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. Smartphone recommendation
2. Making money at trading stocks
3. Sorting out different savings goals
4. Awful returns in Roth IRA
5. Rent or buy in Miami
6. Amazon Mom?
7. Odd banking experience
8. Time management failures
9. Student with huge medical bills
10. Amazon wish lists
I’ll fully admit that most of my exposure to new popular music comes from listening to online radio where new songs that are similar to artists I already like are mixed in.
From several recent songs I’ve heard, it certainly sounds like there’s a significant backlash against the “affluence” promoted in a lot of modern music. So many songs over the past decade have talked about spending money on flashy things in order to show off wealth.
In just the past year or so, both Thrift Shop by Macklemore and Ryan Lewis as well as Royals by Lorde have been giant hits. Both of them are about enjoying life with just a few dollars in your pocket.
Kudos to both songs. You don’t need a shiny new car or a bunch of jewelry or a several hundred dollar bottle of champagne to have a great time.
Q1: Smartphone recommendation
I have resisted so far to get a smart phone and recently been looking into it. I need it to listen to white noise with my noise cancelling headsets to block out workplace noise and also to browse specific websites and check and respond to emails (job opportunities etc.)
I was looking to get an iPhone 5s since I already use a Mac laptop, but at $900 price tag here in Australia it looks prohibitive.
Would you recommend a smart phone that I could use for the long-term, say 5+ years?
I’m not entirely sure how people buy cell phones in Australia, but in the United States, most people buy phones that are subsidized by a two year contract with a cellular carrier. Others buy pay-as-you-go phones.
If you want a smart phone that will last you more than five years, you’re going to want a sturdy phone above all else. While most manufacturers make phones that will last two years with reasonable use, I’d probably avoid phones from Sony and Samsung due to their relatively low build toughness, as this article indicates.
Also, since by the end of that five year timeframe your phone is likely not going to be eligible for updates anyway, I wouldn’t worry about it too much. Instead, I’d focus on a phone that does the things you want it to do right now from a manufacturer with a history of reliable phones, then shop around for price.
Q2: Making money at trading stocks
My brother spends most of his afternoons (he works from about 3 AM to about noon) trading stocks on his computer. He says that it took him years of study and practice to get good at it and his methods are hard to explain. I now work an afternoon shift and would like to start trading stocks in the AM. What books should I read to get started? The books he suggested to me are all old ones.
If he is consistently beating the stock market with his trades, then he shouldn’t be doing this as a day trader in the afternoons. He should be showing his results to a hedge fund, getting a job there, and making a mint. In short, my guess is that he does have some successes with his trades and those successes stand out in his mind, but if he sits down and adds up everything, he’s probably not even beating the market with his returns.
A great article on the problems with being a trader can be found here. In short, it is nearly impossible to consistently beat the market, so you should invest passively to simply match the market.
If you still want to do this, I’d probably suggest reading The Universal Principles of Successful Trading by Brent Penfold. I also wouldn’t jump into this unless you can afford to lose some money.
Q3: Sorting out different savings goals
My husband and I are out of debt except for our mortgage and a recent surgery bill for our dog that will be paid off within 6 months (on an interest free credit card). We’re currently saving for:
1. Emergency fund- we currently have over 4 months of combined income saved. It is highly unlikely that my husband would ever get laid off (union employee with enough seniority in emergency services). He also has disability insurance in case he was injured and unable to work. Our income is split pretty evenly, so if I were to get laid off, this fund would be 8 months of my salary. We’re currently saving $200/month for this.
2. New Cars- we own both our cars, currently 7 and 9 years old. My husband has a large SUV that needs some work done. I have a sedan that will likely die soon. We’re currently saving $300/month for this.
3. College Fund- our daughter was born in July and we’ve opened a 529 fund for her college savings. Our families are both contributing to this fund instead of buying presents for holidays and we’re currently saving $100/month with that increasing over time.
4. Retirement- we both have Roth IRAs that we do not quite fully fund every year. My husband will retire at 48 with a full pension and intends to get another job at that point. Combined, we save $750/month for this.
My question is about where we should go from here. I think that our emergency fund is large enough at this point and we should divert that savings to something else. My husband feels like we should keep saving in the emergency fund (ideally, forever- even if we never draw from it). I keep thinking back to the theory of paying off the highest debt first and then moving the next. Should we save for the more immediate need (the cars) and then move to another goal? We will also need our bathroom remodeled in the near future because of mold.
It sounds like you have several months of family living expenses in your emergency fund. I’d probably switch to saving for the other goals.
Since you know that you’re going to need a car in the near future, I’d save heavily for that goal for the time being. I’d redirect all of that emergency fund saving to that goal so that you can roll through this repair and then start replacing vehicles as they begin to fail.
After that, you’re going to have to reassess. I would keep saving $200 or so per month even after both vehicles are replaced so you can be completely prepared for the next car cycle, but the rest of the money is up to you. What are your other goals?
Q4: Awful returns in Roth IRA
I opened a Roth IRA in 2007 and have contributed $100 a month ever since. Right now, my balance is still below $10,000 and it only goes up about 1% a year. I don’t understand why people wouldn’t just use a savings account.
You probably have the money in your Roth IRA invested in a money market account or something like that. It’s likely that this money market account is the “default” investment for your Roth, which means that’s where new contributions go by default.
When you put money into your Roth IRA, you have to then figure out what you’re going to do with it within the account. Just putting the money in doesn’t mean instant wealth.
Log into your Roth IRA account and look for investment options. You should have the option to put the money into a rather large number of different investments within the Roth IRA. Almost any of those will get you a better return than 1% per year.
My wife wants to buy but I’m not so sure.
We have no debt and can afford a 20% down on a 250K home with no problem.
But my rental costs are only $800 free and clear; I only pay electric which runs at ~ $60 – $70 / month.
You need to sit down and do a side-by-side comparison of the costs and benefits of each move.
For the home, be sure to include the monthly mortgage interest (use a mortgage calculator), the property taxes, the homeowners insurance, the maintenance (figure 1% of the home’s value each year), and the (likely) higher utilities. For the rental unit, include the rent, the renter’s insurance, and the utilities.
If it’s close at all – within $200 or $300 a month – you should go for the home. If it’s not close, you should continue to save.
Q6: Amazon Mom?
Recently, I learned about the “Amazon Mom” program where you can sign up and get an extra bonus on their “Subscribe and Save” items. If you sign up for five deliveries, then you save 20% on all items each month. I’m trying to figure out if it’s worth it.
It’s hard to say. I find that Amazon’s “Subscribe and Save” service is very comparable to warehouse stores.
In my experience, the “subscribe and save” offers with the full 20% discount sometimes beat warehouse stores. You need to price-check against the ones in your area that you’re a member of. The advantage, of course, is that this stuff just arrives on your doorstep for free. The disadvantage is that it arrives on a monthly (or every other month) schedule, so you have to keep an eye on it.
For us, we’ve found enough items that are cheaper than our warehouse store that we get the 20% discount. Your mileage, as always, may vary.
Q7: Odd banking experience
I hope you can offer some thoughts on an annoying banking experience I had yesterday. I’d taken a roll of quarters to swap from some small denomination bills and also wanted to withdraw money from my checking account.
The teller politely informed me that they don’t normally exchange rolled change anymore but that she’d make an exception since it was just one roll. When I asked why, she said it was because the bank had incurred losses from exchanging rolled coins, and the tellers didn’t have time to count out multiple rolls of change. She also declined to give me my money both from the roll of quarters, as well as, the withdrawal from my checking account in the denominations I wanted. Rather than delay the other customers waiting behind me, I accepted what she gave me (after counting it, of course ) and left. I do intend to email the bank to get their “official” response.
I understand the “rolled coins” concern from the bank’s perspective. People will try to pull scams like this, filling a coin roll with some coins on the end and some weighted junk in the middle, and if banks aren’t vigilant, they get ripped off.
The problem is that many banks won’t accept loose change, either. My local bank does (fortunately) – they just run it through a giant change-sorting machine and it takes about a minute or so. Other banks, even ones in my area, sometimes don’t offer this service. I consider that to be a pretty useful bank service, so I’m glad my local bank offers it.
In short, I’m surprised they didn’t just open up the roll and run it through their coin sorter, unless they didn’t offer that service.
As for not giving you the denominations you wanted, was it a matter of them being unable to give you those denominations? Or did the telleer mis-understand your request? This feels more like a communication problem to me.
Q8: Time management failures
I’ve tried lots of different time management schemes. I’ve tried GTD several times. They always fail. I end up with a list of “next actions” or a to-do list that just grows and grows and never empties.
My initial reaction is that you’re simply overcommitted. You’ve got too many things on your plate for the time and energy you have available to you.
If I were in your shoes, I would start looking at the commitments in your life that generate all of this stuff. What’s really eating up your time? Are there any things you can de-commit from?
Also, are you adding non-essential stuff to your to-do list? I have a long list of “someday/maybe/optional” tasks and projects that I tap when I have spare time, but I try to keep all of that optional stuff out of the way.
Time management systems work best when you’re just barely able to keep your head above water without it. It sounds like you’re not even close to that.
Q9: Student with huge medical bills
I’m 21 and in some serious debt. About a year ago I had a rather large goiter which prevented me from breathing. I then went to the ER. From there I had multiple doctors visits and labs then a surgery. The results came back two types of thyroid cancer so they had to go back and take out the rest of it. As you can imagine I have some hefty hospital bills. I work a part time job and go to school full time. I have no financial support from anyone and have no idea what I can do.
The first thing you should do is contact the hospital’s accounts department and talk to them about your situation.
You are far from alone in facing this type of struggle and hospitals know this. They have a lot of ways to work with you so that the bills aren’t completely overwhelming.
Remember, if they overwhelm you and you stop paying, they don’t get anything, either. Call them up and talk to them about the situation as a first step.
Q10: Amazon wish lists
What do you think about online wish lists like at Amazon? I think they help people give gifts that other people want but it takes the thought and personalization and surprise out of the holidays.
I basically agree with you. I find such online wish lists to be a convenience for harried gift buyers, nothing more, nothing less.
Each November, I have two or three family members who encourage me to update my wish list. I usually struggle to do it but (thanks to the cookbook section, usually) I find several items to put on there.
For some people, a gift from their wish list tends to be enjoyed more than a random item. It really depends on the recipient. Still, I enjoy the imagination and surprise that comes from thinking of a gift on your own.
Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. Iíll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.