Reader Mailbag: Leaves

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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. Battling underemployment and debt
2. Happy medium
3. A slow inheritance
4. Employer tuition reimbursement
5. Impatience
6. Daily free exercise routine?
7. Social Security for debt
8. Emergency fund for self-starter
9. Tricky housing decision
10. Would I redo my wedding?

Where we live, the leaves have just started to change their color and just a few have fluttered to the ground.

This past weekend, we traveled north to an area where the ground was practically coated with leaves.

I spent a long while with my children making a giant pile of leaves to leap into. They jumped in several times.

So did Dad.

Q1: Battling underemployment and debt
I graduated a few years ago from an expensive liberal arts college and my parents and I both had to take out loans for me to go there. While I was in college, my parents had some financial hardship and needed loans for my brother and I to live on.

Since then, things have gotten better but they are still paying off loans for my college, and line of credit and credit card debt from the financial hardship period. I recently provoked them to apply for a balance transfer for the credit card debt (~$13k) to a 0% interest CC for 15months (with a 0% balance transfer for the first 60days (Chase Slate card)). The Chase only approved $1k so not the best result. I wanted to apply for the new credit card, with my credit score and such, and try and become an authorized signer on their credit cards so I would be able to use a balance transfer from their cards to this new one. I’m not sure how or if this would work – but before I had the chance to call and ask, my dad called me and told me to forget about the whole thing.

I know that they are making headway on their finances, but I think that this would be a very good option for them. a)Do you know if that is a valid way to transfer a balance (even though they no longer want me to do it) b) Do you know a way for me to help them out?

I am underemployed and battling my own student loans, previously mentioned, so I don’t have a lot of money. Any suggestions??
- Fred

Usually, credit card balance transfers involve the credit card company issuing you a check, which you then use to pay off the balance of the other card. So, if you have that check in hand, you could then just write a check to pay off some or all of your parents’ debt.

Is this a wise idea? It really depends on your situation. If you don’t have a lot of money, you’re basically adding to your own woes to alleviate the woes of your parents.

This question really comes down to the relationship and the obligation you feel to help out, which I can’t really help you with. You have to make up your own mind about that.

Q2: Happy medium
When you talk about frugality, it often seems extreme to me. At the same time, spending without a care in the world also seems like a foolish move. Is there a sensible middle ground?

- Joe

Of course. The sensible middle ground involves having a set of principles that you stick to that guides your spending.

Just like with other aspects of life, some may have more principled approaches than others. Some people might be “hard liners” when it comes to their spending, while others might only adopt a principle or two.

Choose the ones that work for you, but when you choose them, stick with them. Don’t make exceptions and excuses or else you’re simply spending recklessly.

Q3: A slow inheritance
I will be inheriting a substantial amount of money in the near future (probably $100k or more), but I’ll be receiving it likely in multiple installments over the next few years due to the way the estate was set up. We have a substantial amount of credit card debt ($50k over multiple cards at approx 12% APR) as well as 5 year mortgage on a timeshare at 18%… $8k balance (are trying to sell this but no luck so far). We are currently underwater on our home (about $120k unpaid) and have a desire to move in the not-so-distant future for financial reasons as we spend an inordinate amount of time traveling for church and my son’s special education school. Both cars are paid for, but continuing at this rate we’d need a new “used” car within a year or two. Moving would allow us to have him ride the school bus and save about 2.5 hours of driving per day during the school year and perhaps delay the need to purchase a new car.

The twist here is that we’ll be receiving the money over time — maybe $2-3k at a time every few months. Dave Ramsey’s snowball plan would call for paying off two of our smaller credit cards first and then working on the time-share, but I’m trying to determine if more $ can be saved by focusing on paying off the mortgage to get to a point where we could actually move without having to bring any $ to the table. I’d be working on paying off about $20k on an 8.25% HELOC and estimate I could do it within 18 months or so. Do you have any thoughts on what would make the most sense? Thanks for all you do!
- Lauren

Given that the move would theoretically save you money, the only way to figure out the true “best” route is to figure out exactly how much you’d save by moving earlier rather than later and then use that as part of your math when comparing things. That’s a lot of number crunching.

My guess is that, if you’re saving much money at all thanks to the move, then the route that takes you to the move the fastest is the one that will save money overall. This is, of course, assuming that the move is inevitable.

You’d really have to sit down and run the numbers carefully, but unless you’re dealing with enormous differences in interest rates, the savings from the driving will surpass anything you might save from other repayment plans.

Q4: Employer tuition reimbursement
My workplace has a pretty sizeable tuition reimbursement program. They will cover up to $7,500 per year in tuition, which is just about what full time tuition is per semester at the local university. How would I approach this type of “sabbatical” with my supervisor?

- Henry

Your supervisor probably wouldn’t like this kind of “sabbatical.”

I’m pretty sure that your workplace puts that money there for people who are spending nights and weekends taking classes and working towards a master’s degree in their field. I would be really surprised if your workplace allowed semester-long “sabbaticals” where they covered tuition while you went back to school for sixteen weeks.

Having said that, this is still a program worth tapping into. You can essentially work toward a degree for free, which is never a bad thing. Plus, if you still have subsidized student loans, you can likely put them into forbearance while you’re taking classes, meaning you won’t have to pay interest.

Q5: Impatience
I am 27, married with a baby due this winter. We live frugally utilizing YNAB (which I love), have fully budgeted for doctor’s bills when baby comes, and have $6,000 in our emergency fund (~3 months expenses). Our only debt is $8K in student loans but our only retirement fund is a Roth with approximately $12K.

I have approximately $35K of inheritance money heading my way within the next 6 months. The timeline is an estimation, but the money has been tied up un courts since April 2012 and we have recently heard that they are in the final step of liquifying all the assets. I have been anxious to put $3K in to an index fund (minimum deposit for the account I want) as part of our retirement savings but have been waiting on the inheritance. However, I would REALLY like to put this money away before baby comes, which means I would have to take it from my emergency fund. I know you always say to never dip in to your emergency fund non-emergencies, but I’ve grown tired of watching my money sit in a stale savings account for so long! It’s also worth noting that my mother would happily give us a loan on the inheritance if an emergency came up before the cash comes in. What would you do?
- Linda

Impatience is never an excuse to make a very financially risky move, especially in the face of a child arriving soon.

Let’s say you put that cash into the stock market and then something unexpected happens. The stock market craters, for example. Then, let’s say you need to tap that emergency fund. A decent chunk of it is now gone.

That’s why you never put an emergency fund into something volatile. At the same time, you’re entering a period where a larger emergency fund is going to be needed. Don’t make this move, at least not yet.

Q6: Daily free exercise routine?
Do you have a suggestion for a daily exercise routine that involves more than jogging and pushups? I go for walks and jogs each day and would like to do more but I don’t know where to start and I can’t afford equipment or a gym membership.

- Charles

Head down to your local library and check out the book You Are Your Own Gym by Mark Lauren.

The entire book focuses on bodyweight exercises – ones that don’t require equipment and use your own body weight as leverage. The vast majority of them require nothing – some require a chair and a few require a pull-up bar (but you can skip those).

The book offers some routines and a ton of good suggestions. It’s a great frugal exercise book.

Q7: Social Security for debt
I have always read your blog and learnt so much, We ar in our sixties and have a huge amount of credit card debt. My husband has to work till his 70 but I was wondering if it would be a good idea to take my social security next year age 66 to try and be debt free at 70 hopefully. I lost my job 2 years ago and have not found one. I also did not qualify for unemployment so its really a struggle to pay the bills.

- Connie

If I understand your dilemma correctly, you’re trying to decide whether starting your Social Security benefits earlier – which means a lower monthly check each month from here on out – is the right move if you’re struggling to manage debts.

It’s really hard to say without a broader look at your situation. How actively are you looking for employment? Are you willing to accept work that is outside of what you’re searching for? How healthy are you both?

The more open you are to any job and the healthier you are, the more I would encourage you to wait. Ideally, you want to be in a situation where, when you both walk away from work, you’re in a great place.

Q8: Emergency fund for self-starter
I think your advice on having a big emergency fund is a bad idea for someone who is a self-starter and is always willing to work. If I lost my job, I’d have something else tomorrow, even if it were digging ditches or loading trucks. I have no interest in ever sitting around jobless, so why should I have a big emergency fund to protect me from job loss? Why have more than $1,000 or so if I’m not lazy?

- Jerry

If you’re single, this might be a worthwhile argument, and that’s why I usually don’t suggest a giant emergency fund for single people.

For married people and particularly people with children, the situation is different. Let’s say you wake up tomorrow morning, walk out of your house, and get plowed by a garbage truck. You’re out of commission for a year. What does your family do?

It’s not a matter of putting food into your own mouth. It’s a matter of making sure that the people who rely on you are covered.

Q9: Tricky housing decision
I was hoping you could help me work through our situation…we’re contemplating moving to a smaller home to reduce our expenses so I can stay home more with the kids. We’ve been doing better with budgeting (lower grocery costs, no cable, straight talk phones, etc.) but we’re going to have get “gazelle-intense” for me to be really part-time (I’m the primary breadwinner in our household; my husband has a lower-paying job but he LOVES it). I know there are a lot of factors involved that we have to figure out ourselves, but breaking it down into cold, hard numbers might help us make a decision!

We bought our home in summer 2010 (so have owned it only ~3 years). We bought it for 315,000 and I expect we could sell it for that if we decided to move. We have a 15 year mortgage at 4.5% and put 10% down. We owe about $243,000 (we pay ~2700/mo including taxes and insurance). We love that we are 20% done with our mortgage and don’t ever want a 30-year mortgage. Our utilities (gas, electric, water, sewer) run about $250/month. Our home is 5br, 2.5ba and ~2600 sq ft. Cleaning takes forever. Furnishing/decorating seems like an endless and expensive project. The yard that we wanted so badly goes practically unused because it’s such a chore to keep it tidy. We have two young boys, two adults, and two dogs and thought we needed tons of space – turns out we spend most of our time in our lovely, open kitchen/family room.

So…I was thinking we could find a home nearby with maybe 3 br/2.5 ba in the low 200′s at around 1800sq ft.

How do I go about making this decision from a financial point of view? I know we are “losing” money on this home after realtor fees, moving expenses, and closing costs on our new home. How do I determine at what point we “break even” in a new less expensive home? Is it worth it to just stay here longer and hope to sell higher eventually? I also wondered if it’s possible (or worth it?) to get a 12-year loan? We love the idea of having our mortgage paid off in 12 more years. Or would we just get a 15-year and try to pay extra?

Second concern – what if the grass isn’t really greener in a smaller home? Nearly ALL of my friends (who are expanding their families) talk about wishing they had a bigger home, more space, etc. I’d hate to regret it and then want to move again (and lose more money by selling again!). Should we rent for a while and see if we can truly handle a smaller home?
- Chris

Right now, we live in a home with roughly 1800 square feet of livable space. We have three young kids and a home office for my work. It’s about the right size for us. I would change the layout a bit, but 1,800 square feet is just about right. We could probably use more space… but why?

Remember, most of the extra space you’ll have is just storage space for more stuff. You really don’t actively use that much space in your home. Much of it really is used for storage. Do you need that much stuff? You’re right in that most families spend most of their time in only a small portion of their home.

As for the finances, you should sit down and figure out your annual costs for your current house and for the house you’re thinking about. I would adjust energy by the square foot and keep the other utilities constant. I would also check on the property taxes for a property you might want to buy. As for a twelve year mortgage, it’s all about what kind of deal you can strike with a bank. You just need to make sure you’re not taking on payments that are too stiff. Could you make the payments if you lost your job, for example?

Q10: Would I redo my wedding?
You’ve talked before about how your wedding was at least somewhat frugal. Do you ever regret it? Are there things you would have spent more on if you could do it again? What about things you would have spent less on?

- Jared

I would have had a friend be the wedding photographer. I had a friend who offered to do the pictures for free and we turned him down. This would have saved us money, of course, but I also simply wish he had been the photographer because of the friendship.

Given the technology we have today, I would have done the DJing myself, setting it up with a system where people could select the music they wanted. There was nothing the DJ did that I couldn’t do with current technology and a few speakers, and I had a friend in the area who would have loaned the necessary AV equipment.

I really can’t think of anything else I would have changed. I certainly can’t think of anything I would have spent more on. All of the good memories revolve around the people.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. IĆ­ll 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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