Reader Mailbag #78

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.

The cost of education is increasing at an alarming rate. At some point it will come down to a cost benefit thing. Is it worth it to pay $150K for a 4 year degree say in creative writing where you struggle to find a job?

At what cost will college be worthless if tuition is increasing at its current rate? Yes you can say that education shouldnt have a price, but what if it cost you $250K just to get a 4 year degree? That’s a 30 year mortgage for a lot of people.
- Jake

I’m going to throw out my own theory here. I think we’ve reached the peak of the power of the bachelors’ degree as a ticket to a career.

What’s happening is that at many schools, the cost – both in time and terms of dollars – are eating up enough of a person’s lifetime earnings that a properly motivated individual can find other avenues for earning a good living without going through that process.

Entrepreneurship doesn’t require a degree of any kind, and the internet has opened the door to entrepreneurship in countless interesting ways. The door is open wider to self-employment and entrepreneurship than ever before.

When everyone can show off their work online, we move closer and closer to a true meritocracy. Degrees were once ways to show that a person had a set of experiences, but today, one can find evidence of experiences and talents online by viewing a person’s Facebook profile, personal website, online portfolio, and shared thoughts.

I’m not devaluing a college degree – the experience of getting it, if properly utilized, is life-changing and life-affirming. But viewing your degree as simply a ticket to riches is on the verge of becoming a thing of the past.

My suggestion to people thinking of entering school: what are you sharing with the world? Are you creating value for others? The earlier you start doing that, the better off you’ll be.

I hate everyone at my job and I want to quit. Why should I bother maintaining any sort of relationship with any of these bloodsuckers after I leave?
- eldrick

Sounds like somebody’s got a case of the Mondays!

You might view the people around you as soulless cretins better suited for True Blood than real life, but those people are still involved in your current career path – and may even hold valuable connections in other career paths.

You might not like some people in your office and will be fine severing ties with them – that’s fine. But if you have a positive relationship with anyone in your office, you’ll always do well to cultivate that relationship.

No matter what, though, don’t burn your bridges in some childish fashion when you leave. All that does is create a negative impression of you – it doesn’t “show them” a thing.

Trent, what’s the problem with shilling for things you DO believe in? You’re in a fantastic position to provide for your family by blogging — blogging, of all things! I wouldn’t trust you any less for getting paid for peddling products and services you actually do find useful. I think the trust has already been established; we know you can’t be bought. Other readers, you with me?
- Leah

I do write about things that I do believe in. I talk about PaperBackSwap and ING Direct and Vanguard and Evernote and SmartyPig and books and games I enjoy all the time.

The catch is that I restrict my positive comments and reviews to things I actually use in my own life. If I don’t use it myself, I don’t endorse it, period. I don’t even talk about it except on rare occasions where something deserves clear commentary.

It would be incredibly easy for me to expand that a bit and cash in big time. I could start recommending banks that seem to have good service, but that I don’t use because I find more value at other banks. Talking about banks is good, right? And I can certainly make some cash from that with affiliate links. The same goes for some credit cards with good rewards programs. Or supplies for cooking at home. Or investments. The list goes on and on.

I don’t do that. If I write something, it’s about what I’ve found useful for me, not what I’m paid to talk about. Period.

Yes, I’ve been asked to try a lot of things over the years. The only ones I’ve bothered to write about at all were the ones that were compelling enough for me to start using them regularly – like PearBudget and Wesabe. I use both of those things semi-regularly (I use the PearBudget spreadsheet with some homebrew modifications and I follow discussions on Wesabe all the time), so I have no problem mentioning them. However, both of those things were brought to my attention by people who practically begged me to try them. I’ve tried hundreds more and never went back – so I never wrote about them.

If I did anything else, I’d not be honest. That means I leave money on the table all the time. My reward for that is loyal readers, like the 2,000+ who have signed up to be “Friends of the Simple Dollar” and the many thousands of others who share my articles with their friends and mention them on Twitter and Facebook.

It’s more than a fair trade, in my opinion. Full honesty has rewards far beyond a few dollars left on the table.

Frugality is for old people. I want to live now, not later.
- Dimes

What do you mean by “live”? Is “living” buying every consumer product you see? Is “living” throwing cash down the drain on convenience foods and convenience purchases. Is “living” burying yourself in credit card debt and watching more and more of your paycheck vanish into the gaping maw of interest payments? Is “living” working at a job you hate so you can “live it up” on the weekends?

I tried living like that for a while. Before long, I found myself masking a lot of pain – big debt bills in the mail, a career that paid well but didn’t seem to have many prospects and didn’t include work that I was passionate about – with a lot of “living.”

The end result? I almost lost everything I had – my marriage, my job, and my small amount of remaining happiness.

What I discovered is that “living” meant figuring out what I actually wanted to do and then doing it with abandon, then paring down the other aspects of my life that weren’t as important. That’s frugality in a nutshell, and it changed my life. Writing went from being a vague dream I tortured myself with to a way of life. My debt bills went away and I was able to start saving for some big goals. I was able to take some huge professional risks to chase what I wanted to do, not what my spending habits dictated.

If your version of “living” involves designer labels, a pile of gadgets, and drinking and partying and eating to cover up the pain of your job and that growing wall of debt, feel free to have at it. I’ll take my version instead.

I live in a one bedroom apartment in Utah and will be moving to Ohio to live with my sister and her family at the end of September. Due to having been unemployed since March, I can really only afford to take whatever will fit into my 2003 Oldsmobile Alero.

My question is this: what is “worth it” to take with me, and which items would best to sell and buy again once I get a new job and a new place?
- Misty

Take the things that have personal value to you or that you use every single day and sell everything else. Seriously.

A move like this is the perfect opportunity to pare down your possessions to the things that are really valuable to you. No expectations of others. No anything. Just you and what’s important to you.

You’re far better off just taking enough stuff to fill a few bags and a healthy wad of cash than to bring a bunch of stuff you don’t really value and a significantly lighter wallet. You’ll save time, save mental clutter, and have more money by going light when you do this.

What kind of correlations have you made between finance and your previous research job? I’m sure there have been some.
- Mol

Science and finance are both about evaluations of data. The biggest difference is that most of the evaluations done in finance relate heavily to human nature.

In its idealized state, science is about making predictions based on facts. Finance does the same thing. However, hard science generally isn’t impacted by human psychology – the facts are often concrete and stable.

Personal finance is much different. Human behavior can only be predicted to a certain extent. I find that personal finance is actually closer to psychology than it is to hard science.

I don’t understand the “absolutely no debt” philosophy. Do people who advocate this really believe that a person should rent their housing for years and years and years before buying a home?
- Flo

From a pure numbers standpoint, the debt free lifestyle makes a great deal of sense. Virtually every debt you incur requires you to pay back that debt with some interest attached, which is a net loss of resources. Avoiding debt means that you retain all those resources and can invest them, generating more resources.

But do those numbers reflect real life? It’s hard to come up with a concrete answer to that one. I certainly believe that having a nice, stable home is beneficial to my children in ways that are difficult to directly express in dollars and cents.

I think that it’s easy to argue on behalf of no debt in areas you don’t personally value in a deep way. It gets harder when debt intersects with your key values, like your family and the decision to buy a home.

What do you think of the third season of Mad Men so far?
- Ralph

A long-time reader sent me the first season of Mad Men on DVD and got me hooked. It’s an incredible series, one that I’ve thoroughly enjoyed…

… up to this point. The third season hasn’t really clicked with me yet. Perhaps it’s because I haven’t finished watching the second season, but something just seems to not quite click.

Of course, I’ll admit that the first episode or two of the first season didn’t quite click with me either. It took a while for it to really click. Maybe the same thing will happen again.

Ignore the experts for a moment. How big of an emergency fund do YOU think people should have?
- Walt

Honestly? I don’t think there should be a limit. I think people should contribute a healthy amount to an emergency fund with every paycheck.

Why? I think that the definition of an “emergency” is often limited to negative things, when it should also include positive things. My life regularly offers me great opportunities that I could jump on if I had a bankroll – investment in businesses, taking advantage of enormous sales, taking giant career risks with potential rewards.

I’m not saying all of that should be in cash – I believe in a CD ladder approach to maximize your returns. But there should still be a large amount safely in cash for you to grab when an emergency – both good and bad – occurs.

Should Pete Rose be in the Baseball Hall of Fame?
- Larry

I’m a lifelong baseball fan, and the whole Pete Rose question is a nugget that constantly gets kicked around among baseball fans. Several readers – a few of whom I’ve played fantasy baseball against – have asked me this question, so I’ll give it my best shot.

I think Pete Rose not being in the Hall, as things are now, is dishonest.

If he’s excluded for his actions, Ty Cobb, Smokey Joe Wood, Tris Speaker and others should be tossed out of the Hall of Fame because there’s similar strong evidence that those guys also bet on baseball. Yet those fellows remain in.

On the other side of the coin, if Rose is allowed in, then “Shoeless” Joe Jackson should also be eligible for the Hall of Fame.

My personal opinion is that the Baseball Hall of Fame should simply reflect the nature of the game itself and the players that had a significant impact on the game’s history. In that regard, Rose and Jackson should unquestionably be in, as should the guys in the modern era who used performance-enhancing drugs (yes, if I were voting, I’d vote for McGwire and Sosa). After all, many players from the 1970s who used amphetamines to get an edge (like Mike Schmidt, for example) are currently in the Hall, and if that’s the established standard, then that standard should apply to everyone. Given that, I would also understand if they raised the guidelines for membership and cleaned house, getting rid of people that would be effectively “banned” by the character guidelines that are already in place.

In my eyes, the disgrace here is the Hall of Fame and the voters, which is clearly using a double standard for determining who should be in. I’ve loved baseball all my life, but I have no interest in going to Cooperstown if it merely reflects some warped view of the history of baseball rather than the true history of the sport. Put Rose in or kick Cobb out, in my opinion – leaving things as they are is hypocritical.

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

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  1. Paul says:

    To the fellow who wants to live now: The best way to be in a position to have the freedom to do that is to live beneath your means and remain debt free. I do and I am, and my wife and I are talking about taking the trip of a lifetime (to Argentina with a well known chef to stay at a winery) that will cost us about $25K. We can afford that because we don’t have car payments, because we don’t pay foriegn ATM fees, and because we don’t buy a double latte at Starbucks every day.

  2. Scotty says:

    Regarding the first question surrounding college educations, it’s important to note that college/university educations aren’t nearly as expensive in for rest of the world as they are the US. If I were a US resident, I would have likely not gone to college. Up here in Canada, a 4 year degree at a reputable major university is about 1/4 to 1/5 the cost. I think my 4 years cost about $15K (about $12K USD). Obviously the Ivy League schools in the US are world-class, but otherwise, other country’s schools are very comparable.

    Perhaps some people in the US should consider study abroad.

    But in general, I do often have to question the utility of bachelor degrees.

  3. hattie combs says:

    Hi Trent…this comment is about eating sandwiches on vacation as opposed to eating out. We used to take our kids to Florida every Christmas (from Kentucky) in a truck, tent, rv, whatever we had at the time. When we got to the Florida line we would stop, take off our winter jackets, and buy tomatoes and onions from a roadside stand. Then we would proceed to make “Florida sandwiches” with those vegetables and what we’d brought along: bread, bologna, cheese and mayonaisse. They were delicious and everyone loved them. We were eating like kings. We ate them as often as possible while on vacation. The kids would even ask for them after we got back home! The kids are all grown up and married now and we are retired…recently we took a trip and realized we could still have Florida sandwiches even tho we weren’t in Florida! So we did…in our new rv that was paid for in part with the money we saved by not eating out all these years!

  4. JonFrance says:

    Scotty has a point; and here in Europe, that bachelor’s degree would cost 0-3000€ depending on the parents’ salaries (plus living expenses, but most students keep living with their parents).

    However, in a weird way that makes the bachelor’s degree even less valuable here than it is in the US: the fact that it is easier to get one means that having one is less of a competitive advantage in the job market. (The fact that admission is guaranteed for all high school graduates doesn’t help either, but that’s a whole other issue.)

  5. Catherine says:

    Trent – I recently heard about a site called Quizzle.com on CNN Headline News. I haven’t heard anything about this website in the PF blogosphere (and I read quite a few blogs!). Do you know if this site is legit and the best way to utilize the “free” information that they are giving out? I would really like to know my credit score, but it seems ridiculous to have to pay for this information. I would love to hear your take on this!

  6. Jason G says:

    Good mix of questions, Trent. Love the Office Space reference!

  7. Rachel says:

    Eldrick, you hate your co-workers and want to quit? do it! Why be miserable? My brother in law said one of the wisest things I ever heard. “there are too many things you can do in life, why waste time doing something you hate?” It is so true! Think of all the possibilites to make a living! If you truly dislike all these co-workers, you don’t have to stay in touch. But like Trent said, don’t burn all your bridges. Wish I hadn’t.

  8. kat says:

    Regarding school–there’s plenty of associate level degrees available through community colleges that provide access to jobs with a solid income without the astronomical student debt that could be acquired at a 4 yr (or 4yr+) school. I’m completing my studies to become a Physical Therapist Assistant(associate degree)–but I debated long and hard about going for the doctorate level PT degree. That’s what you are supposed to want, right? I’m smart enough and willing to work hard enough, so therefore I should–that’s what we get told by well meaning parents, counselors, etc. But, the loan debt didn’t seem like a good trade off. So, for a minimum time/money commitment I’ll have a flexible, enjoyable career that pays well for someone who does not live(nor wants to live) extravagantly.
    College is becoming a questionable route for many careers, but if someone has an interest in specific technical areas that require licensure or certification of some sort, 2yrs at a community college can be a great, economical option.

  9. Austin says:

    I graduated in June and am torn on the whole college experience. I saw far too many people waste thousands of dollars in a random major because college was “what they were supposed to do”. Instead, the child and parents need to sit down junior or senior year of high school and evaluate what the student hopes to get out of the college experience. If the child doesn’t have an answer, a year or two of work at the local Menards should bring some clarity.

    At the same time, I’m teaching English in Japan and wouldn’t be able to unless I had a bachelor’s degree so I’m thankful for my time and money invested. It just seems like college is becoming less and less vital to a career, but too many are still treating it as their ticket to a job.

  10. leslie says:

    To Misty, I absolutely agree with Trent’s advice. You can buy everything again when you move and you might not even need all of it anyway!

    When I moved across the country, anything that was replaceable I gave away or sold. I gave away blank cds (they’re cheap and how often do you really use them if at all). I threw away half bottles of all my soaps and shampoos (you might be able to freecycle some). Any clothes that I hadn’t worn in 6 months (and didn’t plan to) I freecycled. All furnishings I sold on Craig’sList then just replaced them via CL at the new location; including my bed.

    I kept clothes/accessories/shoes, linens, laptop, all sentimental items and anything that would be more difficult to replace (unique fabric and craft items, acoustic guitar, sewing machine).

    Also, compressing items helps a lot. Digitize everything as much as possible. I’m a sucker for cds and it showed before I moved. I had two huge boxes full of cds. So i went to Target, bought two of those cd holder books and took all my discs out of the cases and the booklets and put them into the travel case (that holds like 500 cds). What used to take up 2 boxes, now fits into two zipper cases that fit in a small box alone.

  11. Brad says:

    This was a great mailbag today.

  12. SteveJ says:

    “I’m going to throw out my own theory here. I think we’ve reached the peak of the power of the bachelors’ degree as a ticket to a career.”

    I think most people can agree with this. Unfortunately many corporations seem to be going the opposite direction where a Masters is the new Bachelors (which was the new HS diploma). If you do want a conventional job, it’s likely going to be some time before the big employers give up on a college degree as an easy weed out mechanism. How do you prove what a good engineer or office manager you are via an internet portfolio?

  13. Aleriel says:

    Designer labels, latest gadgets, and partying don’t automatically equal high credit card bills or a large debt load. It’s all about moderation and trade-offs. If someone likes to party and can afford it (by, say, living in a smaller apartment), more power to them. Frugality for the sake of frugality is as meaningless as spending for the sake of spending, although it is the better of the two approaches.

  14. KH says:

    I like the idea of CD ladders, but interest rates are SO LOW right now that I’m wondering if it makes more sense to just keep it all in savings? I have a CD maturing next month that is at 4% and the thought of rolling it over into 1.65% just kills me when it can easily sit in a savings account at 1.40% while I wait for better rates and save up more for the ladder amounts. What do your think? I’m talking about CD’s in the amount of $1000 – $2000.

  15. MegB says:

    Trent, I agree that the third season of Mad Men did not get off to a great start. However, did you watch last night? That’s when I felt like it finally started to “click.”

  16. Sunshine says:

    Eldrick,

    I agree with the advice given. Absolutely quit your job, but don’t burn any bridges. You never know what opportunities might present themselves in the future.

    As an example, I was working at a job that I *hated* with a passion (so much so that I was happy when I broke my toe because I got a day off of work). It was the best day of my life when I finally gave notice. When I did give notice, though. I gave the company plenty of notice and ample time to train my replacement. I was making 37K+. Fast forward 2 years and my replacement has had it and my boss calls me back. I had a meeting with him just to see how much I was worth to them, with absolutely no intentions of working with them again. I was making 27K at the job I was working at. We talked the talk and they offered me the position at 52K – I turned them down because my sanity was worth more than that. Then, he offered me 60K and I accepted with a personal rationale that I only had to stay there a few years. It has been the best decision I made. My boss has matured, I have matured and, most importantly, I have a new attitude. I could potentially stay working here for many years.

    Again, you never know what sort of opportunities could be available to you.

  17. Michael says:

    Uh…you think emergency funds should have no limits? So, if I was a college kid with a $50,000 emergency fund in a savings account, you wouldn’t suggest I do something with that money?

    One should never stop replenishing an emergency fund, yes, but that’s because emergencies keep using it up.

  18. KH says:

    Also a comment on the college education cost concerns. It cost me hardly anything for my degrees. This is for three reasons…First, I attended a local community college for my AAS degree = cheap tuition for the basics. Second, I married a person who worked for the college and at that time employees and spouses attended free of charge (only had to pay for books). An alternative would be to get a job (any entry level job) at a college and qualify for free or reduced fee tuition. Third, for my bachelors, the company I work for offers tuition reimbursement. If you work, even if there’s been no indication of an official tuition reimbursement program…ASK ASK ASK…go to the top if you have to.

  19. Little House says:

    I’d like to respond to the cost of college post. Not all colleges cost $250,000 to receive a BA. That total fee must be based on an Ivy League or private university tuition. State Universities are still cost-effective and you don’t have to sink too far into debt to receive a 4-year degree.

    I agree that not everyone should get a degree, there are many other opportunities out there that don’t require degrees. Yet, young people who don’t have a clear focus, may benefit from the college experience. Having a BA also gives people more options. There are still plenty of jobs that require candidates to have a minimum of a Bachelor’s degree.

  20. Am I the only one who thinks the “living it up” comment was extremely cynical….? I hardly can imagine ANYONE with an attitude like that to ever take the time to comment to someone frugal for any reason but to spark a debate.

    #10, Aleriel, hits the nail right on the head, dead center. Until or unless you cannot afford your vices, there’s no reason to give them all up. And believe me, my own spending vice is lost on many, many people… Right now, we’re getting ready to spend ~$800 on a new single seat for our one car and $500 to replace the tail lights on another. Because we wanna. And we can afford to do so.

  21. I’m a BIG fan of public schools. There are many high quality public schools in America: Berkeley, UCLA, UCSD, Wisconsin, UVA, William & Mary, Georgia Tech, UNC, and the list goes on and on and on.

    Private schools are great, but if you look at the Fortune 500, you’ll be surprised to see how many went to public schools. Your success is what YOU MAKE OF IT. Save the $100K and go public if you need the money. If you don’t, it doesn’t matter. Go to the school you want to go to the most.

  22. Toby says:

    Pete Rose is not in the hall of fame because the basic authenticity of the game was threatened by his actions. If managers are allowed to bet on the game (or forgiven for betting on the game) the average fan will never know if he’s paying $50 to see a true competition or a shell game. MLB isn’t being prudish: they’re protecting their brand.

  23. Jenn says:

    Trent, I’m a college administrator, but I’m leaving the college debate aside to comment on Pete Rose.

    My colleagues would be stunned and disappointed. :)

    Pete Rose absolutely belongs in the Hall of Fame. As does Shoeless Joe. (My second child would’ve been Joseph Jackson had she been a girl).

    I really appreciate your logic and Spock-like intensity on the subject. GREAT mailbag thisweek!!!

  24. Emily says:

    To Misty,
    One thing I think Trent didn’t stress in his answer was that when you sell everything non-essential before your move, buying it all again once you arrive isn’t a necessary part of the plan. Leslie’s approach to the move is great for things that you find you need to replace, and it’s a fun game – “can I buy a Craigslist {item} for the same or less than I Craigslisted my old {item} for?” But before you go out and buy something for your new apartment just because you had one at your old apartment, really consider how essential that item was to your daily life and how much you miss having it as a tool or a luxury, before you rush out to get one.

  25. Julie says:

    I’ll second what Scotty (#2) said. I did four years of undergraduate studies and one year of graduate studies, all at reputable Canadian universities (Concordia University and University of Toronto, respectively). Total cost of tuition, for full-time studies, was about $3,000 a year. Far more manageable than some of the numbers I’m hearing out of US colleges.

    And I think there *is* a benefit to university education, even if it isn’t necessarily what the university thinks it is. I think it’s a chance to develop as an independent person, delve deeply into topics that interest you, and have an experience you probably won’t have at any other time of your life. There’s a certain energy on university campuses that I’ve never witnessed anywhere else.

    Is it the best way to get on track for a career? No, probably not. But I still think it’s worth it.

  26. L says:

    Is Misty’s question about moving a re-run? Or is it just me?

  27. TheOtherKathi says:

    A Question For Trent:
    In the past five years, three of my grandparents have passed away, having had the usual run of health issues, and having been helped tremendously (at near-sainthood levels) by their respective children – my parents, aunt and uncle. My sister is on the verge of getting married, and we’ve been debating the merits of having children. I love children, and hope to have several of my own. My sister doesn’t much like children, and doesn’t consider herself good “mom” material. But we both agree there are lots of times in life when having family support is necessary, and old age/failing health is the biggest. We always expected that the grown children would take care of the parents. But what if there are no children? Seeing the number of families where the kids grow up and are completely estranged, unwilling to help take care of aging parents, there’s no guarantee they’ll take up the task either.

    My sister says raising kids and paying for college is expensive, and that amount of money invested wisely could pay for a great deal of home health care when the time comes. Does that work? We have a family friend in her 90′s, never married, who has had a home health care aide (let’s call her Jane) for years, who does all the cooking, cleaning, personal care and PT. How do you estimate how much to save for that? I suppose it’s like planning for retirement, but sadder.

  28. Dave says:

    For not having any debt, if you rent an house, you pay rent forever, if you go into debt, mortgage, you pay a mortgage payment for XX# years, then stop paying. and with inflation, a mortgage works in your favor. If you have rent lock, I had a small 1 br apartment for $485 a month, my mortgage for my 3 br house is $525 a month, so for $35 a month a get a full house.

    as for Pete Rose, if he bet against his team, I’d say no, If he bet for his team or on other games he should be in with out a doubt.

  29. I liked the answer for the emergency fund, no limit. But I too would like to hear a concrete number from you.

  30. Ty says:

    Question for future mailbag: Me and my partner are planning to go to live in Southeast Asia for up to a year (or longer – it’s very open-ended). We both have roots there, and think it would be one of those life-enriching experiences that we’d never forget and would thank ourselves for later on in our lives. We’re planning to use about 20k in savings to pay for basic things, and then try to start a little business (English tutoring, guest house, or online service). However, we’re both concerned that when (if?) we get back to the US, we’ll have to resort to office/other drudgery again. Also, our parents are getting to that age where they need more of our financial and emotional support. Being in a traditional family, they’d like to see us buy a home to which they’d most likely move to as well. Do you think it makes sense to travel now or to hold it off until we save more?

  31. marie says:

    @Julie

    I would say that it is more like $3,000 per semester for Canadian universities. At least now, in 2009 . So 4 years (or 8 semesters) would be more like $24,000 plus books & living expenses.

    2 or 3 years colleges are much cheaper though (about $1,500 per semester), and one could argue that they offer almost as many job opportunities.

  32. John says:

    Do you ever write fiction?

  33. Joy says:

    Hi Trent,

    One of the reasons why I have stuck with The Simple Dollar is that your blog is not commercialized — so unlike many bloggers. I honor your integrity and am showing my appreciation by supporting you in my own little way.

    May I know what you consider as the best personal finance book for people in their 30s that you have read so far?

  34. Rae says:

    I love your answer about the emergency fund, Trent. Or, at least the idea behind it.

    I think the concept that emergency isn’t necessarily negative is something a lot of people should consider. Then again, until the fund is sufficiently built up, it could be a problem for some people to be in that mindset. When the good opportunity comes along, sure, they have the cash, but then if they lose their job the next day or something of the sort, they potentially have a very depleted EF.

    Perhaps for most of us, once we’ve built up a sufficient actual emergency fund, maybe there can be a supplemental “opportunity”/Emergency II fund – that way, if a horrible, horrible emergency pops up, you have extra funds, but can also use those funds for the good type of “need cash now” emergencies – and when you spend it on an opportunity and lose your job the next day, you still have your untouched primary, sufficient EF to use.

  35. CathyG says:

    For the person who wants to live now, not later, I say go for it PROVIDED THAT you are not depending on someone else (family or government or charities) to support you, either now or in the future.

    For the folks talking about college tuition, most of the numbers being tossed around are too low. If you want to go out of state, you will spend a fortune, even at a public school. 3 years ago, we toured UCLA and they stated the number $45,000. I was thinking – 12,000 per year that’s not too bad. But no, that was $45,000 PER YEAR and it’s gone up since then. Same price at USC, NYU, Harvard, and Boston University. A college degree out of state will cost upwards of $200,000 a year. Oh, and since we have been frugal all these years (paid off our house, huge savings/emergency/brokerage accounts), we don’t get any financial aid. Co-workers making the same (rather high) wage spent all their money all along and are getting quite lovely packages from the financial aid dept.

    And, for the person who doesn’t understand the “absolutely no debt” philosophy, most often I hear that with “except a mortgage” tacked onto the back of it. So while there may be people who really believe in NO debt, I think the vast majority think it’s better to have very little debt and that is only for a mortgage.

  36. CathyG says:

    sorry… $200,000 a year should read $200,000 for 4 years.

  37. FrugalCubicle says:

    RE: Quit your job decision

    FYI – Bridges must first be built before you can worry about burning them and people that respect you and your work will not think poorly of you because you ended something with a reason.

    In fact, if you quit maybe that will signal someone to review your boss, etc.

    One more thing to remember: If your company can replace you with someone cheaper that has similiar knowledge, then they will. You will get the speech, “It’s business, it’s not personal…I hope you understand.”

    FYI – I have never been fired. I have never needed any of those so called “burnt bridges.”

  38. Bella says:

    @ Trent and Walt

    A friend of mine actually calls her “emergency fund” a “surprise fund” it covers both positive and negative emergencies!

  39. Jim says:

    College doesn’t have to cost $150k. Thats what you might spend if you’re going to a private school, living on campus and footing the entire bill out of pocket. Tuition at in-state schools is usually $5-10k a year so you ought to be able to get a bachelors for $20-40k range if you live at home. Most people can get some sort of financial aid and you can always work part time while in school.

    Whether or not you should go to college is another matter. Personally I wouldn’t go to college unless I had a clear career path in mind and was planning on a profession that would pay my bills.

  40. Daria says:

    Going to college abroad for an american student is like going to an out of state college in the U.S. My daughter went to college all four years in Wales. We chose Wales because it was cheaper than going to college in Britain. We had to show that we had $25,000 in assets available for her expenses in order to get her Visa each year. The Visa was expensive and now you have to have a health screening so she had to go to San Antonio for a bioscan.The Visa had to come from the consulate in California so we had to pay for a visa company to handle the paperwork for us. She didn’t qualify for any scholarships because she was an overseas resident. We were dependent on the exchange rate. When the dollar sank real low against the Euro (she was a language major so one year was in Italy and Spain) and the Pound our costs went up. However, in her third and fourth years, the University chose to discount her tuition by 50%. We don’t know why they did this ( because we weren’t aware of any scholarships) but we were very grateful for the $8000 savings each year. We still had the expense of plane fares, and room and board in addition to tuition. It cost us about as much as if she had gone to a private college in Texas. I watched her cross the graduation stage over the internet because we couldn’t afford to go to her graduation. Gratefully the University chose to pod cast the graduation in real time over the internet. Now we get to see if an overseas degree has any value as she looks for a job here in the U.S.

  41. Lars says:

    We need to completely rethink college in this country. The vast majority of students are being done a grave injustice by being encouraged to go to college when in fact, for most of them, it will lead to nothing more than indentured servitude. Indeed, this is what the system is designed to produce. The U.S workforce is heavily indebted before it even shows up for work on day one, and for some reason no one seems to connect this to our current economic malaise.

    If you are heavily in debt from the moment you graduate and you have no hope of paying it off until you are forty, it will greatly change your career outlook. There is no experimentation in careers; there is no ‘gap year’; there is no travel; there is no taking chances; there is no ‘finding yourself’. Those harassing phone calls start six months after graduation. You take what you can get, and you don’t leave. Does that sound good to you? What if you decide to take a year off? What if you want to switch to a lower-paying job that you like more? Too bad, payments are due every month.

    The elites benefit greatly from unaffordable education. Thus education will remain so in the United States. Banks make profits off of struggling students, employers know that their workers need to take what they get and can’t leave because the loans are due, and the elites have less people to compete against for lucrative positions.

    The knowledge work jobs people are supposed to train for no longer exist. Downsizing, offshoring, automation and consolidation have eliminated them. High-paying jobs will go to those with the right connections. The average middle class family cannot compete with the children of the elites who can get into the best universities (on merit or ‘legacy’), stay in school indefinitely and forge the necessary social connections without batting an eyelash about cost (another PhD, why not?) *That* is who will get the ‘knowledge work.’ Everyone else will get nothing but debt.

    Admittedly students are in a bind with employers demanding more and more education for even the simplest jobs. A smart, capable person has little chance against someone who has infinite funds to get whatever degrees from wherever they want to, since entry-level jobs are determined by how you look on paper. Yes, this advantage diminishes somewhat over time. Also, many of the jobs that do not require a degree do not pay enough to live on (why should any full-time job not pay enough to live on)? Employers blithely shift the burdens onto their employees, while contributing less and less to the tax coffers that once subsidized affordable education. Why should they care? No matter what they require, there will be those able to pay it.

    Put simply – a large number of occupations will be unavailable to the middle class, period. Some already are. No it’s not fair, but that’s the society we are evolving into in the U.S. Sure, there are academic superstars who show their promise early; they will have chances to advance (although many of them are the beneficiaries of a privileged background anyway), and the well-coordinated and athletic who, for some reason, we give free educations to. Everyone else will have to settle. That’s where frugality comes in. Eventually, you won’t have a choice in the matter.

    There seems to be a frank acknowledgment dawning among our leadership. Obama has recently touted community colleges for worker retraining. Blue collar jobs that cannot be offshored are probably your best bets. If you don’t have someone footing the bill for your college, the hole you’ll be in will be too deep to dig your way out of. As often pointed out on this site, positive funds=choice, negative funds=no choice.

  42. SP says:

    I would not hire someone in my field who did not have a bachelors degree. Not because it is an arbitrary standard, rather because in technical fields you actually do learn a ton in those four years, a foundation of which you can’t build deep knowledge without.

    Can you learn those subjects on your own? Sure, MIT open course! But it takes an unreal amount of discipline to learn four solid years of material on your own.

    “Just get a degree, any degree!” is certainly outdated though. Not everyone should be pushed to get a degree. Also, there are a lot of low cost (and some very good!) state schools in the USA as well.

    But I just want to note: My degree is worth far more than just the experience of going to college. (Though that was pretty sweet too). It didn’t cost an arm and a leg, and my student loans are very very very easy to pay on my salary (while saving in a 401k, etc)

  43. IRG says:

    Trent
    You really can’t appreciate the full dimension of Mad Men season 3 WITHOUT having watched, and perhaps watched a second time, Season 2.

    This is a multi-layered and complex show that only seems to be simplistic (to those who have not really watched it, in order, from season 1).

    It makes NO sense for you to watch Season 3 at all. Seriously.

    Finish season 2 and record Season 3. THEN watch Season 3 at your leisure–after you’ve watched Season 2.

    Mad Men is all about context–to the previous seasons’ shows and plot lines.

  44. Lynne says:

    Re your comments on the Baseball Hall of Fame…I couldn’t agree with you more. The Hall of Fame is supposed to be about accomplishments, not what someone did or did not do in their personal life. If one person cannot be in because of gambling, then all should be expelled for the same reason. Performance enhancing drugs are so widely used, (I don’t condone this) that their use shouldn’t exclude some players while allowing other in or to remain. What about Barry Bonds? His accomplishments were denegrated because of accusations and he was basically singled out to be held accountable for all players using steroid type drugs.

  45. marie says:

    How much cash should I carry in my wallet? I usually take out only a $20 at a time from the bank, and because I use my debit card and credit card, it can usually last at least a couple of weeks. Should I carry more? Also, should I keep a certain amount of cash at home in a hidden place or safe? If so, how much?

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