Reader Mailbag: Ice Storm

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. Finding my 401(k)
2. Giving to church or charity?
3. Mortgage schedule
4. Leftover standby
5. To mortgage or not?
6. Frugal solitaire activities
7. Monthly service contracts
8. Making your own clothes
9. Family vacation property
10. Paring down a collection

Yesterday, an ice storm visited our neighborhood, leaving everything outdoors coated in an inch or so of ice. This meant our time outside was pretty limited, as the roads were disastrous for most of the morning.

What did we do? We played board games. We read books. We made not just a gingerbread house, but a small gingerbread town. We made multiple meals in advance.

It actually turned out to be a very nice day.

Q1: Entertainment expenses and singles
I graduated high school and began working full-time and contributing to my employer matched 401. I later decided to quit working and go to school full-time but did not keep up with my 401. Now that I’m working full-time I do not know how much is in my previous 401 nor where it is nor how to find/access it. What do I need to do to get/find it?

- John

Your first step is to contact the HR department of your previous employer. They should be able to point you in the right direction.

If your first employer is now defunct, your best bet would be to look up your previous supervisor or other co-workers for the company and simply find the name of the company that managed your retirement plan.

You might also want to examine your tax filings from those years, as they should indicate which company you invested with.

Q2: Giving to church or charity?
My husband and I have committed to giving 10% of our gross income away. Originally, we were giving it to our church but our pastor talks a great deal about how many people in the world need our money. Is that the right thing to do? I feel really torn and hope you have some spiritual insight.

- Megan

I can’t tell you the right thing to do with regards to your giving. All I can say is to do what seems right to you.

Sarah and I give to several different organizations each year. There are a lot of different problems in the world, locally and nationally and globally, and we feel it’s our responsibility to give to the ones we feel are the most pressing.

Generally, we ask ourselves this: what organizations out there are most likely to create a better world and/or a better community for our children and grandchildren to live in? We tend to give to those organizations the most.

Q3: Mortgage schedule
My amortization schedule for our mortgage includes columns listing the date of expected payment, the dollar amount going towards interest, the dollar amount going towards principal and the total amount of debt. Thanks to extra principal payments, the amount that we currently owe matches up with a date approximately one year out. Is the division of money being applied to interest vs. principal now the amount that my schedule shows for that future date (which correlates with the current amount owed) or is it still applied to interest vs. principal based on the current date?

To rephrase the question: when I make an extra principal payment, is a greater percentage of my next scheduled payment applied toward the principal of my loan?
- Ronald

Unless you’ve signed some unusual mortgage documents, whenever you make an extra payment, it directly reduces your principal.

Then, when interest is accrued based on that lowered principal, the total amount of interest for a given month is lower, meaning that future payments apply more toward your principal than they otherwise would have.

In other words, you’re doing it right.

Q4: Leftover standby
Whenever we have leftovers of pretty much anything that’s not already a dish, I usually just chop it up, mix it with pasta sauce, and serve it as “spaghetti surprise.” This works for pretty much any kind of vegetables or meats that you have left over from a dish. We have this probably once a week and we actually kind of look forward to it because it’s a little different each time.

- Keiko

We actually do this, too. We tend to save every single scrap of leftover vegetables for several different purposes, and this is one of them.

In just the last few months, I recall mixing leftover beans with pasta sauce for a meal, mixing broccoli and cauliflower with pasta sauce, and mixing leftover butternut squash with pasta sauce. I know we’ve done eggplant, too, in the fairly recent past.

Like you, we’ve found it to be kind of fun because it almost always makes an interesting and distinct meal.

Q5: To mortgage or not?
My husband earns all the paycheck. I stay home and run the small farm, take care of household chores. I have 3 teenagers. We are living in a 1960 remodeled falling down ranch with a daylight basement, about 3000 sq. ft. The basement is mostly storage, heating, pantry. This house holds too many memories for me, being left to me in an inheritance. My parents both died in the bedroom where I sleep. We have no bathtub. The plumbing is failing. The electrical is outdated. The roof is leaking. Plus a million other things wrong. It is clearly time to replace the home, as remodeling is not an option. We have 26 acres, plus this house and a barn, free and clear, no mortgage. Worth at least 7-800k. We have about 30k in credit card debt and loans that we are working this year to pay down.

Since my husband is the only moneymaker, I am wondering how it will look to the mortgage lenders when we apply. And how do you feel about sinking all you have into one major ‘life’ payment? It sort of bothers both of us to have a mortgage, since we have not had one for so long and he is the only moneymaker. Is it wise? I cannot go to work just yet; will be a few more years until I can find a minimum wage job. Replacing the house in 2 years is a necessity; we cannot hold on any longer. The cheapest option is to take out a 250k farm loan and get a house, barn, and shop.
- Melissa

I’m left with a bunch of questions about your situation, but I’ll instead just focus on the two questions you asked.

First, lenders will look at your credit, but in terms of figuring out how much to lend, they’ll be more interested in household income than anything else. How is your credit? Have you ever taken out debt in your name? Did you repay it successfully?

As for your other question, that’s a normal fear that everyone has when they take out a mortgage. It’s kind of scary having that much debt at once. Unfortunately, with housing prices being what they are, it’s a reality for an awful lot of people. Sarah and I had a large mortgage not too long ago that was larger than our annual income and we managed to pay it off in about four and a half years of living very frugally.

Q6: Frugal solitaire activities
My job leaves me with a great deal of solitaire time. Not only do I live in a very low population area, my job is on a very weird schedule, leaving me out of sync with the few people that are in the area. I don’t like watching television much. What sorts of frugal solitaire activities can I engage in?

- Eric

There are lots of things you can do. Read. Get yourself into shape. Play solitaire card games, board games, or computer games. Teach yourself a new skill you’ve always wanted to learn. Make something, and if you don’t know how, teach yourself an artistic or creative skill.

Boredom doesn’t have anything to do with whether there’s something to do or not. There’s always something to do. Boredom has to do with the person who’s bored and the choices they’re making.

There are times when I really envy the kind of position you’re in. Part of me would love to occasionally have a solitaire week or so where all I had to do was my basic work and I could spend the rest of my time catching up on personal projects.

Q7: Monthly service contracts
Is it ever worth paying for a monthly service contract? We signed up for one with our heating/AC contractor when we moved to the Phoenix area in May. It provides for a free annual maintenance visit on both our heating and AC systems. And a few other very minor perks. And, it’s only $17/month. Thoughts?

- Reginald

$17 a month equates to about $200 a year. I don’t know what it costs to have a repairperson do an annual maintenance in your area, but I could get one here for less than half that amount.

I also don’t know what the other “perks” are. I’m not really sure what they could be to add up to a significant value, though.

If I were you, I’d find out what the cost of getting a reputable person to your home to do an annual heating and AC maintenance is and see how that compares to the $200 annual amount you’re paying.

Q8: Making your own clothes
Do you think this is an economically worthwhile thing to do? I really enjoy the process of making clothes and I used to be convinced that it saved significant money, but with the price of cloth these days, I’m not so sure.

- Denise

I think it’s one of those things that saves a little money along the way and is worth doing if you enjoy it, but it won’t be the solution to making ends meet.

Sarah sometimes makes clothes. She’s made several “weekend” shirts for herself and for the kids, and she’s crocheted several garments for our family. She’s pretty sure they’ve been less expensive than buying the finished items, at least in terms of raw materials, but the time isn’t worth it without some level of personal enjoyment.

If you like doing it, keep doing it. If it’s drudgery that you’re doing to save a few bucks, try clothes shopping at Goodwill.

Q9: Family vacation property
My family is composed of my parents, their six kids, and one current and probably several future children of the third generation. We love getting everyone together, but are scattered throughout the country, and our parents’ house was bursting with the eight of us growing up and is now overflowing on the rare occasion we’re able to get everyone in town. Over the past decade, we’ve been using graduations as a great excuse to rent a house for a week and get everyone together in that town.

We’d like to continue to come together, and have been trying to craft a long-term solution to this problem. What we’ve been half-planning on is buying land as a group, parceling it up, and developing it for vacationing in as we see fit. The idea is that we’d have a nice place to get together that could accommodate everyone and that we could form an identity with over decades and generations. Sounds nice, eh? Family, enough space for personal retreat, and the outdoors.

We all have slightly different ideas for what our priorities would be, and so we’re starting to sort through those in conversation and email. Some possible issues are the predicted future income disparity and how that would affect people’s shares, issues with shared resources, and what happens if someone doesn’t pay their taxes, wants to opt out, or doesn’t want to take part at all. It’s probable that much of this will be put down in contracts.

I think we’re on the right path in terms of being aware of some of the concerns, but I wanted to run the idea past you and see what you generally thought about the idea. Do you have any resources, or know of families that have arranged as a group to do something similar?
- Monica

I know of one family that did something similar to this, but what they ended up doing is having one family just own the land and hold family reunions on that land. People would come there to camp or park RVs a few times a year. I’ve heard that the family passes the hat each year to pay for a large “bunkhouse” type of cabin with just a big main room and a bunch of bedrooms, but they’ve not put together enough money to build such a thing.

I do think you’re on the right path for this, given what you want to do in the end. You’re right, though – your problem comes with situations where individuals can’t hold up their end of the bargain.

The only purchase you’d really need to make together, though, is the piece of land. I would suggest buying an appropriate piece, then breaking it up into individually-deeded pieces. You’d likely want to talk to a bank about the best way to handle that process. Then, if one person can’t hold up their end of the bargain, that piece either goes on the market or one of the other family members buys it.

Q10: Paring down a collection
I’ve finally decided to pare down my DVD collection (1,000 strong) to a total of 100 DVDs, then adopt a “one in, one out” approach with the remaining discs. My challenge is figuring out how to pare all of these down. How do I even go about it?

- Alan

The first thing I’d do is roughly sweep the collection and pull out the ones you’re sure that you’ll sell. This should be straightforward and it should get rid of 50% to 75% of your DVDs.

After that, what I would do is take the entire collection off of the shelves. I’d grab one DVD, then start sifting through your whole collection. Compare each other DVD to that single DVD you’ve picked and decide which of the two you’d rather keep. Toss the “better ones” into one pile and the “worse ones” into another.

After doing that, count the “better ones.” If the count is more than 100, get rid of the other pile, then start this process over again using just the “better ones” pile as your whole collection.

If the count is less than 100, keep that whole pile and write down the count. Then, repeat the process again using the “worse pile,” but your target number is 100 minus the count of ones you’re definitely keeping. So, if you found you’re keeping 70, put those back on the shelf, then sort the “worse pile” with a goal of keeping 30.

Eventually, you’ll have 100 keepers. Get rid of the rest of them.

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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