with them, don’t use them.

  53. “This stereotype also leads to the cliche that women are all sitting around waiting for a ring on their finger when all evidence points to the fact that men created marriage as a way of controlling women’s fertility. Monogamy means a man knows he’s raising his won children. Women are fortunate int hat they never have to doubt the baby’s maternity.”

    This statement is very biased towards one’s belief system. From my point of view man did not create marriage, God did. And he created it for companionship, enjoyment, procreation, and an earthly picture of the relationship between Christ and the church.

  54. Lauren,
    I wondered when somebody would respond to that.

    My first thought was that men are really good at denial — maybe because many seem to deeply fear being self-sufficient. I have seen FAR more men than women jump headfirst into a new relationship before the divorce ink is dry.

    I think that denial skill is also why so many men REFUSE to go to the doctor until they are near-death (like my family member a month ago).

    Or maybe they don’t “see” how miserable the woman is until she packs her bags?

  55. @Lauren: Very true. Also, don’t you think it’s a bit of a stretch that a situation where the man wants to stay in the relationship and the woman wants to leave is “explained” by saying that women are “wired” to want commitment and men are not?

  56. Gal and Guiness, Thanks for the input on individual accounts. My aunt and uncle serve as an example that it does work, so I’m not really questioning that.

    Perhaps “kill a marriage” was too strong, but many marriages end because of money issues. I’ve found its because of a lack of trust over what’s being speant. Its obvious for my aunt and uncle and y’all that trust is not an issue.

    I grew up in a super traditional household where everything goes into one bucket and then everyone draws from that. Seeing Trent to be conservative, I thought it would be good to pick his brain on the subject.

    Thanks for responding to me though! I know only what I’m exposed to and thank y’all for exposing me to new ideas.

  57. Jon,

    I sincerely hope that we are able to reduce each individual’s footprint so that we can all live sustainably on this planet.

    Consider looking at the issue from the perspective of scarcity. The world holds a limited amount of certain resources, and many resources are tied to each other. This interconnectedness is what people talk about when they say we need to protect biodiversity. The basic issue is that we do not currently understand the extent to which the various resources we depend on are tied to the great diversity that exists on the planet. We are not yet able to produce all necessities and desirable goods from scratch, so we depend on the ecosystem to provide those scarce resources for us.

    In some cases, as with oil, we know the resource is limited and will run out. In other cases, as with fish, the resource appears unlimited as long as we only consume a certain percentage of it annually. The problem is that fish, unlike oil, depend on a vast network of organisms in order to survive. If we were only consuming fish and not otherwise impacting their ecosystems, we might be sustainable. Unfortunately we consume so many resources in so many ways that we are inevitably impacting the networks that fish depend on, thus causing them to disappear faster than we expected. Most other biological resources that we consume have this same problem.

    As population increases within a fixed resource area, the stress that population places on the overall biodiversity of that area increases. At some point, a point that we have not identified, that stress will cause some species to go extinct, and other species that depend on the now extinct species will be in danger. This is happening now at an unprecedented rate (faster than the mass extinction of the dinosaurs), meaning that there is a strong likelihood that renewable resources we have access to now will be gone in the near future.

    Returning to the scarcity issue, consider that for every person you add to the planet, there are fewer resources to spread among all people. With a small population, consuming a small percentage of available resources, sustainability may not be an issue. However, as you increase the population without increasing the resource pool, each individual must either consume less or the population as a whole will use a higher percentage of resources.

    In the world today, both things are happening. In rich countries, we are maintaining or increasing individual consumption (and thus consuming a greater percentage of the overall resources), while in poor countries people are consuming so few resources individually that their quality of life is exceedingly poor. The average value of resources consumed by individuals currently alive is well below the living standards of Americans, for example, and that average can only decrease as population continues to increase since our resource pool is relatively fixed (it expands through innovation).

    If people are to live comfortably and be able to continue using the scarce resources we desire without lowering quality of life, we must either develop ways to create those resources from scratch or protect the ecosystems that sustain the existing scarce resources. We have yet to accomplish the first task, so it is clearly in our best interest to do the second. Maintaining or decreasing population is possibly the only thing we can do in this case.

  58. Trent,

    I’m curious where this might lead. Advice? I’m finally getting smart and digging out of debt. It’s slow but thanks to you and other blogs, I have plenty of resources for encouragement. But now, I’m totally addicted to many personal finance blogs. I can’t get enough and I want to soak up as much information as I can to help me and possibly others. I’m not much of a writer but curious as to how I can use the knowledge/experience that I gain in help others in the future?

  59. Lauren and others,

    Evolutionary psychology is exactly the place to begin looking for insight into marriage issues, but it isn’t completely insightful. Suggesting that men and women act as they do based solely on evolved biological cues ignores the importance and strength of society. Human relations of any kind are extraordinarily complex because they involve an interplay between evolved biological predispositions and rapidly changing and powerful social forces. The idea that marriage is somehow sacred and more valuable than promiscuity is extremely interesting because it demonstrates how complicated the interplay between evolutionary forces and social conditioning is.

  60. Trent I have a question for you :)

    “This site is for entertainment purposes only. Trent is not a financial advisor and no information found on this site should be construed as financial advice.”

    This is posted on the bottom of your site. I think we all understand that it is there for legal purposes. How do you feel about it, as you clearly are trying to dispense advice of financial nature? Do you see any way that our society could be fixed so that its not necessary for people like you to be required to effectively state that everything you say is worthless just so that you can say it at all?

  61. As an attorney, what is funny about the disclaimers to me, Scott, is that they are not as air-tight as people think they are. In fact, while they do hold some significance in the eyes of a court, many courts have found them to be insignificant!

    The purpose of the disclaimers, of course, is to forewarn the readers, as a use-at-your-own risk statement, but the disclaimer is hardly a 100% guarantee that Trent will not be found legally liable to someone who follows Trent’s financial (or other) advice and loses ‘it’ all, which is why I hope that Trent has created an LLC or similar entity which owns this site…

  62. The decision to have children or not and the number is a very personal one. I for example don’t think it should be legislated. Regardless unless you are living in a cave one can’t help but be more aware of how much human activity has degraded the ecology of this planet. No matter how you cut or slice it our planet cannot sustain the 6 point whatever billion people already on this planet, let alone more. I can’t control what people in India do. And even as a frugal american using cfls and walking I use many times more the energy and resources someone from a developing nation uses anyways. I would like my children and grandchildren to grow up in a world that I would recognize, but that’s not going to happen with the current population increase.

    someone who is environmentally aware but also wants to have more than say 2 biological children (adopted, foster children are different). No matter how you cut it, having children or not having children is probably the biggest decision you can make regarding ones environmental impact. It is also a decision that has one of the biggest impact regarding one’s job and financial picture, even the age one retires. I’m not talking about the US population, I’m talking about the world. I can’t do anything about what is going on there, but yes the p

  63. As a happy Atheist, Why is everyone so focused on life on Earth/overpopulation? Do people not take into the consideration that we can and will at some point leave our first home and expand beyond this planet into the Solar system, to the billions and billions of worlds seen in our night skys.

  64. Carrie,

    I look forward to that time, but we are still so far from it. We cannot yet sustain habitable, sustainable (sustainability again!) enclosures even on Earth. Something as grand as moving some significant portion of earth’s population to another planet is inconceivable now, even if the planet was reachable within a human lifetime.

    And you don’t expect that everyone would be saved do you? Only the wealthy and possibly a select few impoverished individuals would have the benefit of leaving earth if it were polluted beyond repair. In order to achieve the kind of happy dispersion among the stars that you suggest, we’d practically need to become one huge utopian society first. Otherwise the division between the classes will be painfully clear.. the poor and undesirables will be left behind.

  65. re: Albeeback’s question about why men don’t truly realize a relationship is ending until the woman is out the door:

    If you want a really good explanation, read the book, “Uncoupling: Turning Points in Intimate Relationships.”

    Also, this phenomenon isn’t gender-specific. There are an awful lot of women out there who are blindsided when their husbands leave what they thought was a happy marriage.

  66. Hi Trent,
    2 mailbag questions for you:

    1) I’ve noticed that since the daylight savings change last month, your posting time no longer correlates with what it did before. So before, if your post was posted at 2 pm, it was also 2 pm here (CST in Wisconsin). But since DST last month, your 2 pm post now appears at 3 pm. So does Iowa not “do” DST? Or is your computer clock’s time just off?

    2) You’ve done a number of posts on the dollar figure savings when making changes, for example, the cloth diapers and the homemade laundry detergent. Could you do one on heat savings? What are the savings if you drop your heat by 1 degree (or conversely, depending on climate, raise your a/c by 1 degree) And if using a programmable thermostat, what’s the break even point in number of hours when you would start to see savings. So if I turn the heat off for 4 hours, then turn it back to 68, is that more or less expensive over just leaving it at 68 for those 4 hours? What if you turn it off for 1 hour, or 8 hours? I know there’s a lot of variables involved, type of heat, temperature outside, size of house, insulation ratings, etc… but even a general sense of how to start crunching numbers would help.

    Thanks so much!

  67. Johanna- hahahahh GREAT point! That was exactly what I was referring to!

    Scott, I COMPLETELY agree and regret if my comment did not reveal my disdain for the topic of evolutionary psychology (mostly because of it’s gross misuse.) Men and women are much more alike than we are different and we all too often ascribe general personality characteristics to gender generalization than to mere individual differences.

    Trent, in the future, PLEASE be more careful and considerate when making gender generalizations.

  68. Again, so many of you Americans seem totally incapable of thinking of any other country beyond your own… It’s amazing, really. For instance, no one criticizes the Chinese policy of having only one child per couple. You would absolutely hate it if the USA adopted the same policy, but imagine what would happen to the world if, say, each of the 1,3 billion Chinese had as many children as they pleased? You really believe the world to be yours exclusively.
    As for your answering a question using evolution psychology, Trent, I totally agree with Lauren: that was a huge mistake.

  69. “Again, so many of you Americans seem totally incapable of thinking of any other country beyond your own… It’s amazing, really. For instance, no one criticizes the Chinese policy of having only one child per couple. You would absolutely hate it if the USA adopted the same policy, but imagine what would happen to the world if, say, each of the 1,3 billion Chinese had as many children as they pleased? You really believe the world to be yours exclusively.”

    Your right, we would. I’ve got no problem speaking out against the Chinese policy of having only one child or restrictions on the sex of the child. There are many other problems wrong with communist China besides just that.

  70. Receipt management: how do you have the discipline to keep track of all of your receipts, reconcile them against multiple credit cards, etc? I’m pretty good about keeping my receipts, and I used to be decent at verifying them against statements, but then I stopped, and now it seems impossible to start up again. Is it even worth keeping everything and reconciling? Most of my friends just check their statement and see if there’s anything unusual, which there rarely if ever is.

  71. Mailbag Question:

    Couldn’t you use a credit card instead of an emergency fund, and stash the emergency cash(sorry for the rhyme) into a higher paying investment. Isn’t the point of an emergency fund to hold you over until you can liquidate some of your more valuable investments? So wouldn’t a credit card be the same, using the grace period? I wouldn’t think it takes more than 30 days(the grace period) to liquidate enough of your investments to live off of. And you could argue that you’re going into your investment which you shouldn’t do, but isn’t that what your doing when you set aside cash for an emergency fund?

    -Nate

  72. I second everyone’s comments about the gross misuse of evolutionary psychology in Trent’s post. The rest of the response would have been fine without it, if conforming to the gender stereotypes originally presented in the question.

  73. @L:

    Thanks for the reassurance in regards to trying to stay away from credit. The idea of taking out a loan, only to pay it back over time, as others have suggested, seems like I am playing a game that, frankly, I don’t really want to play. If I was going to do that, why not take out an unsecured loan, and immediately pay that back the next day, repeat a few times, raising my credit score each time? It doesn’t make sense to me why thats a good idea. I just think too many people that make money from lending have told people for too long to build up their credit score just so they can borrow money.

    I have paid my rent, utilities, etc. early or on time each month, never missing a payment. I realize that this is good but I don’t understand how it helps my credit score. From what I understand, your credit score is only made up of a composition of debt (how long you have used debt, what type of debt, amount of debt you have, and how well you pay it back). Granted, you can ding your credit score if you miss a payment that you have committed to, but if your score is only built up by taking out debt, how can anything else affect your score? If I have never borrowed any money, how can I even have a credit score, let alone a good/bad one? I’ve tried pulling my credit report, and it basically says that it doesn’t have enough data to accurately judge my credit score.

    Finally, I figure that if I am able to have a 30% down payment, with good income and good payment history on utilities and no debt, most lenders would be crazy not to lend me money for a house. That may just be someone looking into the thought process of lending, as opposed to accepting that a FICO score needs to be high because people tell me so.

  74. “The default strategy for any loan is always to pay off as much as you can as fast as you can (unless the interest rate is absurdly low, say, below 3%).”

    This advice is good, but leaves out a few important points. First, unless the money goes in a tax-advantaged retirement account, investment income is *always* taxed, while student loan interest is not always deductible. If you have a high income and put the money in a high-yield savings account while paying the minimums on your student loan, you’re hit with a double-whammy: your student loan interest is not deductible (because you make too much), but the interest on your savings account is taxed at a higher marginal rate.

    As an example, if your savings account has a 4% APR (pretty good these days) and your marginal tax rate is 28%, your effective after-tax savings rate is only 2.88%. You’d be better off paying the 3% student loan.

    IMO, you’d also be better off for cash flow reasons. The fewer debts you have, the more able you are to quit that high-paying, soul-sucking job and follow your calling. :) Other people will disagree and say liquidity is more important.

  75. Trent – Here’s a question for your mailbag. I can’t figure out the best approach to paying down consumer debt versus funding a retirement account.

    I’m 35 and my husband is a few years younger. We have a mountain of credit card debt ($35k @ 7.75-10%), student loans ($100k @ 4.25-5% fixed). I have about $60k in a retirement plan at work (I am contributing up to the match, which is a whopping $40 a month from my employer); my husband has no retirement plan at the moment.

    Thanks to the advice on your wonderful blog and others, we’ve managed to create a snowball of about $300/mo. above our minimum payments on our credit cards. Our projections are that we will pay off our cc debt in 2011, all else being equal. I will be pushing 40 (*gasp*) at that time. If we take the snowball that exists when the last card is paid off and put it toward our student loans, I’ll be something like 45 at that point when those are gone.

    My husband and I have agreed that getting out of debt is our number one priority. But now that we’ve done the math on paying it off and we’re looking at such a long time line, and given the discussions here and elsewhere about the value of time when it comes to compounding interest, I’m wondering if we wouldn’t be better off putting the snowball into 401ks and/or opening up Roths, and just paying the minimums on the cards (and freezing the payments at those amounts). Waiting until we’re nearly 40 (at the earliest) to start saving for retirement in earnest seems like a squandering of valuable time that we just can’t get back. The answer seems trickier to me than a simple comparison of interest earned on an increasing balance in a retirement account vs. interest accruing on a declining balance on the cards, because there’s the element of time thrown in.

    So here’s my question: is it ALWAYS the best idea to pay down consumer debt at the expense of funding a retirement account? What good does it do to free up a couple hundred dollars a month (or even $1000 a month) if you have nothing in the bank for a retirement that’s 15-25 years away and you’ve lost a lot of the opportunity to take advantage of that compounding interest?

    Thank you so much for opening the floor to our questions!

  76. Trent, you wrote:
    “Children are beautiful. They’re not locked into seeing the world as adults do. Most of the perspectives that adults have are the results of many, many years of reinforcement, both good and bad. Children don’t have that – they think differently about everything and they make you think differently about everything, too.”
    Trent, I agree. I have worked with children since I was a child (about 12), and love working with them more than working with adults!
    I have my own(now grown)children, along with students, former foster children, and a grandchild. These children are definitely the best part of my life. Each child is different, and brings something into my life that the others did not. I learn more from them than from any other experience. It is hard to explain to someone who is not a parent.
    I am amazed at how strongly opinionated strangers are about being parents to many children. When I had foster children, and we went out in public, people were rude to me. I was young looking and had five, including my own. Its too bad that what brings us happiness and what could be bringing wonderful people who contribute to society into the world, is judged so harshly.
    The world needs more fathers like you who take joy in your children. I smiled at your answer.

  77. My credit card (Citi) keeps raising my credit limit without my requesting it. I have called before and told them not to at that time. Is it a good thing for my limit to go up?

  78. I just wanted to comment on the public/private school issue. The idea that there is little diversity or that only rich kids attend private school is totally wrong. I have had my fair share of private school and I can attest to the fact that there are parents who are not wealthy who struggle to give their kids good, quality education. There certainly are a lot of kids who were born with a silver spoon or whatever but this is the general sterioypical idea that people have when they don’t really understand the realm of something. From my experience and the experience of others, there are less issues to deal with. Less bullying (although not obsolete). Less danger: While public schools were erecting metal detectors, mandating clear back packs, guns/knives of plenty…). Almost non-existent drug problems. Children were not thinking about sex and while my pub-school friends either got pregnant/had kids while attending grade/highschool, it was unheard of in the schools I attended and our sister schools. All these issues were pretty much nonexistent. I wouldn’t scoff at private school until you’ve actually been introduced to the experience.

  79. I like the debate idea for marital disagreements. I’ll have save that one for future times. A while back, I heard a speaker give a few more tips: hold hands while discussing the issue, and my personal favorite, argue in the nude.

    And about the relationships thing, when the woman is DONE and the guy is trying to hang on. I so wish more men got this point that a women’s reproduction time is limited.

  80. @Mary – I was a happy public schooler, and I think I got a great education – I certainly wasn’t surrounded by pregnant girls giving birth wielding knives. You speak of unfair stereotypes, but I’m pretty sure that’s exactly what you’re doing just in the opposite direction.

    I’m also willing to bet money that those private school kids are still thinking about sex. They aren’t magically shielded from being teenagers by the tuition fee.

  81. I’m with Tracy. From my HS experience, the private school kids were actually the ones with the start up capitol to supply drugs to the kids at the public schools. They were also the ones who had cars and could get abortions (based on anecdotal evidence) before anyone outside of their circle knew they were preggers. The kids at my 98% Hispanic catholic school were the ones who went through with their pregnancies based on religious principles. From my view, those young (public school) mothers are the ones who took the moral high ground.

  82. @Tracy

    I also went to a private school. I had the opportunity too because my father taught there. I do think that Mary was giving out plenty of stereotypes about public schools. There are two sides to the coin and everyone will have different experiences regardless of which school they went too.
    I don’t have much experience with the rules of public school, however all private schools in my area had swift and harsh punishments for breaking the rules. There were no three strikes, it was usually one for major offenses (drugs, alcohol, sexual contact). Each student actually had to sign a contract each year stating they would abide by the rules for the entire school year both at school and in their personal lives. I think that this was a great deterrent against making poor decisions as a teenager. I do know that we had very few of the problems that other schools in our area had. I’m not speaking out against public schools, just offering my experiences of attending a private school.

  83. I am in my early 50′s. We will be inheriting around 60,000.00. What would you recommend for doing with the money to help it grow? Are there any money markets or mutual funds out there that earn you good money anymore?

    Thanks, Julie

  84. @Pawel Mrozik

    As a supplement to writing every day, another good way to improve your writing is to read more. The more written language you are exposed to, the more you get a feel for what “good” writing is and how it is constructed. Find authors with writing styles you really enjoy and immerse yourself. You will be amazed at how much this will help you.

  85. @ gpglinka (comment #83) : It’s good and potentially bad. Good because you’re a better credit risk and bad because it can turn into a deeper financial hole if things should go wrong. My card issuer did the same thing to me several times and the limit’s insane now. IMO, all credit card issuers should be required by law to offer consumers the choice of either a higher limit or lower interest rate when their credit rating improves.

  86. What do you think are the 10 best reasons to leave a job you like/love but there is something/someone about it that is stealing your joy? Are there definite signs that “enough is enough”?

  87. While it might seem like a “game,” Michael, you might as well play it. Not too many people are bright enough, motivated enough or have enough initiative to look beyond the usual “rules” of a credit score and see the very loan-worthy you.

    Perhaps more pressingly, if you don’t have a credit card, and you need to rent a car in an emergency, you are out of luck unless you can pay for the car in cash. If you need to fly to the bedside of an ill or dying parent or family member on short notice, it is way too late to apply for that credit card.

    If you are afraid that you will go on a charging spree, put the card in a glass of water in the freezer. Somehow, I don’t think that will be an issue with you, though.

  88. When you say,

    “Gals, you should not drop hints but be direct with your guy”

    what you are really saying is – “women, do not continue to COMMUNICATE in YOUR way, but adopt to THE MEN’s way, OUR way.”

    No, you get educated and learn about how women communicate.
    I highly believe it is unfair.

  89. “what you are really saying is – “women, do not continue to COMMUNICATE in YOUR way, but adopt to THE MEN’s way, OUR way.”

    No, you get educated and learn about how women communicate.
    I highly believe it is unfair.”

    If you’re in a relationship, you should make a concerted effort to communicate with your partner in a way he or she understands. If you’re not willing to do that – if you’re requiring your partner to have to do research to communicate with you – you don’t respect your partner much at all.

  90. “For instance, no one criticizes the Chinese policy of having only one child per couple. ”
    Lola @ 3:11 pm April 14th, 2008 (comment #73)

    Actually you are wrong. I know plenty of people that criticize the Chinese policy you are speaking of.

  91. I love the mailbags, Trent! And I have a question for you:
    I worked for a restaurant long enough to be fully vested in my stock options. When I quit, I filled out the paperwork and thought I would receive a check that I could invest. Instead, I received a stock certificate. Today, it’s worth about $1000. But restaurants are a pretty volatile business and I don’t want to keep the stock.
    I don’t have an interest in trading individual stocks – but I have no idea how to convert this into money (I’d like to use it as part of the basis for investing in an index fund). I’ve tried to read up on this, but I don’t really understand what I’m reading. Can you offer any advice?

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