Reader Mailbag #61

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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. Several people have asked questions about my childhood lately and how those earliest lessons have applied to my life. I’ve written about this extensively in the past – here are three of my favorites.
Remembering A Painful Childhood Experience – And Trying To Apply What It Means
The Road To Financial Armageddon #1: The Earliest Mistakes
Lessons From My Grandfather In The Garden

And now, some great reader questions!

I’m starting to think about life insurance. Where do I start looking and how much do I need? Is now a good time to buy some with the economy how it is? what is required to get it medical exams?
- Katie

Life insurance is a pretty intense subject, with lots of material out there. Here are some things you should think about (that address your questions).

First, figure out how much coverage you need. If you’re single, you don’t need much – you’re not leaving behind people who are dependent on you. If you’re married, you’ll need more. If you’ve got children, you need a lot more – maybe five times your annual salary (or even more than that). Also, stick with term insurance. Keep your investments and your insurance separate – hybrid plans like whole life insurance aren’t a great deal, particularly if you’re not starting the plan in early childhood.

You can shop around by getting quotes from various insurance companies. You should also investigate those companies by checking out their ratings with independent rating companies like Standard and Poors – don’t even bother with a company if it doesn’t have a good rating. IntelliQuote (http://www.intelliquote.com) is a great place to start gathering quotes.

Most policies will require you to have a physical – policies that don’t require one are prohibitively expensive. Also, life insurance rates are largely unaffected by the current state of the economy.

I want to start investing in some Vanguard Index funds – however I’m unsure whether to go with several individual funds (Shares, Bonds, Property, Cash), or the single diversified ‘LifeStrategy’ fund?

I have about $5000 to invest, which is the minimum balance for any of the funds – so if I go with the LifeStrategy, I would be immediately diversified, however if I go with the individual funds I could only get one now, and have to wait until I save more money to get into the others.

What would you suggest?
- Matt

It depends entirely on whether you’re investing in a tax-free or tax-deferred account (like a Roth IRA) or just investing in a taxable account for other goals.

If you’re using a tax-free or tax-deferred account, put your money in the LifeStrategy fund, contribute to that regularly, then diversify if you want by emptying out that fund and moving it into other funds. Since there’s no tax penalty for doing this, you can move things around as you wish.

If you’re going the taxable route, you need to be a bit more careful so you don’t incur unnecessary tax bills. You want your gains to be long term gains (meaning the money sat there for more than a year) so you can pay a lower tax rate on your earnings. So, you need to decide up front whether you want to go for a diversified portfolio or just want to go with the LifeStrategy fund for good. If you want to go diversified, just buy into each fund you want with the minimum needed to get in, then keep contributing to a savings account and buying into more funds until you have the diversity you want. After that, don’t rebalance – just contribute more to individual funds until you have the allocation you want.

For now, I’m just investing in Vanguard Total Stock Market and Vanguard Total International, keeping them at a 50/50 split. At some point, I will likely diversify this somewhat, but I’ll do it all at once when both have very nice balances and most of the taxes I would pay would be long term taxes.

A new question: Do you recommend using a dealer for car maintenance and repairs or a garage you trust? I have a 2005 Honda Pilot and because it is a “certified” used car, I’ve been using a dealer but I feel like I’m throwing money out the window and possibly getting taken for a ride. Same deal with the last dealer I used (last car).
- Sara

I tend to agree with the Car Talk guys – the best route is finding a good independent shop to work with. Dealers do solid work, but they have very high labor rates and insist on OEM parts, which are typically more expensive than aftermarket parts. On the other hand, independent garages can be of varying quality.

So how do you find a good garage? Your best bet is to ask your friends and family and coworkers. What garage(s) do they use? Are they happy with the work? Have they heard of any good garages?

Almost always, one’s social network is the best source for good answers on questions like this.

I am starting a new business and will soon be having some income from it, hopefully. I want to find a good (preferably free or inexpensive) program to track my income and expenses, but don’t know what to look for. I don’t anticipate I’ll need anything very complicated, at least not right away. Do you have any tips?
- Dave

It depends on your business and your personal experience. If you know how to use spreadsheets, I would probably just use OpenOffice – the spreadsheets in the package will do the job and provide some solid templates for you to start with.

If I didn’t know anything about spreadsheets, though, I’d probably start with QuickBooks Simple Start Free Edition. It’s a very basic entry-level accounting software, intended for very small businesses that are just getting started. For what you seem to be describing, this might be perfect for you.

Personally, I use spreadsheets to track all my stuff, but I’ve spent more than a decade using spreadsheets in various capacities (starting with Excel 4.0 on a Windows 3.1 machine).

My current company doesn’t offer a 401(k) plan, matching or otherwise. We’re currently maxing out our Roth IRAs, but are there other ways to build tax-deferred retirement funds like a 401(k) would?
- Tim

I see several options for you (beyond petitioning your employer to get a 401(k) plan going):

One, start a simple side business and contribute all of the income from it to an Individual 401(k) or other retirement plan for self-employed people. This, of course, requires you to actually start and build a side business.

Two, buy a variable annuity or another investment-type product. The drawback here is that the fees are usually crushing.

Three, don’t worry about the taxes and invest in a taxable account. Quite honestly, this is what I would do.

Four, invest in other areas that have tax benefits, like making your home more energy efficient.

Any updates on the podcast?
- Jim

My problem is perfectionism, I think. I keep thinking up and recording episodes, then I listen to them a few days later and I’m just really unhappy with them.

What’s wrong with them? I find some of them boring. In other ones, I don’t like the way my voice sounds – I’m focusing on lowering my voice so that it’s a more pleasing “radio” voice. In still other ones, I feel like the idea I have goes off the rails.

My goal is to record several good episodes before launching it, so that I’m not in a situation where deadlines are requiring me to post poor podcasts.

When I hit upon a formula that really works, I’ll be the first to let you know.

You mention you keep an electronic journal or diary. What software do you use to do that?
- Lily

I just use a simple text editor, to tell the truth.

I save the entries in a folder hierarchy by date. I have year folders, then month folders. Within the month folders, I have text files named 1.txt, 2.txt, and so on. I have them archived in a pretty hidden place, and I add an entry almost every day.

I have thought about posting them somewhere anonymously in a blog-like format, simply to make searching them a bit easier. The problem with this is I would have to change some names and other elements, and it always felt like more work than it would be worth.

You always talk about never giving up your dreams, but everyone has to give up dreams sometime. I’m sure you dreamed of some things that were never going to come true.
- Max

Of course I have.

When I was a child, I really wanted to be an astronaut. I dreamed of it for years, until I realized that my vision was too poor to ever allow me to be an astronaut. My vision (and subpar athletic skills) also killed my dreams of being a baseball player and a basketball player.

All throughout my life, I’ve fallen into various passions and thought that this is what I should be doing with my life. Inevitably, though, the glow of that interest would fade and I’d find myself moving on to something else.

Writing is the one thing that has been a constant for a long time. The glow never really faded from it – I would find myself coming back to it time and time again, only taking breaks to let my mind recharge a bit. That was the difference – it was a passion that never really faded.

What movies are you looking forward to seeing this summer?
- Sarah

Five 2009 films really stand out to me: Up, Where the Wild Things Are, The Imaginarium of Doctor Parnassus, A Serious Man, and Inglourious Basterds. I think only three of them actually qualify as “summer movies,” but those are the ones I’m looking forward to this year.

Most likely, something I’m not expecting at all will come along and really interest me, but it’s hard to tell what that will be.

I showed a friend this list and he said, “You like kids’ movies and weird movies.” That’s actually pretty apt, I think.

Do you intentionally write things to be controversial sometimes?
- Rachel

I don’t intentionally write things for the sake of controversy. That being said, I do look for topics that I’m confident will generate a lot of discussion.

To me, a great post is one that gets people talking and shows that people can have a lot of takes on the same idea. If I look at something and can quickly see two or three or four different angles on it, that says to me that it’s worth talking about.

What’s often seen as “controversial” is that I’ll take just one or two sides on the issue when there are many more angles to look at – I usually stick with the elements that interest me the most. This usually gets people quite whipped up, as they point out my “error” or staunchly defend some different angle on the issue.

Along the way, we all learn something. That’s what it’s about.

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

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60 thoughts on “Reader Mailbag #61

  1. There are single people who have dependents. There are even single people who have kids. Maybe there aren’t people like that in Iowa, but in the rest of the world, there certainly are.

  2. Do you ever revise your posts when the comments’ consensus is that the advice you gave wasn’t very good? (I’m thinking of last week’s car insurance post.) Or do you leave them as is, and hope that people looking at it also read the comments?

    Thx!

  3. To Matt’s question…I have always thought that investing in taxable accounts is a little underrated. Sure, there are tax implications, which could be avoided or deferred, depending on the retirement vehicle you chose, but at least you have the freedom to access your money without penalty.

  4. When you’re wrong, what’s important is that YOU learn something. Also, take those sarcastic quotes off of “errors” because sometimes you really make them.

  5. Another for Matt’s question…Municipal Bonds are tax free federally and in most states. You could put some of your bonds allocation in the non-retirement account in Muni’s and then move your retirement account more tax-heavy.

  6. For the guy who is running a business:

    I second the Open Office suggestion.

    Spreadsheets are very powerful tools when used correctly.

    If you have any knowledge of building simple databases, you could even do that and then have an excel spreadsheet that generates reports based on the data in the DB.

    I actually build pretty complex spreadsheets for my company, so if you have any questions feel free to ask.

    MLR

  7. I’d recommend using Gmail for your journal entries. Just put the entry into an email, send it to yourself, and you’re done. Extremely searchable, and you can even use labels if you want to be more anal in your classification of entries (like if today’s entry is about money, your wife and kids then you apply those labels; tomorrow might about about a goal, frustration, and fitness).

  8. @ the person interested in life insurance, I wouldn’t stop there, I would plan out how you’ll provide for your wife and children in the event of your death (God forbid). I would look into protecting your assets with a trust, finding someone you trust to be the executor of your estate, avoiding probate as much as possible – and figuring out how the life insurance money your kids get can be invested to create a sustainable income stream for them that lasts them until they reach an age where they can care for themselves. Good luck.

  9. About finding a good auto repair shop – we took my brother’s advice, which was to find the busiest shop that advertises the least (which implies repeat business and recommendations don’t require them to advertise to drum up new business). This has definitely worked for us! We switched from a somewhat “flashy” independent place, where we weren’t always pleased with the service, to a smaller, almost hidden shop where we always feel as if they always do good work for a fair price.

  10. @ Trent:

    Regarding your podcast comments, I would like to point out that few people actually like the sound of their recorded voices until they’ve had a chance to get used to it. In trying to change your voice more than a little, you may come off sounding less than genuine. I think your best bet may be to get constructive criticism from people you trust, rather than trying to please yourself (generally your hardest critic).

  11. It’s ironic that you’re so unwilling to admit your mistakes when you wrote as recently as a month ago about the necessity of apologizing when in error, rather than continually insisting one was correct.

    Actually, this isn’t really ironic any more. At this point, the hypocrisy is to be expected.

    I look forward to your next entry decrying behavior in others that you sanction in yourself.

  12. I think, when giving up dreams, you have to be at the point where you can say that the dream itself is holding you back more than it’s helping. (You can easily substitute “goal” for “dream” in that sentence, but I’ve always felt that a dream is a goal, just one that’s a bit out of reach yet.) If you don’t ever take a step towards your dreams, that makes them extremely intangible and hard to accomplish. Ya gotta work towards it, even if it seems unrealistic, to see whether or not you can achieve it to begin with.

    Likewise, when you say that, at least learn what it was about the dream that captivated you so much. For me, one that I gave up was medical school. Sure, I could have probably done it, to the detriment of my time with my husband. Instead, I figured out that I just wanted a chance to make a difference in people’s lives, and then realized that medicine wasn’t the only way to do that. Instead, I changed majors and am now planning on becoming a financial planner. I’ll still be helping people, but I won’t have to commit so much to my career. (Plus I can be self-employed, which fits MUCH better with how I envision my life.)

  13. I second Anne’s point regarding garages. I found the garage I take my car to by word of mouth. They do an excellent job, are always busy, and don’t advertise. The place is attached to a small mall and cannot be seen from the street.

  14. Wow, I’m surprised at all the really critical comments here.

    I read your post on the earliest financial mistakes; I can recognize some of them in my own upbringing too. I think it’s extremely important for kids to learn about money in a more regulated, budgeted way. We had allowances, we also had to work for them. But there were definitely other money mistakes in our family!

  15. I noticed the question in the bag on life insurance. I was always taught growing up not to invest in life insurance. Would you ever give someone such a recommendation from a strictly financial standpoint?

  16. Re: car repairs. I’m leery going to a non-dealer repair shop, because with the high level of computer integration in vehicles today, how sure can you be the shop will have up-to-date systems to correctly diagnose a problem with your vehicle based on the car’s computer’s error code? I also question the use of non-OEM parts – the manufacturer designed the vehicle to use their parts, not others’.

  17. The Car Talk guys are also a good resource for finding a good independent mechanic. My mechanic in the city I used to live in recommended them for finding a new mechanic in the city I’ve moved too. But I bought a used Acura in 2005. I had some trouble and took it back to the dealer. They fixed the problem, but also kept recommending other things that needed to be done. So I went back to my mechanic for the suggested things. He looked over my car and said it didn’t need anything Acura has recommended. So I felt like Honda/Acura was just taking me for a ride – they fixed the warranty work, but they wanted me to pay for some other “recommendations”. I’ll never take an out of warranty car to the dealer again.

  18. One more thing on auto repair shops. Others have said go on word of mouth – that is great! That is how we found our wonderful mechanic in Memphis and its how I expect to find the next one in my new city. I am a librarian and asked a lot of the single female librarians who they take their cars too. I got the names of 2 very good shops. Single women don’t have much choice but to find the best shops out there – they’ll give you good advice. But ask around to your friends and see who does good work.

  19. Yeah, I’m a little surprised at the snarking as well. And in non-constructive ways. But, some people seem to either read too little or too much into whatever Trent says. I guess that’s the way it goes. Whether it’s about life insurance or Trent’s “errors” and “hypocrisy” (and use of sarcastic quote marks; had I known they were meant to have feeling behind them, I’d prolly be peeved as well, and be using them more), it’s always entertaining reading the comments as well as the articles. But maybe that’s just me. :D

  20. I’m surprised at the ire that’s been raised here too. Who knew a mailbag post could be so snark-inspiring?

    Anyways, I wanted to say that I don’t think I could EVER do a podcast because I hate the sound of my voice so much. I like blogging because I can communicate without anyone have to hear me talk. lol

  21. Regarding auto repair shops – I agree with the idea of word of mouth. With the cars I’ve had over the years, taking them to a dealer for regular maintenance would have been a bit too expensive on my budget, whereas my local car guy (next door, lucky me) specialized in cars like the one I had (Saab), and took better care of it, for far less than dealers would have. He got my recommendation several times, and if I ever live in the area of his shop again, I will become a returning customer, for as long as he’s around.

  22. Wren, some of us have put in a lot of time constructively correcting Trent’s posts in the past. Here he is pretending he does not actually make mistakes; rather, he deliberately portrays one side of a controversy to generate discussion. That’s why errors was in quote – he doesn’t actually think we’re pointing out real errors, or at least that there’s no such thing as an erroneous opinion. We’re a little frustrated.

  23. For Sara’s question, I would also recommend looking on yelp.com (if you’re in a city that has a robust amount of information) – people are really good about posting good/bad reviews about car mechanics on there.

  24. I imagine you get these kinds of questions all the time and it’s probably very repetitive, but I just turned twenty last month and want to know what else I can do for the sake of financial security. I have a savings plans with ING Direct, but I always see people saying “If I had started doing (blank) when I was twenty, I would be financially secure right now!” How do I learn how to invest, or where, or what into? What should I know about credit cards and banks? Is it good to be in a little bit of debt (with regards to credit cards) for the sake of good credit?

  25. I have a passion for photography. It was tough giving up that dream but at least I can do it for fun since I know that no one will ever pay me to do it.

  26. While I have never needed to buy life insurance (single with no dependents) one thing that no one ever mentions when talking about life insurance, and one I am appreciating more and more is regulation.

    Insurance companies are regulated at the state level, not the federal level. Say what you want about AIG, it was their “federally regulated” subsidiary that blew the rest of the company up.

    Your state does audits and inspections of insurance companies doing business in the state, and life insurance companies are required to pay into a contingency fund (its a premium tax really) in case of insolvency.

    Best example of this is when Conseco went bankrupt at the partent level, the various states would not let them divident back surplus’s to the parent in order to protect policy holders.

    Ignore S&P and Moody’s, look at AM Best rating which will tell you the financial stability of the insurance company. Maybe I will do a post to look at things no one ever thinks about.

  27. Hi Trent,

    I’ve been following your blog for a bit over a year now and have really enjoyed the content. I’d like to ask you a question for your weekly mailbag – even if it doesn’t make the cut, I’d appreciate your input. I’ve reviewed your posts on building a blog and think my question has a bit of a unique twist on it. So, here we go.

    I’ve been casually blogging for the past few years and have recently come into a time when I’m intentionally unemployed (due to a short-term career transfer for my husband, we’ve deemed it more trouble that it may be worth to pursue traditional employment at this immediate juncture). With this said, I have the opportunity and inspiration to increase my blogging routine into a more structured practice. I’d love to eventually produce a blog like yours that provides a service, creates a readership, and generates an income.

    My problem is this: I blog about something I’m passionate about: the pursuit of reading, the experience of learning from books, and the enjoyment of the activity. I don’t have official training in this, but it’s always been a central part of my life. I post book reviews, insights on upcoming publications, discussions of books and overlap with current affairs, etc. I’m also a creative writer working on a variety of pursuits from a freelance career to a full-length novel.

    At this immediate juncture, I don’t really see an income potential from blogging about books. Aside from issues of making money based on someone else’s creation, I’m just uncertain how to visualize this content, which I am passionate about, as something that others may pay for. For instance, you offer e-books for download – something I’d like to do, but don’t yet see the connection with my content.

    So simply put, my question is, do you think that committing to a blogging schedule out of passion, despite the fact that it promises no immediate revenue streams, to be a productive step? Can I have the expectation that I as continue, I may encounter more opportunities for income than I can see at this moment? How have you experienced the growth of income-creating opportunities on your own blog? How have you best determined how to streamline your interest with insights that your readers will ultimately pay to enjoy?

    Thanks for your time – I hope to hear from you and will continue to enjoy your writing.

  28. NEW QUESTION: I have about $10K sitting in bank and I feel I should do something about it. Since I do not have Roth IRA account, I plan on spending $5K (max) to invest on Roth IRA. But I am struggling to find ways to invest remaining $5K. I really do not want to invest in stocks, 401K or mutual funds – I have lost quite a bit of money on all these last few yrs nor I have time to do research. Ideally I would like to invest where there is atleast 5-6% return. Pls advice.

  29. Actually Michael, I don’t see him saying he doesn’t make mistakes, I see him saying he writes about what interests him, which often isn’t the only side to the story/argument/whatever. Which, to me says that he recognizes that his viewpoint may not be the only one, or even one that will work for everyone. If you don’t agree with what he says, that doesn’t make him wrong and you right, any more than it makes him right and you wrong. If he wants to say the sky is green, but you see it as blue, for all you know he’s wearing green sunglasses and the sky is tinted accordingly. Or there’s a nasty storm over Iowa at the moment, turning the sky a particularly bilious green shade. I do see some people making constructive criticisms, but I also see some people snarking to hear themselves snark. That I find amusing. And giving feelings to punctuation is even more so. Last but not least, I really like the word snark. :D

    What I hope is that Trent reads the comments, recognizes the differences of opinion and even fact that others may present, and goes forward from there, thus making his advice even more relevant for his readers. I just don’t see snarking as being an effective means of encouraging that to happen. But again, that’s just me.

  30. @eli skipp: Getting and using a credit card can help you build a solid credit history. But (as I understand it) it doesn’t do you any good to carry a balance from month to month – it’s just as good for your credit report and credit score if you pay off the balance in full at the end of every month. And since not paying off the balance in full means that you have to pay interest charges, I don’t see why you wouldn’t pay off the balance in full if you are able.

    One counterintuitive thing about credit cards is that your credit score suffers if you use more than about 30% of your credit limit. So if your credit limit is $500, and you charge more than $150 in a month, that’s bad – even if you pay it all off at the end of the month.

    If you have earned income, you can look into opening an IRA. Since you are probably in a low tax bracket, a Roth IRA is probably a better choice for you than a traditional IRA. Vanguard (dot com) is a good place to do this, although you need to save up $3000 before you can invest in most of their funds. The “Target Retirement 2050″ fund is a good place to put money you’re saving for retirement (a Target Retirement 2055 fund might be better, but they don’t have one). But you don’t need to stress too much about what exactly you invest in within the IRA – if you change your mind later, you can always move your money to a different fund.

    But the most important thing you can do to get yourself in a good place financially is to spend less than you earn. Be aware of where your money’s going – for some people that means drawing up a formal budget, but it doesn’t have to – and make sure that what’s going out is less than what’s coming in. If it’s not, then you have two choices: Spend less or earn more.

    If you’re interested in reading a book about all this stuff, “The Complete Idiot’s Guide to Personal Finance in Your 20s and 30s” is pretty good.

  31. Trent – I’m intrigued by your journal process and structure. Any chance you could post more detail, including an example entry (e.g. 1.txt) that has been obfuscated appropriately?

    I’ve tried using OneNote in a similar way but get frustrated that it is tied to one computer (e.g. not easily accessible or editabled over the internet). Evernote may be a better alternative…

    Anyways always curious how other document their time (e.g. what granularity do you get to).

  32. @PR: If you have any debt with interest rates above 5-6%, you could direct the money toward paying that down. Other than that, I don’t think you’re going to get a safe 5-6% return these days, and if I saw an investment that promised as much, I’d immediately start asking, “What’s the catch?”

    Also, a Roth IRA is not in itself an investment – it’s more like a container for investments. You still need to choose something – like stocks, bonds, mutual funds, or CDs – to invest in within the Roth IRA.

    What are you investing for? If it’s for a long-term goal – 5-10 years or more down the line – then don’t fear stocks. They’ve lost a lot of value lately, but that value will come back. And keeping your money out of stocks *because* they’ve lost a lot of value is a surefire strategy for *not* getting that value back.

  33. @Battra92: I don’t know if I’d call that giving up–just reframing. I did a similar thing with theater, shifting away from the idea of trying to make it my full-time job. There’s more than one way to keep your dreams in your life. :-)

  34. I hope no one takes Trent’s advice on life insurance. A licensed insurance professional or financial planner would be able to discuss how much and what type of insurance is appropiate. Not having children and not being married does not mean you do not have a life need.

  35. Wren, I like the word snark too. :D I just hope Trent will man up and admit that negative commentators are trying to point out real problems and not merely sprucing up his posts with their ‘amazing diversity’ ‘viewpoint from a different worldview’ or whatever patronizing language he’s using this time…

  36. “have thought about posting them somewhere anonymously in a blog-like format, simply to make searching them a bit easier. The problem with this is I would have to change some names and other elements, and it always felt like more work than it would be worth.”

    The Simple Dollar is set up on a regular webhosting account. Your particular webhost offers one-click install of WordPress. You could then password-protect that directory and no one but you could read it. No need for anonymity.

  37. What is the difference between a “licensed insurance professional” and a salesperson?

    The guy from whom we buy our home and term life insurance describes himself as a “Personal Financial Representative” even though he was giving us poor financial advice in recommending whole life insurance (there is absolutely no reason we would benefit from that right now).

  38. Regarding controversy:

    I see the quotes around error referring specifically to the perceived error that Trent is not providing or describing every possible point of view. I do not read it as him being patronizing regarding general disagreements- he’s talking about one specific aspect of his blog that generates negative feedback.

  39. RE: the life insurance issue … whether or not to buy it should depend totally on whether or not there are others dependent upon your income. If no one is dependent on your income, you DO NOT NEED ANY life insurance. This scenario could be a single adult with no dependents, but could also be a couple, each of whom makes enough money to meet their individual expenses, for example.

    If others DO depend upon your income, then (and only then) do you need life insurance.

  40. re: Necessity of life insurance for single/no dependents persons

    I disagree with the folks who advocate no life insurance is necessary. If you are a young person (20s) starting out in life and career, it is entirely likely that you will eventually be in situation with a partner and/or dependents within a few years. And life and health being what they are, you might not be insurable at that point, or affordably insurable. So it’s really penny-wise/pound-foolish to categorically dismiss life insurance. Even a small term life insurance policy can be a useful thing for this person. You never know.

    As one ages, the viatical benefits of a life insurance policy become important. Don’t know what that is? It’s the provision which allows a terminally-ill person to sell the life insurance policy (even a term policy) for a lump sum of cash. This can make a huge difference in the quality of life for a terminally-ill person.

    In one case I know of, a mid-50s single woman with no dependents who had exhausted her savings and retirement funds while terminally ill with cancer cashed in her life insurance for viatical benefits, which enabled her to pay for hospice care at home. Don’t count on Social Security Disability benefits; she died before she ever received a single check.

  41. @Dave about tracking income/expenses:

    While QuickBooks simple start is def cheaper than the full out Pro version, normally, often times you can get the Pro version for $100 if not less (watch for coupons at various sites) and lately Staples has been throwing in a nice bundle of extra free software which you might or might not use (can always flip it on craigslist or ebay) so don’t rule out the higher end versions just because they seem cheaper at one time.

    Really though, for a just starting small business you could probably get away with Excel or Open Office (if you can stand how sluggish it is) but IANAA

  42. NYC reader – wouldn’t proper health care insurance have been a better bet than the life insurance?

  43. I have my life & health license but I do not sell life insurance. There is more than one purpose for insurance – living needs, estate, special needs, funeral expenses, charity, just to name a few. Unfortunately, pretty much anyone can call themselves a financial planner, so I would suggest someone who has credentials behind their name, or have someone referred to me, someone who is willing to sit down and listen to what I want. If you find a good agent they will be willing to do this, most likely run a few scenarios and let you decide what you want.
    Part of my work involves processing death claims. In over 5 years, I have never come across any beneficiary – whether they are a spouse, child, business partner, heir (nephew, neice, etc) – who said no thanks, I don’t need the income. I have a job.

  44. From my experience life insurance people will sell you the most expensive policy and advise you to insure yourself for more than is probably necessary. We were constantly being steered towards a whole life policy (much more expensive than term life) because it would be a good investment in the future (uh-huh) and to insure ourselves for several million cause my husband is a doctor and I’d want to continue my “lavish” lifestyle if something were to happen to him (I’ve yet to start leading this lavish lifestyle, so whatever). So I ditched this advice and went and got a couple of term life policies over the internet w/o having to talk to a person. We took out a million dollar policy on him and a quarter million on me. Plenty of insurance and quite affordable. Its a 20 year term and at the end of that we’ll re-evaluate our needs, if we have any at all at that time.

  45. Hi Trent,

    I have a new question for you.

    How does one justify the cost of a house, insurance, property taxes, and maintenance these days? I understand that equity is built but it seems (without running though the numbers) that you’re really paying for a house 3 times over once all the interest is factored in. Add all the previously mentioned expenses and it seems like renting comes out ahead. I know you wrote on the subject but I’d love to see some realistic numbers run on the subject. (FYI I live in a fairly expensive location where houses are no less than $350k and taxes are typically $12k a year)
    Thanks!

  46. I have a question: Is it really cheaper to sew your own clothes, or your children’s clothes, rather than buying them?

  47. Back away from the soapbox.

    There are single people who have dependents. There are even single people who have kids. Maybe there aren’t people like that in Iowa, but in the rest of the world, there certainly are.
    Johanna @ 8:08 am May 4th, 2009 (comment #1)

  48. “I see the quotes around error referring specifically to the perceived error that Trent is not providing or describing every possible point of view. I do not read it as him being patronizing regarding general disagreements- he’s talking about one specific aspect of his blog that generates negative feedback.”

    That’s pretty much exactly what I’m saying. As I said above, I intentionally do this. I write about the specific angles on issues that interest me. I know quite well that posters like Jimbo and Michael will be all too happy to jump in, point out my massive flaws, and tell people how worthless my advice is. I don’t mind in the least – it gets them involved and engaged in the conversation.

  49. @Reflection –
    Use a mortgage calculator like the one on Yahoo:

    With today’s low rates and 20% down, a 30-yr mortgage means you’ll pay $256,000 in interest for a $280,000 loan on a $350,000 home.

    A 15-yr mortgage for the same home means you’ll only pay $110,000 interest.

    The interest expense numbers are a LOT lower than you’re thinking. Plus, when the home is paid off, you only need to worry about insurance and taxes whereas rent is forever… that’s when the real savings come in.

  50. @Reflection,

    Do you need a house for the space? I was in a similar real estate situation and needed four bedrooms and a yard. The rent was staggering, $1400/month and the maintenance was lackadaisical at best. I’d say if you don’t need a house, you don’t need one. If you do need one then you just have to look at your situation, in my case a mortgage + taxes was $200 less than rent. Even with maintenance I’m way ahead. If I could rent a sizable house for less than my mortgage I definitely would have gone that route, but most folks are looking to cover their mortgage, maintenance, and often even a property manager, so they charge a bit more.

    Are you planning on staying in one place? If not, then a mortgage is probably not for you, either.

    I think the tax benefits are a joke. It’s a nice rationalization for folks, but it doesn’t come close to balancing the staggering amount of debt you take on. Wow I paid out thousands of dollars in interest and you’ll let me have my tax rate’s worth back? Here’s the deal: If you give me $100 (interest), and my buddy here $100 (taxes), then my buddy will give you $25 back while slipping me a few bucks. Good deal for you, right?

  51. Trent, that comment is what I’m talking about – anyone who says they disagree with you has been successfully tricked into getting involved! So if everyone agrees, you were right, and if anyone disagrees, you were deliberately withholding that perspective to get people talking. That is too convenient.

    I know the difference between choosing an angle, only seeing one angle and being flat-out wrong. I’ve seen all three many times here and I’ve done all three in my own endeavors so I don’t know why anyone should be so embarrassed about it.

  52. I don’t think he’s all that embarrassed by it, Michael. It’s what he does, as he stated. Still, there is a line between criticism and excess whinging, that is best avoided if at all possible. Commenting on one part of one line of a post, while deliberately ignoring the rest as it suits one’s view… excess whinging. Commenting that perhaps a whole other aspect of a particular subject hasn’t been touched on, and is possibly forgotten in the fray, constructive criticism. Recognizing that the writer will have his/her own view that will not cover all aspects of a subject… perhaps the first step towards learning.

    Again, this is how I look at the world. YMMV :D Snark on, my brother, snark on…

  53. “I have thought about posting them somewhere anonymously in a blog-like format, simply to make searching them a bit easier. The problem with this is I would have to change some names and other elements, and it always felt like more work than it would be worth.”

    Kate Petersen presents a very valid option. If you don’t want it on your host, you could install WordPress on a home computer. If you use the 15″ Dell regularly enough, it would only take a few minutes to get WordPress installed.

    Backing up could then be as simple as setting up automated back-ups(either backing up your database or WordPress Export files).

    And another option, requiring even less effort, would be to use TiddlyWiki [http://tiddlywiki.com/]. A single file, self-containted, taggabble, searchable, extendable wiki. Backing up is easy, since we’re talking about a single, normal file.

  54. Besides life insurance, and if you are in your early 20s a whole life policy may well be the way to go, you NEED disability insurance. Everyone does. Invest some of that $10,000 in a good policy that you can raise the coverage levels as needed. (NOT from Unum/Provident).

    I agree that just because you are young and single it doesn’t mean you don’t need life insurance. Besides the viatical benefit, you may well want to support someone later in life. If not a spouse and/or children, perhaps a disabled sibling or parent or grandchild. The advantage to whole life insurance is that your premiums are level and you can raise coverage as time goes by even if in the interval you have become uninsurable. And for heavens sake, get the disability rider that has the premiums paid if you become disabled. It doesn’t cost much and can save a lot, particularly if you do become disabled and unable to afford the premiums.

    Back in the good old days, you could even reach a point after some 20 years where you don’t need to make any more payments.

  55. So I used the intelliquote to look at prices for life insurance.
    I am in my twenties, married, no kids, in general good health- but I am wondering if I should wait for life insurance- because I would likely qualify for significantly lower rates if I wait just one more year to sign up.
    I joined Weight Watchers almost a year ago and have lost over 50 pounds, but I’m sure I need to lose a lot more to qualify for a much better rate. Also, the best option for a former smoker is 5+ years since quitting, and it’s been a little over 4 years since I quit. My question is: Are life insurance policies changeable every year like car insurance, or is this something were I should just wait a year? I’ve never had life insurance before so I’m sort of confused.

  56. A new question:
    I am going on a weekend camping trip in a couple of weeks and was debating on renting a car for the weekend vs. using my own.

    The trip will be four days of which I plan to put about 1,000 miles on the odometer. I have a 2001 Honda accord with 81,000 miles on it already and was thinking that I could save in the long term if I rent a car with unlimited miles.

    What would be your advice on this issue?

  57. I have a question for other mailbags.

    On another blog (which I will not name since they do not deserve to get traffic for this type of content), a writer talked about obese people in the workforce, and how they would not work with them/hire them. They went on to make some claim that overweight people were less effective than normal-weight people. From a legal standpoint, isn’t it illegal to say something like that? Can an employer not hire you even though you are qualified for the job simply for weighing more than they judge normal? Also, what is your opinion on that?

  58. Marie, obesity is not a covered disability under the ADA, unfortunately. There are some states, such as California, where it may be covered under state disability laws. It is not illegal to say such things, but it is stupid. There is a common notion that obesity results simply from overeating, which is clearly not the case.

    If the obesity is caused by a demonstrable medical condition, it is covered under the ADA. For example, someone who is obese because she is on corticosteroids to treat lupus would be covered. This is why it is exceedingly stupid to say such a thing, not to mention putting it out on the internet. This individual could easily find him/herself in really deep doodoo someday with no defense. This includes being named specifically in the lawsuit, and the company will most likely not provide any legal help since this is not part of the job, assuming that it is not an official company blog. If it is, oh, boy!

    They could also put their employer in very deep legal trouble. Do you know for whom this blogger works? If you were to forward the post to the HR department this blogger might next be blogging on job hunting after being fired for disability discrimination. And if the blog is an official part of the company, forwarding it to the EEOC would be a good idea.

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