Reader Mailbag: Civil Disobedience in Toddlers

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. Personal loan question
2. Everyone else has more money
3. Spice question
4. Child credit question
5. Huge warehouse club bills
6. Miserable at well-paying job
7. Credit card dilemma
8. Cost of living overwhelming me
9. Bitcoin alternatives
10. Nanny questions

I often wonder if Gandhi devised some of his civil disobedience tactics after watching a three year old who refused to put on clothes in the morning.

Q1: Personal loan question
This morning [a large bank] called me to see if I’d want to come in and talk to them about getting a personal loan to pay off my credit card I have with them. They said the interest would most likely be between 8 – 10% and being a personal loan, it would save me interest etc. My credit card is nearly maxed out at $9600, and I’m only paying my minimum due each month. I’m not really making much headway so a personal loan is pretty appealing to me.

My dilemma is that I don’t understand how they benefit from providing me with this loan? The are making a lot of money off interest, so why would they want to help me out? The only thing I can think of is that they are doing this assuming that I’ll just charge up my credit card again. But other than that, I really can’t think of why they’d want to do this. Do you have any ideas?
- Tim

In terms of the company as a whole, it makes no sense, of course.

However, most large corporations are set up with separate divisions that practically compete with each other. I’m not surprised that one division is directly competing with another in this way.

After all, the division that wins over your business is the one that looks better during the quarterly reports, as they “acquired” a customer!

Q2: Everyone else has more money
How am I supposed to feel sympathy for someone who’s trying to figure out what to do with their extra $10,000 when I can barely keep food on the table? I get really tired of hearing the “poor me” routine from people who have money running out their ears.

- Sandy

Every ounce of energy you waste being mad at society or mad at someone else because of what they have, that’s an ounce of energy you didn’t spend improving your own situation.

There are always going to be people with more money than you. They’re almost always goin to have concerns that seem trivial to you. That’s life. Until you’re Bill Gates or Carlos Slim, there’s always going to be someone on top of you on the food chain.

Don’t spend even a second worrying about the people who have more money than you. Instead, focus every ounce of energy on putting yourself in a better place.

Q3: Spice question
My local food co-op sells bulk spices at a really good rate, better than the stuff in jars at other grocery stores. My problem is that I don’t know how to store the stuff. When I buy it in bulk, it comes in little baggies and that just turns my pantry into a mess.

- Dana

My suggestion would be to stop at a Goodwill store and see if they have any lidded jars. Almost every Goodwill store I’ve ever been to has jars for sale. Not too long ago, I saw a giant box of clean baby food jars with lids at a Goodwill, which would be just about perfect for this.

Even if they don’t have lids, you can easily buy a bunch of standard lids from Amazon. Most glass jars have a standardized lid.

If your Goodwill doesn’t have them, poke around at the nearest dollar store. They often have jars or small containers that work perfectly for this.

Just buy your bulk spices, put them in the jars, and label the jars with some masking tape.

Q4: Child credit question
My husband and I keep fraud alerts on our credit reports and renew them every 90 days. Our fifteen year old son doesn’t have a file with any of the three agencies. He has bank accounts, a debit card and, unfortunately, his social security number has been used by his schools and doctors for years. I am concerned that he could become a victim of identity theft. Is it a good idea for us to ask the three agencies to set up files for him so we can include him in our ongoing fraud alert process? The agency web sites really don’t offer advice on this and want $30 a month to provide protection for the entire family.

- Elise

You certainly can do this, using the same process you already use. You would just sign for him as a guardian.

When your son gets older, he’ll have to start doing this himself starting at age 18.

As for the bureaus, of course they’d rather sell you a product. If they can charge you $30 for something you can get for free, why wouldn’t they do this?

Q5: Huge warehouse club bills
Whenever I go to Costco, I buy only the stuff on my list but the total always ends up being something way higher than I would have expected. I understand that the cost per unit is lower there but how do I keep this under control?

- Yancee

Theoretically, if you’re following a shopping list that’s based upon a meal plan and authentic household needs, your Costco bills shouldn’t be that high except for the first few times you move to buying household supplies in bulk.

I guess I’m not sure what you’re buying there that’s adding up to so much. If you already have most household supplies in bulk, you shouldn’t be restocking on them nearly as often, and if you’re following a grocery list and a meal plan, your food shouldn’t be any higher.

Are you sure that you’re not being tempted by impulse buys that seem like “bargains” because their cost per unit is so low? I have a few friends who probably doubled their beer consumption after joining a warehouse club because the beer was so cheap… but suddenly they were actually spending more on beer than before.

Q6: Miserable at well-paying job
I work at EA. At first, I was thrilled to get the job as the pay was tremendous and the work seemed really stable. About two weeks in, I realized that it was actually hell. Everyone works a minimum of 70 hours per week and those who *just* work 70 are often shuffled out the door. The work is mind-numbing. I regret ever taking this job. Help?!

- Nathan

Quit! This is, of course, assuming that you have opportunities with lower stress levels elsewhere. You should never live to work. You should work to live.

What are you actually getting out of life for that extra pay? Theoretically, you should be dumping all of that money into getting rid of every bit of debt you have so that if you walk out the door, you can easily afford a much lower-paying job.

There is no paycheck that is worth being miserable when you’re working.

Q7: Credit card dilemma
I’m 26 and I’m about to pay off my credit card entirely! (Using a portion of the money I’m getting back from taxes in April, with the other portion going direct to savings.)

I accumulated the debt while working at a non-profit after college, and have been working to pay it off since, and as of a few weeks from now, that credit card will have a balance of $0.

Right now, I’m in the lucky of financial situation of being on a full-scholarship to law school, and of having the support of my domestic partner and my family for my living expenses until I am out. So I will not need to use the credit card for anything–unless emergencies arise–and would like to keep a credit card for that reason.

But the question is:
-Should a credit card with a balance of $0 be kept open? What effect will that have on me?
-Am I better off if I charge some minor amount each month (say $10) and pay it off immediately?
-I have been using a Bank of America credit card which I’ve had since college. I would love to switch to something less slime-y. Can I simply close by BoA card and get a newer, better one? Will closing it and opening another hurt me in some way?

- Sloane

If you only have one credit card and no other debts, it’s probably a decent idea to keep it open to show that you have a positive established line of credit and length of credit history. The advantage of your old card is that it has a long history associated with it, and the length of your history is a key part of your credit score.

If you want to switch to another card, I’d probably just get a new card and leave the BoA one alone. Stick it in a drawer somewhere and forget about it.

As for charging a small amount each month, I’d do that once you get the new card. Choose a Mastercard or Visa that has a bonus program associated with a retailer that you use regularly. Use that card only at that retailer and only on stuff you ordinarily buy there, then pay it off each month. You’ll get some rewards in the process and help keep your credit score up.

Q8: Cost of living overwhelming me
When I took this job eight years ago, I was able to make ends meet. Since then, not much has changed. I’m still single and I live in the same apartment. My job has given me “cost of living” raises. The problem is that I can’t make ends meet any more. My rent has gone up faster than my pay and the energy bill has too. Food just seems way more expensive. I feel like I’ve always lived cheap but it isn’t enough any more.

- Andrea

It’s likely that the “cost of living” raises at work aren’t actually reflecting the true changes in your cost of living. If you live in an expensive area and your employer is using generic nationwide figures for “cost of living” raises, then you’re actually falling behind in terms of pay.

It’s also quite possible that you’ve added some expenses in the last eight years. Do you have a smartphone with a data plan? What about high speed internet? Those are bills most people didn’t have eight years ago.

I can’t tell you what the answer is, but something has to change in your life. You either need to cut the new expenses (meaning cut the internet or Netflix or the phone bill) or cut some old ones (move to a different place, reassess your food use). Alternately, you can seek a higher paying job or ask for a raise at work.

Q9: Bitcoin alternatives
Do you have any thoughts on any of the Bitcoin alternatives like Dogecoin?

- Ethan

They have all of the same problems as Bitcoin has, but with the further problem of a lack of large established user base.

Bitcoin may or may not evolve into a stable alternative currency, but as of right now, it’s not one. When things like the MtGox situation can occur with your currency because of a lack of a secure exchange method, then it’s not reached maturity yet.

However, Bitcoin has the advantage of having quite a bit of money invested in it right now. There is large financial motivation for a secure exchange. The others are orders of magnitude smaller. The motivation for secure exchange is much smaller.

Q10: Nanny questions
This is the first year that we have hired a person to come to our home and take care of our son during the day. When we hired her, I didn’t think to look at tax implications and how to file for each pay check. Now that it is tax season I naturally have a lot of questions. I already contacted my CPA but I don’t think his response is ethical, so I am hoping you can help me out.

So our nanny comes to our house Monday thru Friday. We set the hours and days, and we provide all of the materials (ie. food, diapers) to take care of our son. This past year we paid her a total of $3800. My CPA told me to give her a 1099 and treat her as an independent contractor but I did a little research and discovered this is unethical and puts all of the tax responsibility on the nanny. I don’t want to treat her this way and want to do the right thing. So, I discovered I need to treat her as a household employee but I really don’t know what I need to do beyond that. I know I need to pay a certain amount of Medicare, SS Tax, and Unemployment Tax, but don’t know how much exactly. I’m afraid I am filing things too late and will be penalized.

So, my main questions:
1. How much do I need to pay in Medicare, SS Tax, and Unemployment Tax?
2. Do I also have to pay state taxes? I live in Hawaii.
3. What is the nanny to be responsible for?
4. Am I too late to file correctly?
5. My nanny is the wife of someone in the Army, does this change anything?

- Sam

I believe this guide will walk you through each of those questions. You’ll also find NannyTaxTools to be a big help. For Hawaii, this guide should answer your questions.

If you think your accountant is giving you unethical advice, then you should seek a different accountant. You don’t want anyone shady managing your money.

I don’t believe the nature of the employment of a spouse of your household employee should have any impact on how you handle payment and taxes to your employee.

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.

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