Reader Mailbag: Handwritten Letters

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. Rent or sell first home?
2. Keep investments or pay debt?
3. Prayer and money
4. Couple facing financial crossroads
5. Falling into money
6. Audio personal finance advice
7. Preparing for possible medical emergency
8. How to find simple joys
9. Large purchase in bad economy
10. Reading long books

Recently, I’ve found out that two college-aged people I know have taken up writing handwritten letters to others in order to impart more personal value than sending a text or an email or a Facebook message.

I can’t tell you how much I applaud that. There’s no better way to really let someone know they matter than a handwritten and heartfelt note.

Q1: Rent or sell first home?
My fiancé and I are both in our 20s, I was going to say early 20s, but I’d be lying because I’m now 26 :) We will be married in September. We have owned our home for 2 1/2 yrs, 3 yrs in sept. I owe $96,000 and have a 6% interest rate. We were talking about adding on an addition in a few years, but thought for the heck of it we would just get an estimate, and turns out they want $45000 for just a family room. We were going to finish the basement with our wedding money and thought we would show the guy what we were going to do. Turns out we have to replace the basement wall, easily $9-$15000. The guy left, and here we are, our dreams crushed. We can’t afford it.

We want to stay in our school system for our son, its a great system, and we have family we are very close to. The bad part? What the heck do we do with our house? Rent or sell? Either way, I will be fixing the wall. Disclosing it is one thing, but with the way the market is, no ones going to even walk in here.

We want to rent for the obvious reasons and don’t want to rent for the obvious reasons.

As for our money situations, my fiance has a little debt to his mother, which will be paid off after the wedding (we’re paying $1000 a month to our wedding fund right now), I’m an RN and he works at the bank, and goes to school in the evening. He won’t be done with school for at least 5 years.

I do have about $16000 saved, a well funded Roth and IRA. I gross about $58,000 and right now I want to just go by my gross. Should we rent or sell our first home?
- Janine

I’ll agree with you that you don’t have much of a chance to sell the home in the current marketplace with a severely damaged basement wall. Your best approach is to get multiple estimates on it, then start saving up for the cost of repairing it, perhaps supplemented with some of your savings (don’t clean it out for this).

The real question comes after paying for that wall repair. For starters, you need to start thinking of your income and his income as household income, and your expenses and his expenses as household expenses. What does his income look like? What are his expenses like? Clearly, he has a job at a bank and he’s also going to school. Do these two cancel each other out? What’s the true take-home that you’re working with here? What portion of that is eaten up by the current mortgage? Beyond that, where do you want to be in a few years? Do you want debt freedom? Do you want this house with a family room? Do you want a larger house?

The questions you’re really bringing up here are more goal-oriented than anything. You have to sit down with your partner and start talking these things through together.

Q2: Keep investments or pay debt?
I have an investment account valued around $50,000 and student loans of $65,000 at 6.8%. I have a job lined up after graduation, paying roughly $50,000 per year. Should I preserve the investment account and pay down the debt from income, or is it better to apply the investment funds to the debt?

- David

You should pay down the debt using most of your investment and reserve the rest (around two months of living expenses) in a savings account for yourself. Then, use income to knock off the rest of that student loan as quickly as possible.

The biggest reason for this is cash flow. The more cash flow you have, the better you’re able to deal with opportunities that life hands you, like taking a chance on a startup or suddenly meeting the perfect person for you, or dealing with the blows life hands you, like an unexpected job loss.

The return on investment issue is a wash. Warren Buffett estimates that long term returns on the stock market are roughly 7% going forward, which roughly matches your interest rate on your student loans.

Q3: Prayer and money
Do you think it is useful to pray for financial success? Do you think it’s right?

- Margie

Do I think it’s useful to pray? It’s always useful to pray for whatever’s weighing down your mind. The act of praying in itself is a great way to release a burden on your shoulders.

Does that mean God will respond? No. Just because you ask for something doesn’t mean you’ll immediately receive it.

It’s often the act of prayer that provides the value because it enables you to deal with the issue from a different angle. Any response from God is on His timetable which your intervention may or may not have anything at all to do with.

Q4: Couple facing financial crossroads
My husband and I are kind of at a financial crossroads in our life. We are both around 30 with no credit card debt, no home mortgage and no car payments. We have an emergency fund of $11k, $1,200 in an old stock that’s pretty stagnant, $12k in Roth IRAs in my husband’s name (the only retirement funds he has) and $46k in a 401k with my company. I’m putting in 6% of my income into my 401k and the company matches that with 4% for a total of 10% going into that fund every year (about $8k). The only debt we have left is my husband’s student loans, which are around $20k at 7.25%, but in deferment currently. He never finished his undergrad and was working a full time job for the last several years until he was laid off due to the economy about 1.5 years ago. We used his income to pay off tons of debt we had racked up in college. Since the lay off, he’s been going to school full time at the community college to get all his pre-reqs out of the way cheaply before transferring over to the big university to finally finish his Bachelor’s. We will be paying that huge tuition payment out of our pocket (~$4,500 a semester for the next 4 semesters), which we already have a plan on how to pay that without dipping into any savings or other monies listed here.

My question is this: I make about $4k monthly and after all of the monthly bills and budgeted money, I have about $750 dollars left. I was wondering if I should (1) increase my 401k contribution to make up for the fact that my husband isn’t actively putting money into any funds, (2) invest part of it into one of my husband’s Roth IRA’s monthly and save the rest, (3) put all of it towards my husband’s student loans, (4) build up my emergency fund even more ($11k in savings + $12k in Roths if we need to liquidate them) or (5) start saving for a down payment on a house.

We had a foreclosure on our first home because of an ugly situation with the bank and know we will need 20% down for our next home. When my husband graduates and finds a job, we shouldn’t have a hard time saving this up in a few years. I also have a pension with my job that is projected to, combined with my 401k and Social Security, be able to cover all of our retirement expenses so my husband doesn’t necessarily need to put money into anything. If we pay a lot towards my husbands student loans now, the principle will go down faster since they are in deferment and don’t require a monthly payment, but I have a sinking feeling in the back of my mind that I should be putting more money towards savings. We just don’t know what to do. Thanks.
- Stephanie

Given your situation, I would focus on eliminating his loans as fast as possible. That 7.25% interest is painful, as is the fact that it’s a sizeable bill eating into your monthly cash flow. Your emergency fund savings are more than adequate given your situation.

This also gives you more flexibility if the marketplace changes and your husband ends up finding it harder than he expects to find a job. Banking financial choices on him finding a job is not a good move, as it puts a requirement on something that’s not truly certain.

I don’t think you’ll ever regret not having that debt around your neck.

Q5: Falling into money
My wife’s father has been slowing giving his children some of their inheritance over the past decade, up to the IRS tax free limit (around 13K I believe). In order to limit any inheritance tax upon his death, he decided to give a much larger sum of money this year (about 90K after taxes). My question is, what should we do with this? It will ultimately be used in our own retirement (we are in our early 30′s), but we also have plans for a vacation home when the time is right. The vacation home is not in our 5 year plan (likely not even in our 10 year plan) however. I guess I’m looking for a place to stash the money in a semi-liquid financial product, for at minimum 5 years. After that, I’m not too sure. I have IRAs and 401K, so I’m not really looking to put money in those products. I would say my risk aversion in somewhere in the middle. Any product that has an early retirement penalty is probably not an option, based on our vacation home plans.

- Roger

So, in summary, you have a long term goal for this money that’s not hinged on retirement. You’re wondering what you should do with it.

The best option for a long-term goal without retirement tied to it is in a brokerage account. There, you can invest the money in a variety of things, including stocks. If you’re looking at a long-term goal (beyond ten years) that’s not tied to retirement, stocks in a normal brokerage account are a great way to go. I use Vanguard for these types of goals.

However, I would probably diversify it across several investments. Split it up – put some in a domestic stock index fund, put some more in an international stock index fund, and put even more in a bond fund. As time goes on and you feel like your big goal is getting nearer, close out one of the stock funds and put that money in the bond fund. Eventually, just move it all into your savings account – that will keep the balance safe for you as you hit the final stretch of savings.

Q6: Audio personal finance advice
I’ve been reading your blog for a while now and enjoy it. I’m lucky to be in a great position financially, but my boyfriend is not. He is open to advice, and we discuss finance and economics often. I would love to share your blogs, stories, and reader questions with him, but there’s one problem: he’s not a big reader. He is a slow reader, doesn’t have much free time, and generally prefers glancing through magazines if he reads anything at all. He does however enjoy listening to podcasts and always has one on (or NPR) when he is driving. He and I live about an hour apart so he drives quite a bit!

So my question to you: do you have existing or plans to create audio material from your blog? If not, do you have any recommendations for other places online that I can look?
- Christina

I’m not particularly skilled when it comes to podcasting. I think my content is all right, but in order for it to shine, I need a skilled producer. Given that this isn’t a high priority, it’s not going to happen (again) any time soon.

Instead, I’d suggest he listen to some personal finance podcasts. The best one, in his case, is probably Dave Ramsey’s podcast, which you can easily find on iTunes or on daveramsey.com. It’s essentially an excerpt from his radio show, which I think is the best one out there on the subject of personal finance.

Beyond that, I also recommend NPR’s Planet Money podcast. It’s a bit deeper, but if you really want to understand the issues underlying personal finance, it’s a great one.

Q7: Preparing for possible medical emergency
I am in what may be a very specific situation. I’m 27 and recently married a man, 31, whom I have dated and lived with for five years prior. My husband has a medical condition that poses a potentially huge problem down the line for many reasons.

When he was a teen, he contracted a virus that spread to his heart. After lying in a coma for several weeks, he received a heart transplant. It has been sixteen years since his transplant, and aside from some “minor” complications (most recently being a stent to clear a blockage), he lives a happy, healthy life.

We’ve addressed the emotional complications in therapy and continue to work on them today. We want to have a family and are making plans for the future. My question for you is how we can best plan for the possible financial complications that his condition may create. Currently, he has several visits to the hospital for testing and check ups (about 1 per month) and one cardiac catheterization. The stent was the only unplanned procedure that he has had in several years. We are both employed full-time, though I earn nearly double his income (60K to 35K), and have good health benefits individually with our employers. His parents, who are quite well off, have stepped in on several occasions to help with the medical bills. We currently do not have a separate account for medical savings. Would you recommend us saving for the known procedures, plus some percentage for unforeseen costs up to a certain number of years? Are there any accounts that you would recommend we do this in? Do you think it is reasonable to involve his parents in the discussion? Is there anything I should do separately? As you can imagine, it is a fraught discussion, but one I think is worth having for our collective piece of mind.
- Jenna

Since I don’t know the specifics of his condition and what the future expectations are, I can’t comment. However, here’s what I’d do moving forward from your situation.

The first person I’d talk to is the doctors. I’d try to get a good understanding of the future prognosis and what procedures and medications he’ll likely need in the coming years. What will likely happen? What can happen?

Beyond that, I’d start saving as much as I could for such procedures. I’d essentially recommend an infintely large emergency fund – as much as you can muster. I’d certainly involve his parents in the discussion, but with the understanding that you’re primarily looking for their advice as they’re financially successful. I would not rely on any help from them, but appreciate it if it drops out of the sky when you need it.

Q8: How to find simple joys
Whenever I read about frugality or about cutting spending, I can’t help but think it sounds really un-fun. You often mention finding joy in simple things. How do you do that?

- Kelly

I mostly do simple things. My average day involves writing, making a meal or two for my family, reading a book, playing in the yard with my children, maybe going to the grocery store or to the park – not exciting stuff.

Within that, I look for the parts that make me feel good. The taste of a well-prepared meal. The laugh of one of my children. The smile of my wife. The sense of feeling good after playing hard with my kids. The flowers I found and picked in the unfinished part of the park.

These things make me smile – and what else is there, really, than a good smile and a good feeling inside of you? I could chase that feeling all day long, or I could just do the simple things and find that those feelings come to me.

Q9: Large purchase in bad economy
I am a divorced woman, over 50. I am blessed and grateful to have a terrific job in the healthcare field. For a single person, I believe I make a good wage and contribute automatically to two retirement plans through my job: one a pension; the other a supplementary 403B. My only child is grown and lives/works in another state. My financial outlook was very low after my divorce some years ago, but through education and opportunity, I have been able to improve that outlook dramatically. I have never purchased new furniture for myself, always being the (grateful) recipient of hand-me-downs from others. I saved my entire IRS refund from last year to finally purchase some large furniture items such as a sofa and some lamps. But I find myself afraid to let go of that money. I seem to be hearing nothing but negatives regarding the state of our economy and I’m afraid that everything will go south and I’ll find myself without that extra money when I most need it. Logically, I know this isn’t true, as I have a checking account and an additional small savings account that I could tap in an emergency. Yet, I’m still afraid to move forward, even though I love the idea of owning something that I selected and bought for myself (after shopping for the best bargain of course). I greatly respect your opinion and would value any advice you could give me.

- Ginny

This is a common feeling for people who have reached a very scary financial bottom and have pulled themselves up a bit. They’re afraid to spend anything lest they find themselves drowning again.

To them, I usually say that they should trust their heart. There’s a tipping point to be found in here, where you’ll find enough financial security to be able to afford both a healthy savings account and that item you want.

Be patient and do what leaves you feeling best about the present and the future. One of these two conflicting feelings is more powerful and you should stick with that one while re-evaluating every once in a while. If the regret of having not owned whatever item it is you’re wanting begins to outgrow your desire to continually increase your savings, that’s fine, as long as you don’t wipe out your emergency fund or put yourself into debt in the process.

Q10: Reading long books
How do you read such long books like A Game of Thrones or Shogun? Whenever I see such books, I just get intimidated. I’ve started a few very long books but I’ve never been able to finish them.

- Andy

I usually just leave such books on my bedside table with a bookmark in them. At bedtime, I read a few pages, then stick the bookmark back in.

Sure, it might take a long time to get through the book, but that doesn’t really matter as long as you enjoy the journey you’re taking with the plot and the characters.

The only time I give up on a book is if I genuinely don’t care about the characters or the situation involved, which is pretty rare, indeed. Otherwise, I keep plugging away, because each page tells me a little more of their story.

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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  1. Melissa says:

    Q7-Jenna- I know you asked about emergency savings, but if your employer offers a Health Savings Account you may want to look into that. Some Out-of-pocket expenses for medical procedures and some medications for a year can be purchased with this pre-tax. But you need to know what your going to spend. They are a use it or lose it deal.

    Q10-Andy- Try listening to the audio book versions. I’m listening to Game of Thrones book 1 now. I listen in the car, at the gym, when I’m cooking or knitting. See if your local library has the audio book or uses a service like overdrive. Or you could even purchase it from audible/itunes.

  2. Johanna says:

    Q2, David: I don’t think there’s any one right answer to your question, but I do think that Trent’s reasoning is exactly backwards. If you think you’ll want to make a large expenditure in the near future, you’re far better off having the money in savings (or liquid investments) than using it to pay down your debt.

    To decide what’s best to do in your situation, I say you should think about how each option would play out. Are you the type of person who would be motivated to make extra payments on a $65K debt (but not on a $15-20K debt)? If you did pay down the debt to improve your cash flow, what would you do with the extra money each month: put it in savings, spend it on things you value, or blow it on stuff you don’t really want? Do you think you *would* want to use some of the $50K for something in the near future (buying a car, making a downpayment on a home, etc.)? Only you can answer these questions.

  3. Johanna says:

    Q5, Roger: It sounds like your father-in-law has a lot of experience managing large amounts of money – can you ask him for investment advice?

  4. Finance Nerd says:

    @Q10 – I agree with the earlier suggestion to consider audiobooks. I read a lot of books, and listen to a lot of books, and have noticed that there is a difference in the type of book I prefer for each format.

    For longer books, especially those with a lot of characters or details, I find audiobooks to be better, because I don’t get bogged down in all of the minutiae. For shorter books, novels, etc. I prefer to read them.

    Also, many audiobooks allow you to speed up the playback (after pitch shifting so you don’t get chipmunks!) which I like. I generally listen to books at 1.7 times regular speed, but I do something slower if the narrator has an accent or the material is dense.

  5. Johanna says:

    Q8, Kelly: If the things that bring you joy are things that cost money, there’s nothing wrong with that. The key is to get and keep your spending in balance. Figure out how much you can afford to spend on fun things (the 50/30/20 budget is a good guideline), and then feel free to spend that much without feeling guilty about it. You don’t have to cut all the fun out of your life in order to get your finances to a good place.

  6. valleycat1 says:

    Q1 – Why are you moving out of this house? It sounds as though, barring the needed repair, that it’s in the right area, you’ve been in it awhile, & you aren’t sure what to do. Just because you have been in a house a few years doesn’t mean you automatically then need to enlarge or upgrade. I’d stay there until you have a better feel for what you actually want to do, and your fiance/husband has finished school (is he paying his way there or getting student loans that will then be part of your debt load?).

  7. valleycat1 says:

    Q10 – I know a few people who prefer reading long books on an e-reader, because the length is less intimidating if you’re not seeing that huge tome parked on the table. It’s also easier to physically handle, since weight isn’t an issue.

    Audio books are great, as others have said, especially if you have chunks of time you can listen while you do something else. I used to listen to at least a book a week when I had a half-hour commute every morning & afternoon. Now I’m enjoying the audio versions because I can ‘read’ and do needlework at the same time.

  8. Brittany says:

    I’m also confused why the first questioner feels the need to leave, especially since she stresses they like the area, have ties, and want to stay in the school district. Also, your addition plans were several years out, until you got the estimate on a whim. So why are you desperate to leave now? Get some more estimates and start saving for your upgrade. If the only issue is that “your dreams are crushed” because homeownership is expensive, why would selling your house and buying another be the solution?

  9. Alison says:

    I remember reading a story about a man in France who said, “You Americans, you want so much that is meaningless. Here I am, sitting in my back yard, grandchildren playing about me, drinking a glass of wine from my own grapes. How can anything be better than this?” I love that story.

  10. Adam P says:

    “how can anything be better than this?”
    #9- Alison
    Answer: Drinking a glass of wine with NO kids playing about me, that’s how.

  11. jim says:

    Q1 Janine : As others have pointed out, theres no real explanation given for why you are moving in the first place. If theres no compelling reason that you NEED to move then don’t move. Stay put in that house till you can afford to buy another.

    Q4 Stephanie : I’d put your extra savings in a Roth IRA for now. You can pull the contributions out in an emergency without penalty, or you can use it for a home downpayment, or you can just leave it for retirement. You’re in a lowish tax bracket so a Roth can make sense. Side Note : I’d make sure you fill out the financial aid application, you might be surprised and be eligible for grants (probably not but doesn’t hurt to try). Also make sure to take advantage of tax breaks for your tuition, the lifetime learning credit will give you back 20% of that tuition bill.

    Q7 Jenna : Since you both work and have health insurance it may make sense to consider different combinations of health insurance. For example you could take a low deductible plan with an HSA and your husband could get a straight PPO. An HSA may be useful to stash extra money tax free that can be used for future medical bills. But HSAs come with high deductible plans only so that may not be a good choice if theres ongoing bills like medications. I’d also make sure you both take advantage of group disability and life insurance options between your employeers. It will be smart for you both to have good insurance coverage in your situation, but lets hope you dont need it.

    Q9 Ginny : Fear about the economy in general shouldn’t dictate your personal life too far. Your finances depend on your situation. Is your employer in bad shape? Most hospitals aren’t hurting. Whats the worst case scenario in your personal life? If you lost your job abruptly could you make do until retirement? You’re in your 50′s so you’re not far from retirement and you have a pension and retirement savings so you’re fairly safe at that point.

  12. anna says:

    About the books – there is no need to focus on the size of the book, or let this intimidate you. I think reading should be a pleasure, not an achievement. The best books I have read all have the same thing in common: I enjoyed reading them so much that I didn’t want them ever to end! They could have been infinitely long and I would not have minded.

  13. Joyce says:

    Q1 – RE huge quote for building of family room or basement remodel. You have another option. You could learn to do the bulk of a basement remodel work yourselves. Lowe’s has on-line and in-store classes to teach you how to do just about anything. Handy friends can help you, too. Yes, you will pay for materials, but you can shop for sales. After you build up some significant skills, you might even be able to tackle adding on the extra room. Handyman skills will lower your lifetime home ownership costs tremendously.

  14. Tom says:

    Q1, get a few more quotes, and opinions on the wall. Don’t forget to ask about permits for structural work in your area.

  15. Tom says:

    Responder #1 Melissa – Health Savings Accounts are not use it or lose it, that is for Flexible Spending Accounts – it’s an important but subtle difference. HSAs are attached to High Deductible Health Plans, and function like a 529 or 401(k) for medical expenses. Anyone with any type of medical insurance can have an FSA, and money set aside needs to be used in a given calendar year (or up to tax day the following year in some cases).

  16. mary w says:

    Q7. Look to see what would happen if you got “family” coverage at your work while he maintains his single coverage. Sometimes deductibles are waived is a patient is covered by two policies. Worth a call to HR to see if it would work in your situation.

  17. Amanda says:

    @1 Why do you want to move? A new house will probably cost an additional 45000 too. Why don’t you just save the money to repair the wall (might be lower price, get another estimate as has been suggested!)?

    Save up the money for either the new home or the remodel. Then sell.

  18. Amanda says:

    @2 I’d personally feel better if I paid off my debt. However, be sure to remember you’ll likely have some sort of tax situation with the investment and may not be able to pay off the whole debt…

  19. Amanda says:

    @7 Yes, save up for procedures the docs think likely will need to be done!

    @9 Do you have 6 months emergency fund? If so, then it’s probably OK to buy a couch!

    Donna Friendman at MSN money or her own web site are good to read. She was in your exact situation and she recently had an article on how to let go and spend more now that she has money. her divorce left her emotionally screwed up. Which I assume is true of most divorces.

  20. Maureen says:

    Q9 – Ginny, my sense from your question is you’ve always been frugal. I bet you crave freedom and independence too. People who have a hard time parting with money are typically fearful of loosing their power or becoming impoverished. Although you realize you have enough, letting go raises all sorts of fears. These fears usually come from our perceptions and what we’ve learned as a child about money. The best thing you can do to help overcome this fear is transform your desire for freedom and independence into a healthy integrated balance of saving, investing and living well. One trick that helps is to create a “fun money” account for those specific purchases and then follow through and spend it. Go ahead and give yourself the permission to do this. Remember, balance is the key to having a healthy relationship with money.

  21. Nina says:

    Response #20 from Maureen re:Q9 -

    This is one of the best and most practical responses I have ever read. Great advice!

  22. wink says:

    Podcasts:
    Marketplace Money is a better personal finance podcast than Planet Money. Planet Money is more focused on economics. Market Place Money has a more question and answer format with gurus like Liz Weston ans JD from GRS.

  23. Gretchen says:

    I actually find longer audio books more daunting because I know I need to finish them off in 3 weeks (rental), plus it’s upsetting how much time I spend in the car. I’m a really fast reader, though.
    My answer would be to try shorter books. If it’s good, it’ll be done quickly and if it’s not, stop reading.

    I’d get a second opinion on the wall issue.

  24. deRuiter says:

    “We had a foreclosure on our first home because of an ugly situation with the bank…” Is this because you didn’t make your payments? Banks and mortgage companies are funny about that sort of thing.

  25. CMT says:

    Q4 Stephanie – when I read your letter, I got the sense that the “sinking” feeling that you should be saving more money stems from prior experiences where things didn’t go as planned, and ended up costing you money. In your letter, you mention that you have student loan debt from an unfinished degree, and a foreclosure in your joint history. I’d imagine that those experiences color how you view financial decisions. It also seems that you are optimistic in your financial projections – that your husband will find a job that will pay well enough for you to save a down payment in a few years, or that social security is likely to be contributing to your retirement income. My feeling is that you have been burned by rosy outlooks in the past; and the nagging worries you have are related to the fear that history may repeat itself.

    In the past, things (presumably) didn’t work out as planned; and left you in a position where money was wasted on an unrealized asset (ie, the non-existent bachelor’s or the repossessed home). Your fears may be grounded in a desire to avoid that type of experience again. While having money won’t prevent things from going wrong; not having money to deal with life’s unexpected complications is harder than having it.

    I might suggest that your emergency fund is inadequate for your current situation. With you as the only breadwinner currently, your monthly household income is entirely dependent on your job. Your emergency fund would last about 3 months*, which may be insufficient for you to find a new job. If your husband were to go back to work in a case like that, you risk losing the deferment status on the loans, which would increase your monthly costs. You don’t mention how stable your job/industry is, or whether you plan on having kids, or a host of other factors which would influence the appropriate size of your emergency fund.

    You could put the money into a savings account and earmark it as your emergency fund for the time being. When your husband graduates and finds a job, and you are a two-income household, you may decide that a different level of e-fund is appropriate (less likely for both incomes to go at once if in different industries, but if you do have kids/house/whatever you may want more). If you find that your emergency fund is bigger than you need, you can always apply that money to the student loan debt, but the reverse isn’t true.

    Whatever you decide to do, please don’t pay off the student loan while in deferment, if it’s subsidized (which it sounds like it is). Put the money into a savings account, and allow it to earn you interest, however paltry. About a month before the loan leaves deferment, apply it all to the loan balance. Over 30 months (estimated based on reported 4 semesters plus 6mos grace before repayment, in savings at 0.85%), you would amass $22748.73; including almost $250 in interest. That would be enough to pay off the loan in full.

    *I’m excluding her Roth money because 1) I’m also a financial conservative/worrywart and view Roth money as a backup e-fund, not a primary one; and 2) it still represents a sizable portion of their retirement assets, and I have a concern about their retirement projections re: social security; mentioned above.

  26. Diane says:

    Q9 Ginny – I was in your shoes a few years ago. Upon turning 50, I wondered if my home was ever going to reflect “me” instead of being full of other people’s castoffs. I had money saved but didn’t want to blow it, as my retirement is entirely self-funded. My solution was to seek a higher grade of “castoffs”. I started looking at better consignment stores and Craigslist. Little by little, I started getting rid of the things I liked the least and replacing them with “new” finds. Sure, I paid a little more, but nowhere near the cost of brand new. I tweaked my LR, DR, FR and created a lovely guest room. I felt satisfied at that point and have mostly stopped looking. I have entertained more and had more overnight guests. I love opening my home to friends. A home which now reflects my adult self. I’m happy I did it and that I found an approach that let me reach my goals without breaking the bank.
    A bonus – when a friend of a friend (who knew what I was doing) was moving to Hawaii and selling all of her furniture, she contacted me. I was able to score a wonderful four poster bed, so now my MBR is complete, too.
    Finally, don’t forget Estate Sales. They can be a great source of budget-friendly finds, especially high-quality accessories.
    Good luck to you, I know you will create a lovely home for yourself.

  27. Maureen says:

    In response to Nina – thanks for the feedback!

  28. AnnJo says:

    Q9, Ginny, I second what @26-Diane said – Craigslist and estate/garage sales (which are also listed on Craigslist) are a great resource when you have specific shopping goals. Focus on nearby upscale neighborhoods, and don’t be shy about emailing people having garage sales to ask if they have what you are interested in. The down economy you are rightfully concerned about has at least the benefit that it’s a buyer’s market for home furnishings.

    There’s nothing like walking into your home and feeling like you’re really HOME, with your environment reflecting your own tastes, offering beauty and comfort. That is definitely worth (frugally) spending money on.

    By the way, I’ve found that even more important than the furnishings are: 1) having the right wall colors, 2) having the right balance for you between decorative “stuff” and clean, clear areas, and 3) finding the right floor and wall arrangements.

    Upscale furniture stores like Ethan Allen offer in-home consultations. The one I had offered a suggestion for how to arrange my awkwardly shaped living room that has made all the difference. I felt guilty that in the end, I went for much more frugal options for the actual furniture purchases, but although their furniture was lovely, I couldn’t justify the expense.

    Good luck and have fun!

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