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. Home purchase question
2. Cheap non-tacky home decor?
3. Gardening for salads?
4. Car repossession question
5. Feeling guilty about spending
6. Replacing magazine subscriptions
7. Big celebration? Or wait?
8. Credit score estimates
9. Old shoes
10. Roth IRA for spouse
I have fond memories of watching children’s television shows when I was a kid. Not too long ago, I showed my kids a few of the shows I used to watch.
They didn’t like them. Neither did I.
Children’s television has drastically improved since the early 1980s. There are a few shows that are still worthwhile from my childhood years (like Fraggle Rock, Sesame Street and Reading Rainbow), but many of them are absolute junk that teach nothing at all, have characters with no depth, and present no moral dilemmas (or do so only rarely). They were just generic “good guys beat the bad guys” stories. Sure, a few shows were all right, such as
Today, even the worst children’s shows tell far better stories than some of the stuff I watched as a child. Many of them have really good educational content tied in, as they’ve refined the recipes of the early CTW shows (like Sesame Street and 1-2-3 Contact) and simply made the shows better.
Even the shows that are blatantly designed to sell toys are still light years better than the stuff that was around when I was a child. You have to really dig down to the bottom of the barrel to find the same kind of one-dimensional shows that were everywhere when I was a kid.
I still think that most of it pales in comparison to the value of having a kid play at the park with their friends, but I wonder what kind of impact such an improvement actually has on our children.
Q1: Home purchase question
With my credit card debt paid off the only remaining debt I have is 13k in a student loan at 2.65%. I’m not too concerned about paying this one off right now since the $200 monthly payment is reasonable and the interest rate is low. We currently have $5k in savings and are able to sock away around $800 – $1000 per month if nothing unexpected comes up. I’ve been reading a lot on finances and home buying and initially really wanted to avoid paying PMI on our home purchase. We’re looking at homes worth around $150,000 and with a 20% down payment to avoid PMI, we’ll need to save up for more than 2 years before we can afford the down payment. As a first time homebuyer is it unreasonable to focus on saving up to avoid PMI? With really loud neighbors next door in our duplex, our living situation can be pretty trying at times. I’d love to get into a home of our own sooner rather than later especially with the market turning around like it is. What are your thoughts?
PMI is the equivalent of adding 0.5% to 1% additional interest to your monthly mortgage payment. So, if you’re getting a 5% mortgage, it becomes 6% (or so) until you get significantly below that 80% threshold.
From a purely financial standpoint, it’s far better to keep saving rather than buying now, with two exceptions. One, is the housing market you’re looking at going up like gangbusters? If so, it makes sense to buy sooner as the increase in home value will undo the advantages of waiting. Two, are interest rates about to rise? The Federal Reserve usually gives hints at this before raising rates.
The noisy neighbors do add a “quality of living” aspect to this question. It’s hard to estimate what that is truly worth, especially considering you know nothing about your potential future neighbors.
If I were in your shoes, I would try to calculate the total monthly cost of living in the house you’re looking at – monthly mortgage payment plus 1/12th of the annual property taxes plus the monthly insurance cost plus any homeowners association fees. How does that compare to your monthly rent plus insurance? That comparison should give you a good idea of whether the move makes sense.
Q2: Cheap non-tacky home decor?
My husband and my two sons and I moved into a much larger rental home than the apartment we were living in (without an increase in rent!). Now that we’re settled, the walls look really bare. We have a few family pictures up, but with so much more wall space, it kind of feels like a prison. We don’t have much money for decoration. Do you have any ideas?
I often stalk the local Goodwill stores looking for things like vintage video games and board games. One thing I consistently notice there is the availability of very inexpensive photo frames and also poster-sized frames for only a dollar or two.
What do you fill them with? Whatever you want, really. Be experimental. You can put family photos in the small frames. You can look for artistic prints online for the larger ones – if you look around, you can find amazing stuff that will come to you in a tube for a very low cost. AllPosters is a great place to start – just search for ones that match the size of what frames you have.
You can also make your own art. My office has several pieces of framed artwork done by my children. I rotate some of the pieces, while others that I particularly like stay the same.
Choose things that you all like and you can fill the walls in a tasteful way for a very low cost.
Q3: Gardening for salads?
I have about 100 sq. ft. in our fenced-in and tilled garden for our apartment complex. What should I grow to make good salads? We eat salad two or three times a week but we mostly just buy lettuce and spinach and mushrooms and mix them together.
Honestly, most vegetables go in a salad. Lettuce and spinach are two obvious options, but you can put almost any thinly-sliced vegetable into your salads.
Are you looking for salad suggestions? I particularly like cherry tomatoes and shaved carrots when I enjoy a salad. I like arugula, too. All of those can be grown easily in a 100 square foot garden.
Focus entirely on what you like in salads. You like spinach, so grow spinach. If you’re unsure, try some things in your salad from the store and see if you like them. If you do, then you have something else to grow in your plot.
Q4: Car repossession question
I have a car paid for. The title is in my name and my sisters – as “OR”. Long paid off now…. but she has old debt. From…oh, years ago. Do you know if the car is exposed in any way from some random credit card collector who may have by now bought a debt of hers?
No. If the car wasn’t collateral for the debt – meaning this isn’t a car loan – then the debt collector can’t repossess the car.
However, the debt collector can legally pursue your sister. In that case, your sister will be legally bound to cough up the cash for the judgment. Since the car is an asset with her name on the title, she could theoretically sell the car to pay the collector.
That would create more of a personal issue between you and your sisters than a legal matter, though.
So what can be bad about this? Well I feel bad whenever I spend money on something that isn’t absolutely necessary. Instead of not feeling guilty when I buy stuff and then feeling horrible when the bill comes in, I now feel incredibly guilty when I buy stuff and feel great when I see that smaller bill.
I’d like to find a healthier balance. Any suggestions?
I had this same problem when I first started my financial recovery. I felt guilty about spending money I could have used for other things.
My solution was to add a line item to my budget that essentially gave me a certain amount each month to spend however I wanted. Knowing that I had already accounted for that money made it easy to spend that money on enjoyable things.
This was such a natural solution that I still use it, many years later.
Q6: Replacing magazine subscriptions
I have been a subscriber to The Atlantic and The New Yorker for many years. I love reading their long articles. But the price of the subscription is really getting to me. I spend something like $80 a year on magazines that I just throw out. I can read some articles on their website but do you have any other ideas for enjoying some of the articles without paying? I don’t like piracy so don’t even suggest that.
Both of those magazines are wonderful if you enjoy long, well-written articles on a variety of topics.
The closest substitute for them that I’ve found online is Longreads.org. That site posts a link or two each day to a long, well-written article found somewhere online.
I visit that site almost daily and I’m usually quite happy with what I find. It’s filled that niche in my reading life without padding my budget.
Q7: Big celebration? Or wait?
I’m a software engineer and I’m going to be 25 on this 2nd April. I’m single. I have debts of around $800 on me. My monthly salary is $400 in which $200 goes in livelihood and education loan EMI’s.
The problem is I’m thinking to have a big celebration on my 25th that would cost me somewhere around $100 or I can just do in a small party to my friends at home in around $30. In heart I’m tempted towards former but my mind says go for later one. I’ll be married in next 2 years and I want to finish my debts ASAP and start saving for my hobby of books and travelling.
A note: Steve lives in another nation with currency values that are different from our own. This question translates well to American dollars if you simply stick a zero on the end of each dollar amount.
For decisions like this, I usually try to think about what I would get out of the more expensive option that I wouldn’t get out of the cheaper option. So, what would the “big bash” give you that the smaller one wouldn’t? An afternoon with casual acquaintances, of which some of the time would be spent with your good friends anyway? Is that worth the extra $70 to you?
I can’t make that call for you, but I tend to vastly prefer smaller parties personally.
I don’t know what value you get from an estimator that you can’t get from just looking directly at your credit report. I can see the value of seeing your real FICO score, but an estimator isn’t giving you that. It’s giving you an approximation.
In exchange for that, you’re sharing your data with yet another party. Regardless of how secure that new party is, there’s still at least some risk of intrusion.
For me, Credit Karma and other credit score estimation tools just don’t provide enough value to be worthwhile.
Q9: Old shoes
What’s the “cut off line” for throwing away old shoes? I’ve been a “keep wearing them until they fall apart” user since I was a teenager, but my fiancee is hysterical about the state of my shoes.
You’re asking the wrong person because I’m basically in the same boat you are. Why get rid of shoes until they’re unwearable?
The “middle ground” I’ve used with others is that I keep two pairs of shoes around. I wear one pair most of the time and keep wearing them until they fall apart. I keep the other pair “nice” so that I can wear them during nicer moments.
When the old shoes finally give out, the “nice” pair becomes the everyday pair and I then pick up a new pair to become my “nice” pair.
The “nice” shoes stay nice for a long while because I don’t wear them much. The “old” shoes are my main shoes that I can wear until they fall apart. It’s a system that keeps everyone happy.
Q10: Roth IRA for spouse
I’ve had a Roth IRA account with Vanguard for quite some time. It’s in a targeted retirement index fund. We are about to set my wife up with a Roth and wondering your thoughts on opening it with Vanguard and the same fund? I have been happy with Vanguard’s performance and customer service but I’ve always heard about diversifying. I was thinking maybe going with T. Rowe Price or Fidelity so all of our eggs are not in one basket as they say.
I don’t see any problem with doing it that way. Just make sure to compare the expense ratios and fees between Vanguard’s target retirement fund and Roth IRA and the expense ratios and fees of the same things at the other house you choose.
Of course, it doesn’t really matter that much. Both of the target retirement funds are going to be invested in very similar things, plus all of the investment houses you mention are insured by the SIPC against failure (not investment losses, but failure of the investment house).
If I were using another investment house besides Vanguard, I’d lean toward Fidelity, but I would honestly let the numbers do the talking. If the numbers are close, I have more faith in Fidelity’s reputation.
Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. Iíll 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.