Reader Mailbag: Baby Steps to Music

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Retiring (very) early
2. Pessimism and thriftiness
3. Checking account cushion
4. Cash advance questions
5. Cutting term insurance
6. Handling a lemon
7. Why no political commentary?
8. Frugality or hoarding?
9. Frugality and motivation
10. Self-employment concerns

Over the past week, I’ve been giving some very simple and incredibly informal piano lessons to my two oldest children. My daughter seems to have taken to it the best, as she’s gone from just banging on the keys to playing one at a time and listening to them, not attempting any songs as of yet. My son will start playing a very simple melody, like “Mary Had a Little Lamb,” get frustrated, and bang away on the keys. They both request that we try things on the keyboard a few times a day, though.

I prefer my daughter’s progress, actually. She’s listening to what the instrument can do. We’ll see if their interest continues.

Q1: Retiring (very) early
Here are my stats: I’m 52, never married, no kids. No consumer debt. Don’t own a car (drive a company car which would vanish when/if I quit). Own two homes. Don’t want to sell either property in this down market. The first home could be rented for break-even cash flow. Second is rented with about 600/mo. negative cash flow (This is CA, don’t jump to conclusions yet.) The second house has a guest house which is mine. It could be used as a remote base of operations in the proposed plan. My tenant is 92 and has health issues. I am NOT going to sell and kick him out of his home. The house is in a 55+ community, so I can’t live there as the primary yet, but can use the guest house at will.

I have 225K (=3 years gross salary) in retirement funds, 17K (=8.5 mo. mortgage payments) in cash reserves for the rental property, 80K (1 year gross pay) in cash. I’d like to quit my job (yes, I still have one, but I’m in a down industry and see changes coming.) buy an older, small motorhome (say, 10K cash) and travel for a year or two. I have seen first hand what happens when people wait too long to travel. I had cancer 30 years ago and have a lot of ticks on my Bucket List. Rambling, non-specific travel without regard to a schedule is one I haven’t completed and I’m yearning to. I’d probably have to buy high deductible health insurance and self-insure the rest.

Am I crazy? Can this even be done? Are there others out there who have done something similar?

When I was growing up, I was deeply inspired by a friend of mine’s mom. Upon her husband’s untimely demise, she received enough insurance money to either pay off the house or travel throughout Europe with her 3 kids for a few years. Remarkably, she chose to travel with her children! I met them after they had returned from their years of travel. They were the most wonderful, well-adjusted family, and though we’ve long lost touch, I remember them clearly to this day.
- Melinda

The things you describe certainly can be done, but they’re typically done by people who have a significant amount of cash in the bank with which to weather any storms that come their way. I’m not convinced that you have enough cash to pull it off.

Look at it this way. Let’s say you do this for five years. You’ve bought the vehicle. You’ve rambled around for a few years. You’re now 57. Your emergency fund is going to be mostly gone.

To put it simply, you’re probably going to have to return to the workplace at that point. You’ll own a house, but it will have utility bills. You’ll own an aging RV.

Will you be able to return to the workplace at that point with a job that pays $80,000 a year? At age fifty seven? It depends on your field, but I would never bank on that.

I think you’re in a good place to retire early, but today might be a bit too early. Give it a few more years. Consider what you’ll do if the money runs out.

Q2: Pessimism and thriftiness
I enjoy reading your column and have a question that your readers may enjoy commenting on. I was raised by parents that were a product of the Great Depression. Until the age of thirteen I lived in a small three bedroom house with six family members until my dad built a beautiful five bedroom house with a neighbor and paid it off the next year. “Use it up, wear it out, make it do, do without” was engrained in all five children. We all graduated from college debt free and have lived like our parents with great success.

I teach high school art and because I’ve previously written college guides, students will come to me for advice. After discussion about goals and majors, I ultimately steer students to think about the costs and loan repayments. I always end each conversation with, “It’s entirely up to you where you go and what you do, but remember, college loans must be repaid, and if you don’t choose carefully, those loans could dictate your life. Be sure to multiply your college offer by four! (Four years) That’s how much it will cost!”

I look at these wonderful young people and fear for their futures! What I see in most of these young people is ego-centricity coupled with an amazing sense of optimism. They all think that they will make $60-80,000 right out of college with bachelors in history, political science, and communications, so they rationalize that a $40-100,000 student loan debt is ok. (Isn’t it a good debt?) Parents encourage their children to “aim high!” with little research as to where their children will end up at the age of twenty two.

My own daughter, a recent graduate with two degrees in August (BA and BS) is having a hard time landing that first job. She is debt-free, so her search isn’t quite as stressful as some of her peers who are facing $40-50,000 of student loan debt for one degree. My other two daughters are going the same route as their older sister.

Am I becoming overly cautious and pessimistic because of my personal thriftiness? Is there ever a time that students should take on deep debt for a four year degree? (I’m not talking about graduate degrees.) I don’t want students to limit their potential and am a firm believer in re-invention, but I also don’t want them to be a slave to debt.
- Nancy

I don’t think your thriftiness is causing your pessimism. However, it might be that your thriftiness is an outgrowth of your pessimism.

For me, thriftiness is a tool that leads to a more optimistic place, not a pessimistic place. Thriftiness makes you more able to deal with the hands that life deals you. I think, to some degree, thriftiness is a reflection of your worldview.

Most people have an overabundance of optimism when they’re young. Don’t stunt it – instead, channel it. Tell them that they can major in whatever their heart desires, but that their post-college life will be much, much easier if they live as cheaply as possible during college. Enjoy what the campus has to offer instead of spending money on “stuff.”

Q3: Checking account cushion
How much money do you keep in your checking account? Once all the bills are paid, of course. I am trying to decide on a “cushion” amount.

- Kay

I usually keep an amount equal to roughly a month’s worth of bills in my checking account as a buffer. The rest resides in savings.

Mostly, this is just a protection against miscalculations and simple mistakes, like my wife and I both making simultaneous withdrawals or minor unexpected expenses. The value of having a big enough buffer to ride through these things without an accidental overdraft is worth the tiny loss in interest from not having more of this buffer in savings.

How much should you have? I think the real answer is “as much as you need to feel completely comfortable.” If you feel nervous or worry about not having enough buffer, by all means, have more buffer. An extra $200 in your checking account over the course of a year is going to cost you $3 or so in lost interest – interest that you’d also have to pay taxes on. That small amount is well worth eliminating a worry.

Q4: Cash advance questions
I received a promotional offer in the mail for a cash advance with 0% apr until Oct of next year, about 9 months. Would it make any sense for me to to take this money and because I don’t necessarily need it, put it into a high interest account and just pay it back before the apr kicks in? This way, I would make interest on someone else’s money without having to pay a high interest rate.

- Joe

You can do that – the technique is usually called “credit card arbitrage.”

The problem with it is that it’s not very much reward for some significant risk. The risk comes in the form of your own behavior. If you just let the account sit there for months, you have some likelihood of forgetting about it, then finding yourself with a fat interest bill at the end of the term. I’d make absolutely sure that you’re not going to be liable for any interest if the 0% advance period expires and you haven’t repaid the loan.

Let’s say, hypothetically, that you would borrow $1,000 doing this. You’ll find, at best, a 1.5% interest rate in a savings account right now. That will earn you $15 for your efforts. At the same time, you’re increasing your identity theft risk and giving yourself some more accounts to manage. That’s not worth it to me.

Q5: Cutting term insurance
I am a 46-year-old, single female putting myself through college. I’m trying to cut expenses. In 2002, I took out a 20-year term life insurance policy for $250,000 at $36 monthly. I only have one child left at home who is now 20. Can I discontinue the policy now that they are all adults? Or maybe just lower the amount? Can this type of policy be used to pay off a home loan in case of my death?

- Nancy

Yes, that money can be used to pay off a home loan in the event of your death. Whoever you willed the home to will become responsible for the mortgage on the home. If that person is also the beneficiary of your insurance, they can use the money to pay off the mortgage.

Often, in order to lower the amount of a policy, you’ll have to get a new policy and allow the old one to expire. Given that you’re older, you might not save too much in that process, depending on your health.

The question of whether or not you should reduce your insurance amount depends heavily on how much you still owe on your home and whether someone would use it for a residence (like your child that is still at home). I would not completely eliminate all life insurance as there will be funeral expenses in the event of your passing.

Q6: Handling a lemon
My daughter purchased and financed her first used car through a dealership on 12/22 , I co-signed the loan for her. She went out of town to purchase the vehicle so this dealership is about a two hour drive from our home but still in our state of Louisiana. The vehicle had an implied warranty and she also purchased an additional warranty to cover parts and labor. She drove the car home on the 22nd then drove the car on the 23rd then on Christmas Eve she noticed it had leaked an enormous amount of oil and would not even start. Since it was so late on Christmas Eve and the next day was Christmas and the day after was a Sunday (dealerships closed on Sunday’s in Louisiana) we waited until Monday and contacted a tow truck to pick up the vehicle and move it to the closest GM dealership. We were told when she purchased the vehicle that any GM dealership can service the vehicle.

The GM dealership closest to us refused the vehicle, they no longer work on that particular brand but they referred us to another one that was in the next city. So the truck towed the vehicle to that dealership Monday afternoon. Tuesday morning my husband went to check on the vehicle and was told that the warranty my daughter purchased may not go into effect for 30 days. He had not even had a chance to look at the vehicle at that time so didn’t even know what the problem was or if it would be covered.

I contacted the dealership where the car was purchased by email on 12/28 to let them know what was going on and I asked that they contact the dealership where the car is at to authorize and cover for any repairs to the vehicle. I was sure to email the General Manager, General Sales Manager, Finance Manger and the salesperson who closed the deal. I was expecting either a phone call or return email by this morning but have not heard anything concerning the vehicle. I’m planning on calling them later today if I don’t hear from them first.

My question is what recourse do I have? The car was purchased and drove one day then quit and now we’re being told the warranty might not be any good for another 30 days! Are there lemon laws for used vehicles in Louisiana? We just want the vehicle repaired and don’t feel as though we should have to pay for those repairs. Your input on this matter would be greatly appreciated.
- Peggy

Whenever I hear of an obvious “lemon” car purchase like this one, I encourage people to go to carlemon.com, which is a good clearinghouse of information about how to handle a “lemon” purchase.

If you are unable to reach the dealership within a reasonable amount of time, I would contact a lawyer in Louisiana. Pointing the lawyer toward that website might be of use, since it does contain the text of Louisiana’s “lemon laws”.

One of the first things I would do is make sure I had a copy of the warranty issued by the dealership. Without that, it may be hard to prove that you purchased a car with any type of warranty on it.

Q7: Why no political commentary?
I am curious as to why you refuse to comment on well documented cases of national fiscal hypocrisy, such as (several links that I excised). Given your willingness to comment on sports, I honestly don’t see why you fail to comment on these issues, given their importance for the financial future of the country (as well as for the future of Social Security, which will be applicable to every Simple Dollar reader).

- Brent

I comment on sports occasionally because sporting events (from a fan perspective) are fun. Few sports fans get enraged because someone else is a fan of another team (outside of hooliganism); instead, it’s good-natured joking around and enjoyment of a shared interest.

Politics, on the other hand, is a no-win game, particularly in an era where there is blunt refusal to even listen to someone else’s political perspectives. A comment on anything vaguely political quickly dissolves into a left-versus-right battle with vicious and acidic diatribes coming from both sides. Even a mere statement of fact is immediately weighted with interpretations and accusations of bias. Try reading the comment section of any political blog – and trust me, the moderators on such site are out in force knocking down dissidents and flamers and trolls.

My interest in politics is local. I have very little interest in national (and even in state) politics at this point. My focus is doing what I can to make sure I can handle anything that may come, mostly in terms of building and preserving my own skills and having realistic assets for the long term. I have no interest in commenting on national politics much at all aside from when they directly affect personal finance, and projections about the future of Social Security do not fall into that. They fall into yet another pawn in the never-ending political war between the left and the right, and any comments I would make about the future of Social Security will completely change with the policies of whoever is elected next.

Q8: Frugality or hoarding?
Now that I and my siblings are adults (or nearly so), my parents are starting to think about downsizing to a smaller house. The problem is that they have a bit of a hoarding problem. While it’s not as bad as some of those cases you see on tv, there are still piles of things all over the house, boxes in corners, and generally no clear surfaces anywhere in the house.

My parents realize that they need to get rid of things, but they seem to have trouble actually doing so. I was talking to my mom about a sofa they have in the basement; it’s threadbare and has two broken legs. They’ve tried getting rid of it on craigslist for free, but there was no interest. Still, they refuse to throw it out. “Someone could fix the legs and reupholster it. I would just hate throw it out.” she says. I completely agree with donating, selling, and fixing things if possible, but in this case it just doesn’t seem like it’s going to happen.

That’s just one example; there’s old games from when my siblings and I were small that are missing pieces, pieces of wood from a porch that my mom thought ‘looked neat’, and whole boxes of things in the attic that have not seen the light of day in 20 years. Part of the problem is that my parents don’t have a whole lot of money, and don’t want to get rid of things that can be useful or that they think have value, but I think this is beyond that (and they can’t seem to see it). They seem paralyzed when they try to decide what to do with something. At the same time something ‘might be useful to someone’ but they’re ‘not sure it’s good enough to donate’, so they can’t make a decision on what to do and whatever it is sits there for another couple of years.

I don’t know how to help my parents see that by keeping some of these things, they’ve crossed the line and gone beyond frugality. Do you have any suggestions? Articles I could send them? Things I could do?
- Sarah

Hoarding is the result of people failing to realize that possessions have a cost until the weight of those possessions is overwhelming.

What do I mean by saying that possessions have a cost? Each thing you own requires some amount of storage space. You’re paying rent or taxes or mortgage payments on that storage space. The more stuff you have, the smaller your livable space becomes and the larger portion of your taxes and rent and mortgage payments go to paying for a space just to keep your stuff. Each item you own also has a time cost, meaning the time you spend cleaning it and taking care of it in order to preserve whatever value it has.

Take an old boardgame. It costs some amount to store that board game, even if it’s just a cent or two a month. That board game also takes time, in that you’ll eventually have to move it (if nothing else), clean around it, etc. Is the presence of that board game repaying that financial cost and that time cost to you?

Hoarders tend to place more value on the future than is realistic. They believe that an extremely vague “someday” has some sort of value that counterbalances the cost of keeping an item. I think of my own father, who has some hoarding tendencies. He has more stuff stored around his property than he will ever be able to use. He’s actually erected additional sheds to hold all of this miscellany, and all it does is accumulate.

If hoarding is becoming a problem in someone’s life, they need to seek therapy. However, it sounds like it’s not a problem for them at this point. Your best approach is to simply talk to them about the cost of their items, both in terms of time and the space they take up, and then compare that to the value they’ll ever get from a broken-down board game.

Q9: Frugality and motivation
How do I (or is it even possible) get someone motivated about saving money and being more frugal?

A little background – My fiance and I are pretty different when it comes to money. I’m the saver, and he’s the spender. I’m all about the future, and he is more about the present. He has changed a lot after we got together, and now that we are saving together for a wedding, he has definitely cut back on most of the big spendings. But I get very bothered by the fact that he speaks of saving money and of eventually buying a house, and verbally, we are totally on the same page as to what we want for the future, yet he is always wanting to eat out (I do try to cook at home), to look and perhaps purchase the latest gadgets (he’s switched cell phones 3 times in 2 years and has gotten a macbook and ipad), and to go on vacation. The latte factor could definitely work on him – he has a gold card from Starbucks which goes to show how much he frequents it. Also, his last job had really good pay but not the current one, so that may also contribute to the spending habit. I’m not sure if I am just giving him too hard of a time or if there is just some thing I am not doing right. Do you have any advice?
- Linda

Take it slowly. Your partner is not going to change overnight.

It sounds as though on some level he does understand the importance of saving, but has yet to connect the idea of saving to his day-to-day actions. My suggestion would be to do an annual budget. Start off talking about your basic things you need (basic shelter, food, clothing) and subtract that from your income. Talk about what you could do with the money that’s left – how long would you need to save to reach your goals?

Then start adding in all of the extra stuff. How much has he spent on gadgets in the last year? Let him see how those gadgets make the goals further out of reach. Do the same with the Starbucks habit. Do the same with the cell phones. Figure up how much they cost per year, subtract that from what you could be saving, and figure how much time those things are adding to your savings goals.

You might find that Starbucks alone is moving your down payment years into the future.

Examples like this can be startling, as they show the magnification that little things today can have on your future.

Remember that this is the start of a long discussion that will take a long while to come to fruition. Take it slowly and don’t demand that he immediately change to your worldview, or else you’re begging for a fight.

Q10: Self-employment concerns
I’m an independent consultant in the financial services industry. While most have been scrambling to keep their jobs, I’ve had the good fortune to parlay a niche software skill (knowing a vendor’s application) into a successful consulting career. For the past three years, while the industry has been in downturn, I’ve managed to create a very comfortable living in consulting.

I never planned to go this way but quite frankly, I’ve discovered that I don’t work well when others tell me what to do. Hence, I actually enjoy my line of work. I find my own clients (albeit right now through recruiters), work and design my own game plan to make my client successful, and I get paid handsomely for it.

The unfortunate part of consulting is that it is typically budget oriented. If the client can’t afford it then the well dries up, even if there is work. However, I have found that client’s somehow manage to find money if they want to keep you.

The lifestyle is hard, though, when you have a family. I have a two year old son and wife I leave every weekend so that I can commute to my client in Boston. Earlier this year it was in Frankfurt, Germany but I brought them with me.

However, as I get older, I think that perhaps I may need to go work for a company. Somehow, people think this is more stable. My father believes that you get benefits in your older age had you worked at a company. Of course, he worked at IBM where he gets great medical coverage and a pension.

I’m not of the same belief. I’ve seen people work for a company for years only to be summarily to be dismissed. I see downsizing happen all the time.

What are your thoughts on this? Does it make sense to work for a company or for yourself? Hard to answer but what do you think about the pros and cons as one gets older.
- Vincent

They each have benefits and drawbacks.

One big benefit of working in a corporation is the structure and motivation. If you’re self employed, you don’t have a boss pressing you forward to make progress. Self-employment requires self-motivation – and a lot of it. If you don’t have it, self-employment is going to fail. It sounds like you have that.

Another challenge of self-employment is handling the irregular pay. You have to live at the level of your worst paycheck and bank the rest for the future, particularly if you have a family to feed. If you can’t survive on an income level equal to your worst month over the past year, then you’re not handling irregular pay very well. How would you handle a year at the level of your worst month? Could you handle that? To be able to handle that means that you’re banking a lot of your income as a buffer against the unknown.

At the same time, I think it’s a mistake to put your full trust with regard to your future in the company you work for. Companies can and do discard employees all the time. I have come to view any form of employment as a form of self-employment. You have to look at any job as a contract position in which you want to leverage yourself for the best situation you can be in at the end of that contract. That means not necessarily giving it all to the company, but building yourself up as well.

There is no “best” solution for everyone. It depends on whether you’re self-motivated, financially sensible (especially in terms of spending control), and focused on improving yourself. The more of those traits you have, the better suited you are for self-employment. The fewer you have, the better off you are in a corporate environment.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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  1. Michael says:

    Asking me, a 27-year-old, to count on government aid in retirement is as silly as asking my parents to trust the stock market or asking anyone to trust Robert Kiyosaki’s advice to provide Cashflow(tm). There’s politics, and then there are the bare facts of publicly available actuarial calculations.

    Thankfully you advise nothing of the sort.

  2. Kerry D. says:

    Q9, Linda: There is the practicality of entering into a discussion on budget and how to save for the down payment on a home, BUT, I would consider the situation in a broader context… Attitudes and approaches to money that are widely differing between partners can cause huge problems in a marriage. Imagine years from now, day to day where you are living frugally and your spouse hits the ATM for a delicious lunch out nearly daily. Or you’ve built an emergency fund and your spouse thinks it’s no big deal to erode it during Christmas shopping. I could give more specifics but you get the idea… Talk NOW on big topics, before the wedding.

  3. Lynn says:

    For the hoarding issue, the best book I’ve read is “Stuff.” It’s not about organizing possessions but understanding why individuals want to keep things, and how meaning is projected onto objects. It helped me to see some of my own quirky thinking when it comes to throwing or not throwing out items.

  4. Evan says:

    @Q9 Linda: Thought I’d give you an optimistic story. My (now) wife is just like you and I was just like your fiancé. I can’t remember the number of times we almost broke up because she couldn’t imagine living with someone who was so irresponsible with money. Every time we had a fight we’d ‘compromise’ (I’d move a step closer to what she wanted). It took a LONG time and was painful for both of us.
    It started small – make sure the bills were paid on time. Then a bit of savings for emergencies. Then a plan for repaying student loans. Then a strict budget.
    Here’s what helped the most. Long-term thinking is a huge help to understand where you’re going and how much what you’re buying now is costing in the long term. That, and having some savings. I’d never before had money in the bank. Having a separate account that ONLY gets bigger is a great feeling and makes you realize that it feels GOOD to have money accumulate. You don’t need everything.
    Now, 5 years later, we’re going to pay off our first house (bought 3 years ago). This means my wife will be able to be a full-time mom when we have a kid and I’ll be able to do more contract work so I can spend time with my family. THIS is worth making different choices for and is much cooler than a new cell phone.
    Be patient with him – he’ll come around.

  5. Gimena says:

    @ Q6

    I had a similar problem, also in Louisiana. From my understanding of the law, it is only new cars that are covered under the Louisiana lemon Law.

  6. Mary says:

    @Q9: I can relate to your fiance and what Trent said about making the connection between saving and the day-to-day financial decisions you make. I can be a saver, but really I’m a spender thanks to the debt I got into with my first degree in college. I have a hard time making that connection by staying home like my boyfriend does. So far so good, but every so often it bugs me if I’ve been cooped up in the house for 2+ days. I just need to find some hobbies to do for little or no money, and our plan of eating in every night and only going out once a month is definitely helping. Just takes time.

  7. Kristen says:

    In Q1, did he say in his letter that he was retiring? I thought it sounded like he wanted a two-year hiatus. I would recommend taking a shorter time fram like six months instead–live your dream, but don’t put your finances in jeopardy. In six months, you could see much of the country and have a truly memorable experience. Even better, your job skills would still be up to date and your emergency fund would not be depleted.

  8. George says:

    Q1 – With ~$300k in assets and using the 4% safe withdrawl rate, you can retire if you get your expenses down to $12k per year.

  9. William says:

    @Q4: Every cash advance offer I have seen comes with a 3% or 4% up-front fee or minimum fee (whichever is greater). Be sure to read the fine print, ALL OF IT. Trent’s example could very well be: borrow $1000; owe $1030 principle + fees; earn $15 interest; net loss of $15. I would say the offer is only worth it to pay for projects that save money, but would otherwise take more time to pay. For example, replacing old, drafty windows with insulated windows, to save on heating/cooling costs.

  10. Barb says:

    Q8: Try this tactic with your parents. Remind them that they are getting old and the job of winnowing out the chaff/crap is going to be harder as time goes on. They will have neither the strength nor the energy to tackle the job before long.
    Point out that by not wrestling with it themselves they are leaving the job for their children, which is unfair. Also point out that when the children are forced to do it (when the parents die) there may be lots of important or valuable things that are lost because they are wasting time and energy getting rid of so much junk. After all, if you have spent six hours hauling out garbage how alert are you at sorting out the good stuff?
    And last point out that they are paying an emotional price by allowing themselves to be tied to junk for years. Maybe have them attack one room at least and get rid of half the stuff in it. Also point out that things they cannot even give away really have no value.
    When I moved from an area where there was no charge at the city dump to one where there was a significant per pound charge I learned the hard way that hanging on to junk too long can be expensive. I also got a good tip from an ex-military man who moved every year: If you haven’t used it in the last year you don’t need it – sell it, give it away or throw it out.
    Last and most desperate, run a yard sale yourself and ask them to contribute. Then anything that doesn’t sell can be thrown in the garbage! Repeat as needed.

  11. Johanna says:

    Q8: I wonder if part of the reason your parents are reluctant to get rid of their stuff is that they are holding onto it for sentimental reasons – they see getting rid of the stuff as getting rid of the memories. I mean, pieces of wood that “look neat” are unlikely to be of any use to anyone.

    If that’s what it is, maybe something you could do is have your siblings (and maybe some other family members) all come over to go through the stuff and reminisce. Talk about how much fun it was to play the old games, how you remember when the old threadbare couch was brand new and was in the living room, etc. Take lots of pictures, videos, or audio recordings, and write stuff down. Give your parents a copy of the record of the day, and see if they aren’t more inclined to get rid of some things after that.

  12. Kate says:

    Q8 hits close to home because I am dealing with a similar situation…a relative has been in a rehabilitative care situation and will be moving back to their house. It has taken me days and days and days to get their house cleared out enough to be able to actually enter many of the rooms. My tactic has been to box up the stuff that could eventually be given away and I have tossed most of the things that are broken, etc.
    What I have realized is how important it is to get rid of something when you buy something to replace it. I found every towel, blanket, piece of clothing, pot, plate, tupperware container, cooking utensil, small appliance, bathroom set, shoe that ever came into the house (along with a bunch of things from deceased relative’s houses). To me, it went far beyond the “child of the depression” which is what so many people use to excuse the behavior.
    I realize that I can’t change the relative’s behavior but I can sure change mine. I look at all my possessions with a new eye now and hopefully, will look at new acquisitions with the same eye.

  13. jim says:

    Q5 Nancy: You do not have to have life insurance at this point. Your child is an adult and you don’t have to leave them money to care for them. (I assume they are able bodied). If you are worried about leaving your heirs debt then don’t worry about that. You can not hurt your heirs by leaving them debts. Worst case your estate is insolvent and your heirs get nothing. Your Debt will not cost your child anything.

    Q7: I appreciate that Trent keeps the politics out of the blog and I prefer it that way.

    Q9 Linda: Your boyfriend has changed his spending to accommodate you. Thats good. Don’t expect too much change. You two need to compromise and appreciate each others priorities. A good exercies may be for you two to sit down and prioritize spending categories. Just make a list of all the ‘want’ or luxury spending categories : cars, eating out, clothing, pets, vacations, gifts to relatives, entertainment, furniture, etc. Then prioritize them from most to least important. Then compare lists. If eating out is #1 on his list then whats that tell you? If you spend a lot on pets and its #19 on his list then should he pester you to get rid of the dog cause it costs too much?

  14. Cheryl says:

    Many full-time RVers do “work camping” or “campground hosting” to make their savings go farther. Workcampers may get money as well as a site and utilities. Hosts usually just get a site and utilities. A month long commitment is usual and you have days off for exploring the area.

  15. Johanna says:

    Q9, Linda: I agree with jim that you both need to give a little and respect each other’s priorities. What I am reading in your letter is “How do I get *him* to give up (more of) what *he* wants so that *I* can have what *I* want?” Maybe you think his Starbucks habit is wasteful and unnecessary – but there’s probably something you do with money that he thinks is wasteful and unnecessary, too. (Maybe – and this is just an example – he’s not as interested in having a big, expensive wedding as you are.)

    Drawing up a budget, as Trent suggests, may be a good idea. If you do that, though, then once you agree to save a certain amount per month for the wedding, for buying a home, and for other goals, then that’s it. No more pestering him that you could be saving even more than the amount you agreed on, if only he’d give up his frivolous (to you) spending on this, that, and the other thing.

  16. Laura says:

    Linda: It may be helpful if you can show your fiance how overspending is affecting you. He probably cares a lot about your well-being, otherwise you guys wouldn’t be together. So, you could start by identifying one area where you could both cut down together, such as dining out or vacations. I would guess that if he’s dining out or vacationing a lot, you probably are doing some of this with him and spending more money than you’d like too. What you might do is ask him to help YOU cut back, the idea being that if he’s helping you be frugal, he’ll probably start being frugal himself too. You could say, “hey honey, I love going out to eat with you, but it’s getting expensive for me. Do you think we could try to limit it to once a week/ X dollars a week? It would really help me.” Then what really helps is if you have a money tracking software or bank account that you can show him that shows just how much all those vacations add up to. Talk about how often you’re going out to eat, why you’re dining out instead of eating in, what he feels is reasonable. Dining out, besides being a financial habit, is a health/eating habit too. As we all know, eating habits are very hard to change, so you really have to talk together about what’s feasible and why. The point is not to make him feel like you want HIM to change, but how he can help YOU. If you guys talk together about this in terms of helping each other and not “changing” him, he might feel less attacked and like he’s doing something good for you too.

  17. Lisa says:

    Q8: if your parents are holding onto things that they think that you or your siblings (or their grandchildren) might want one day, then take that stuff now. Once the half-lost game or pretty box is in your possession and away from their property, it’s yours to do with what you will, including pitch it in the dumpster if that’s the most appropriate option. If they ask about it later, then you can truthfully say that you found a good home for it.

  18. jim says:

    Q9: Its hard to know from Linda’s question what the real details are. Honestly I am not sure if Linda even knows the details of her fiance’s finances.

    She mentions he has a Starbucks gold card. So? That doesn’t mean a lot. You’d assume he probably spends a fair amount on coffee but who knows how much. Does he still use it regularly?
    If she said that he goes to Starbucks 2 times a day every day then that would mean something more specific. But having a gold card in your wallet is an implication that he probably spends too much on coffee. That kinda seems like Linda is putting together clues about his spending and jumping to conclusions rather than knowing concrete details of his spending. Its not a unsafe conclusion that he spends “a lot” on coffee but for all we know he spends $300 a year on coffee and the 10% off via that card saved him $30.

    Not to criticize Linda. But if I’m right I think its probably important that Linda and her fiance should sit down and talk about finances in more detail. What % of income do each of you save? If he’s saving 10-20% of his income then fine. Thats pretty good. If he saves nothing and actually has a giant credit card debt then thats not so good.

  19. jim says:

    p.s. yes I know I’m jumping to conclusions by thinking that Linda may be jumping to conclusions, but don’t jump to any conclusions about that.

  20. Another Elizabeth says:

    Q9: It sounds like you and your fiance are a lot like my husband and I were seven years ago, when we were engaged. Like you, we found that we verbalized the same or similar financial goals, but he tended to spend large chunks of money on electronics that he didn’t need. There were two things (as I see it) that helped us eventually get to be on more of the same page. The first was simply time. As we had our first child, as we got older and felt like it was time to buy a home, he started taking a more realistic view of how his daily choices were affecting our long term goals. The second thing that helped was to draw charts or other visual representations showing actual numbers. For example, when our daughter was born I went back to work only part-time at first and even though he verbalized understanding that we would need to “cut back” we weren’t actually spending any less until I drew up a page with “before” and “after” columns. Then he could see that where we had a certain amount of money “extra” each month previously, now we had almost exactly enough to break even. Being able to see the numbers made a huge difference, where saying vague things like “we aren’t making as much and we need to cut back” didn’t make any difference at all. So, time and concrete numbers/graphs were the two things that helped us. (Time also worked the opposite way on me – I’ve learned that it’s okay to spend some money just on fun stuff that I want and don’t need. We’ve actually helped to balance each other quite well over the years.)

  21. Steve in W MA says:

    @Q1, Considering Early(ish) retirement,

    You may have enough to do it if you include the value of the two homes. You currently have $300K in cash or equities, and if you have $300K in equity in the two homes (and it could be realizable), that amounts to a sum of $600K. At 3% withdrawal per year, that should last a pretty long time. The question is, can you live on 18K per year?

    I think you can. With a motor home and only gas and food expenses and some entertainment expenses, why not?

    There are issues of obtaining health care etc, as well as whether you can maintain your lifestyle permanently (what happens when you get significantly older?) but I think you are in striking range of what you want if you value it highly and are willing to live withoug lots of frills.

    I would recommend checking out EarlyRetirementExtreme.com.

  22. Steve in W MA says:

    @Q1, I’d consider working one more year at least and banking as much of your income as possible to pad your savings.

  23. Amanda says:

    QUESTION 1 (I haven’t read the rest of the article or any of the comments.) THE POSTER SAID A year or two!!!!!!!!!!!!!!!!!

    In a tax update class we discussed the social security system. Wage earners will get the best ratio of benefits for work done by working for 10 years at 70% of the max withholding amount (Currently over $106,000/yr). If the poster has in fact worked 10 years at the current rate of income (based on the note that $225k retirement was 3 years gross) she’s going to get that max benefit! Like she says, her industry is changing. Instead of being forced out of the market why not take a year off! Then, refreshed, she can come back to work for awhile. Maybe even part time or 3/4 time! She’d have plenty left in her cash reserve fund and rental emergency fund if she spent a year away! Not to mention that although she “only” has 225 k retirement the rentals may eventually net an income while she’s living in the back house for free!!! Or the market could come back and she can sell a home (remember, tax benefit only if you live in it the last 2/5 years!) Of anyone, Melinda, you are in an excellent position to take a year off. =)

  24. Amanda says:

    @1 I don’t know what your comment is referring to. However, paying into social security currently provides disability insurance to the payer, their spouse and children, not to mention that they may receive some retirement benefits for themself and their spouse of 10 years. Death benefit to spouse and children. Small death benefit. No, the system is not perfect, but don’t discount it’s benefits when you look at only one aspect of it.

  25. Amanda says:

    Linda, whose boyfriend isn’t a saver:
    My DH was more of a spender than me. One thing that helped is getting rid of advertising. ie-no tv. It’s not just the $50-$100/month it’s costing you. The constant barrage of ipad and iphone ads is obviously a greater cost to you!

    Like someone else commented. Know yourself before committing to this person. While a lot of commenters said they changed, gradually, years later… realize that there is a potential THAT YOUR SO WILL NEVER CHANGE! Don’t be too optimistic and then find yourself stuck in a relationship that’s frustrating to you.

    The reason I say this? If my DH did what some of my friends DH’s do I couldn’t married to them. I’m pretty controlling of the finances and my DH has willingly given up that control and agrees with the choices we make for our future.

  26. deRuiter says:

    Dear Melinda, let’s see, you’ve got an 80K a year job which at age 52 you’re going to throw over to see the world. After three years of seeing the world, you’ve depleted your savings and you now expect to get a job at 55 with a three year gap in your resume, for something better than a greeter at Wal-Mart? I don’t think so. How about taking some nice vacations without hemoraging $10,000. to buy a used RV. Rent a new, clean, well functioning RV for your vacations, and return it to the dealer between trips. Keep working, keep saving, andf you will have great vacations, and a fiscally sound retirement.

  27. Telephus44 says:

    Q1 – I would absolutely go for it. You also have equity in the houses to fall back on. I’m guessing also that your expenses whil RV’ing won’t be $80,000/year. I find it somewhat amusing that question 2 is about frugality and pessimism, when clearly all the responses (including Trent’s) response to Q1 are all pessimistic.

    Q2 – Yes, your pessimism is coming through. Not that it is entirely misplaced, but there’s a big difference between cautioning someone against taking out $100,000 in loans to be a social worker, and telling every student you run across to put themselves through community college part time while working 3 jobs to avoid student loans. I don’t think you want to present student loans and college costs as the be all end of the experience, just provide a realistic viewpoint – that most history majors don’t make $80K out of the gate, for example. And I love the idea of pointing out that they need to multiple the cost of college times 4.

    Q9 – I think you need to cut him some slack. You already said that he’s “cut back on most of the big spendings” and now you’re going after him for the small ones. Give him some time to adjust. My DH was the same way – and while he still spends more on Dunkin Donuts and computer games than I’d like, he has curbed the big spending – he won’t come home with a gaming system or something that big un-announced.

    And the Starbucks gold card – I’m sorry, I go there on average once a week, and I usually get just the regular coffee (maybe once a month I’ll get a “fancy” drink – and I was upgraded to the gold card last year. Just having the “gold card” doesn’t mean he’s spending $20 a day there.

  28. Angela says:

    Q8 for Sarah- if your parents are serious about downsizing, I wonder if they would be willing to get help from a professional organizer. There are many who are trained to work with hoarders. My dad is this way although my mom isn’t quite as bad. Interesting that I ended up being a professional organizer. But I do understand how emotionally hard it is for some people to get rid of their stuff. It is necessary though.

  29. Mel says:

    @Q1: The actual question doesn’t mention an RV at all, just ‘travelling’. Go for it! I have never met anyone who said they regretted travelling. Keep expenses low – one way to do that is to pick a cheap place to go to. Thailand and S.E. Asia (and the Trans-Siberian railway) come to mind, but there are plenty of other places too. As long as your health is up to it, no-one is “too old” to do it. Put most of your savings somewhere earning as much interest as possible. Then put an amount (perhaps 1 year of current living costs) somewhere accessible, pack your bags and go. Travel for as long as you need or until the money runs out, but remember to buy a ticket home before it’s all gone! When you return, if you need to return to work, emphasize what you did. You’ll be the envy of and maybe inspiration for many younger colleagues, I’m sure! If nothing else, you’ll definitely stand out from the crowd.

    @Q8: My dad was a Depression child, and very much a hoarder, and I’ve inherited some of those tendencies. I find disposing of things isn’t that hard if I can convince myself it’s being useful. But starting the process is extremely hard! My suggestion: you and your siblings choose one room/area, go through and put everything for disposal into a pile. Your parents check there’s nothing they *really* want in there, and you take it away to somewhere appropriate. The reminiscing idea is a good one too!

    @Q9: Can you organise your joint finances so he has his own ‘fun’ money that you have no claim/say over? My fiance sounds similar to yours, and earns much more than I do. I have x amount each month, he has 2x to spend. He gets to buy a new toy or game or gadget every so often, and I can still feel like we’re saving something. Sometimes it’s hard to bite my tongue, but he’s always quick to remind me it’s *his* fun money.

    @Q7: As an non-American living outside US, I’m *EXTREMELY* glad Trent doesn’t talk about politics! And your Social Security does not affect me in the slightest, nor any other reader outside US. I reckon there’s more of us than you’d think!

  30. jim says:

    Amanda said : “If the poster has in fact worked 10 years at the current rate of income (based on the note that $225k retirement was 3 years gross) she’s going to get that max benefit!”

    No we can’t assume they’ll get max benefit. Working 10 years will only qualify you to get social security benefits. To maximize benefits you have to work 35 years at max contribution rates.

    Your SS benefit is based on the average wages over 35 years so if you work fewer than 35 years you’ll have lower wages on average.

  31. Nancy says:

    @Q2 I didn’t state the entire source of my pessimism, which should be re-stated as fear. I’m now having scores of students that are graduating or have recently graduated from college expressing anxiety about their student loans because they are either unemployed or underemployed. Some have applied for hundreds of jobs, to no avail. They have all done the hard work and taken the loans. These highly trained young people went into college four and five years ago riding high on optimism because there was no recession in sight. The national unemployment rate is 9.3%. For our young people it is MUCH higher, and now because their parents are being squeezed, graduating high school students are left holding the college loan bag. I’m the most positive teacher in our building, and always encourage every student. I don’t express my fear out loud to high school students, though I encourage them to think things through.

    Are there other readers out there that are recent college grads encountering this same experience?

  32. Rachel says:

    Sarah, I have a similar situation. My mom and her boyfriend live in a home that is just filled with junk. He blames it on her, she blames it on him. Once when my mom was very ill, I went and cleaned. In the process I cleared surfaces and found homes for things, like a kitchen drawer for a flashlight. when he saw I had moved things he became very agitated and upset, then started putting things back. I decided to just give up. I visit occasionally and as long as the kithcen and bath are clean, and I don’t see any evidence of filfth anywhere I know my mom is okay. My plan is just this: if Mom goes first I will go through her things and take what I want, then let him deal with the rest. If he goes first I will try and get her to leave the home and find a better living situation. Not sure if I have any legal right to make decisions about what is actually in the home, furniture and the like. They did a reverse mortgage several years and I am not sure what the bank has ownership of. If your parents really want to work at getting some things moved out of the home, I agree that a professional organizer would be best. there is just too much emotion among family members.

  33. littlepitcher says:

    @Sarah–Have them offer the sofa to an upholsterer, or better yet, to an upholstery class at the local community college. The same solutions can be applied, box by box, item by item. Old books can be donated to prisons, newspapers to recyclers. The bane of housekeepers, senior accumulations of plastic bowls, can be sorted by that little number on the bottom and sent off to the recycler, too, at least in urban areas. The rest of us just have to smuggle them out the back door to the neighbor’s garbage can while the hoarder’s in the bathroom…

  34. Steve in W MA says:

    @ q7, “so far, not to help pay off the student loans, but to give her an opportunity to recover by affording her totally free room, board, use of a car etc. We are doing this for her, and it is at marginal increased expense for us, but nevertheless, because of our age and her own future, think it should not and cannot be indefinite and long term. ”

    Firstly, if your daughter she weren’t there, I’m guessing you wouldn’t be renting the room out at your age. So there’s no “lost rent” involved here. Instead, what you have is a case of just needing to establish an arrangement of economic equality between you three for contributing to the household upkeep.

    The marginal cost you refer to is the cost of gas and the intangible of the lack of use of the car while she is using it.

    There is no reason whatsoever to be feeding her for free, unless she literally doesn’t have $50 a week for groceries. I suspect that this arrangement goes back more to a pattern of parental support (feeding the kids) than it does to her desire for a free ride. It makes more sense to share the grocery expenses, so I’d suggest having a family meeting about bills and splitting up those costs each month. Same thing with the house bills–have her cover one third of the utilities.
    If she’s financially able, I would suggest having her pay for one third of the monthly property tax in lieu of “rent”. That seems fair enough and puts her on an equal plane of responsibility with you two for the house upkeep. rather thatn in oesn’t put her in, rather than the one-down position she is currently in by not being asked to contribute equally to those expenses.

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