Reader Mailbag: Boredom

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. Rolling 401(k)s into Roth IRA
2. Simple cheap and healthy breakfasts
3. Solving bad debt situation
4. More expensive internet worth it?
5. Prioritizing student loan repayment
6. Eliminating old papers
7. Life at a crossroads
8. Getting elderly out of house
9. Stupid mistakes leading to retirement
10. Praying for financial recovery

When I was a teenager, I went through periods of boredom. Looking back on that, I’m just stunned.

I truly do not have nearly enough hours in the day to do all of the things I want to do. If I ever find myself in a situation where I’m just sitting there not being productive or doing something mentally or physically engaging, then I know only one thing – I’m tired. I usually try then to fill the time until I can sleep with simple tasks.

I would give anything for a few more hours in the day. I can’t remember being bored. The idea seems alien to me.

Q1: Rolling 401(k)s into Roth IRA
I have two old 401k’s that were started with former employees. One has approximately $4,000 in it and the other has around $500. I already have a Roth IRA with Vanguard and am wondering if I should move them into that account. I am 29 years old and in the 15% tax bracket. I would pay for the taxes associated with the moves with other money, not taking anything from the accounts themselves for the move. My feeling is that I should try to get as much money as possible into my Roth IRA while I am in such a low tax bracket because I expect to be in a higher tax bracket later in life. Do you think I should move the 401k’s to my Roth IRA? Or if I should move them into an IRA instead, what type do I need (traditional, rollover)?

– Linda

There are two steps in this process. First, you have to roll your 401(k) into a traditional IRA. Both of these are pre-tax retirement savings accounts, so this is mostly a matter of filling out paperwork.

The tougher part is rolling a traditional IRA into a Roth IRA, as you’re moving from a pre-tax account to a post-tax account. That means you’re going to be liable for income tax on the money you convert. In your case, it could be anywhere from $1,000 to $2,000 depending on where you live and how much you earn (the more you earn, the higher the taxes).

In both cases, you want to do it directly, as you do not want to hold the money in the middle. Talk to each company involved and make sure that they’re clear you want to do a direct transfer.

I agree that it’s probably a good move to get into a Roth IRA while your tax bracket is low.

Q2: Simple cheap and healthy breakfasts
My oldest child started kindergarten this year and this has completely changed our morning routines. I used to have plenty of time to fix breakfast for her in the morning but now she needs to be at the bust stop almost an hour earlier than before. Any suggestions on simple, cheap, and healthy breakfasts? I know you have multiple young ones in school

– Gracie

When the weather is warm, we usually don’t have a warm breakfast. A healthy cereal and some fruit is usually a good start for my kids.

When the weather is cooler, something warm is a good idea. When that’s the case, we usually have either oatmeal or scrambled eggs for breakfast. If we have oatmeal, I make it in a small crock pot the night before and let it sit overnight so I can serve it in the morning with ease. With scrambled eggs, I usually have the eggs cracked and mixed the night before so that I can basically just pour it in the skillet and start cooking while they’re getting dressed.

You’ll learn soon that the best thing you can do to make a good morning routine is to prep as much of it the night before as you possibly can.

Q3: Solving bad debt situation
I have over $18,000 of credit card debt, spread primarily across 3 credit cards (Freedom, Sapphire, and Slate), offered by my bank, Chase Bank. I also have a balance of several hundred dollars on my Discover Card. I have had periods of unemployment over the last several years during which I received meager unemployment insurance checks, and during which I wracked up much of the credit card debt.

A large chunk of my c.c. debt is from putting my direct-pay health insurance monthly premium on a credit card every month. (This is a health insurance program overseen by the state, with “reduced cost” insurance – the monthly premium was mostly in the $300 – $400 dollar range during the 5 years or so that I was on this health plan). I’m happy to report that I’ve been employed for nearly the last year straight, and am hoping to remain employed long-term with the organization I’ve been working for since late 2012.

My current monthly net income is in the neighborhood of $1,700 – $1,800 (I work between 35 and 45 hours a week, at $15.00 per hour, on the books). I cancelled the direct-pay insurance earlier this year when I became eligible for the virtually free health and dental insurance from my employer. Unfortunately, however, the position I originally worked in was not a great fit for me and did not work out, and I switched to working in a different position with the organization that does not offer benefits.

As a result, I elected to enroll in COBRA benefits which are now costing me $582.00 a a month. I am hopeful that I will be able to obtain another position in the organization that offers benefits in the not-too-distant future. Despite the high cost of the COBRA benefits, I plan on paying for my insurance from my checking account and continuing to not use my credit cards, which I had intentionally stopped doing earlier this year in order to “stabilize” my debt.

I am a 35 year-old single male, never married and with no kids. I live at home with my parents and pay no rent. My current monthly fixed expenses are:
$582 health insurance
$200 car insurance (with 4 months a year with no payments)
$175 car lease
$92 student loan
Gas money uncertain – somewhere between $120 and $250 per month
$30 to $50 prescription med. copays
and currently around $410 in minimum payments on the four credit cards
*The above of course does not include things like food, social life expenses, or personal care/toiletry expenses.

For a long time, I have been delaying on deciding what course of action to take to improve my finances and start eliminating my credit card debt. Among the options I’ve encountered are: bankruptcy; credit card balance transfers; personal loans, such as First Solution from First National Bank, Omaha, Lending Club, Prosper, and Discover; and debt settlement, such as National Debt Direct, etc.

I know that an attorney my parents had spoken to had suggested negotiating to reduce the credit card debt, although he didn’t go into detail with his suggestion. The prospect of not having to pay off the entire balances is very appealing obviously, although it may be morally/ethically suspect to shirk my debt responsibilities in this way. I want to move out of my parent’s house finally and be independent. My desires/goals are pretty simple and revolve around needing to have my finances in a place where I can afford to rent an apartment and enjoy my life more (e.g. – get a girlfriend).

Any thoughts/opinions you could offer on this would be of great help and be very much appreciated. I need to start managing my finances and getting them under control so that I can finally start to really live my adult life. If you do have the time to read and respond to this, please let me know if there is any more info. I can provide that would further inform your opinions on my situation.
– Kevin

If you negotiate a reduction in your debt, most of the time it will result in a negative ding on your credit report and it will also come with a fee. I’ve personally witnessed several debt negotiations and each time, regardless of the promises, it had a negative impact on their credit. For you, that likely means higher interest rates on things like car loans and mortgages, higher insurance rates, and much more scrutiny when renting an apartment, at least for a few years. Given that you’re wanting to rent an apartment in the near future, this may not be the best option.

If I were you, I’d take advantage of the remaining period of living with your parents and start whacking your debt as hard as you can. Talk to them about it and set a goal with them that’s reasonable for all of you so that you can get out of the house and on your own two feet within a reasonable timeframe without a large debt load.

One final thought: simply moving out will not trigger a sudden enjoyment of life. People often pin their hopes and dreams on life changes like moving out of the home, only to find that the struggles are still there but in a different form. Don’t pin every life hope you have on getting an apartment.

Q4: More expensive internet worth it?
My husband has been talking about upgrading our internet service for months now. We currently have 2 Mbps service for $30 a month, and he wants to upgrade to a 15 Mbps service for $60 a month. I don’t see the value in it.

– Angela

There’s value in it if it enables you to drop cable television service and just use streaming services like Netflix and Hulu. There’s value in it if there’s a professional benefit to faster internet speeds.

If it just means you can sit at your laptop and watch “The Fox” a little faster, it’s probably not worth it.

The idea of something like this being “worth it” comes down to the value you’re getting out of it. If faster internet produces $30 a month in value for you, it’s worth it.

Q5: Prioritizing student loan repayment
What should be the priority between student loan payments and retirement? Right now, my fiancé and I are able to make our minimum payments for all of our loans (~$120,000, most at 6.8%, one higher at 8.5%) and we are saving enough to get our company match for retirement. Should we debt snowball or up retirement contributions? We don’t have a ton extra each month. We do have a $1000 emergency fund.

– Charlotte

If you have relatively low interest debt, I would make sure you’re getting all of the employer match for retirement and then focus on getting rid of the debt – in other words, exactly what you’re doing. I think you’re nailing it.

If you have high interest debt (you don’t), your focus should be on not accumulating more and reducing that before either retirement or low-interest debt. If you don’t have an emergency fund of at least $1,000, that should be your top priority of all.

A note: whenever you can spare an extra few bucks each month or when you get some kind of windfall, toss it all at that student loan. The sooner it’s gone, the better.

Q6: Eliminating old papers
I have boxes of old papers that I’m afraid to throw away due to identity theft worries. I know I should shred them but the quantity of papers means I’d be using a home shredder for weeks. Ideas?

– Adrian

If you live in an area where community shredding events happen, that’s what I would use.

Alternately, if you live in a rural area, burning the paper is an option. You can burn quite a lot of paper during a bonfire. Invite some close friends to a paper-burning fest and do it in a secure area where there’s little or no risk of a fire spreading.

If neither of these apply to you, you can also try using a shredding service like what OfficeMax offers. Their entire business relies on doing this securely.

Q7: Life at a crossroads
I’m 29 and at a crossroads in my life. I have only started to seriously save in the past year (and so frustrated to have wasted 8 years of my early earnings). This is where I’m at:
– a very conservative stock portfolio
– majority of my savings is in a savings account at around less than 1% interest per annum.
– have investment in the cooperative in my former place of work that returns around 18-19% cash dividends per year.
– have a small bit of money in a time deposit account that returns around 1% per annum
– have started investing in a mutual fund.

My family is currently being run out of the house that we have lived in the last 20 years. We do not own the house, so we will not get any cash coming in from that. This is a blessing in disguise because the house we are living in is really too much space for all 3 of us, and expensive upkeep and utilities expense. It is also too far from where we all work in the city, and we incur significant expense on our commute (gas, toll, parking for 2 cars).

We are looking into renting or purchasing a modest condominium or townhouse (we are a family of 3 and a few dogs) that is closer to where we all work. I am hoping, however, that I can find a studio to rent (rent to own) or purchase so that I could live on my own already. I can afford to put up to half of my monthly salary towards rent expenses (the amount which is currently being eaten up by my transpo expenses anyway). If I move on my own, I will give up my car, and will primarily commute via taxi. If I find a place close enough, I can walk to work.

I do not necessarily want to wipe out my savings to put towards any downpayments. I also will end up saving less money per month and will essentially live from paycheck to paycheck.

What do you think? Should I go off on my own?
– Angie

I can’t tell whether or not you have any debt, but if you are debt free, then I would consider moving out to be a reasonable financial move.

Being on your own is often a question not of finances, but of other aspects in life. If you feel as though being on your own will bring you more benefits than drawbacks, then it’s probably a wise move.

One suggestion: unless taxis are really, really cheap in your area, that’s going to eat up a lot of money. Consider mass transit instead.

Q8: Getting elderly out of house
Since my father retired, it seems like all he wants to do is sit at home and watch Fox News. I really want to get him out of the house to do something but the only things he ever mentions to do are expensive, like golfing. What can I do to get him moving around without ponying up for golf excursions?

– Roger

Anything. Anything at all. My great grandfather basically did this after retiring, and my grandfather also did this after my grandmother died.

Having said that, it’s really hard to come up with good suggestions for you without knowing your father. Different people enjoy different things and it’s hard to say what your father might actually enjoy.

My suggestion is this: look up the community calendar for your area and just start suggesting events and activities you find on it. Make it clear that it’ll cost him nothing to try any of them (even if you have to foot a small amount for the first time or two). You should have some idea of what might click and what will work.

It will take time, but you need to get him up and around.

Q9: Stupid mistakes leading to retirement
I’m wondering if you’ve ever addressed a situation like mine in any of your articles online. I just turned 60 years old, so that means retirement is close. We don’t have much, not nearly enough saved. I’m sure you probably not addressed this issue, because you didn’t know about us and I’m sure no one else is as stupid as we are and have been all our lives, apparently!

– Patricia

There are a ton of people in your exact situation. Unfortunately, there is no easy answer that will allow you to magically retire in a few years.

My advice to you is to start saving every single dime you can right this second. Don’t waste a minute. Save it anywhere – a Roth IRA, a savings account, a 401(k) – whatever you have. The point is to save something starting immediately, and the more, the better.

You’re also going to want to wait as long as possible to start Social Security benefits so that you can get the largest amount per month, as Social Security is going to have to make up a large part of your retirement income.

You’re also going to be working for another decade at least.

That’s the harsh reality of things. There isn’t a magic switch to flip that will correct four decades of not saving money. If there was, no one would start saving until age 60. However, if you start saving now, save as much as possible, eliminate any and all debt, and wait on Social Security, it’s not unreasonable to look at a retirement in the next ten to fifteen years.

Q10: Praying for financial recovery
I pray and pray for something to happen and help us to fix all of this debt but it just seems hopeless. Every time it feels like we step forward we step right back because something goes wrong. I don’t know what to do any more.

– Gillian

I fully believe in prayer as a tool for helping people reduce stress and find solutions. The problem is that when answers come knocking, people sometimes don’t answer the door.

You need to open your life to as much opportunity as possible. Go out there and get more involved with your church. Join some other community groups. Do the best job you can at work and ask lots of questions about how you could do things better (and listen to the answers!).

The more things you do like this, the more routes you provide for opportunity to come into your life – and opportunity is what you’re really praying for. The less you do, the fewer chances you give for things to happen in your life.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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