Reader Mailbag: Emotional Control

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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. Costs of going to seminary
2. Is vehicle trade worth it?
3. Are we doing okay?
4. Roth IRA versus Roth 401(k)
5. Dealing with an overzealous client
6. Best “safe” option for money
7. Cash flow in big city
8. Wedding versus emergency fund
9. Habits for handling life instability
10. Frugal video gaming habits

One of the biggest challenges of parenting – at least for me – is teaching our children how to control their emotions. As adults, most of us are pretty good at controlling our waves of emotions – they might be really powerful inside of us, but we’ve trained ourselves to not let those emotions spill out.

Children – particularly young ones – haven’t learned that control yet, and sometimes (often when you least want it), that emotion spills out of them.

Our solution, thus far, has been to take them out of any social situations that they might be interfering with and placing them in a fairly isolated spot to get their emotions under control to the point where communication is fruitful, followed by a chat about handling our emotions and a minor punishment (usually removal of some minor thing they like in their daily routine).

Still, it’s no fun when such an emotional spill happens in public, requiring a parent to simply leave.

In pursuit of what I feel I’m called to do I’m planning to quit my job and attend seminary next fall. I’ll bring my family with me (I’m 29 and my wife is 27 and we have a three month old daughter). In the next year there are a ton of large and small decisions to be made. One of the biggest decisions will be what to do with our house. Here are some specifics, our house appraised about a year ago for $76,500 and I’m six years into a 30 year fixed loan @ 5.6% with a balance of $35,000. I believe we could find a nice house to live in for the 3-4 years of seminary for about $90,000. Keep in mind that in my denomination there is almost always a parsonage provided for the pastor. We’re going into seminary knowing that it will be a tight time for us financially. Tuition alone for a Masters of Divinity is close to $50,000 and that doesn’t include all the other associated costs. We have about $25,000 saved specifically for seminary with the hopes of saving more in the next year. I will also receive tuition assistance from my denomination and from the military. Needless to say we’re saving now and trying to be as good with our money as we can. I have a couple of scenarios regarding our house, although I’m open to other options.

Scenario #1: We rent the house that we live in now for $500-600/month (monthly mortgage is $337) and my dad who lives about a mile away could manage the property for us. We would then need to find a place to rent while in seminary, I’m guessing that it’ll cost around $700-800/month. This keeps us from buying and selling while under the gun and possibly gives us a bit of extra income (which will be needed).

Scenario #2: We sell our current house and buy a house close to the seminary. We could conceivably put down 50% on a new house and then after our seminary days either rent to seminary students or try to sell the house. The upside is that we could possibly have a lower monthly payment than most places that we would rent since if we put down a large down payment.

So what do you think? How can we best make our money and our house work for us?
- Chip

Scenario #2 seems like the right choice to me.

Under Scenario #1, you’re still losing money each month even if you have a renter in the price range you’re hoping for. You’re still paying the mortgage and shelling out $700-$800 a month for rent while only taking in $500-600 more if you have a renter. That’s a net loss of $100-$300 a month, which most likely exceeds the equity you’re building each month in the mortgage. Overall, I don’t think this is a winning situation for getting ahead.

I vastly prefer the second scenario, because you’re probably not drastically altering how much you pay for housing each month, but you’re also building equity with each house payment and you have a property in the end in a high-value place.

I have a 2003 Toyota 4Runner 120,000 miles – I could trade in for $7000-$9000. It is paid off, and in pretty good condition, although it does need a $1500 repair in the next year. Should I trade in? I can find 2005 Toyota Camry’s with 50,000 miles or less (one with only 28,000 miles) for $12,000 or less. Do I fork over the $3000 (which we have saved)?

The whole reason for this is I would like to increase my mpg, and lessen gas costs. I am also worried about the 120,000 – I think my car will only get less valuable, and I do not want to take on a car payment – so I am right at the point where I could break even. I travel about 6,000 miles/year, and I am a stay at home mom of a 1 year old boy.
- Megan

This seems like the right move, provided you’re paying cash for the car.

I used fueleconomy.gov and found that the 2005 Toyota Camry averages 25 miles per gallon, while the 2003 Toyota 4Runner 2WD (I assumed that – the 4WD is worse) gets an average of 18 miles per gallon. Driving 6,000 miles per year, with gas at $2.75 a gallon, will save you $257 a year.

Another thing to consider is whether or not it lowers your insurance costs. I would contact your insurance company and simly get a quote on a 2005 Camry and see how it compares to your current ride (my guess is they’ll be somewhat comparable, but it’s worth checking). Also, many areas charge different vehicle registration rates for such different types of vehicles.

In the end, if both vehicles meet your needs for reliability and other such requirements, it really comes down to cost of ownership, and I’m pretty certain that a Camry, with such better gas mileage, will get you the best deal.

My husband and I feel we are on the road to a simple, yet comfortable, life financially. I am 20 and he is 23. Though we currently do not make a ton of money, I’d like some reassurance we are doing the “right things” with what we have earned thus far. We currently have no children and do not plan to for a couple of years. We are both in school on and off and are currently more than half through our degrees. Here are our stats:

His salary: 36400 yrly gross (job security, some flexibility, travel perks make up for the low pay…sort of)
Mine: 27000 gross
Mortgage: 94,000 at 6% 30yr
Student loan: 1800 total
Car loan (his poor-advised purchase before we got married…ugh): 215 monthly. (payoff around 5,000 with penalities… bad purchase for other reasons).
Our current vehicle in use is my car from college, for which nothing is owed.
Credit Card Debt: 1800 total
We had a few other small debts that we just paid off. We are currently living off of his salary and banking mine.

We just started adding an additional 350 to our mortgage principal monthly (out of his pay). According to my calculations, this should help us pay off our mortgage before we are in our mid-thirties. Paying off the credit card debt first seems like it would free up about 120 dollars in cash flow per month. The only real benefits of paying off the vehicle would be to lower insurance on it, since it doesn’t run, and to have a clean title so we can sell it and minimize our loss. I suppose the student loan would be last since the interest is low?

With all debt (excluding mortgage) paid off, we would have monthly “bills” down to about 1450 per month. This is including our 350 extra toward mortgage. We can easily live off of 300 for gas, groceries, and any extras per month, putting our total budget per month at less than 1800 dollars. We’ve really worked hard at scaling down our living expenses and minimizing our debt.

The small remainder of his salary per month should be spend where? Is now the time to open up the IRA? Am I correct on the order I should be paying off what’s left of our debt? I feel like we are doing really great in comparison to whom we know in similar situations, am I wrong? The averages of net worth and such online feel like a hoax, and what I read in blog forums just doesn’t add up in comparison to average american statistics.
- Ashley

You’re making the right move in paying off the debts in order of interest rate, from highest to lowest. That’s the most efficient way to pay off one’s debts.

As to whether you should open an IRA or do something else with the remaining money each month, the answer changes depending on whether or not you each already have retirement plans. As young as you are, if you shoot for 10% of your gross income going into retirement, you’ll be doing well, and if you already have that much going in due to your workplace, you’re probably better served for your life by putting that money towards paying down the debts.

You’re doing very well for a couple at your age. The simple fact that you’re able to bank all of your salary means that you’ll be entering your thirties in a much better financial state than most people your age. Kudos.

My employer offers both traditional 401(k) and Roth 401(k) options. I’m 26 and participate in both, putting enough in my regular 401(k) to receive the full company match, while putting some additional post-tax money into the Roth 401(k). Lately, I’ve been wondering if I would be better served by starting a Roth IRA instead of funding the Roth 401(k). I understand that contributions to a Roth IRA can be withdrawn without penalty – are there any other benefits/costs I should consider when making this decision? I like the convenience of my employer’s Roth plan, but would be willing to set up the IRA on my own if the benefits are worth it.
- Jessie

The ability to withdraw one’s contributions is certainly an advantage of a Roth IRA – in some respects. On the flip side of that is that you’ve suddenly made your retirement savings pretty easy to access whenever you want without penalty, which makes it easy to just grab it and go.

In my eyes, the biggest advantage a Roth IRA has over a Roth 401(k) is the freedom you have to decide where exactly your money is invested. You’re able to choose your investing house and the specific investments held by the account.

At the same time, you should also be aware that there are income limitations to a Roth IRA (you can’t contribute if you’re above a certain income threshold, currently just a bit over $100K for singles) and there’s also a cap on how much you can contribute, one that’s much lower than the 401(k).

So which option is better? If you have a Roth 401(k) available to you and the investment choices are solid (meaning they’re not loaded with fees and earn competitive returns), I’d put my money there.

This article does a great job of outlining the differences between the two accounts.

Not to muddy the waters too much, but there are also some compelling arguments about how a traditional 401(k) is better than a Roth 401(k). While there are some good points there, I think they hang far too much on current tax rates remaining the same from now until retirement. Given the strong political resistance towards eliminating entitlements and government spending, plus the upcoming retirement of a lot of baby boomers (meaning they’ll be paying in a lot less income tax) and the current spending that far exceeds what the nation is bringing in, tax rates have nowhere to go but up (in my opinion), which swings favor to the Roth 401(k).

All such choices are speculative, though. The real key is making sure you’re actually saving as much as you can and making sure it’s in a low-cost retirement vehicle with good returns. If you’re doing that, you’re ahead of the game, no matter how the tax issues turn out in thirty years.

I recently quit my job and went back to school. I started my own business which so far has taken off so quick I can barely keep up. Before I decided to do this I was unsure on how much money I would make so I worked out a daycare solution with a sick neighbor. (she was recently diagnosed with Lupus and her digestive system is degenerating pretty quickly) The deal was I would watch her two kids while she attended doctor appointments and she would watch my one kid while I attended class. So far I have 3 classes and one is online. So two days a week I need care. My problem is that so far I have watched her kids every day for at least 5 hours a day. I had agreed to this knowing that I was watching two vs my one and being okay with that, but every day has become a strain. Now I have 3 kids in my house for at least 5 hours, 5 times a week and she has watched mine for 2 days for 4 hours. I have night classes. I know she is sick and cant help how many times she had a doctor appointment a week, but this is getting in the way of my homework for school, and new business. Yesterday I was up till 4am just catching up on math homework, and doing revisions to a menu I am designing. (my new business is Graphic Design just like the job I left) In the long run this is saving me valuable money, but i am so strained that I cant keep up. My ultimate question is, how do I tell her to back off a bit, or maybe find another person that she can also swap babysitting services with. If it goes on any longer I will need to go hire someone in place of swapping. Is there services for people like that. She does desperately need the care, but I can only help for part of it.
- Shauna

I think this is a time where candor will pay off.

Just stop over there for a visit and ask her about her medical situation. How is the treatment going? How often will your neighbor have to be visiting doctors in the future? Is five times a week the norm, or is it exceptional due to early stages of treatment?

If this kind of imbalance is a short-term thing, I’d just ride along with it for now. The load will lighten soon and you’ll have a very valuable arrangement on your hands.

If the large number of appointments are going to continue for a long time, ask her about a partial arrangement, where you watch her kids for a limited number of times a week.

If you really want to help your neighbor out, you might want to seek out a third person for your arrangement so that there’s another person to take on the children in this scheme and you have some extra time to excel at your classwork.

I’m a soon-to-be 22 year-old college senior with absolutely zero debt. My tuition and room & board is 100% paid for via grants and scholarships, and knowing that I’m super lucky to be in this situation, I want to take advantage of it if at all possible.

I currently have $2,000 in checking, $6,500 in savings, and have managed to save $4,500 in a Roth IRA over the years since opening it when I was 18. I also have $500 in a Scottrade account from my dad, but I largely let that take its course.

With a bachelor’s in Psychology, graduate school is a must if I plan on making a “comfy” living (to me, “comfy” = living below my means and saving money every month). By May, I’m anticipating having around $15,000 in checking/savings combined after financial aid payments and a monetary gift from my grandparents as a graduation gift.

What should I do? All the graduate programs I’m looking at are around $15,000 total. With that in mind, I’ll be living with my dad during graduate school so I won’t have to worry about rent or groceries (though I will have an added car insurance payment of ~$600/yr.) and by nature, I’m not one to spend frivolously, if at all. I know that CD’s don’t have the greatest interest rates right now, but would it be worth it to make possibly a couple hundred bucks by opening a CD if there aren’t any other “safe” options?
- Jaime

You have almost exactly the cash in hand that you’ll need to pay for graduate school, in other words? You have $15,000 in hand and will owe $15,000.

That means you’ll need access to all of that money in 9-12 months, which means that your CD options are pretty limited. You’re more likely to earn a bit more from your money by just shopping for a high interest savings account than you would from a short-term CD right now, with the rates as depressed as they are.

I just wouldn’t buy any CDs right now, honestly. The rates are so low that you can nearly match short term CDs with savings rates and the long term ones that offer you just a bit more will likely be painful in a few years when rates rebound.

Keep your money in cash and look for a high interest savings account.

My wife, myself and our toddler live in the San Francisco Bay area, and purchased our house this past April for $870k, with 20% down, 30 year fixed @ 5.125%. When we went into this, we were both working, I was pulling down $122k base, and she $105k base. Our mortage on the house is $690k, with our only other debt being 2 car loans, totaling $34k. So our monthly outlay is $5000 mortgage + taxes & insurance, and about $1400 for car loans.

Since then, our situation has changed – my wife was laid off in June, with severance that just finished. She is now collecting unemployment at $810 every other week while continuing to look for work. She’s also pregnant with #2, due in March, which makes full time positions harder to find as time goes on.

We’ve cut back on non-essentials like eating out, and canceled our satellite TV (which I’ve not missed at all). Our emergency fund is currently $6000, way too low I know. We have about $33k in stocks, and $175k in a mix of 401(k)s & IRAs.

The company I was working for was purchased 2 years ago, and a retention bonus was put in place for all employees, and just came due, so I’ll have a check for $87,500 before taxes on the 15th. I’ve also just accepted an offer for another job @ $155k base, with a $10k signing bonus. I’m very aware of how lucky we are compared to many folks struggling right now. After taxes are taken out of the retention & signing bonuses, there will be around $64k left.

My initial thought is to pay off the car loans to improve our cash flow ($30k left), and stick the rest into our emergency fund. At that point, my single salary will be enough to get us by until my wife finds work again, which may become June 2011 at the earliest. Does this seem like the best way to move forward? Is there anything else I should be thinking about?
- Dan

First of all, I know previous mailbag readers have complained in the past about responding to people with high incomes. An important thing to consider here is how high such a family’s housing expenses are. They have an $870,000 home for which they paid 20% down, meaning they took out a $696,000 mortgage over 30 years at 5.125%. Boom – there’s a $3,800 monthly mortgage payment. As the note mentions, their total monthly outlay for housing is $5,000 a month just to keep owning the residence. That’s $60,000 a year right there, folks, gone in a flash. That is the cost of owning a home in a city like San Francisco, and renting really isn’t all that much cheaper for anything comparable. To put it simply, someone in that situation has the same challenges as someone earning $45-50K a year in the Des Moines, IA area.

Having said that, you absolutely should use those bonuses to improve your monthly cash flow by paying off the car loans. That would unquestionably be the first move. After that, an emergency fund is a very good idea for what’s left.

I would encourage your spouse to spend her free time when she’s not job hunting doing everything she can to reduce your monthly expenses or bringing in more income, even if it’s just a little. If you’ve never taken a lot of frugal steps before, the money saving will probably pay off more. Air seal that home of yours so you’re not losing heating or cooling with the outdoors. Put in a programmable thermostat and program it so that the heating or cooling shuts off at night. Put heavy curtains up in your lesser-used rooms and use them to block direct sunlight in the summer months and retain interior room warmth in the winter months. Become a master of the kitchen and take charge of home meal prep so you’re not eating out. There are countless things she can do that will reduce your shared monthly expenses – and those things produce a return for you guys, just like any employment outside the home.

My fiancé and I just bought a townhouse with 25% down. Our broker told us that we could get a lower rate by putting 25% down instead of 20%, so we did. That extra down payment was a stretch for me though, leaving me with $1000 in my emergency fund and $500 cash.

My monthly cash flow will cover all of my current expenses, including all of the new housing costs. If my spending habits don’t change, I should have around $600 left over each month. However, every penny of that $600 is going toward the wedding. I need $3,500-$4,000 in 6 months if I want to pay my half of the costs. I won’t be able to start rebuilding my emergency fund until early next summer. Is that wise?

My fiancé still has $10K left in savings, so if I choose to save for the wedding, he can take care of me in case of an emergency. If I choose to save for my emergency fund, then I’ll probably have to ask him to cover more of our wedding costs.

I take pride in being able to support myself financially and pay my fair share of our expenses. Even though I know my fiancé won’t think less of me if I ask him to pay more for our wedding, I would feel bad inside, which is why I want to put all of my savings toward the wedding.

Is my pride making me foolish? Should I save for the wedding or for my emergency fund?
- Kat

You’re choosing to be married. That means that your financial futures are becoming a single financial future. Your expenses and his expenses are going to become our expenses.

Even if you keep your money separate, it doesn’t really work like that. The financial choices either one of you make will eventually help out or weigh on your spouse because of how it changes the money flow in your home.

Sit down today and start planning this stuff together, not as individuals splitting the cost of a wedding. You’re both going to be paying for this wedding, indirectly or otherwise. You’re both going to need an emergency fund. You’re both going to have the same housing expenses, the same electric bills, and the same internet bills. Start treating this wedding as the same thing.

What’s the best solution if you treat the two of you as a single person in terms of the money? That’s how you should start thinking about these things, because it’ll put you both in the best long-term state.

Good financial habits are easier if you’re life is stable – stable expenses, stable income, stable location so you can get to know the territory and find the deals. The details of my case don’t matter, because I suspect I’m not that unusual. Generally, I’ve been telling myself for years that once my life is stable (i.e. once I finish school and get a Real Job and settle down and so on), spending less than I earn and setting money aside for an emergency fund and savings will be easy … and so I don’t have to worry about that now since I’ll do it later, I can develop the skills later when it’s easy.

However, I’ve realized that in order to be happy, my life is going to continue to be unstable in some ways, and it might be that way for a long, long time or even most of my life. Do you have any tips for spending less than you earn and still managing to save when you plan to move from one city to a more expensive one in the next few months; when you anticipate continuing to move among neighborhoods with some regularity; when you often can’t anticipate very closely either your income or expenditures from month to month?

Personally, I find it really easy to just buy things that would be useful but aren’t necessary when I have money left over. I just won’t pay much attention to how much I spend on groceries because I don’t have a specific goal in mind and “as little as possible” leads to me feeling guilty about eating which is [messed] up in the first place and then I don’t eat enough until I go back to not paying much attention. (My grocery bill isn’t ridiculous and I rarely throw food out, but I am in a position where paying more attention to one of my main expenditures would be worthwhile.)
- Jessy

You’ve got the old variable income problem. It’s not even so much that variable expenses are the problem – everyone has them – but it’s variable income.

My suggestion – the one thing that’s worked for me – is to use a two account system.

Every single dime of income you make should be direct deposited into a savings account at a different bank than the one you normally use. It shouldn’t be very easy to access. Don’t allow yourself to have an ATM card for it or anything like that; in fact, consider having the bank in a fairly far-away town.

Next, set up an automated recurring deposit from this account to the account at your normal bank. This way, some amount is deposited into your checking account every week from this “hidden” savings account elsewhere. Make that amount small – an amount that ensures that your source account will never, ever run out. It should be an amount that equates with one of your lowest income months over the last year.

Now, live on that money in your main checking account. Let it guide the life choices you make. If that means you end up having to be roommates with someone in a tiny apartment in the city somewhere, so be it. That’s part of the equation for the lifestyle you’re choosing.

If you do this, then you can effectively budget your money each month. You’ve now got a steady income instead of an irregular one.

If, at a later date, you’re consistently earning a lot more, give yourself a “raise” and direct deposit a bit more each week.

My biggest money sink is video games. I don’t watch any television, but I’ll stay up playing games many nights a week with my friends online or at my apartment. I did the math and I realized that this is a really expensive hobby. I know you’re a gamer so I am wondering if you have any good ideas for how to cut the expenses. I have an Xbox 360 and a lot of games for it.
- Donnie

There are a lot of ways to reduce the cost of a video gaming hobby. I’ll comment on some of the stuff that I do.

First, I keep a close eye on video game deal websites, looking not so much for deals for games I want (though those are nice), but for deals I can exploit. This site is my favorite of such sites. I look for situations where I can acquire a popular game for really cheap, trade it for additional credit at a game trading shop, and hold onto that credit for the future games I actually want to play – usually an occasional new release that a bunch of my friends also are into playing (because video gaming is far more of a social hobby than it used to be).

I’m also not afraid of used games – in fact, the vast majority of my games are used. I constantly shop at and trade at used game stores, converting my old, played games into other games that I haven’t played. I’m in the “customer” club at two different local used game shops as well, which gets me 10% additional credit on trade-ins and 10% off any used games I buy or trade for.

So, instead of spending $60 on a new release at Target, I’ll go to a used game shop, trade in a used game I’ve played through for $10, get a $1 credit for being a regular customer, pick out another used game for $20, get $2 off for being a regular customer, and spend only $7 on an interesting new game.

My biggest advice? Simply get rid of the “cult of the new” mindset and play some of the classics available for your system. The biggest way to blow too much money on video games is to buy them the day they’re released. If you absolutely must do that, trade in your older games to take the edge off that blow.

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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48 thoughts on “Reader Mailbag: Emotional Control

  1. I disagree with your ideas on not buying new games. As long as you finish them in a few weeks you can buy a new game, play it, and then trade it in for not much less than you paid for it. Of course this requires a different mental attitude of seeing games as disposable rather than things you keep forever

  2. Donnie: are video games benefiting your life? Yes, I know you enjoy them as a hobby. But what if you could start your own business and work on it 5 hours a week? Or freelance for 5-10 hours a week? Where would you be in two years? Five years? Maybe in ten years you’ll have all the time in the world to play video games because you’ll have sold a successful business. Food for thought.

  3. @Dan: Well, Trent said that you should “unquestionably” pay off the car loans, but I’m going to question it. Because I was confused by this:

    “At that point, my single salary will be enough to get us by until my wife finds work again, which may become June 2011 at the earliest.”

    Does this mean that your single salary is enough for your family to live off of (to meet regular and irregular expenses and to have some money left over to build up your emergency fund), or not? If it’s enough for you to live off of, it’s enough for you to live off of indefinitely. If it will only get you by for a finite amount of time, that means you’re dipping into your savings to make up the shortfall, so that’s another story entirely.

    What happens if your wife doesn’t find work in June 2011? Will there come a point where you’ll be in trouble? If there will, and if that point is before the car loans would normally be paid off, then don’t pay off the car loans now. Keep the money in savings, make the monthly payments out of those savings, and you’ll be able to hold out for somewhat longer.

  4. “That is the cost of owning a home in a city like San Francisco, and renting really isn’t all that much cheaper for anything comparable.”

    While I agree with the first part of that sentence, the second part is false. Home ownership is extremely expensive in the Bay Area. Renting, while still expensive relative to other urban areas (besides NY), can be significantly cheaper than ownership. For example, I rent an apartment in the city for $2300 (ugh), and my friend who owns a comparable apartment pays $4300 after mortgage, taxes, HOA, etc.

  5. @rxtx: I agree to an extent, with a couple caveats. Games with a lot of replay value (“party”-style games like Rock Band or “sandbox”-style games) are worth keeping. Also, your idea only works for people who are devoting a certain amount of time to it (which it seems Donnie does, but it wouldn’t work for me). Keep in mind you can re-resell used games, too, to recoup some cost.
    A local game store lets you trade in 3 used games for one new one. Assuming each game costs 60 bucks new, you’re still averaging $45 per game. You can do better than that buying new.
    Also, if you finish games quickly enough, it can make more financial sense to rent them!

    @JP: The question of whether the games are benefiting his life is valid (you should ask that of all things), but too many people assume More Work = More Benefit. “Benefit” is pretty vague.

  6. I wonder if Chip is really better off buying than renting while in seminary. Why not sell the current house then rent for three years? True, the monthly payment will be a bit higher. But you won’t be responsible for repairs or maintenance at a stressful and financially strapped time in your life. You also won’t have to worry about losing money if the housing market drops lower (which it’s expected to in some places), or about having to sell the house or rent it out at a time in your life when you’re looking at moving and starting a new career. I know that there’s a lot of benefits to buying, but over a three year horizon in these circumstances I’m not sure it’s a given that they trump.

  7. @Donnie: With regards to video games; escaping the “cult of the new and shiny” is a huge benefit – there are tons of great, older games out there that can be great played online or with a local group.

    The main problem here is peer pressure. If your group just absolutely must play the latest First-Person Shooter or Madden 20xx game the moment it drops, then be prepared to open that wallet.

    But one thing you can do even so is be realistic about your used games library: what you’re REALLY going to play again, and what’s just gathering dust and losing value. Selling off your used games on Amazon, eBay or Glyde can get you a surprising amount of money. I never trade a game in unless nobody will buy it – and for the value most trade-in places give, you’d get more from giving it to Goodwill for the tax deduction.

  8. @Dan: Can you sell the cars and buy two cheaper cars in cash? If you can even have $20,000 worth of vehicles rather than $30,000, that’s another $10,000 in your emergency fund. For income, could your wife freelance from home or watch a child in your house? Good luck!

  9. @Donnie, I know exactly how you feel. My solution to this problem was two fold, first be very brutal about my game collection, what would I really ever want to play again. The answer for me was only 2 games, that is out of about the 100ish that I had. Also look at from a perspective of what you will play soon. My example here is Mass Effect 2, bought it day one but after I beat it (30 hours and 2 month later) and loved it I sold it for about $45. Why did I sell it? Because even though I loved it I knew I wouldn’t play it again for a few months, if ever. Taking advantage of the high price of resale means that if I buy it again next year, perhaps a bit before Mass Effect 3, will probably only cost me $15ish. Financially sometimes it is better to sell a game early and buy it back late than to hold onto it for a long time before you play through it again.

    @TaJ, I agree that it is very difficult to get out of the cult of new and shiny for games where all of your friends are playing, my example is the recent release of Halo:Reach. I bought it day one (actually pre-ordered from Amazon for $20 gift card bonus) because I knew all my friends will be playing it for the next few months. I want to be a part of that experience with my friends. However with games that are mostly singleplayer based I have gotten into the habit of waiting about 6 months. After about six months generally the price has went down to about the $30 range, really the same game for half the price.

    @Trent, Great mention of CheapAssGamers(CAG) they really can help. Also I would mention Goozex. It is a game trading site where you can trade in a lot of games that you really can’t at other stores, they go to other members and you get points to trade in for new games. It isn’t very good for recent releases because you get stuck in line behind other people who wanted one first, but it is great for the 1+ year old games where you ban basically just trade one for another.

  10. Regarding Question #3, rather than banking the wife’s salary, let’s say its $1500 a month after taxes, why not pay off the credit cards and student loan over the next three months instead? And we don’t know her equity situation, but shouldn’t they be refinancing that 6% mortgage, I think the monthly savings from going from 6% to 4.5% would payoff any fees rather quickly.

  11. @Chip: I know this isn’t the question that you asked, but I’m wondering what role your wife is playing in these decisions. “I’m planning to quit my job and attend seminary, and I’m bringing my wife with me” is different from “My wife and I decided that we’d relocate so that I can attend seminary.” This is her life and her financial future too.

  12. Trent, you’ve clearly never spent much time in San Francisco, so your advice on frugal tactics for the homeowners there made me laugh. It’s chilly, foggy and damp quite often, but rarely gets below 40 or above 80 or 85 degrees. Air sealing a home and putting in a programmable thermostat are good frugal tactics, but the time it would take to recoup the cost is *much* longer than in Iowa.

    In my rented San Francisco apartment, we only have built-in heat in one room. For the rest, we use a portable space heater. The building is 100 years old, and there’s no bathroom fan. Instead, our landlord bolted the bathroom window so it’s always open about an inch to ensure ventilation. Not great on really chilly mornings, but it gives you some idea of the climate here.

  13. @Chip – I think Trent’s advice to buy again in the new location is possibly not the best. You have to take real estate fees and closing costs into account. Those add up a lot and if you’re only going to be there for 3 years it may not be worth it. Plus, if you rent at seminary and sell the old house, you’ve got some breathing room – you don’t need to sell the old house right away, as long as you can afford the mortgage + rent till it sells. And once it sells you can bank the money and earn interest on it.

    @Ashley – Not sure why you are banking your salary and not using it to pay down debt. Wouldn’t it make more sense to just pay off the debt ASAP with your salary and then start banking it once it’s gone?

  14. If video games (and having lots of variety and the newest stuff) is so important, rather than buying any games at all, he might try Gamefly or a similar service (like Netflix for video games). Then his video games expenses become fixed instead of variable and he has access to all the new stuff he wants.

  15. Toddlers are not small people; trying to reason with them and explain away their emotion isn’t going to work, I’m sorry to say. I would recommend The Happiest Toddler On The Block by Karp.

  16. I can’t understand the logic in trading in the RAV4 for the Camry. If you have a $1500 repair in the next year and you have to pay $3000 more for the Camry, that means it will take nearly 6 years in gas savings to recoup the other $1500.
    The only benefit to “upgrading” is for a lower mileage car. But if you maintain your vehicle and, from how it sounds like, you pay attention to what the car needs, you should get plenty more miles out of the RAV4.
    Trading in just doesn’t make sense to me.

  17. @Jessy: If you’re not eating enough because you feel guilty about spending money on food, that sounds like a problem that needs to be addressed separately from dealing with an irregular income.

    I don’t know what the best solution is for you, but maybe you could decide on a minimum amount you’ll spend on food, in addition to a maximum amount (whether this is part of a larger budget or not).

    Human bodies need food. It’s not worth starving yourself for the sake of saving money. Take care of yourself, OK?

  18. Chip: I would rent for seminary. You’ll be in seminary for 3-4 years and then pastors usually have a parsonage. I would NOT buy a house for the seminary and would instead rent. If you buy the house now you may only live in it for 3 years during seminary and then end up somewhere else with a parsonage. Buying a house how will cost you closing and selling it later will cost realtor fees. Combined you could easily be spending $5000 to $10000 in turnover fees to buy then sell the house. That adds significantly to the cost of the house / year. Also the housing market is not great nowadays and for all we know that house could lose value in that short period. If you are only going to be in a house for 3 years then I don’t think buying makes sense.

    Megan: If you sell your 4runner yourself you can probably get $1000 or $2000 more than what the dealer will usually give you as trade in.

    Ashley: You’re doing very well. You are too young for average net worth figures to mean much. Your debt repayment plan makes sense. Are you saving for retirement at all? First priority there is to contribute to 401k’s for either of you up to the point of employer match. Thats the next step for you I’d recommend.

    Jessie: I’d go with the Roth IRA over he Roth 401k. Roth IRA’s are generally more flexible. Unless you’re over the income limit for Roth IRA or want to put in more than the cap on them then I’d do the IRA.

  19. Agreed with #13 – while the SF wife can definitely spend her time well on frugality, it won’t be by doing weather sealing. It a) probably wouldn’t save money because temperature adjustments in my Bay Area house are accomplished by opening or closing the windows or putting on a sweater, not by turning on the non-existent central air, and b) would be pretty expensive because houses here aren’t really built to keep out the weather – it’s not a matter of caulking around the windows, more like replacing all of the doors and windows and adding some insulation in the floor, walls, and ceiling.

    Also to Chip: Why are the only options rent/rent and sell/buy? Is it not possible to live without owning a home? I would sell the current home, but instead of automatically buying I would at least investigate the price to buy versus rent in the new location, particularly because you may not have much flexibility on your move-out date from the home near seminary – you could lose a lot if you don’t have the flexibility to ride out a down local market.

  20. @Donnie,
    One trick you can use to prevent yourself from getting new games is to go after as many of those achievements as you can. I haven’t sold a single one of my ~40 360 games because there aren’t yet any that I’m truly “done” with in the sense that I still have achievements to get for them.

    Also, ebay is your friend. I’d say 75% of the games I have were NOT purchased on day of release. They were all purchased NEW, but some where as cheap as 10 bucks, plus shipping from ebay, or occasionally a good deal on amazon or newegg.

    You don’t need to drop 60 bucks on a game to enjoy it, keep your eyes open.

  21. Ashley, couldn’t you pay off your debt with your pay? What are you saving for? After you have $12000 in bank for emergency fund of course! After that can you put part of your pay to mortgage part to retirement?

  22. Shauna offer to watch her kids for an = time she watched yours. 8 hr/ wk. Maybe 10!

    Not your responsibility to find a third person for the arrangement.

    Is she at the dr THAT much?! Or doing errands…

  23. My situation is pretty similar to Ashley’s. I never thought about living off one income and banking the other. I think I’m going to bring that up to my boyfriend and see what he thinks. We have some credit card debt and we’re trying to save for a house.

  24. @Johanna My wife is certainly on board, I wouldn’t be able to do it otherwise. It’s a poorly worded intro to my question.

    @ ruth, jim and sue The idea to sell and then rent while in seminary is an option. We’re planning a visit in the next month so we can look at specifics, like how much is rent? The question is where is the breaking point where renting is better than buying?

  25. Trent, a comment on teaching your kids emotional control. Telling kids to control what emotions to have is unlikely to fly, besides being impossible. Instead, tell them that they can feel anything they like, but that they have to control their actions.

  26. I think Jaime should look into graduate programs that offer fellowships, even as he plans to pay tuition.
    If he has the kinds of scholarships and grants that paid for his undergraduate education, he likely is a competitive candidate for a graduate fellowship or scholarship as well. In some disciplines you are advised to not go at all if you can’t find funding, though I expect some areas like clinical psych with a strong earning potential are a different story.

  27. You might find more success with your toddlers’ emotional meltdowns if you remove the punishment part. It’s just not necessary. There’s a really wonderful book, Unconditional Parenting, by Alfie Kohn, that I can’t say enough good things about.

    If you think about it, sometimes adults aren’t able to control their emotions either. Suppose you had a really hard day and wanted to vent to your wife about it, and got a little worked up. How would you feel she responded by saying “I’m sorry you feel that way, but this is not an appropriate response. I’m going to take away your favorite book for the rest of the evening.”? Losing control of one’s emotions is unpleasant enough all by itself, and adding a punishment on top of it is overkill. The only effect it’s going to have on your kids is feeling ashamed of their overwhelming emotions. One of my favorite ideas in the book is that it doesn’t matter what message you’re sending to your kids – what matters is the message they’re getting. What message are you sending them when they’re punished for something they don’t have control over?

  28. Laurel, but the punishment is not for being sad or mad, the punishment is for screaming/throwing things/kicking/whatever. If the parent is making sure the child realizes that they are being punished for the ACTION, then why NOT punish them? It is NOT okay to react to emotions by acting out. The point is not to control your emotions, it is to control your reaction to them. “Getting a little worked up” while venting to a wife in the privacy of your home is fine (assuming it is not physical), getting “a little worked up” in front of your boss for example is not, and actually WILL get an adult “punished” – a bad reputation, less chance of promotion, in extreme cases, fired. There is a difference between telling a kid “don’t be mad!” and telling them “don’t throw things when you are mad.” Of course this is age dependant, Trent’s oldest will understand this, his youngest won’t.

  29. Hey Trent, to echo another user, weather proofing your home doesn’t do much here in the Bay Area. Our highest summer temp was 90 (for 1 week) and our lowest was 50 (also for one week) :)

    Also, renting is usually better here, although not always. It really depends on what you want to rent, where and for how long.

    That said, one of the interesting things about the Bay Area is the wide variability of housing prices for what is essentially the same quality. Your reader could easily save a large chunk of that housing budget by moving about 10 miles south into one of the beautiful neighborhoods on the peninsula. You get a few less good restaurants and night life but better schools and less crime, so I’d call it an even tradeoff. Not sure if the costs of selling their house would make this less worthwhile though.

  30. I agree with Lauren #28. Punishment is not appropriate. I found that teaching a toddler the vocabulary to express their emotions worked well. I also tried very hard to never take a toddler to the store if they were hungry or overtired. Especially avoid it if they are both tired and hungry. That is just asking for a meltdown.

  31. @Johanna (#3)

    It’s hard for me to project that far out, because there are a number of variables outside of my control. My best numbers show us tight, but doable just on my salary. There are some additional things we could do, like reduce the number of days our daughter goes to daycare/preschool.

    @Kristin (#9)

    I’m not sure it’s worth selling our existing cars, and buying cheaper ones. They are both less than 4 years old, and both high-efficiency diesel with great gas mileage. We’re planning on keeping them until they fall apart.

    Regarding home energy improvements, the house we bought was remodeled from top-to-bottom in 2006 by the previous owners, and has a great energy profile. It’s insulated well, new double pane argon windows, 90+ furnace (which we haven’t even needed to use yet), gas range & dryer, etc. Our total energy costs are around $90/month. Also, we’re in the area, not San Francisco proper, so our weather is better. :)

    I made the decision yesterday (before Trent’s post this morning) to pay off both vehicles, and did so yesterday. Feels good, and I can now focus extra money into our emergency fund.

    Any other questions – feel free to ask.

    Thanks

  32. Trent,
    Agree with several of the comments on the emotional control issue. One big thing is to make sure you’re expecting developmentally appropriate behavior from your young children. If we ask a child to do what they really can’t do, it’s the fault of the adult. I’d recommend Positive Discipline for Toddlers…it’s great and goes into the developmentally appropriate expectations. I think reframing “learned to control my emotions” to the more correct “my brain developed enough that I could control my emotions/behavior” would be a useful way to consider this.

    I’m sure you’re a wonderful father and this is meant to be helpful, not critical.

  33. Chip – I wouldn’t consider knowing you need to sell your house in a year as “selling under the gun.” And I agree with the others that renting while in seminary is a better idea — you can either sell the current house or rent it out. Selling it would give you cash to either pay the rent or beef up your savings to get you through the next 3-4 years.

    Jessie – don’t feel you’re limited to using your employer’s recommended IRA options – check out additional IRA options & see if you can get a better return on your money through them. It’s better to not have all your retirement savings tied to your employer.

  34. @Johanna

    LOL are you suggesting I have an eating disorder? Cuz I don’t. Trust me. My guilt is a result of spending money, in a situation where I spend very little and my rent, utilities, internet connection, and transportation costs are more or less fixed expenses. I do not feel guilty about eating.

    My relationship with food is a little complicated but that’s bc a chronic health problem both effects my appetite (frex, often first thing in the morning I have no appetite but if I don’t eat fairly soon after I get up, I’ll experience a major energy drop and also I can’t take my meds) and makes me easily fatigued so I spend a certain amount of time fretting about having appetizing, easily prepared food around, blah blah blah.

    But seriously, diagnosing a stranger on the internet based on one little clause? You didn’t have nearly enough information to reach any kind of conclusion about my body image or eating habits – in my case, both are above average. Thank you for your concern but in my case it is very misplaced.

    What I do need to work on is tracking how I spend on my money on food more closely, how much specific meals cost, making decisions about what groceries I’ll buy where (i.e. local produce from the co-op, or produce from the supermarket), and so on. I know closely examining food habits is really bad for some people with histories of disordered eating but in my case that’s not so at all. And since I’m not in school anymore (now *that* was bad for my health!) I have the energy and focus to really get organized and create new habits.

  35. Trent, thanks for answering my question! I think that suggestion could work for me.

    Reviving my ING account will help, since I never did carry my ING card around and I always have to look up the password to access my account online.

    Looks like saving my grocery receipts paid off, since now I can use them to get a sense for how much I’ve been spending on food – though I’ll have to estimate on what I spend when I don’t eat at home.

    Again, thanks.

  36. Just wanted to add that I’m a long-time reader, and it’s quite clear that you make parenting and your children a priority, and that you love them very much :)

    @Kat, #28, I reject the premise that parents must represent the real world. Sure the boss would punish you. But there’s PLENTY of time to teach kids the appropriate behavior, and it doesn’t have to involve punishment. Punishment might “work” faster, but what it really does is provide an extrinsic motivator. If you want your children to be intrinsically motivated to behave in socially appropriate ways, it’s far easier long-term to set them up to want that for themselves.

  37. Chip, the ship has sailed on the probability of being able to buy a home and break even on it 3-4 years down the road. I suggest scenario #3: Sell your current home and rent while in school. Save your $ for the education of your child and any future children, your own retirement, etc.

  38. My library has signs up all over it that says this month they’re going to start making video games available for check out.

    Sounds like a pretty frugal option.

  39. @prufock 3 old games for 1 new is a pretty bad deal. As an example of what I’m talking about, I recently bought a game new for £37, played it for 2 weeks and then traded it in for £29. Much cheaper than renting and you get to play the latest releases

    For me a big part of gaming is the discussion and the hype, theres a big social aspect to it. Very few people want to talk in any depth about 2 year old games, and the online community is usually dead by that point

  40. just one thing about controlling emotions – i believe it’s important to distinguish between showing emotions and having emotions. i think most emotions are natural and good to feel, but knowing when is an appropriate and fruitful time to espress/discuss them is what children need to learn. also, possibly the difference between a large rage and a small rage which will pass but which kids may let consume their behavior.

  41. I cannot imagine a circumstance where one would be having dr. appointments for 5 hours every day of the week. I fear you are being taken advantage of. Regardless of that, it is not working out for you and I think you would be better off making other arrangements that would allow you to spend more time either studying or earning more money. It may be cheaper in the long run.

  42. Lauren, I was not claiming that parents need to “represent” adulthood, I was saying that it is untrue to say that adults don’t or shouldn’t get punished for inappropriate displays of emotion, as you claimed is a reason to not punish kids. Adults are punished often much more harshly for inappropriate displays of emotion than simply having something fun taken away from them for a day. I also disagree that there is “plenty” of time to teach kids appropriate behavior – if the foundations aren’t laid when they are young, it is very difficult. I’ve seen this is children who were very well cared for but never punished when young – their parents are now having a hard time both in getting themselves to actually go through with a punishment and their kids are reacting very badly to the attempts, since they are used to only “positive reinforcement” and now they are tweens and teens and it’s not really cute to start screaming at their parents in public. Positive reinforcement only, with no consequences for negative behavior, is nothing more than bribing someone to do something that are supposed to do anyway, it’s not teaching kids to want to do something because it is right or giving any other intrinsic motivator. This is why so many kids have tantrums in the first place, they know eventually their parent is likely to offer them a reward for stopping.

    I am not saying that kids should be punished for crying or saying “I hate you” or pouting or other age appropriate displays. But throwing things, hitting, or purposefully screaming to get the attention of an entire store are all unacceptable at almost any age. Trent’s oldest can understand money transactions, how to save for a large purchase, and how to follow the rules for group games. Why shouldn’t he also be expected to understand that some actions are unacceptable and have negative consequences? If the parent has given the child appropriate ways to express their feelings (teaching them proper words, telling them to cry quietly, or teach them to ask to walk away for a few minutes to calm down have all worked with varying degrees of success for me) and they still choose to make a scene (as Trent described, this is in situations where he has to leave a public place due to the child) “minor punishment” makes sense. This isn’t a week long grounding, it’s taking away a candy for a day!

    As you said, what matters if the message kids get from the punishment. This is true of lack of punishment too. A child can control their actions by the age of Trent’s oldest (and probably second oldest) and the message he would get from continuing to throw tantrums without negative consequence is that it is okay keep doing it.

  43. @Kat, and I wasn’t saying adults don’t ever get punished, just that they usually don’t, and shouldn’t, by people who are supposed to love them unconditionally. My example only works because it’s Trent’s WIFE.

    What I’m suggesting is stepping completely out of the framework of rewards and punishment as intentional behavior modification strategies. I highly recommend Alfie Kohn’s book. This isn’t the sort of thing one can argue for in the comments of an unrelated blog.

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  45. Question for the mailbag or wise readers:

    My husband’s grandmother is going into a nursing home and has decided to give us her car. We both have a car and both need a car for work. So, which one do we get rid of?

    Her car – 2003 Honda Accord, 25K, bbv $9000; my car – 1998 Jeep Cherokee, 215K, bbv $1700; or my husband’s truck – 2002 Nissan Frontier, 75K, bbv $4500.

    All the cars are paid off. We would love to sell one to pay off some debt, but there are some issues. First, her car is the most valuable, but she would probably be unhappy if we sold it after she gifted it to us. Also, it’s a Honda Accord, which in my mind is the best car ever and would last a long time. The obvious choice is my car, but selling it won’t pay off much debt and it might go, per my mechanic, another 100K without too much expense (but with 215K, who knows). My husband’s truck is in much better shape, so it could either last a while or sell at a decent price. It’s a truck, which is really useful 3-4 times a year, but also a truck, only really useful 3-4 times a year.

    Thoughts?

  46. In regards to the Rav 4 vs Camry, I’m a bit stunned that nobody else has mentioned trade in vs sell yourself. I have consistently sold on my own and found a dealer has to get a minimum of 30% off what you can sell on your own. Sell Rav4 for $12,000, or trade for $9,000. It’s worth the hassle of selling every time.

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