Reader Mailbag: Memories of Near Misses

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. 401(k) expense ratio
2. Grocery shopping idea
3. Home buying books
4. Raising allowance?
5. Consolidating several accounts
6. Compost and time
7. Making your own mayonnaise
8. Car insurance options
9. Crock pot recommendation
10. Challenging career choice

There have been a few times in my life where I’ve been very close to a major accident. Memories of those events stick in my head and have made me really wary.

For example, when I was thirteen, I was riding around on an ATV. I flipped the thing on top of me and burnt the side of my leg on a hot part on the underside of the ATV. I was just an inch or two from the accident being much, much worse.

When I was about fifteen, I was pushing a large garden tiller up a rather steep bank and it flipped over. The knob on the gearshift stuck under my pant leg while it was flipping over and caused me to trip and my other pant leg got stuck in the blades. I immediately managed to get it shut off, but it was very, very close to doing disastrous things to my right leg.

I’ve had nightmares about both of these incidents (and a few more) ever since they happened. I suppose it’s my own mind guiding me and reminding me of things to be careful with and things to avoid.

Q1: 401(k) expense ratio
I just started my first “real” job last week, and will be eligible for my company’s 401k 6 months from now. The default option is American Century Livestrong 2055 target date plan ( here is where I found my information), and it lists the expense ratio as .45%. I would greatly appreciate your perspective on this option, or if I should see what other options are offered.

For additional background information, the company contributes up to 3% matching, and although I’m unsure what the requirement is to get that match I plan on contributing at least 6% which should bring the total contributions to 9%, plus contributing additional money to my small but already established Roth IRA. I have no debt and have already established an emergency fund, so getting my retirement contributions established is the only real financial concern I have.
– Marcus

That particular fund is solid, but not a top performer. The performance is comparable to other target 2055 funds (like this one at Vanguard), but it’s really hard to get a good sense of the performance over such a short timeframe, as both funds have just existed for a little over a year.

The expense ratio is a little high, but it’s not incredibly high. It seems to be on par with other funds from American Century.

Since I’m not sure what other options your 401(k) gives you, I can’t say for certain that this is your best option, but it’s decent and it seems as though it will get the job done. Most 401(k) plans don’t offer the “best” investment options, mostly because they’re restricted to the offerings of certain investment houses. However, the tax benefits of a 401(k) make up for it.

Q2: Grocery shopping idea
My best friend (who lives next door) and I came up with a great plan for solving our impulse buys at the grocery store. We both find ourselves buying silly stuff we don’t need whenever we shop. So we just started giving each other a grocery list on alternating weeks. One week she will take my list and buy everything on it for me and the next week I do the same for her. Once every month or so we resolve any financial difference between the two, which usually ends up just being $10 or $20.

I only have to go grocery shopping once every two weeks and my impulse buys are way, way down. It all works out really well.
– Jenny

This seems like a really good idea, actually. If you have a trusted friend who can follow your grocery list and it’s convenient to swap groceries with them (like a next door neighbor), this can be a great way to keep yourself from too much impulse buying.

Another thing I like about it is it forces you to carefully think about a grocery list, which means you have to plan your meals out for the week and think about it. It will also subtly encourage you to put healthier items on the list, which can only be good for you.

If I lived really close to one of our closest friends, I’d strongly consider this type of system.

Q3: Home buying books
My husband and I are starting to look towards buying our first home in the next 12 – 18 months. We are saving up now and plan to pay entirely in cash. Do you have any home buying books you’d recommend we read to help get us started?

– Alice

When we were looking at homes back in 2007, we read through a lot of home-buying guides. The best one we found, surprisingly enough, was Home Buying for Dummies by Eric Tyson.

Never mind the name. The book was actually a great overview guide for the process of buying a home. It alleviated a lot of our questions with just a couple read-throughs.

The small number of questions we were left with after that book were answered with Google searching and checking with multiple sources.

Q4: Raising allowance?
Up until now, we’ve given our children allowance based on a rate of $0.50 per year old they are, stopping at age 16. It’s worked really well, at least from our perspective.

Our twelve year old daughter – our youngest – has argued with us for the past week that the rate should go upwards. She actually went online to get inflation data and argued that there should be at least a 30% increase in allowance since we started doing this, since the price of things is at least 30% higher than when we started with her oldest sister.

How do you think we should handle this?
– Marcus

For one, kudos to your daughter for thinking about the situation, doing some research on her own, and presenting a case for an allowance raise that’s actually based on information and not based (purely) on wanting things. That takes some initiative and some smarts.

She makes a good point in the sense that the items she would buy would be more expensive than they were ten or fifteen years ago. However, she doesn’t make a good point in the sense that she’s not really going to be buying useful items.

My response as a parent would be to negotiate a compromise to teach her some negotiating skills. I would make a counter-case against her suggestion, actually, so you can dig into the realities of what inflation actually means and how it doesn’t affect all items equally.

I feel that a child exhibiting these skills should see some positive feedback, but she could also learn about negotiation. In your shoes, I’d probably aim for a raise to $0.60 per year (not quite 30%, but an increase), but I’d make her work for it.

Q5: Consolidating several accounts
Right now, I have several bank accounts and credit cards. My main checking account, and my only savings account are with Ally Bank. I also have a second checking account with a local credit union, which is where I also have my car loan. For my credit cards, I have one with Capital One, one with American Express, and one with Chevron/Texaco.

I really don’t like having these many accounts, but the second checking account with the credit union I keep just in case I need to pay my car loan through that account (since the payment is classified as a transfer and it can be done the same day). As for my credit cards, I’d like to get rid of one, but I’m not sure if I should (I pay each one in full every month). My Capital One card has an annual fee and a low credit limit ($1000), but it’s my oldest account so I don’t want to get rid of that one. I like my AmEx and I use that one the most, and my Chevron card I haven’t used in months, but when I got it I was in an area where I passed by several Chevrons, and I also got it to help with my credit score.

Ideally I’d like to get rid of my Chevron card, as it provides absolutely no benefits to me and I don’t even use it anymore, but I’m not sure if I should because I don’t want it to hurt my credit score. It’s not a major network card, so I don’t think that it would hurt my credit score much, if not all, but I’m not 100% sure.
– Drew

Since it’s not your oldest card and you have several other lines of credit, closing the Chevron card will not have a major impact on your credit score.

The only area where your score will be impacted will be a change in your credit ratio, which is the ratio of your credit card balances to your credit limits. Since you’ll be cancelling a card, your total credit limit will go down without adjusting your card balances.

Now, if you’re not regularly carrying a balance on your cards, this is completely a moot point. It only really matters if you carry a significant balance from month to month. If you carry no balance or only a small one that’s just a fraction of that card’s credit limit, go right ahead and cancel the Chevron card.

Q6: Compost and time
It seems to me that making compost isn’t a very efficient use of one’s time. It takes a lot of time to turn your scraps into compost, with all the carrying out of scraps and turning of the compost. It’s also messy. It seems like a pretty silly thing to do with one’s time.

– Jill

I view composting as a hobby. Whenever you look at someone’s hobby with a complete outsider perspective, it often seems like an ineffective use of time.

Look at golfers – they spend hours hitting a ball with a stick so that the ball will go in a little hole, then they do it again and again. Look at people who love to read – they spend hours just sitting in a chair staring at little markings on a page.

Almost any hobby depends a lot on what is important to the person involved with the hobby. For us, filling our small kitchen composter and emptying it into our barrel composter outside, then occasionally emptying out that barrel composter onto our garden is a good use of time. We get extra pleasure out of reusing our scraps and we like the fact that our garden is getting a boost from those very scraps.

If you don’t see value in that, you don’t see value in composting, but that kind of evaluation is true for any hobby or any way another person uses their time.

Q7: Making your own mayonnaise
Here’s something I have found after getting frustrated over the ever-shrinking mayonnaise jars -

A little background: I have long made large batches of ranch dressing, kept it in quart jars in the refrigerator. I liked the taste as well as bottled ranch dressing, and it was about 1/4 to 1/3 the cost of the bottled when I made it myself. I used a quart of mayonnaise, a quart of buttermilk, and two seasoning packets. It was two times the recipe on the packet, but it only required one cleaning of the blender instead of two, and since it is everyone’s favorite, we use it fast enough that it doesn’t go bad.

Since the mayonnaise came in quart jars, and the buttermilk was in quart cartons, it was already pre-measured, and I just dumped one of each into the blender. About two years ago I noticed the dressing was not as thick as it used to be. Long story short, I then noticed like so many other products that the mayonnaise jars had shrunk and were only 30 ounces instead of 32, a full quart. (I have since noticed that some are now only 28 ounces). The price remained the same, though, isn’t it funny how that works. It doesn’t sound like a lot, but it is 6.25% less, and enough that the reduced amount of mayonnaise with the same amount of buttermilk made a noticeable difference in the consistency of the finished product. For a while I still used one of the 30 ounce jars of mayonnaise, plus 1/4 cup from another jar, and the dressing turned out like it always did.

I then stumbled across a recipe for making mayonnaise, and learned that it really isn’t that difficult. A single batch is as follows:

1 egg
1 Tablespoon of vinegar
1 1/4 cups of oil

That’s it.

Break the egg into your food processor or blender jar. Add the vinegar and beat or process for about 1/2 a minute. Then add the oil 1/4 cup at a time, letting it mix for about 45 seconds to a minute after each addition. It will take you about five minutes to finish adding the oil, but it you add too much at a time it will not make an emulsion properly.

If you want to jazz it up a bit, at the end you can add a little paprika, seasoned salt, or even a little horseradish. I also have started making it with canola oil, which is high in Omega-3 oils and healthier than most other oils.

End result, making my own isn’t that difficult and costs about half as much per ounce as the ever-shrinking quart jars. The main reason that I bought quart jars in the first place is the lower cost per ounce over pint jars, but since I am making it myself I now usually make a double batch, which is a little more than a pint, at a time.

When I am making my own ranch dressing now, I quaduple the mayo recipe, then remove one cup to put in a jar for the fridge for sandwiches or whatever else. Add my quart of buttermilk, two seasoning packets. I have less than four dollars in half a gallon of dressing, not much more than what two 16-ounce bottles of the pre-made costs, and have twice times as much.
– Sylvia

This is a great recipe. I love homemade mayonnaise.

The only catch with this that I see is that homemade mayonnaise isn’t pasteurized, which means I wouldn’t keep it around more than a few days and I’d be very careful about cross contamination.

Still, when it’s fresh, few things go better on a sandwich than this kind of homemade mayonnaise.

Q8: Car insurance choices
I drive a 2003 car almost every day. It has almost 10,000 miles. The blue book searches available online show my car as worth approximately $3,200. Is there a way to use this data to determine whether I should reduce my car insurance coverage to just liability or something? Every friend I ask about this has a different opinion and of course my insurance agent recommends keeping it insured to the max. (My current State Farm policy costs me $55/month, with an unblemished driving record and the deductibles already made as high as I think would be wise.)

– Julie

Such matters are always based on opinion, of course.

My question would be whether or not you could financially handle a replacement car purchase right now, with no trade in. Do you have some cash on hand for a down payment? Is your credit at least strong enough to get a decent car loan?

If you’re saying “yes” to those things, then going to liability insurance is a reasonable option. It will save you money each month. However, if something happens (like sliding on a wet road and hitting a tree), you’re going to have to be ready to buy a replacement car immediately.

Insurance is basically all about risk. Over a long period, insurance is going to cost you more than what you get out of it (for the average person, at least). Insurance really only benefits you when something bad happens. When you reduce your insurance, you’re essentially saying that you’ve got enough financial backbone to take on that risk yourself.

Q9: Crock pot recommendation
I’m considering purchasing a crock pot/slow cooker for family use. Do you have a recommended model?

– Shari

It depends a lot on what size you need.

If you’re single or are only feeding two, I’d get a very small one. In that case, I’d get the 2.5 quart Crock Pot. If you’re cooking for two, this will make a meal and also provide some leftovers.

For a family, I’d get a big one. In this case, I’d recommend the Hamilton-Beach 6 quart programmable model. It can handle almost any family-sized meal you throw at it.

Most slow cooker models are pretty good. I haven’t come across any models that are consistently bad.

Q10: Challenging career choice
I have been offered a new job with 30% more pay which is about 25-30 minutes away downtown and involves about 2-4 business travels per month. It’s a lateral position move but with more potential than what I have now.

At the same time, I really love my current job, my boss and associates are great and my commute is 10 minutes or less. Also, I have great flexibility to take my kids to and from school and meet my wife for lunch at home every day! I really love it. I have been at my current job 10 years.

We are doing well money wise but new job does offer 30% pay increase. I find myself trying to get excited about it and get positive but it’s hard as I love extra time with family, especially since we just had a newborn.

How would you look at this choice and what’s your advice?
– Cliff

What will that extra 30% enable you to do in your life that you’re not able to do right now?

If you can list anything significant there, ask yourself if the things you gain are worth the things you’ll lose (flexibility with kids and work, a good work environment).

Unless there’s something really compelling going on here that you didn’t list, I don’t think the job switch is worth it.

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. Jackson says:

    Crickets. Coupon.

  2. Carole says:

    Q7: I don’t like to eat raw eggs. Some people don’t seem to mind.

  3. Jonathan says:

    @Jackson #1 – I actually tried to comment earlier, and my comment never showed up (not even to say it was in moderation). So I wonder if that’s happening to others as well, and if this one will make it through.

  4. jim says:

    Marcus: You could tell your daughter that lots of people don’t get inflation raises. What did she do to earn more money?? Its not automatic. She seems mature enough to argue for inflationary increasees so maybe she’s mature enough for some reality.

  5. Johanna says:

    Q4: I don’t understand why people think Marcus’s youngest daughter should have to do extra work to get the same allowance (in inflation-adjusted terms) that her older sister was getting at the same age.

  6. Johanna says:

    Marcus, tell your daughter she’s absolutely right, and adjust her allowance forthwith (after possibly doing some more research into what the correct adjustment should be).

  7. jim says:

    Why would Marcus’ daughter be entitled to a cost of living adjustment? Did mom and dad promise one? Why would people think Marcus’ daughter is entitled to any free money?? Its OK to tell your children ‘no’.

  8. Johanna says:

    Parents of multiple children should treat their children as fairly as they can.

  9. Johanna says:

    If Marcus gave his eldest daughter $6/week at age 12, he should give his youngest daughter the same – adjusted for inflation – unless he has a compelling reason not to.

  10. kc says:

    Q4 Not sure Trent ought to give any advice on negotiating.

  11. kc says:

    After all, he negotiated the sale of his blog to a company that has ruined it.

  12. bookaunt says:

    Q7- ranch dressing seasoning mix: onion flakes or powder, garlic powder, parsley flakes, salt, pepper

  13. bookaunt says:

    Q4 Give her a larger allowance but begin to have her be responsible for some expenses you now cover (e.g. school supplies, school lunch).

  14. Johanna says:

    @bookaunt: Again, why should she have to pay for things that her sister didn’t have to pay for at the same age?

  15. Joan says:

    #4 The daughter is very motivated, I would give her a larger allowance, possible not 30%, but at least larger.

  16. Joan says:

    #4 You must be very proud of your daughter, she gave you good reason for an increase in allowance.

  17. Steve says:

    Q5: You don’t say what your credit limits are on your Amex & Chevron card so it’s hard to estimate the effect closing the Chevron would have.

    Things to consider are what % of your total credit card limits is your Chevron, how much total credit do you have and what does your current credit report look like?

    If the Chevron is not a significant % of your total credit, you can probably go ahead and close it. I would also ask Capital One for a credit limit increase. If you pay in full every month, they should not have an issue with that.

  18. bookaunt says:

    @Johanna – Actually I do believe an allowance increase would be in order. Also that the money education opportunities could be expanded.

  19. Robin S says:

    I totally agree that Marcus should give his daughter the full increase. She’s smart enough to know she is otherwise getting shafted. My family and I have a toxic relationship because my parents refused to treat us consistently based on age(ie. we are 5 years apart, but my brother was allowed to date at 13 when I wasn’t allowed to until I was 18, stuff like that). Go the extra mile, because losing your child’s respect isn’t worth a few cents a week.

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