Reader Mailbag: Family Visit

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 off items
2. High-interest foreign accounts
3. Putting off home ownership
4. 401(k) leftovers
5. Early payments on 0% loan
6. Vegan snacks
7. Using a windfall
8. Self-employment and taxes
9. Paying down credit card debt
10. Reference books

My parents visited us this past weekend. I love it when they come to visit us, yet I also sometimes feel some relief when they’re gone. I feel the same way with almost any guest – I’m glad they’re here, yet I also feel glad after they leave.

It’s just the natural stress of houseguests. A guest in my home for an afternoon isn’t stressful, but once someone is here for several days, I almost always find myself getting stressed out.

Q1: Selling off items
When you said the first thing you did was to sell all your media (DVD’s, CD’s, etc.), where did you sell? I have a hunch it was eBay or Amazon, but I’m not certain, and I would like to know the best way to go about selling media. I find eBay and Amazon very time consuming to use for selling. We have a local buyback store, although I’m not sure they offer a respectful amount of money for items. In a nutshell, where is it worth it and what makes it worth it?

- Sandra

I did not sell all of my media online when I first hit my financial bottom. I did use eBay for some items, but I was very selective about what items I sold (particularly after the first batch), focusing on ones where I felt the return would be worth the time investment.

What I actually did was sell a handful of items online, then sell most of the rest at a used media store. The few that were left wound up at a yard sale, and the unsold ones there wound up at a Goodwill store.

I was pretty happy with the financial return here compared to the time invested. That money went a long way in helping me deal with my initial debt load.

Q2: High-interest foreign accounts
I am a long-time reader of your blog and have loved your insights. I was wondering if you could provide some insights into how I could profit from the extremely high interest rates available in countries like Brazil or Turkey? It would seem prudent to park our money in a cash-deposit or savings account in a foreign bank paying high interest for a while… then move it back to the US.

- Tim

There are several concerns I would have here. First, in order to use the money, you’re going to be converting your currency twice and paying a fee on that conversion twice. This will eat up a significant amount of your gain.

Another concern is that, to an extent, you’re playing the foreign currency market. If the exchange rate moves in favor of the U.S. dollar while your money is in the Brazilian or Turkish bank, you’re going to see most of your gains eaten up.

Yet another concern has to do with the banking industry in those nations. I’m not clear on how stable the banks are there and how protected ordinary depositor accounts are.

There are enough uncertainties and risks in this that I wouldn’t try it unless I was actually from one of those nations and very familiar with the risks and concerns involved.

Q3: Putting off home ownership
My husband has a stable job at which he excels. I have an office job that I was happy to accept in the depth of the recession (after a two-year low-paying but freelance blogging gig) but that I don’t love. We were married in May 2008, and started our life together with $43,000 in credit card, car and student loan debt.

In just over 2.5 years, we’ve reduced that debt to about $7,500, which we are on track to pay off by the end of this year, using monthly automated payments. On January 1, we began weekly automatic savings of $230 per week to an emergency fund (we began with Dave Ramsey’s $1,000 mini-fund back in 2008).

Our gross income in 2010 was about $120,000, and in 2009 it was $96,000. However, due to our aggressive debt repayment, our entire savings consists of $2,000 in our emergency fund. I do have $3,200 in a retirement account from an old job, and I just started contributing to my current company-matched 401k in January. My husband (who earns about 70% of our combined income) is not contributing to retirement.

Here’s the quandary: we both dream of owning our own house. We are currently renting a house for $1,400 (a great deal in our area) from a family friend who would like to sell it to us. She has offered owner financing (not sure if we need this — we have good credit, but understand that lending is tight and we have no down payment), but won’t name a price range. We’re a bit concerned about this, as she previously listed the house for a price that was aspirational to the tune of $100-$150K over market value (needless to say, she received nary an offer, not even a low-ball one).

Our lease is up in June. I would like to quit my job next year to explore a new career, travel and raise children (we are in our early 30s, no kids yet). With only my husband’s salary we can afford mortgage payments up to $2,500, which, depending on what calculator we use, seems to put us in a $375,000 home. This is about the value of the house we are renting, and an average price for a “starter home” where we live. We keep and stick to a meticulous budget.

I feel like conventional wisdom would tell me to stay in my current job until the emergency fund is built, the debt is completely paid off, max out retirement, and then and only then, start saving for a 20% down payment on a home. But that might take us another 3 years or more, and involves asking to extend our lease on a property we know our landlord wants to sell, or moving to another rental that could be more expensive or far less comfortable and convenient in the meantime. Also, home prices are temptingly low right now, and while we have little savings, our income is healthy, and would still be without my income, though we’d probably qualify for a smaller mortgage (that wouldn’t be enough for a house in our area).

So what do you think? Should we ask to extend our lease? Should I plan on staying in my job longer than I’d like? Is there any good reason to halt our debt repayment and emergency fund savings to redirect towards buying a house?
- Johanna

I think you should sit down with your landlord and try to get a bead on what kind of arrangement she’s wanting for the sale. What’s the price? How does the financing work? You need more information with which to make a decision here.

If that’s a non-starter, I would try to extend the lease and then get your financial house as solid as you can. You have the right ideas – pay off your debts, build your emergency fund, contribute to your retirement.

As for your wish to take a year off, I think it’s fairly incompatible with the other things you’re mentioning. While I’m not opposed to the idea, you have to reconcile yourself to the fact that you can’t have everything. You can’t have jobless freedom while also paying off your debts and building up your down payment. You’re going to have to make a choice there.

Q4: 401(k) leftovers
I’m a 24-year-old writer who graduated from college in 2008. I was lucky (and hardworking) enough to graduate with zero dollars in student loans. But thanks to the terrible economy of the summer of 2008, I haven’t exactly had much career success. Just out of college, I had a paid internship that afforded me a 401(k) and matching funds. I contributed as much as I could, but my small intern salary for the summer left me with just around $500 in the 401(k).

Since then, I’ve been working, but not contributing to a retirement fund. I make a very modest salary as a receptionist, combined with some side money from freelance writing. The writing is my passion, though, and with my networking contacts, I’m considering making the move to be a full-time Freelancer in the upcoming year (As soon as I have my $900 credit card bill, my only debt, paid off).

But now I’m ready to start modestly (only around $100 per month) contributing to a retirement fund again; I know it’s important to sock away as much as I can while I’m young. I’m considering opening up a Roth IRA to take advantage of the tax benefits later on in life (when I hope my income and tax bracket may be higher), as well as the flexibility to take out my capital contributions if times get really tough (Journalism is a fickle industry).

But my problem is that I have no idea what to do with that 401(k). Should I take the money out and put it in my (eventual) Roth IRA? Wouldn’t that leave me with pennies after the early withdrawal fees? Should I roll it over into a Traditional IRA? If that’s the case, should I keep both a Traditional and a Roth IRA? Just the Traditional? Can freelance contractors make tax-deductable contributions to a Traditional IRA? Would that be a better idea for a self-employed person? Should I leave it in the 401(k) for simplicity’s sake? I would jump at the chance to re-join the non-Freelance workforce if the right opportunity presents itself, so perhaps I’ll have another 401(k) down the road.
- Evelyn

The usual process is to roll a 401(k) into a Traditional IRA, then convert that Traditional IRA into a Roth IRA. That’s the type of thing that a fee-based financial planner (do not use a commission-based financial planner for this – ask them if they operate on commission before using them) can help with. This usually doesn’t incur early withdrawal or other fees. However, the conversion from a Traditional to a Roth IRA will cause a taxation event because you’re moving from pre-tax to post-tax dollars. You’ll have to pay income tax on that money. If you can’t do that, leave it in the Traditional IRA.

You can certainly have a Traditional IRA and actively contribute to a new Roth IRA, just as you can have a 401(k) and a Roth.

I like IRAs because you have more control over how your money is invested. You pick the investment house and you usually get a much wider and richer range of investment options.

Q5: Early payments on 0% loan
What do you think about making early payments on a car loan that has 0% interest?

I’m torn between reducing the car loan debt (about $28k), opening a Roth IRA, or starting another account to save for a house. I already contribute 10% of my salary to a 401k which my company matches 50%, so the Roth IRA doesn’t seem urgent. I’m a few years away from wanting to buy a house, but I’d be able to pay for a mortgage a lot easier if I’m not spending $500/month on car payments (there’s about 57 months left to go!).

Selling the car to buy a “reliable, used car” instead is not in my interest, despite that being the typical finance blog approach.
- Charlotte

The reason the “typical finance blog approach” involves buying a reliable used car is because it provides the most driving bang for your buck. If you choose not to do that, you’re simply choosing to redirect money from other financial goals into having a shinier car, which pretty much opposes most financial sense. If a “typical financial blog” advocated buying a new car on a loan, then that “typical financial blog” would pretty much constantly be ridiculed for offering dodgy advice.

If you’re committed to your current car, that means you’re committed to it above your other goals, which is good – you’ve assessed your goals and figured out what you want. The advantage to paying off the loan early in this case isn’t to avoid interest, but to maximize your cash flow as soon as possible.

However, if your loan really is 0% interest for the entire life of the loan, you’re better off making extra payments into a savings account, waiting until that savings account matches the balance of your loan, and then either paying it off right then or simply using that savings account for all remaining car payments. This takes financial willpower, but it’ll put you ahead financially, perhaps saving you the equivalent of a car payment or so in interest earned.

Q6: Vegan snacks
On your diet, what kinds of snack foods do you eat? I’m amazed at how much stuff has milk or eggs in it!

- Jeff

I eat nuts. I eat fruit (I love dried apricots). I eat mushrooms that have soaked in olive oil, a touch of vinegar, and spices. I eat crackers. I eat pretzels dipped in hummus.

You just have to look around your grocery store for options. The best place to start is usually in the produce section. Look for things that look like you could munch them. Hummus is a great thing to dip these vegetables in.

Pick up some nuts and try them. Try out a variety of dried fruits. You’ll be shocked how many good things are out there once you start looking in the right places.

Q7: Using a windfall
After a year of unemployment I am now gainfully employed. I have cut my budget down to bare bones (no extra spending of any kind, no cable, no shopping, no…anything) in order to be able to save $1000 each month.
15% of my salary goes to my 401k/Roth401k
$200 a month goes to my RothIRA
I save $1000 a month (starting this month)
I have $8000 in savings
I have $9000 in debt. I pay this off at $300 a month, and there is 0% interest (praise God)
At this rate, I will be paying this debt off until December 2013.
We are planning on having a baby in Summer of 2012 and that is what we are saving up for.
We currently rent, and are not looking to purchase a home for another 5 or so years.

I am starting a certification program that will allow me to start my own business by the end of the year. The program costs $7000 and I am paying out of pocket, from my savings and replenishing my savings at a rate of $1000 a month. I am getting $1600 windfall shortly, and at my new job there are two bonuses this year. I was told I can expect to take home $2000 for each.

What do you suggest I do with those $5600 in extra funds? Should I put them to savings to replenish what I take out for the certification program? Should I put them to debt so I can pay it off faster and have that additional $300/month to go towards savings instead of debt sooner?
- Danielle

I’m not sure how much your monthly expenses are, but if you’re a permanent couple with a baby on the way, I’d make sure that my emergency fund covered at least four months of living expenses, and preferably more. With two adults and a baby, the potential for emergencies is huge.

For you, that probably means banking most of your windfall right back into that savings account and sitting on that egg until you need it.

It’s not exciting or glamorous, but it’ll take care of you when you really need it.

Q8: Self-employment and taxes
I know you previously wrote about the difficulty of being newly self employed and the taxes that come with it. Since you’ve been in that situation for a few years now, I’m wondering if you have any tips (or lessons learned from experience) for those of us facing that situation?

Our personal tax situation is this (though it isn’t really relevant): In the past, I was an employee and my husband was self-employed, so we withheld more from my paycheck to cover what little tax he owed. Unfortunately, this past year, I made partner and became self-employed and my husband’s business is starting to take off. We tried to pay quarterly estimates throughout the year, but still ended up owing a big chunk at the end. In fact, so much that we might have to take a loan to pay it (in our defense, our taxes tripled from a year ago). I’m trying to figure out how to avoid this situation next year–create an account and put money in it every week and send that in quarterly? Do something else? Our accountant advises writing the equal checks quarterly, but I don’t see how we can do that, especially with owing what we owe this year.
- Dawn

The idea of equal checks only works if you can make a really good estimate of how much you’re going to earn in the coming year, which is pretty challenging for many self-employed people (myself included).

My solution has been to just take every single drop of income I bring in from my self-employment and put half of it aside. Every three months, I cut a check to Uncle Sam for about half of what I added to the account over the last quarter, plus a check to the state of Iowa for about half that much.

This gets me pretty close to what I owe (usually). The amount that remains in that account helps me to cover any additional taxes I owe. If there’s any left over, I move that back into my normal checking account.

Q9: Paying down credit card debt
I received an 18% cut in my pay for 2011. I am an independent contractor doing medical transcription at home and because I love my job, have flexible hours, and make pretty good money, albeit less by 18% now, I do not want to look for another job. I live in a small town with no job opportunities too. My question is, I am trying to pay down 3 credit cards that are all roughly the same balance, approximately $4200-$4500 range each. Two of these are at exact same interest rate of 12.24% and one at 9.99%. Rather than snowball I want to pay all down within a 36 month time range at the very least, and more when I can throw money at them. For the next three months (while paying off a medical bill) I plan on making the minimum payments plus the interest. For example, one bill is minimum of $91 plus finance charge of $46 with total payment of and some change I will round up payment to $140. Is this a smart way to do it for short term until I pay off the medical bill? After the medical bill I will be able to pay total of $450 per month prorated to each bill and I want to continue to pay the finance charge on top of that.

- Ronnie

It depends on the interest on the medical bill. Your best approach is to make minimum payments on all of the debts, then make the largest additional payment you can on the debt that has the highest interest rate. This will pay off all of your debts in the fastest possible way.

The medical bill seems to be somewhat thrown into the mix here. I’m assuming it has some sort of payment plan involved. If that’s the case, you’re likely facing a 0% interest on that debt, so I would just make the payments on that one and hammer the credit cards.

If your goal is to get debt free as quickly as you can, this is the way to go.

Q10: Reference books
You mentioned before that you buy books for reference, not for entertainment. What kinds of books do you buy for reference?

- Angie

Mostly, I buy books for reference when I know I’ll return to them in the future for facts, inspiration, or other materials. I’ll also buy books when I know I’ll get greater value out of them if I’m able to hand-annotate the pages or highlight certain parts.

Another exception are books that I’m sure I’ll re-read again, which includes my favorite novels. We have copies of the entire Song of Ice and Fire series, for example, because my wife and I both love them.

If a book doesn’t fall under these conditions, I’m fairly hesitant to purchase it. I’ll pick other books up at sales sometimes or I’ll use gift certificates on them.

Got any questions? Email them to me or leave them in the comments and 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 hundreds of questions per week, so I may not necessarily be able to answer yours.

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49 thoughts on “Reader Mailbag: Family Visit

  1. Johanna says:

    (In case anybody’s wondering, I’m frequent-commenter-Johanna, and the author of Q3 is not me. Hi, Other Johanna! Nice to meet you.)

  2. valleycat1 says:

    OT – Bandaid Fix for Saturday 10 Pieces font issue: If you couldn’t read my late comment on Saturday’s post, you can temporarily fix things to be able to read Trent’s Sat. posts by opening your browser, go into Internet Tools, General Tab, Accessibility (NOT Fonts), and select the option to “ignore font size specified by website.” Read post. Then go back in & de-select that option, as it messes up other more complex website views such as newspapers.

  3. valleycat1 says:

    Q2 – instead of putting our money directly into a foreign bank, we have some of our investments in a fund that is weighted toward foreign stocks.

  4. valleycat1 says:

    Q8 – Check the IRS website/forms instructions for estimated tax payments. If I recall correctly [and I'm sure someone will correct me if I don't], they generally base expected quarterly payments for the current tax year based on your previous year’s reported income/tax debt. And as long as you come within a reasonable amount with your payments, they’re ok with that. You don’t have to predict to the penny, although of course if you’re expecting a big jump or decrease in your income, you can adjust the current quarterly payments accordingly.

    The big hit that surprises many people the first year of self-employment is not realizing how big a chunk they have to for their social security contribution on top of income tax.

  5. Kacie says:

    #1 Johanna — I wondered, but then the situation didn’t sound like you so I figured it was another :)

    For Q3 Johanna, it sounds like they would like to travel some and really explore life for a little bit pre-children. Seems like they are really getting their finances in a place where that could be feasible. Owning a house doesn’t seem to fit into that equation at the moment, though saving up for one does sound like a good idea.

    Saving 5% down is roughly $18k for a $375k house, plus factor in closing costs.

    $75k gets you to 20%. Wow! Good luck!

  6. Benjamin says:

    Goodwill is definately my medium of choice for getting rid of unwanted items laying around the house (clothes and other items of less value).

    Other items (such as rare books, musical instruments, and other higher value items) can make it worth the time to fool around with ebay, craigslist, or some other classified ad.

    I find the net tax advantages of “writing off” a dress shirt for $10-15 yields just as much as if I had had sold it for $8-10 on ebay and paid to ship it across the coutry…

  7. Carole says:

    Trent your comments remind me of the old saying “house guests make you happy twice–when they come and when they go”. Also “house guests and fish stink after three days”.

  8. Canan Onat says:

    Q2- I am with Trent on this one. In Turkey the current interest rate is around 9,5% but, you will always be exposed to currency exchange rate risk if you convert your money to TL and invest in TL. In the past, when the interest rates were even higher, some investors were able to make money on this but I would not advise an individual to do it. It is always a gamble.

    As for how stable the banks are; I can say that the Turkish banks are very solid. After the 2001 crisis and some other problems prior to that, the Government has taken very serious precautions and the banks are subject to very strict rules and the banks are run very well as opposed to many European banks. So, we do not expect a banking crisis at all.

  9. Gimena says:

    Q4- I disagree with Trent recommending a financial planner to perform a 401(k) rollover. When I had to roll over money from an old 401(k) I used Scottrade. They helped me with all the paperwork for free. All other brokers (Schwab, Vanguard, TD Ameritrade, etc.) will also help you for free.
    Your biggest problem is that you have a very small amount to invest. Most mutual funds require at least $1000 to buy in. I don’t know about other brokers but Scottrade does have CD’s, Bonds, and Stocks you can buy into with just $500. You should spend some time looking at the different brokers (Schwab, Vanguard, TD Ameritrade, etc.) to see which have investment options in your asset range. I would keep the money in a traditional IRA since paying taxes to convert to a Roth IRA will eat up even more of your money. If you change your mind, you can convert to a Roth later.

  10. JS says:

    Q9: I agree. I used Fidelity to rollover my husband’s 401(k) and they made it very easy, for free. We also didn’t have enough to buy into the fund we wanted, so we left the money in the core brokerage account until we saved enough and then bought the fund.

    I do think the Roth conversion could be a good idea, though. It doesn’t sound like Evelyn is in a high tax bracket, so she won’t owe a lot. Also, if I understandd the process correctly, we weren’t required to take the tax bill out of the balance of the account when we converted. We chose to convert the full amount to a Roth and adjusted my withholding to cover the extra tax we’ll owe for 2011. We’re in a low tax bracket, have an education tax credit coming and converted early in the year, so this worked for us, but I can see how it wouldn’t work for others.

  11. Other Jonathan says:

    Q3, if you’re interested in the house you’re in, definitely explore the owner-carry financing your landlord has mentioned. I would LOVE the opportunity to buy a house with owner-carry financing – there are tons of ways that can be an excellent situation. If the landlord wants to much for the house, offer that price but ask for no interest on the financing. Or, ask for an interest-free period; or a low interest rate; or a very long amortization term. Ask for the right of first refusal if the debt is sold. Ask for the right to prepay the note at a discount. Get everything in a written contract. Do what you can to dictate either the purchase price or the terms.

  12. Jackowick says:

    Q1: I had a lot of success recently in using the Amazon trade-in program vs direct selling. This works well with GOOD condition books, DVDs, and video games. CDs not so much. You look up your items, see if the trade-in option is there, and add it to a cart. Once you “check out” your trade in cart, you print up a pre-paid UPS label that you can drop off at UPS (or Staples or any other UPS shipper) and in about 7-10 days you get a credit into your Amazon account.

    I find this is good for putting money into a place where I can’t blow it on an impulse, plus Amazon has a lot of items across multiple departments for whatever you need.

    I also use ebay, used media stores, and flea markets.

    The KEY is to take the time to evaluate the bang for the buck and the time investment. You can usually make the most by selling individually on ebay but it will be a looooong tedious process. You will get the most up front cash but the lowest value by going to a used media store (in my opinion and experience; regional stores can vary and everyone has different experiences, so I welcome counter strategies, but don’t slam my experience for working for me.)

    If I had a rule of thumb, I’d say box sets, big books, and video games are best to sell on ebay, then take the remnants and other items to amazon, and THEN, in case some items aren’t available for trade-in or items get returned by Amazon’s buying agents, then take everything left over to a used media store and/or flea market.

    AND FINALLY: don’t overlook the value of donations. It may not give you as much money, but you can take a tax write off usually with proper documentation i.e. a Goodwill receipt plus it’s good for karma.

  13. valleycat1 says:

    Trent – I’m also an introvert & find houseguests draining after a short time. My daughter, on the other hand, is an extrovert & is energized by always being around other people & her pets & having plenty of things happening.

  14. Tom says:

    “Every three months, I cut a check to Uncle Sam for about half of what I added to the account over the last quarter, plus a check to the state of Iowa for about half that much.”

    Um, am I not reading this correctly? You give half to the Federal gov’t (50% – I get that b/c of FICA tax) and then half of that to Iowa? 25%???

  15. mary w says:

    #14 Tom. Trent puts half his self employment income into the account and then sends half of that (25%) to Uncle Sam and half of that (12%) to Iowa.

  16. jim says:

    Q2 Tim : Don’t do it. You’d just be gambling on foreign currency and potentially losing a lot. At the start of 2011 the Turkish lira was worth about 77¢. Today lira are worth 58¢. If you’d bought a CD in Turkish currency you’d have lost 25% of your money so far this year. Even with 10% interest you’d still be down around 20%.

    Q3 Johanna : You should pay off your debts and then save up a 20% downpayment before you quit your job or buy a house.

    Q4 Evelyn : Trent mentioned a fee based financial planner. Please do not hire a financial planner to help you roll over a $500 account. $500 is not worth spending money to hire help for. Not sure if Trent intended that but he threw it in there for some reason. I’d just call up a company like Fidelity or Vanguard or wherever you want to do your IRA at and they’ll help you do a rollover into a traditional IRA. If you don’t have time or you’re not sure on how to get it done then just leave it in the 401k for now. But be aware your ex-employer MIGHT cash it out and send you a check since its a small amount of money. Employers aren’t required to carry retirement accounts for small balances if they don’t want to and most don’t want to.
    Also, theres no compelling reason to convert that into a Roth IRA and voluntarily hand over taxes today. It makes sense for everyone to have some % of your retirement savings in taxable accounts to take advantage of the standard deduction and exemption.

  17. With regard to Q3 –
    The first thing that you should do is hire an appraiser to appraise the house. Then meet with the landlord with that number in hand. This takes a lot of the potential ill-will out of the situation. The landlord likely has an unreasonably high view of the house’s worth, but the appraisal allows you to say “Here’s is what a fair market is really telling me the house is worth today – and I can’t overpay.” It makes it so that you are no longer negotiating against a family friend – the family friend instead has to face the reality of the appraisal.

  18. Des says:

    Q6 – Most of the classic healthy snacks are already vegan – veggie sticks, fruit, nuts, popcorn, etc. If you’re looking for vegan processed snacks, google “accidentally vegan”. There are a TON of vegan snack foods, including my favorite vice: Oreos. (It seems like the filling should be made of cream, right? But no, its pure chemicals ;)

  19. prodgod says:

    Self-employment and taxes can be tricky, especially if you need 100% of your income in any given month/year. And once you get behind, it can take a while to catch up. Most of the debt I’ve accumulated over the past decade is a result of borrowing money to pay taxes (I’d rather owe Visa the money than the IRS). Yes, ideally, I should set aside a percentage of my monthly income to make quarterly payments, but when that money is needed now for other expenses, it’s not as easy as it sounds. Even if I did have the money, I probably still wouldn’t make quarterly payments – I’d just pay the lump sum every April. The penalties/interest really are not so big, assuming you file your taxes on time and make the full payment by 4/15 every year.

    On another note, I will say that making the 15% contribution to Social Security is a tough one – it basically makes it close-to-impossible to do any other retirement saving, so I’m foolishly depending on SS to be there for me when I retire. Not much of a choice.

    After 15+ years of self-employment, that’s really my only complaint. All things considered, it’s still totally worth it.

  20. prodgod says:

    Regarding Vegan snacks: keep in mind that “vegan” doesn’t always necessarily mean “healthy.” Potato chips are vegan, margarine is vegan, Cool Whip is vegan, soda is vegan; all of which are usually loaded with either partially-hydrogenated oils or high-fructose corn syrup. Best bet is to read the labels. Or, better yet, prepare your own snacks. Even packaged nuts often have added oils and salt.

  21. Des says:

    @prodgod: Margarine and Cool whip are not vegan. Margarine has whey unless it is specifically Vegan margarine, and Cool whip has both milk and cream.

    But I agree with your main point. Vegan doesn’t necessarily mean healthy. Neither does “natural”, “organic”, or “low-fat”. Reading labels is really the only way to know.

  22. Sonja says:

    Q1 – Selling off items: as a side effect of a DIY proejct (removing popcorn ceiling texture)I decided to go thru my CDs, DVDs, and books. I have done this in the past with better results. My results with this purge were not great. Digital downloads and instant streaming (Netflix, Amazon Prime) have rendered a lot of my DVDs and CDs to be not worth much. The books were more specialized (Civil War and WW2) and I did better selling those. I mostly used Half.com which has a minimum price of $0.75, and I chose this method because I have lots of good feedback on ebay and my reputation is established. If the item I wanted to sell was already listed for less than $1 I donated it to Goodwill and will take the tax deduction. After mailing supplies and commissions, I netted about $300. A lot of stuff is still listed, but I am tired of looking at it after 3 months and will probably pull the plug and just donate rest of it soon.

    Really, I don’t buy CDs/DVDs/Books anymore myself. I prefer the digital downloads or digital rental just due to the fact I don’t want to dust or care for a physical object if I don’t have to. I think this mindset is spreading and I don’t see selling your media as a way to pay down a great deal of debt.

  23. valleycat1 says:

    Q6 – Nuts – watch portion size for snacking.

    If I were to decide to go vegan, whether for health or ethical reasons, it seems that it would naturally follow that I’d only be eating real foods (fruits, vegetables, nuts, grains, oils) rather than manufactured ones (Oreos, fake cheese). Ditto for going vegetarian – to me, using all the pseudo-meat and dairy items doesn’t make sense if one has committed to the concept that one doesn’t want to eat meat or dairy. Maybe briefly during the transition, but not on an ongoing basis.

  24. Johanna says:

    @valleycat: A person can like the flavors and textures of meat and dairy products but dislike the fact that animals have to suffer and die to produce them. These aren’t mutually exclusive concepts.

    Or, a person can find “fake meat” products (which are really just seasoned soy and wheat protein) to be appealing foods in their own right. Maybe that sounds strange, but people have all different taste preferences, and not all of them have to make sense to you.

  25. Katie says:

    Personally, I think the Morningstar veggie bacon is delicious, in an entirely different way than real bacon (which I also love). And I like their breakfast sausage way better than real breakfast sausage.

  26. prodgod says:

    @Des: Thanks for that correction – and for not missing my point, despite my mistakes!

    @Johanna: Well-said.

    @Katie: Yes! While I personally find real bacon not very appealing, I love the Morning Star “Facon” (as I like to call it). I grew up eating meat, but I no longer do for health and humane reasons. However, that’s not to say that I still don’t find the smell of a BBQ appealing. If that seems weird to some people, I can live with that. :-)

  27. Brittany says:

    @Des… Read the Cool Whip package– “Non-dairy whipped topping.” It’s all chemicals, no dairy there.

  28. valleycat1 says:

    24, 25, 26 – Makes about as much sense to me as someone deciding they are a carnivore & begin making fake veggies & fruits out of meat and dairy.

  29. Katie says:

    #28, you do understand that people have reasons for being vegetarian besides not liking meat, right? If people are vegetarians for health reasons, why wouldn’t they eat meat substitutes that they believe are more healthy for them? And if people are vegetarians for ethical reasons, why wouldn’t they eat meat substitutes that they believe were more ethically produced than meat? I’m really honestly baffled by your viewpoint (and I’m not even a vegetarian).

  30. Diane says:

    Q3: You do NOT want a $2500/mo mortgage on a $375K home. My mortgage is in that range – and my SINGLE salary exceeds your double salary – and yet it feels tight for me. You want to do that on some amount less than $120K? Bad idea.

    Houses cost a lot to maintain. Taxes go up and up on them, and there’s a lot out there that makes them into a money pit. Don’t stretch for this. Enjoy your lives. Travel. Chill. Save. There will be another house down the road.

  31. moom says:

    I think that shows that you are an introvert.

  32. Tom says:

    Thanks Mary for the clarification on SE taxes

  33. Johanna says:

    @Brittany: Just because a product is marketed as “non-dairy” doesn’t mean it doesn’t contain any dairy products. (It’s weird, I know – it surprised me too when I learned about it.) You have to look at the ingredients list on the back of the package, not just the label on the front.

    Milk and cream are recent additions to the Cool Whip “recipe,” but it always contained casein, which is a milk protein, so it was never totally vegan. Same goes for non-dairy coffee creamer – also not vegan.

  34. Laura says:

    Q1: Used book stores (like Half Price Books) are also a good place to unload excess books, videos an music.

  35. Brittany says:

    I guess I only buy generic cool whip recently, which is the only package I’ve looked closely at. It does not contain milk or cream, per the earlier comment, according to the back of the package currently in my fridge. No one in my group is vegan (but some are lactose-intolerant, which is why we buy it in addition to making “real” whipped cream for group events involving dessert), so I’ve never checked (nor did I argue) whether it was fully vegan, just that it was non-dairy.

  36. CMT says:

    I found it ironic that Trent was so snarky about traditional pf blog advice in Q5, after he had just given “traditional” pf advice in Q4, which was totally wrong for the asker! It seems that “general” or “typical” would be better qualifiers, because the standard advice indiscriminately doled out can do more harm than good.

    In the case of Q4, she should NOT, as others have pointed out, use a fee-based planner. A $50 fee is 10% of her investment amount! Also, if she does convert to Roth, she needs to be able to pay the taxes from outside the account. I’d recommend Suze Orman’s Money Book for the Young, Fabulous, and Broke – it has lots of advice for people in situations like Evelyn’s.

  37. jim says:

    Diane #30 said : “My mortgage is in that range – and my SINGLE salary exceeds your double salary – and yet it feels tight for me.”

    You make $240k a year and have a $2500 mortgage? That should not be ‘tight’. Spending just 1/8 of your income on a mortgage should not be hard at all and is far lower % than most people spend. Especially at such a high income level you should have lots of money to work with.

    Spending $30k a year on mortgage while making $120k is fairly doable. But if they were to drop to just the one job and only make 70% as much then it would be a lot harder. That would be ‘tight’.

  38. jackie says:

    Jim, Diane didn’t say her salary was double $120k, she just said it exceeds $120k.

  39. Amanda says:

    @17 excellent response!

    Regarding #3 the poster thinking of owner finance home purchase. I think Johanna wastes a lot of money. It seems like you could have cut expenses and paid off the $48,000 debt you started out with in one year. Practice spending 1/2 of your combined earnings and saving the rest. That should get you a down payment in just two years. You could pay off your home in 2-3 years after that! There is a lot to be said about not paying interest. =)

    I agree that you should travel OR buy the home.

  40. Amanda says:

    Question 4:

    It’s good to have a ROTH IRA and a Traditional IRA.

    There are tax benefits to a Traditional for low income earners. Potentially a several hundred dollar credit!

  41. Amanda says:

    @35 – They can label things non-dairy if there is a small amount of dairy (casein, as was mentioned). In my view, that’s not non-dairy!

    valleycat, I understand your viewpoint. Having read about the health risks of soy I generally don’t eat meat/dairy replacements (although I’d like to try rice cheese!).

    However, I had a breakdown about 2 months ago and I was CRAVING chicken strips. (I don’t eat meat because I feel it’s unhealthy and I just don’t like it so it’s generally easy for me to avoid.)

    I got some chik’n nuggets made primarily from egg whites and some other vegetarian things, no soy!!

  42. jim says:

    Jackie, you’re correct. I misread it. My bad.

  43. Johanna says:

    @Amanda #40: It sounds like you’re confusing two different tax deductions/credits.

    There’s the regular tax deduction for a Traditional IRA: If your income is under a certain threshold (~$55k for single filers), then the amount you contribute to the IRA is tax deductible.

    And on top of that, there’s the “retirement savings contributions credit”: If your income is under a different, lower threshold (~$28k for single filers), then you get a tax *credit* of up to $1000 for saving money in *any* retirement account, including a Traditional or Roth IRA, 401(k), 403(b), etc. To be eligible for the credit, in addition to having low income, you have to be 18 or older, not a full-time student, and not claimed as a dependent on anyone else’s tax form.

  44. Johanna says:

    @Amanda #41: Unfortunately, there’s a lot of negative misinformation about soy out there. Most of it can be traced back to anti-vegetarian organizations (such as the Weston Price Foundation, which has some truly strange ideas), but it’s been repeated so much that it’s been picked up by some vegetarian organizations and repeated as fact.

    Look at it this way: People in various parts of Asia have been eating soy foods for thousands of years and don’t seem to have suffered too much for it. There’s no reason to avoid soy entirely unless you’re allergic to it.

  45. valleycat1 says:

    #41 Amanda (& #29 Katie) – We tend to eat processed-free food as much as possible but are omnivores. We buy 95% of our food from local growers – farmers & ranchers and don’t stress out about the other 5%. We rarely eat out; by choice our food dollars go toward great food we cook at home rather than to restaurants.

    Amanda, if I am completely craving a specific item, I’ll have a small portion of whatever it is, even if it’s something I normally might not eat. I figure my body is telling me I’m missing a nutrient or just wants the occasional treat!

    #44 Johanna – Actually, women who have had estrogen-positive breast cancer are advised to limit soy intake because of the way soy breaks down when digested.

  46. Johanna says:

    @valleycat: OK, but “limit” does not equal “entirely avoid,” so that doesn’t contradict what I said.

  47. prodgod says:

    @valleycat1: I’ve read that the body-cravings=nutrient-deficiency argument has been pretty much scientifically disproved. Sometimes we feel like having a Snickers bar just because we crave it – not necessarily because our bodies are nougat-deficient.

    That being said, I tend to not pay close attention to single studies/findings. Consistently, I have found overwhelming evidence pointing to the health benefits of a plant-based diet vs. a meat-based one. I try my best to process the information I’m provided, filter out the biases, find what works best for me and implement dietary changes accordingly. Your mileage may vary.

  48. Katie says:

    But Valleycat1, reasonable as that is for you, that does not address the issue of people who either (a) have different health needs or interpret health findings differently, or (b) are not eating vegetarian for their health but rather believe that killing any animal is fundamentally wrong in and of itself. There’s no logical reason those people might not eat processed fake meat either seldom or often. The fact that it’s not the choice you’ve made doesn’t make it illogical from their perspective (or like a carnivore eating fake veggies made from meat, huh?).

  49. Steve says:

    Q5: It is not inherently dodgy/a bad move to buy a new car. Most people shouldn’t get new cars because most people’s finances are shaky (too much debt and too little savings). But there are plenty of people for whom buying a new, not overly expensive for their income car is a reasonable move. If you have decided (after considering the facts and options) to buy a new car, it is not inherently a bad move to take the 0% financing (assuming you don’t have to accept a higher price/less discounts to get the financing). If you need financing to buy the car you might not be able to afford it. If you need to buy a new car because that’s the only way you can get 0% financing, you definitely can’t afford it.

    Once you have a (no longer new) car, it is probably not the best move to sell your car and buy a used one, unless your car is inappropriate to your life in some way, and/or you can/should get a much cheaper used one. And once you have a 0% loan, the opportunity cost of taking it is a sunk cost, so there’s not much reason to pay it off early.

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