Reader Mailbag: Cold Well Wishes

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. Selling antique car
2. Friend who sells
3. Space heater?
4. Thinking about relocation
5. Child irresponsible with money
6. LED bulbs
7. Retirement savings question
8. Spending, guilt, and feeling poor
9. Homemade mayonnaise
10. Roth IRA vs. Roth 401(k)

Thanks to the many of you who wrote to me with well wishes concerning my cold. I am much better now and feel completely normal except for a bit of coughing, which I’ve been told could last for another couple of weeks.

Your well wishes were deeply appreciated.

Q1: Selling antique car
I have an antique car that I would like to sell. I have no idea what it is worth, can you suggest a way to establish a price and then how to advertise it or is it better to just let an auctioneer handle it?

- Adam

You’re probably better off letting an auctioneer handle it.

Having said that, there’s no reason you couldn’t identify the make and model of the car, take several photographs of it, and then take that information to a car show and ask around about the approximate worth of the vehicle. You’ll likely get a bunch of honest answers and a few “sharks” who will lowball you in an attempt to buy the car for a low price. Don’t sell at the car show – just use it for some estimates.

Getting an estimate in that way is probably useful even if you do use an auction service as then you’ll have some approximate idea of the worth of the vehicle.

Q2: Friend who sells
One of my friends has started a Pampered Chef “business.” She’s pretty much constantly sending emails and Facebook messages asking us to buy this stuff from her. I bought a couple of things when she started but I have zero interest in buying any more. How can I carefully clue her in that these messages are rude and off-putting?

- Diana

You can tell her directly, of course.

The problem is that when people are caught in the enthusiasm of a network marketing business like this, they’re flush with entrepreneurial fever. That’s because they’ve usually been introduced to the business by someone who is really enthusiastic and good at marketing and thus they’ve bought into the idea.

Your best approach is not to criticize the business, but to suggest some alternative approaches. This is the route I would take. I’d let your friend know that her current marketing techniques might be missing the mark and suggest some other approaches to take. The entire point should be that you want your friend to succeed, not that you want your friend to bug off.

Q3: Space heater?
Does it make sense to use a space heater in the room you spend most of your time in and then turn the furnace off elsewhere? I spend the vast majority of time in the bedroom at my apartment, where I have a couch and a television and my laptop. I don’t mind the bathroom and the kitchen being cold, though I might put the space heater in the bathroom for cold mornings. What do you think?

- Jared

Since I don’t know the size of your living quarters or how they’re currently heated, I can’t say for certain that your space heater would be more efficient, but that would be my guess.

When I was younger, my family used a space heater in the bathroom to keep that room warm, plus my father kept a wood stove roaring throughout the winter, using a fan to direct the warm air around the house. This allowed my family to minimize furnace use. It is worth noting that we had plenty of sources of wood, as I grew up on land that was mostly wooded.

As for your space heater plan, I’d encourage you to give it a shot. A space heater isn’t too expensive and, if the plan works, you’ll probably pay for it in the first month of winter use.

Q4: Thinking about relocation
I work in the prison system, and my wife is an educator. We both work full time, and in addition I work a second job about 20 – 25 hours a week. We have two children, ages three and two. We have a substantial amount of debt, and I have been working the second job in an effort to help reduce that debt, but often times, we end up just getting by, due to the fact that our “gap” is not very large.

We have a budget, and have cut where we can. We buy store brand foods, almost never dine out (maybe four times per year) and really make a team effort to spend only when we need to. I make $38,000 per year, and my wife makes about $45,000 per year. I have been in my career for five years. In this time I have promoted three times skipping pay grade levels in the process out of necessity (Grade 9, 10, 13, 15). I am very well respected in my department and love my job. We live very close to my wife’s family, and my children interact regularly with grandparents and cousins. In addition to our primary income, I take home about $150 per week with my second job.

The hours required by my two jobs only allow me to see my children briefly in the mornings, Saturday evenings and all day on Sunday (if I’m not mowing the lawn or seeing to some other necessary household task). I feel as if I am absent from the lives of my children, but cannot afford to stop the second job. There have been no pay raises in my department for seven years, and insurance costs will raise significantly in January, effectively nullifying my most recent promotion.

Anyway, I wrote all that to write this: I have recently been recruited by a state agency in Ohio doing almost the same thing I am doing now, but the potential for a huge increase in pay is quite significant. My income would increase by at least $20,000 per year. My sister lives in Ohio, and we have friends from college there as well, but nothing like the huge family we have in Kentucky.

My home is worth about $1000 less than I currently owe, because we purchased it right before the bottom dropped out of the market in 2007. My wife is from the town where we live now, and has her entire family here. She wants me to look into this opportunity but would miss her family terribly.

What factors do I need to consider as far as a move from Kentucky to Ohio. If my income increases 20K, but my living expenses increase 15K, it would not be worth moving at all. We would have to sell the house, breaking even if we are lucky, and my wife would have to find a job in a competitive Ohio education system. She’s a good teacher and I have no doubt she could do it, but it would take some time. How can I translate these factors into numbers to figure out how much I would need to make (there is some room for negotiation) for this opportunity to even make sense? I won’t know about exact salary until later, but I want to be informed when I get this information.
- Sam

The easiest way to do this is to sit down with a sheet of paper and compare both income and expenses for both situations. Use a cost of living calculator to compare the costs of each area (they look pretty similar for most areas of Ohio and Kentucky). You should also include taxes in this equation, including state taxes in both Ohio and Kentucky (again, they’re pretty similar).

The thing that worries me the most is that your wife wouldn’t necessarily have a job if you moved to Ohio. You seem confident that she could find one, but it sounds far from certain to me. I would make sure that she can find a position of some kind with ease if you decide to move.

My feeling is that unless your new income blows away what you’re making now, you should probably stay put, mostly due to job stability concerns for your wife.

Q5: Child irresponsible with money
My fifteen year old daughter spends money the second she gets it. She’s almost constantly complaining about how she doesn’t have any money, too, but doesn’t seem to want to do anything to earn more. She just wants us to give her spending money. I’m really worried about where she’s headed.

- Anna

She should be doing something – even if it’s merely household tasks – to earn any and all money she receives at that age. You should not be giving her money.

If she has a strong craving for additional income, you should be encouraging her to get a part-time job after school or to start some type of business.

As for her penchant for spending, that’s something she’s going to have to work through on her own. Balancing wants and needs is something everyone has to figure out for themselves. The best thing you can do is simply explain the idea to her and show her how you do it in your own life. You need to be a living, transparent example of financial good behavior.

Q6: LED bulbs
Are LED light bulbs worth the up-front expense? The hardware store sells them but they are really expensive but they say they use very little electricity and last for a long time. Are they worth it?

- Shane

We have been very happy with LED bulbs over the past year and are in the process of switching all of the bulbs in our house to LEDs. The energy efficiency and life span of the LED bulbs make them a significant bargain over the lifetime of the bulb.

The first LED bulbs that came out in 2007 and 2008 weren’t really good. They often had a strong blue tint to the light. Newer bulbs – the ones you’ll find now – seem to produce really good white light.

The best part, in my opinion, is that LEDs produce full light almost instantly, much like incandescent bulbs. CFLs often take a while to “warm up,” which is a pretty big negative in my opinion.

Q7: Retirement savings question
I’m a perfect example of someone who was never taught about money, and as a result, I’ve made many financial mistakes and repeated some of those of my parents. But I’m turning things around!

I’m single, 32, and am a couple years into a job with a solid base salary and commissions that vary from month to month. I am in the process of agressively paying down about $15,000 credit card debt. [I also have about $40,000 in school loans locked in at 4% that I am not too worried about at this point.] I’m working on building my emergency savings up as well, but honestly my focus now is getting out from under the crushing credit card debt. Because my income fluctuates each month, it’s difficult to predict when I’ll have them paid off completely, but I’m already starting to feel a little “snowball” momentum building!

Now that I feel a like I’m gaining control of the debt (or at least have a workeable plan), my question for you is about the best way to start saving for retirement. My company offers no match on 401k. My instinct is that a Roth IRA would be a better choice (the idea of saving after tax makes more sense to me as it seems like tax rates will increase in the future). Is this my best approach? I know I am behind on this, and I would like to have a plan in place so that, once the credit card debt is behind me, I can redirect that portion of my budget into building up my retirement. No lifestyle inflation for me!
- Philip

If your employer offers no match on the plan they offer, then you’re better off maximizing a Roth IRA before contributing anything to that plan.

If you max out your Roth IRA contributions and want to continue to save, your work plan is a reasonable choice. In fact, that’s likely what I would do.

However, if you’re maxing out a Roth IRA and are making less than, say, $60,000 a year and you still have outstanding debts, I’d pay off those debts before looking for more places to save for retirement.

Q8: Spending, guilt, and feeling poor
I am so sick of feeling guilty whenever I spend $3. I am sick of feeling like I’m poor. I have worked insanely hard to get rid of some of my debts but I feel like I’m living in poverty. When does it end?

- Jason

This type of response to frugality usually comes from denying yourself something that you want out of a sense of being responsible or saving money or being frugal. If frugality is making you feel that way, then something’s not working.

My suggestion for you is to add a line to your budget that’s basically free spending. Let’s say it’s $100 a month. At the start of the month, you can take $100 out of an ATM, stick it in your wallet, and spend it on whatever you want.

If that doesn’t help, there may be other things in your life contributing to your unhappiness. Are you happy with your job? Your relationships? Those things may need some extra focus right now.

Q9: Homemade mayonnaise
We’ve started making homemade mayonnaise because it’s pretty inexpensive and it lets us control what’s actually in it. We usually use 1 egg yolk, 2 tbsp red wine vinegar, 3/4 cup vegetable oil, and a bit of mustard for flavor. It turns out really well. The only problem is that we usually make more than we’re going to use and the rest goes to waste. Any suggestions?

- Donna

If I were you, whenever I made a batch of this stuff – which sounds wonderful, by the way – I would try to plan for multiple uses for it.

Use it for sandwich spread, but then also use it as a coating on baked seafood.

Use it for coleslaw, then use it to make deviled eggs.

There are lots of uses for mayonnaise. Just plan ahead to make sure you use all of it at once.

Q10: Roth IRA vs. Roth 401(k)
I finally got a new job that has a 401 option. I was wondering are there any differences between a Roth IRA and a Roth 401 that I should be aware of? My company offers a Roth 401 option and I decided on that one because it allowed me to start with just any amount per pay check taken out where as with a Roth IRA you usually have to start with 1,000 or more dollars (which I don’t have). Also my company offers no match as we also have a pension plan (government job) so there is no advantage for the Roth 401 over the Roth IRA in that regard. I suppose the main difference would be the funds available to invest in. Are withdrawal limits the same for each? Any reason you could give me to sway me towards a Roth IRA instead?

Would you recommend saving for downpayment within a Roth 401(k) and withdrawing your contributions later, or saving only outside of a retirement plan? (PS I live in a place where small 1 bedroom condos and studio condos start at nearly 300,000- I am not having children so this size will suffice, but still be difficult to save for). I am age 26.
- Tom

If you have no matching, you should use a Roth IRA simply because it offers more flexibility in terms of choosing investment options. A Roth 401(k) locks you into whatever investment choices happen to be offered through your employer.

A point of advice: never, ever bank on a pension plan as a major part of your retirement. Pension plans are often raided and misused. Consider it a bonus on your retirement and perhaps even include it as a minor help, but don’t put yourself in a situation where everything falls apart without your pension.

Also, I would save outside of a retirement plan if I were saving for a down payment. There are usually repayment restrictions if you take money out of a retirement plan for things like a house down payment and sometimes those restrictions come back to bite you. It’s not worth it, in my opinion.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. IĆ­ll 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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