Reader Mailbag: Endless Winter

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. Merging finances
2. Spending small windfalls
3. Handling parental stress
4. Career decisions and relationships
5. Energy drinks
6. Parents and financial disasters
7. Financial planning and self-education
8. Finding encouraging friends
9. Spending more than usual
10. Food pantry

Do we really need another snowstorm a week before Easter?

I am now very ready for spring to begin.

Q1: Merging finances
My husband and I both are college graduates with stable, full time jobs making over 40k each. We both have about 15k savings each. Our college loans are 15k (mine) and 45k (his) and we are paying about $100 over our required payments monthly. He has a truck loan for 18k and that covers all of our debt and assets… now, that we self paid our modest wedding off (6k) we have found a perfect little home. It is 105k and we were advised by the bank to put 11k down, so that we only have 3 years of PMI and it qualifies us for a traditional loan (which apparently is better than FHA?)….anyway, after all those details, I guess I just want to know: Should we merge banks/finances?

- Sarah

Functionally, all of the debts you list here affect you both. They all draw money away from the shared pool of funds that you effectively share, whether you’re actually mixing the money or not.

My belief is that it really doesn’t matter whose names are on the debts, you should treat them as debts you both owe and strive to get rid of all of them as quickly as possible.

I think it makes sense to combine accounts for the sake of convenience. It makes it much easier to track spending and get a clear picture as to your mutual financial state.

Sarah has a follow-up question.

Q2: Spending small windfalls
Also, when we come into extra money, like after not spending our monthly allotment on groceries, or at tax time, or bonuses at work, what do we pay down first? Which loan – school or truck? Do we pay ahead on our mortgage? Do we put way more into our savings (which will be at around 20k total after down payment)? Do we splurge and take that little 1k honeymoon we’ve been dreaming about?

- Sarah

It’s really up to you and what your priorities are.

If you choose to pay off debt, I would throw that money at the debt with the highest interest rate first, as that will minimize the total amount you have to pay on all of your debts over the long haul. There’s also some merit in tossing that money at the debt with the lowest balance, as that will help you reach the success of paying off a debt first.

If you choose to splurge, I’d recommend keeping it in mind as you make other spending decisions throughout the year. If you spent your tax refund on a splurge, it might be sensible to be a bit tighter with your money during other parts of the year.

Q3: Handling parental stress
I have a six month old. Most of the time everything is great but sometimes she starts crying and I don’t know how to handle it. I usually eat but that’s not a good solution either as it costs money and isn’t helping me lose my baby weight. Any help?

- Mary

First, if you have a neighbor or someone else nearby that would be willing to occasionally watch your child for half an hour or an hour or so while you regain your sanity, that can really help take the edge off. With our first child, Sarah and I settled into a routine of sometimes relieving each other while the other one got a break, usually outside the home. The other one would go take a walk or do some task outside of the home while the other one stayed at home alone with the baby.

If you really need a quick break, don’t feel bad about putting your baby in a crib for a bit, turning on the baby monitor so that you can hear the baby but low enough that the crying isn’t driving you crazy, and stepping out of the room for a little bit. If you can hear the child, you can be sure nothing’s going wrong and it can give you a breather when you most need it.

If the crying is really persistent, don’t be afraid to ask a doctor about it. Some babies do cry more than others, but sometimes persistent crying can be the result of a medical issue of some kind.

I will say handling the stress of a crying baby got easier with the second child (and our second child cried far more than our first one) and even easier with the third one.

Q4: Career decisions and relationships
I have a tough decision to make, because i want to move out from my parents. I’m 23 years old and work as a programmer and make ~27.000 $ net a year. My girlfriend is schooling as a physiotherapist and will be finished in 2015.

The special thing at my job is: I work from Monday to Friday at different companies, living in a hotel, mostly 250km away from my home. So there is nothing, that holds my near to my home. Near to my work is difficult, because i don’t work at the same city.

So, how does a young guy at 23 years with a girlfriend, which can work at every city (physiotherapist are needed all over germany) decides, where he should rent an appartment?

Should I stay near my parents (why should I?), should I move to a place where renting is as cheap as possible (probably east Germany)?
- Alan

If you’re in a committed relationship, you should choose to live in whichever city that allows you both to easily find work. If one of you has narrower job prospects, then that person should be the leader on determining where you should live based on where they can find work.

Staying near parents depends heavily on your relationship with them. There is no wrong or right answer here – it really depends on the connection you have with them.

I will say that when you have children, it is advantageous to be fairly close to your parents because grandparents can help tremendously in the child-rearing process.

Q5: Energy drinks
Energy drinks are costing me about $6 a day. That adds up to $180 a month and that’s a bill I can’t afford. Problem is I tried to quit cold turkey and got really sick and the only way I felt better is by drinking one. I even tried slowing down and I still feel awful.

- Leslie

There are a lot of tricks to breaking an energy drink habit.

Let’s say you drink six energy drinks a day. Instead of drinking six of them today, drink just five and replace one of the mid-day ones with some cold white tea, about the same volume as the energy drink. You can make white tea using tea bags from the store. Make a large container of it and sweeten it with honey to your liking.

Do that for a week. Then, either eliminate the white tea or replace a second energy drink with white tea.

Every single week – on, say, Monday – either eliminate an energy drink or a white tea from your drinking schedule (replacing it with water) or replace an energy drink with a white tea.

In other words, bring down your level of energy drink addiction slowly. Even cutting it by half suddenly can cause severe headaches and nausea. You have to be slow about this change or you’ll be miserable.

You’re absolutely making the right move in getting off an energy drink addiction, though. Kudos to you for heading in the right direction.

Q6: Parents and financial disasters
Over Christmas, my parents revealed to my brother and I that they are in very bad financial shape. They have over 100% debt on their home (they were able to get mortgages for more than the appraised value) and a frightening pile of credit card debt. Apparently, they’ve been living like this for a while, as they’ve emptied out what little retirement savings they have to stay afloat. They’re both in their sixties, have nothing for retirement, and are struggling to even keep their head above the debt. What should I suggest that they do?

- Amy

They’re not going to be able to easily retire. The only asset they’ll likely have is Social Security during their retirement years. That’s the path they’ve chosen.

Your parents have a long pattern of spending more than they earn, and the only way they’re going to reverse that pattern is by spending substantially less than they earn. Even if they do that, they have a giant hole to dig out of. There’s really no easy way around it.

They may want to consider bankruptcy at this point. If they don’t have any debt-free assets to their name, they don’t have much leverage when it comes to handling all this debt themselves. I would encourage them to consider a bankruptcy lawyer, as they certainly sound like they’re in a personal bankruptcy situation.

Q7: Financial planning and self-education
My husband recently passed away. He had a 401k which should provide reasonably well for me. The 401k is being invested in low risk investments so I will have a modest income for the next 30 years. I have two children still at home, one working and one a freshman in college.I have no major debts except my home and a high cost of living in the area I’m in. Before his death we were planning eventually on selling our home and moving to a Northern community we have always loved. I make a minimal amount of money as a musician and travel to other venues 6-8 times a year. I can live anywhere but I prefer to live near family. The new house would be much smaller if I move where we had planned. I love it there but the cost of living is only a little lower than where I am. If I spent the same amount I could live in Florida and buy a large house with a pool. I prefer living in the North and near my kids although I have family in the South and my general cost of living would be much lower. I don’t want to make a bad decision. I do need to decide within the next few months.How would you decide? And, if you have no background in or knowledge of finance ( and I do mean ZERO knowledge) how would you educate yourself?

- Linda

First of all, do not tap the 401(k)’s balance to buy a home, even if it’s perfect. You’ll regret that for the rest of your life.

If you’re living alone, you don’t need that big of a home. A large home for a single person just means a lot of floor space that requires vacuuming and dusting and upkeep. You’re better off looking for something quite small that suits your needs – something with one or two bedrooms rather than four or five. Many people want a home with several bedrooms to provide room for all of their children to stay, but situations where all of the children are staying at your home at once are pretty rare and not worth the tremendous cost it takes to buy and maintain a home like that.

You need to decide what you want. Where do you want to live at this point? Would you be happier in the north, near family, or in the south, where there’s nicer weather and a lower cost of living? I think you have the means to make either one happen. You just have to decide which one you actually want and then go for it. Focus more on where you want to live than the cost of it.

Q8: Finding encouraging friends
All of my friends make fun of “cheap” people and constantly go shopping and out for drinks and dinner. I’ve now realized that I can’t afford to keep up with this, but when people stop going out with us, they usually get labeled “cheap” and made fun of. I really don’t want to lose all my friends.

- Amanda

What’s happening is that your values are starting to move away from the values that your friends outwardly share. That’s a completely normal thing that happens to people as they grow older.

What it does mean is that you’ll be well served by making moves to seek out new friends and new interests that are more in line with what you enjoy and value.

What do you enjoy doing that doesn’t involve going out on the town? Are there any hobbies or activities you wish you had time for but don’t because you’re going out every night? Look around your area for social activities that involve those interests of yours – book clubs or workshops or classes or volunteer groups – and join one or two of them.

Yes, your “friends” may make fun of you as you withdraw from that group, but does that really make any difference at all if you’re moving on to new friends and relationships?

Q9: Spending more than usual
Our family currently has no consumer debt, except a mortgage, we save in our 401Ks, contributes to IRAs and still save roughly 15% of our paycheck after tithing. We are currently working to pay down the mortgage while beginning the building net worth phase of our life.

I’m writing to ask what things you spend more than the average on? Almost all of your writings focus on being frugal with your money, which is awesome. But being frugal isn’t necessarily about being cheap, but being wise with money. I was wondering if you could make a post that explains this concept.

An example with me is sort of related to your post on building a cheap computer from the other day. I’m a software engineer in my profession so one thing I spend more on than the average is computers. I usually buy the best computer that I can afford on a 3-4 year rotating basis. Last purchase was a MacBook Pro that wasn’t maxed out, but middle of the road that I upgrade with a SSD drive and more RAM.

Most people would flutter at spending $2K on a laptop and would argue “Macs are just way more expensive”. But in reality, they’re great. It’s Unix under the covers with a nice UI. Most people don’t get that because they don’t do their work from the command line. But as a computer guy, you get that :)
- Randall

Our family spends more on food than the average family. We tend to buy as much as we can from ethical and local sources, which sometimes comes with a premium. Buying all of the ingredients for a dish so that it’s made wholly from fresh ingredients costs quite a bit more than just buying a frozen boxed meal.

Although our overall hobby spending is probably lower than the average family, our specific hobbies (mostly books and games) probably involve spending that’s higher than the average family.

I don’t think we spend more on technology than the average family. I’m writing this article on a PC that’s mostly built out of parts that I picked up here and there.

Q10: Food pantry
How low does your income have to be before you can feel okay using a food pantry?

- Ron

I don’t think there’s a magic number here. I think most food pantries will help anyone who feels that they’re in a position of sufficient need to require using a food pantry. If you feel you need it, then use it. That’s what it’s there for.

I have witnessed people using the local food pantry that were dressed rather nice and driving decent cars. I did not know their financial situation, however – they may have been recently unemployed, for example.

If I felt there was a genuine concern about being able to feed my own family, I would not hesitate to use a local food pantry. At the same time, I would seriously examine my own financial situation and see what I could improve so that I didn’t have to rely on that food pantry.

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

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