Reader Mailbag: Graduation Season

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. Auto refinancing
2. New direction
3. Supporting local businesses
4. “Driving into the ground” perspective
5. Bad neighborhood, cheap rent
6. Ups and downs
7. Credit card debt first steps
8. How is a 401(k) bad?
9. Frozen sandwiches?
10. Career advancement thoughts

Graduations seem to come in waves.

For most of my twenties, I didn’t have any close relatives graduate. They were all drastically younger than me.

Since last May, a niece, a nephew, several first cousins, and a sister-in-law have graduated with more to come in the next few months – and I’m not even counting children of friends and other community acquaintances.

It’s really great to see so many people embarking upon their adult lives full of hope and plans to do great things.

Q1: Auto refinancing
My husband and I purchased our first car in July of last year. We had found ourselves with years of bad experiences with pre-owned cars, so we decided to buy a new one. We currently owe around $19000 with a 7% interest rate, and the term of our loan is 72 months. We have (partially with the help of this resource) improved our credit since then, and are continually making good positive movement with regard to our financial stability and responsibility. With that said, we know that refinancing is an option, and would do many good things for us if we could lower our interest rate. When might be a good time to do this? We would want to make this move in a way that would reflect positively on our credit, as we’re looking at buying a condo in a few years.

- Lindsey

As long as you haven’t paid off the loan but are still making all of your payments, it will provide a benefit to your credit rating.

If you’re considering refinancing your car, I would do it more than a year ahead of the condo purchase, but do it in a timeframe where the car is getting reasonably close to being paid off.

Given what you describe, right now would be a pretty good time to refinance.

Q2: New direction
I feel like my life is directionless. I go to work and just do my work. I don’t feel happy about it, but I don’t hate it either. I spend money mostly to make me happy for a while but it never really lasts. I don’t really have a goal of financial independence or anything because I feel like I would just sit around and watch Netflix all day if I wasn’t working. I wish I had direction like you and your readers do.

- Kelly

My suggestion is to fill your free time with new experiences. Go to meetings of community groups. Sign up for a volunteer program. Take a wide variety of classes with Coursera. Keep striving until you find something that sparks you.

I cannot speak for you, but my experience has been that when people find themselves in this kind of situation, it’s basically that they’ve found a tolerable but unexciting routine but don’t have enough motivation to actually experiment with it or alter it. You have to find at least enough motivation to explore new things.

Once you find things that really excite you and motivate you, then you’ll have direction. It honestly takes a while. It certainly took me a while.

Q3: Supporting local businesses
Do you feel it makes sense to spend more at a local business to “support local businesses” than it does to spend less money online?

- Daniel

It depends on what you internally value. Do you place value in having a nice main street to stroll along? Or are you a homebody or someone who views your community as just a place to rest your head?

If you really want a nice thriving town, you have to support it. There’s no way around it. That means spending money locally. If it’s not a value you strongly hold, then you should chase the bottom dollar.

I tend to use local businesses that do things to directly help the community and provide events and services that can’t easily be found online. There’s no reason to support a generic local retailer that does nothing for the community and doesn’t sell distinct products or services. However, I’ll happily buy items from local businesses that support the community and host events and provide great services.

Q4: “Driving into the ground” perspective
I also *had* the attitude of “driving the car into the ground”.

But then I got into a multi-car accident with my 15-year-old car. The airbags did not deploy. Well, they kind of did, about 45 seconds later, and it was like someone with emphyzema trying to blow up the airbags. Basically, they didn’t work.

I realized that things just don’t WORK very well after 15 years in extreme weather (I live in an area where the heat exceeds 110 degrees in summer and can get below 30 in the winter.) Also, by having such an old car, many “standard” safety features just simply did not EXIST for my old car.

I am very frugal, and basically live on a cash basis with ample savings and no debt (save a small mortgage). But I have decided to buy a “new” (2 or 3-year old vehicle) every 10 years based on this very scary experience.

Technology marches on, and for safety reasons, it is prudent to take advantage of newer vehicles.
- Lana

That makes a lot of sense.

In our situation, daily commutes mean that vehicles won’t last more than ten years anyway. When commuting, Sarah puts well over 15,000 miles per year on a car – I’d average it at 18,000. Over a ten year period, she’s putting 180,000 miles on that car. Even with good maintenance, you’re still pushing the end of a car’s lifecycle at that point.

If you put fewer miles on your car and it rolls past the decade mark, it’s probably worth evaluating the safety features of your automobile. If nothing else, you can ask a trusted mechanic about the state of the airbags and other such features.

Q5: Bad neighborhood, cheap rent
I currently live in a small apartment in a nice neighborhood. I found one for half the rent, but the neighborhood has a much higher crime rate and looks kind of run down, but it’s way closer to my job – I might even bike there in the summer. Worth it?

- Ken

If I were single and didn’t own many valuable possessions, I’d certainly jump on board with this thing. If I were married and had young children, I’d be much more hesitant to do this.

It sounds like you’re closer to the first camp. If that’s the situation, I’d feel better about it. Just get some renter’s insurance in case you’re robbed. If you don’t have many possessions, it’ll be cheap and it’ll be easy to recover from.

Just make sure you use the extra money for something sensible in your life. Use it to eliminate debts, for one.

Q6: Ups and downs
Does frugality come in “waves” for you? Some months I am really on the ball and am careful with my money. Other months, it all feels distant and I spend and spend. And then it goes back the other way again. Is this normal?

- Tessa

Absolutely. There are times where I obsess over almost every facet of personal finance. There are other times where I just don’t feel it.

I’ve found that I make it worse if I try to “tighten the leash” when I feel less motivated. I know that I’ll eventually come back to being more focused and, at the same time, I’ll resent too much self-restraint, which will end up making things worse.

I usually allow myself to wander a little bit, then I just take time each week to think about my big goals. Eventually I come back to where I should be.

Q7: Credit card debt first steps
Can you please give me some advice on how to pay off 16,000 dollars worth of credit card debit. I was thinking about calling one of those credit card counseling companies, so that I can consolidate and have one monthly payment . Please help…

- Karen

The first thing you need to do is learn to live without the credit cards. You should literally cut them up (or at the very least put them in a place that’s extremely difficult to access) and learn to live without using credit. You need to be able to cover your own bills or you’re never getting out of this mess.

Next, try to negotiate your rates downward. Call each company and request a rate decrease. If they won’t give you one, seek out balance transfer offers. Contact your lowest interest credit card company and ask them about transferring balances there. If you get any balance transfer offers, take advantage of them.

After that, build an emergency fund. You’ll have to live on less than you’re spending for a while. Make it your goal to build up $1,000 in savings that you’ll use to take care of emergencies. It is emergencies that often cause people to fail at their plans.

Once you have that, start making whatever extra payments you can to your highest interest credit card.

That’s what you’re going to have to do. It’s a hard road, but it’s one that I’ve personally had to follow. You can get there.

Q8: How is a 401(k) bad?
At work we have a 401(k) plan that offers 100% matching up to the first 6% of our savings. One of my coworkers complains all the time about how this 401(k) is terrible and how he uses a Roth instead. How bad does it have to be to make it worth skipping the match?

- Eric

It would have to be worse than any 401(k) in existence.

I have no doubt that the investment is probably worse than what your friend can get in his Roth IRA, but you’re essentially doubling your money with every dollar you contribute. Even if they’re charging really high fees, it’s pretty hard to overcome that much money.

If you’re ever not employed by this company, I would roll it over into an IRA quickly, but while you’re there, I’d get every dime of matching that I could.

Q9: Frozen sandwiches?
Here’s a tip that my mom did when I was a kid and I still do decades later. On Sunday, I make several sandwiches and put them in individual freezer Ziploc bags and toss them in the freezer. In the morning, I get one out and put it in my lunch bag along with other stuff. It thaws by lunch time and is a cool sandwich, particularly in the summer. I make peanut butter and jelly (peanut butter on both slices, jelly in between), peanut butter and banana, cold cut sandwiches (I put condiments on the inside between meat and cheese then flip them around at lunch), egg salad, and tuna salad sandwiches and they all turn out good. It makes for a really cheap and easy lunch. Instead of taking leftovers, we just eat them again two or three nights later.

- Mark

There are multiple good ideas there.

The sandwiches make a lot of sense. I’ve frozen sandwiches in the past and they’ve turned out just about as you described, thawing perfectly by lunchtime. I suggest wrapping them in a paper towel to absorb some of the moisture – most of the time it’s no problem, but if a sandwich is full of moist stuff, the thawing can cause the sandwich to get soggy. I don’t think any of Mark’s suggestions would do that, though, unless you put on a ton of condiments or had really sloppy egg or tuna salad.

I also think the delayed leftovers make a lot of sense. We do it at our house when there’s a real abundance of food (such as the time we made soup for ten people and wound up feeding only three). We’ll just wait two days and have it again and maybe freeze any of the additional leftovers.

Most of frugality is just simple stuff that people overlook in the rush of modern life. Companies pitch “convenient” solutions that solve problems that aren’t really there, causing us to overlook good ideas like these.

Q10: Career advancement thoughts
I am a recent grad and finally found a job in my career field (entry level) but a job nevertheless. I work in a clinic inside a Major hospital in my city. I eventually would like to become a director of said hospital. We have the option to wear business casual or scrubs most people choose to wear scrubs. I was wondering if i should dress business casual to set myself apart? I am aware that networking is great but in a place this size its really hard to interact with people other than the ones i work with who happen to be on the same level as myself (the administrators and directors are in another part of the hospital). I just would like some insight on what direction i should head in and most importantly HOW. I would like your thoughts on how to advance myself.

- Sara

In this kind of situation, I would dress as close as I could to the position I wanted to have. Whatever that position is, dress like you’re working in that position unless that actually somehow gets in the way of your current position.

You should take advantage of any opportunity to get yourself known with regards to people a couple steps up the hiring chain from you. Don’t hesitate to ask for a meeting and ask questions about what you would need to know or do to be in line for the position you would want should it become available.

Outside of work, you should be seeking any and all supplemental coursework that will prepare you for taking on that position. Even if you’re not working toward a higher degree, any sort of complementary education is a good thing as it demonstrates a commitment to lifelong learning.

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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