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. House now or later?
2. Blender recommendation
3. Long term care insurance question
4. Enjoying music at low cost
5. Protecting a family property
6. Finding the right home
7. Birthdays and charities
8. Keeping food
9. Graduate school planning
10. Found money
Several people have asked me recently if I believe in ghosts. I can honestly say that I’m unsure. I won’t say that I disbelieve in them, nor will I say that I absolutely believe in them.
I will say that I believe that there are a lot of natural phenomena here on Earth that we don’t understand and don’t have any sort of a good explanation for. I’ve witnessed several extremely odd things in my life that have no good explanation as far as I could ever tell.
I am probably willing to believe in a broader definition of ghosts, in that there is some sort of natural visual phenomenon that appears to take on something of a human form. If you start talking about reincarnation and spirits, then I’m far more doubtful.
Q1: House now or later?
I’m entering unfamiliar territory here in contemplating a house purchase. There’s not much recent info online about what it means to do it without a mortgage. You wrote recently about how specific advice changes over time given changing markets. Here goes:
My boyfriend and I set a goal to move to a different part of the country closer to our families where we felt the quality of life is better. His company transferred him in January, and I accepted a job in our new city this month. Our salaries are roughly the same, and while the cost of living is reportedly 5% higher in our new city than in our old, so far almost all of our expenses have stayed the same or decreased. We’ve been saving for a house and have a healthy down payment (a bit more than 50%) in savings accounts because we lived so long in a city where we didn’t want to sink roots. We had been thinking about buying a house when our apartment lease ends in a few months. With the housing market predicted to decline further, we’re now talking about saving up enough to just pay cash. We think we could do this fairly easily by 2013 or 2014 if we focus on that as a stretch goal. We’ve talked about perhaps contributing less to our retirement funds for a while (we have both been fully funding our 401Ks at $16,500/yr and our Roths at $5000/yr for several years). We’re in our mid-30s and neither of us has ever owned a house or had children. We are both savers, not spenders.
In doing research about paying cash for a house, it seems like the two biggest arguments AGAINST cash and FOR having a mortgage are 1) diversification of assets and liquidity – not putting all your money into a house, and 2) using the mortgage as a hedge against inflation.
If we’ll have MORE in our retirement funds than in our house fund (plus a 6-month emergency fund and a house maintenance fund), does reason 1 even apply to us? And does reason 2 matter in a declining market, or am I reading “old news”? If we buy now, we may be able to avoid rising interest rates, but we’ll likely pay a higher purchase price. If we wait until the market bottoms out, we can get a lower price and let inflation (maybe) increase the value of our paid-for house. I’m wondering if I really understand what inflation means to the housing market, and if this is a market we should try to “time”. We don’t really view home ownership as an investment, but appreciate the security of not having to make payments. We’d also appreciate not having to pay an artificially high “bubble” price. Our new city is NOT one of the foreclosure capitals and actually has a fairly stable housing market, considering.
There is a huge reason for not owning a mortgage: if you don’t have one, your cash flow each month is free, meaning that you can much more easily survive a job loss or other major unexpected event. If you have a mortgage payment to cover, that’s just another minimum requirement in your monthly finances.
You just can’t predict your future. It might be as smooth as your imagination makes it out to be, but it also has a strong likelihood of including a job loss or a severe illness or a major injury or even a spectacular opportunity at a lower initial pay rate (like a startup that offers equity along with salary or instead of salary).
As for concerns about market timing, it’s not something I would put too much weight into. Making financial bets based on market timing mean that you’re betting your money largely on predictions of the future. Instead, look at what you know about the future – namely, that if you have a mortgage, you’ll have more demands on your monthly finances than if you do not have a mortgage.
Q2: Blender recommendation
I’m a big believer (as you are) in trying out a new hobby with inexpensive equipment and then upgrading if you find it’s becoming a major part of your life. About two years ago, I started making daily fruit smoothies with a cheap blender I got at Goodwill. Now, I have one of these for breakfast almost every day but the blender just stopped working. I’ve poked around online for recommendations. Do you have a suggestion for a great blender for this or at least a resource to look at?
I’ve owned several blenders over the years. Much as you, I really enjoy making fruit smoothies and, beyond that, we use blenders for other things, such as making salmon burgers and making mixed drinks, so a really good blender with a lot of diverse uses was the best choice for us.
While I can’t comparatively comment across a wide range of blenders, we own a Blendtec HP3A that we found on sale a while ago. I absolutely love the thing. It blends everything perfectly, from fruit smoothies to milkshakes to salmon puree to peanut butter without skipping a beat. The only minor complaint I would have about the device is that it’s loud, but you’re only going to be running it in small amounts.
It’s a great device and if you find yourself using a blender daily (meaning that a blender is a heavy-use item in your life), I highly recommend it.
Q3: Long term care insurance question
Can you explain anything about insurance for long-term-care? Is this an add-on to life insurance? Do you have to have insurance for a number of years before you could claim on it? How does it work? How much coverage is recommended?
Long term care policies are insurance policies that kick into effect to pay for the long term care of someone who cannot complete some number of activities of daily living (usually referring to personal hygiene, dressing, feeding, transferring such as getting out of bed, continence, and ambulation) and undressing). This number varies from policy to policy, but usually a person has to be unable to complete two of these things to receive long term care. Typically, a doctor has to certify that a person is unable to complete these tasks for a period of ninety days or longer in order for the policy to come into effect.
Usually, this is purchased as a distinct policy on its own. Policies often come with fairly high premiums because typically people who are interested in such a policy tend to be facing some concern of a long term care condition in their future.
How quickly you can claim the care depends on the policy, but there is usually a waiting period of some length. As with other insurances, you’ll have to be screened first in order to set the premium price and also to determine if insurance can even be offered.
If you’re looking at long-term care insurance as a miracle that will help you pay for a long term care situation that you know is coming, it’s not going to work like that. It will be difficult to get a policy, and even if you do, the premiums will be painfully high.
Q4: Enjoying music at low cost
I’m trying to find a balance between my desire to enjoy music at a low cost along with my feeling that music piracy is wrong. What are sources for low cost music that actually has a decent selection?
A few options immediately come to mind.
The first one is Pandora, which essentially lets you listen to high quality streaming audio for free. Typically, it works like this: you type in the name of an artist you like and Pandora creates a station based around that artist and similar artists. As new songs appear, you vote them up or down depending on your tastes and, gradually, the station becomes more and more customized to your particular tastes. Pandora is free for a small amount of listening per month and there is an inexpensive pay service if you want to listen more than that.
Another option is Grooveshark, which functions a lot like an mp3 player inside of your browser. You can listen to the tracks you want within the service and then optionally purchase them for offline use. The selection isn’t perfect here, but it’s pretty solid all around and I can always find something to listen to.
A third option is simply using Youtube, which has tons of music videos and performances available for viewing and listening.
Q5: Protecting a family property
My 2 siblings & I will be inheriting a family cottage when our parents pass away. I don’t anticipate this happening for awhile, but I want to be prepared when that day comes along. When my father’s parents passed away, they left the cottage to my parents & his siblings. Long story short, the fund they had set up, dried out & my father bought out his siblings. Some of them were okay with this, others were not. I don’t want another buy out situation to happen to me and my sisters in the future. We’ve talked about this and all agree, that starting something sooner is a better plan than trying to catch up later. I’m thinking we’d collect about $600 a year ea. for starters and need these funds in about 15+ years. The funds would be used for taxes, utilities and upkeep around the cottage. I anticipate the mortgage being paid off when it gets handed down. Ideally, all 3 of us would have access to the account. So what I’m looking for is some feedback on what type of account would you start for these funds we’d like to start setting aside?
Your plan sounds good except for the “all three of us would have access to the account.” This sets up a situation where you are all relying on the individual honesty of each other and that’s never a good situation.
The best situation is to put the cottage into a trust with rules defined that allow only people who contribute to the trust to be able to use the cabin. Then, set up a single person to manage that trust and make sure bills and such are paid on the cottage.
This provides a legal backbone for everyone to rely on instead of just having some account that a bunch of people have access to (which, in my experience, smells like a lawsuit in the making).
If you want guidance in doing this, contact a property lawyer.
Q6: Finding the right home
My husband and I recently started looking into buying a home. As we see places we like, but don’t love, we find ourselves wondering how much we should buy into the idea that we’ll find a house that’s “the one” and we’ll know right away versus a house that meets most of our major criteria. Lots of variables here, of course, but generally speaking perhaps you have some input? Side note: We are looking around the Greater Boston area, so the number of decent houses on the market that we can (responsibly) afford is lower than it would be in many other markets.
The idea of “the one” relies heavily on the person doing the search. For some people, there will be a house that just clicks for them. For other people, they’ll simply see a lot of houses that match some of the features they want. I find myself in the latter camp. I don’t think there is “one” house that is “perfect” for me.
Our house search mostly involved us seeking out the house that had a significant majority of the features we wanted within our price range. When we found one that had several of the features, we struck. It’s the house we’re living in now. Is it “the one,” the house that’s just perfect? No. Does it have a lot of features that we value? Absolutely.
In your shoes, I’d just spend some time identifying what things a house must have and what things you’d like to see in a house, define a price range, and jump on any house that has the musts with some of the likes without having any features that scare you off.
Q7: Birthdays and charities
My daughter recently had her first birthday. We kept her party small and simple (thanks to me searching your blog for some good advice) but she still received a huge pile of presents. I am not a fan of electronic toys, plus she can only play with one thing at a time. I’ve also really started to simplify our life and feel “less is more.” Thus, I returned a lot of stuff and bought a few things we really needed. Right after her birthday we opened up her own savings account. And it occurred to me that next year I’d like to say, “please help us celebrate L’s birthday. Instead of a gift, we would appreciate a $10 donation to her college fund.” $10 is less than what most of these people spent on these presents and I would much rather have the money than more stuff cluttering up my house. So how do I do this politely? Or do I resign myself to a lifetime of stuff? Or do I include a list of suggested gift ideas with the invitation?
My general feeling is that if you’re having a party where gifts are welcome, you have to allow the gift-givers some control over their gifts. They’re not offerings of appeasement. They’re gifts selected by the giver because they believe the recipient will like them.
If you have a good relationship with the person you’re inviting, have a chat with them about it. Explain your situation and give some informal ideas.
If you don’t have a good enough relationship with the person you’re inviting to do this, then either don’t invite them or accept that you may receive a gift that you don’t like. There’s absolutely no harm in quietly returning them later on or donating the toys to a charity.
It depends heavily on the food. If I’m unsure, I use a constant “three and out” rule. If I prepared the meal within the last three days, I consider it okay if it’s kept in the refrigerator.
Some foods are obviously exceptions to this. For example, I will eat bread as long as it’s mold free, for example. I often make homemade bread and homemade bread tends to form molds on the surface fairly easily – after all, there are no preservatives in it.
Another big key in this equation is freezing. If I know that I’m not going to use an item within that three day period, I usually freeze it if I think there’s any chance I’d use it again. I usually try to freeze leftovers in individual meal sizes so that I can easily pull out a package and eat it for lunch in a pinch.
Q9: Graduate school planning
I work in an unchallenging, boring nonprofit job that underutilizes me, yet pays me a comfortable salary with benefits. I’ve been wanting to leave for a year now, but since my living situation is so comfortable, I only wanted to leave for a really, really good opportunity in my desired field. Despite getting to the final round of a few of those potentially wonderful opportunities, I haven’t landed anything new.
I also recently moved in with my boyfriend, which drops my expenses a great deal. We’ve discussed splitting costs and bills and the mortgage (he owns a condo), but because he earns a decent salary and is financially stable, he doesn’t need any of my income to maintain his lifestyle.
I’ve decided to apply for graduate school in my desired field for the next academic year, which leaves me with a full year to either languish at this job while socking away money for school (I may or may not receive funding and a stipend, depending on if I go for a masters or PhD), or looking for a part time job in my field that will not pay very much, but will let me get more work experience in that field (with the possibility of combining with a part time retail or other job just for money). I would probably lack health insurance benefits with this option.
My question falls into two parts: Firstly, is it stupid to leave a cozy job with benefits because it’s boring and unchallenging and not taking me where I want to go for a poorly-paid part time job in a field I plan to pursue?
Secondly, living with my boyfriend makes the part-time option much more financially feasible, but I’m reluctant to depend on him for this, even though he’s said he’s fine with it and wants me to be happier and more fulfilled–I don’t want to come to resent him for any reason. I could probably do this on my own, but having him around makes it much easier on me. Would it be wrong to take advantage of the happy accident of falling in love with someone who can support me while I follow my passion?
Final background: I carry no debt and have a small savings account and some retirement savings; he has only a mortgage as debt and has (what I consider to be) substantial savings. We have no plans to break up, but no solid plans to get married in the future (though it’s been discussed as a happy possibility in a few years). My field will never be a high-paying one. (It’s education, if you’re curious.)
As long as you’re in a situation with no dependents and you can keep the minimum bills paid, it’s never stupid to leave a cozy job with benefits because it’s boring and unchallenging and not taking me where I want to go for a poorly-paid part time job in a field I plan to pursue. I would always recommend that people do that very thing. You’re far better off being engaged with your work and on an upward trajectory than earning more money at a job you hate in the short term.
As for the situation with your boyfriend, my only advice is this: if you take this new job and then you guys break up, would you be in truly dire straits or would it be a livable situation? I’m not sure from your description which is the case.
If you’re putting yourself in a situation where you literally could not pay the bills without your boyfriend’s help, I would be nervous about doing this unless this relationship is strongly committed for the long term. If you would be able to survive, then I wouldn’t worry about it for another second.
Q10: Found money
I found a bank envelope with [unusual writing] on the envelope but without any sort of receipt on the ground outside of my grocery store. It had [$300] in cash in it (ed: I changed the content of the writing and the exact amount of cash, but kept the order of magnitude correct.) I didn’t return it to the grocery store because I was pretty sure that the person at the customer service desk would just pocket the cash. So I kept it. Now I feel guilty about it and I’m not sure what to do. What would you do?
If I were you, I would put up a couple of signs saying “I found an unusual envelope in the parking lot of this store. I would like to return it to its rightful owner. If you think I may have your envelope, contact me by some date” and include your contact info on the sign.
If no one contacts you by that date, consider it a windfall and keep the money. Take down the signs and move on with life.
If someone does contact you, make them describe the envelope to you so that you’re sure they’re not trying to scam you out of whatever it is that you have.
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.