Reader Mailbag: Holiday Preparations

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. Direct investing
2. Not motivated at work
3. High inflation question
4. Collection plate
5. First steps toward investing
6. Talking to friends about money
7. Great “kids and finances” story
8. Signing up for credit cards?
9. Frustrated with student loans
10. Helping others not selfish

It seems almost inconceivable to me that Thanksgiving is only two weeks away. Over the next seven weeks, Sarah and I have countless gatherings of family and friends to prepare for, meals to plan, gifts to buy and make…

The only way I can handle all of this is with a lot of lists. If I don’t keep all of the ideas and plans organized, things will fall apart.

Holiday preparation is as much about organization as anything.

Q1: Direct investing
I have been considering investing around $5,000 in an Iowa company and ran across Alliant Energy’s Direct buying plan that can get you in for $250.00. I am trying to compare this with something like e-trade or others out there that advertise for $7.50 a trade, but wanted to really talk with someone rather than rely on my own understanding of the literature. As I understand it, the initial cost is $15 enrollment fee and then nothing when you buy after that. Anytime you want to sell it is $20 per transaction plus 9 cents a share. What are your thoughts on the two approaches?

– Pete

If your plan is to buy shares regularly and then sell all of them at once, this is probably a better deal than you’ll get from a brokerage. If you plan just to buy one big lump, sit on it, and then sell it, a brokerage will do better.

Most brokerages charge you on a per-transaction basis, meaning that you’ll have to pay each time you buy and each time you sell. However, their individual charges are usually lower than what you mention here – think on the order of $7.50 per transaction, as you mention.

So, if you were to just buy once and sell once, a brokerage would cost you about $15, whereas this plan would cost you $35 plus the $0.09 per share. On the other hand, if you were to buy some shares every month for a year, this plan would still just cost you $35 + $0.09 per share, while a brokerage would cost you around $100.

It comes down to how you plan to invest, in other words.

Q2: Not motivated at work
How am I supposed to perform well at work when I absolutely hate my job? I have a set routine that I perform every single day like clockwork, everyone there is unfriendly, and I count the minutes until I can leave.

– Jared

If that’s the case, then you should be looking for another job.

If you “can’t” do that because of pay issues, then this job is providing quite a bit of value to you. It might be miserable, but it’s financing your lifestyle through a high rate of pay.

If that’s the case, then your focus should be on improving that set routine so that it’s more efficient during your downtime or seeking out other tasks to work on. Sitting there idle helps no one – yourself or the company.

Q3: High inflation question
I have a major issue here in Argentina that push me to spend my money, (I try to spend it in experiences rather than things) and it is that our inflation is over 25% a year. So the money that I have in my hand is losing value by the minute. Although I’m not in bad shape, I have an increasing emergency found and I own my house (I’s not big deal but hey! is something) I have a car 4 years old, (a wife and no kids, for now). Any suggestions to make my finances easier?

– Jerry

I would invest in things that will hold value regardless of the inflation.

For example, I’m assuming that real estate is also rising like crazy there to keep pace with inflation. If that’s the case, I would sink money into home improvements and, if you can, into other properties.

Another move would be to convert every spare penny you can into American dollars or Euros – a stable currency. Hold onto those until the inflation situation figures itself out. When you convert back, you will likely wind up with quite a bit more than you started with.

Q4: Collection plate
If I’m at a church that I don’t attend and a collection plate is passed around, is it appropriate to use a check or to attach my address to the donation with a paper clip so that I can use it on my taxes?

– Jeff

Absolutely.

In these situations, a check is ideal because then your bank will have the record of the transaction. If you just put your address in a paperclip with the money, you’re hoping that the note stays attached and the person on the receiving end makes sense of it.

So, if you’re going to find yourself in church sometime soon and you’re planning on dropping a bit in the collection plate, it never hurts to use a check.

Q5: First step toward investing
I have recently been thinking about my future and hoping I can start investing in stocks. I would really like to know more and how to cause am basically a masters student but i believe I could use my some of savings for something meaningful than just buying stuff.

– Charles

The first step for investing is to know why you’re investing. What’s the goal with your investing? What are you hoping to achieve?

Having a goal helps you set a timeline, and a timeline will tell you how volatile your investments can be. For example, if you’re investing with a goal that’s coming up in a year, you shouldn’t be investing in stocks – they’re way too volatile. Stocks are only a good investment if your goal is far down the road – a decade or more.

If you have no idea where to start, my suggestion is to start by building a retirement plan. See if your employer has a 401(k) or a similar retirement plan and, if they do, see if they offer matching contributions. If they do, start by taking advantage of that, because matching contributions are just free dollars.

Q6: Talking to friends about money
Most of my friends are in roughly the same financial situation I am. We’re all trying to pay off debts and saving for a home and working in the early stages of our careers. I think it makes sense to talk about our money together but every time I touch on that topic someone just changes the subject. How do you get friends to talk about money?

– Jim

You don’t – at least not in a group setting. People are often uncomfortable talking about their earnings and their financial maneuvers in a group situation. I’ve seen it over and over again.

Your best move is to try one-on-one conversations. Sit down with one friend that you trust and start the conversation there. Even then, some people might not feel comfortable, but you will have a much greater rate of success with one person than with a group.

Remember, you might feel comfortable sharing these details, but a lot of people aren’t nearly so comfortable. Take it slow and focus on one-on-one conversations.

Q7: Great “kids and finance” story
When I went thru a divorce I had a difficult time figuring out how much money I had to work with and where the money needed to go. I became adept at floating (making minimum payments only) so I could buy time to figure it out. I discovered drastic changes were needed in the household expenses and began shopping only loss leaders for our weekly food. I explained to the children that their needs would be covered and their wants would have to wait. My divorce attorney advised me to declare bankruptcy at the same time as the divorce, but I wouldn’t. I would meet my obligations slowly but surely. My daughter, in 9th grade, decided to challenge me on my allocation of the funds. Everyone knows a 9th grader knows-it-all J. So, I collected all the bills, handed her my checkbook and my paycheck stub, and told her to figure it out and she can advise me of a better way. She really gave it the old college try and discovered there was too much month left over at the end of the money. She came away insightful of choices and priorities in our situation. That lesson from long ago has served her well into adulthood and she is a financially responsible adult today.

– Carrie

I’m a big believer in the idea of opening up finances to teenagers so they can see the reality of the world.

So often, kids are sheltered from the reality of life until they finally graduate from school, then they’re dropped into the real world and are completely unprepared for it.

Walking your kids through your finances can be very instructive for them and it can provide a great bonding moment. It shows not only that you trust them, but it also allows them a portal into what adulthood is like. I think it’s generally a really good idea.

Q8: Signing up for credit cards?
What do you think about signing up for credit cards for the sign-up bonus, sticking the card in the closet and not using it, and then canceling it at the first opportunity?

– Jenna

In theory, this works great, provided you’ve got strong credit to begin with.

However, every credit card you open has a slight chance of identity theft, so you need to be vigilant about the number being stolen. Also, depending on your current credit, the new card may have a short-term negative impact on your credit score, so I wouldn’t do this if I have a credit need in the near future.

For me, it’s not worth the hassle. There aren’t many sign-up rewards that are worth the effort plus the risk of identity theft plus the credit effects plus the additional thing to remember if I move.

Q9: Frustrated with student loans
I am a US citizen currently living abroad and will most likely settle down abroad with little likelihood of returning to live in the US. I used to be very proud and nationalistic but now the longer I’m away the more frustrated I am with the way things in the US are and I feel foolish. Student loans being the normal? Not right! The US being the only country in the world that makes its citizens living and working abroad pay US taxes on that income even when 0% of it was done in the US or for a US company? What??

– Andrea

I agree with you in some respects, at least regarding student loans. I could write pages and pages about this topic.

With regard to the taxes, most first world nations require their citizens living abroad to pay taxes in their country of residence. That’s part of being a resident of that nation. My understanding is that the only time this is an issue is if you’re a freelancer or you earn a high income. (Edit: I fixed this paragraph a bit after publishing it because the original was badly worded due to my use of “citien” and “resident” in a very unclear fashion. My mistake, but it’s been fixed.)

If you do not wish to return to the United States and have no use for the citizenship, you should consider renouncing it.

Q10: Helping others not selfish
The reason to help others isn’t to gain for yourself. It feels good to help and to know that you’ve made someone else’s life better.

– Joan

That’s absolutely true, but it’s something that people often have to discover for themselves.

Like it or not, most people are motivated in their day-to-day choices by self-interest. If people take that first step toward helping others due to self-interest and then discover that it’s actually enjoyable, they’re likely to continue that behavior.

I tend to look at helping others both ways. Not only does it make the lives of others better and make me feel good, it sometimes ends up making my own life better in some indirect way that I couldn’t possibly foresee.

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.

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