Reader Mailbag: Mockingbird Hill

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. Primerica concerns
2. Different goals among partners
3. Buying a tablet
4. Ending allowance
5. Retiring young
6. Starting a community group
7. Life insurance advice
8. Ads in magazines
9. Dream job and pregancy
10. Speeding and saving money

When I was little, my mother used to sing the song Mockingbird Hill to me as I was falling asleep. My memories of it are vague, as are most memories of early childhood, but that song will always have a warm familiarity for me.

Now, whenever my mother puts my children to bed, she sings Mockingbird Hill to them as well. I can hear her singing it to them in the next room as I type this.

It’s one of those warm continuations of family tradition.

Q1: Primerica concerns
I have a question regarding Primerica. My brother is recently returned from active duty service and living in the Des Moines area. He is only getting calls from insurance companies like Primerica. I hadn’t heard of them before, but apparently they target middle-class people, solely by word of mouth and networking, and sell term life insurance. The gimmick (in my mind) is that they give you “free” financial advice – that is, show you how to make room in your budget to afford their product – and then sell you on a product. In theory, I don’t disagree with their mission – to help people understand fiances better and plan for the future – but their practices of: 1) commission-only sales, 2) a pyramid-like structure (paying most of your first few, and presumably easiest, sales to the upper management), and 3) sending agents out to give financial advice without adequate training have me very skeptical about how and if their style/tactics are aligned with their stated values. My question for you: do you know of any good background digging on companies like Primerica? Their rhetoric is very dense and appeals to the all-American middle-class values that my family and most of your readers probably embrace. I’m just looking for some detailed analysis and an objective view point of what this company (and others like it) really do. I’d appreciate your opinions or insight, as well as any information you might have on these kinds of groups.

- Ellen

Primerica functions pretty much like any other multi-level marketing company. Other well-known examples include Amway, Scentsy, AdvoCare, Pampered Chef, Mary Kay, and Avon.

You describe the basic tenets of MLM pretty well – a pyramid-like structure where portions of sales proceeds go up the chain. Primerica simply uses that model when selling financial products like mutual funds and insurance, much like Pampered Chef sells kitchen goods and Mary Kay sells beauty products.

I am not a fan of the MLM model. It encourages the salespeople on the ground to use their friendships as the basis for business growth, and a significant portion of the money that you earn from selling to a friend goes up the chain to other people. I don’t like any business that requires you to treat your friends as customers. It also requires a lot of sales skill to succeed, and a person with that level of sales skill can find more success in other businesses.

Q2: Different goals among partners
My husband and I have been following your advice and have been talking a lot about our goals for the future. Our challenge has been that we seem to have very different goals for the future. My big dream for the future is to have some children and take some time away from my career to be a stay-at-home mom for a few years, sooner rather than later. He doesn’t want children any time soon and mostly talks about them as a vague thing in the future. His interests seem to revolve around having a nice house in a good neighborhood and doing some traveling together. How can we even begin to reconcile this?

- Becky

You have to start by figuring out what goals you have in common.

I’d suggest that you each sit down and make a list of ten things you’d like to have in your life ten years from now. Do it completely separately.

Then, when you have those lists, sit down together and compare them. Most likely, you will have a thing or two in common that you share. Those things should be the focus of your energy.

If you have absolutely no goals in common, then you’re looking at a deep compatibility issue and you should consider marriage counseling so that you get things back on track.

Q3: Buying a tablet
My husband and I are at the point that we have worn out our desktop and it is on its way out (we have had it for almost 10 years and it is now just too slow and not working properly). He has a laptop through his work that we can use in the evenings or on weekends. We are trying to decide if we should get our own laptop at home or perhaps look into an iPad. I am planning to homeschool our children and am thinking it might be a valuable resource to invest in. Our children are still small (4.5, 3, and 18 months) so we were thinking about looking for a first generation iPad or iPad2 that we could start with for them to play reading games and just learn some technology skills early on. I feel like we’d need to upgrade in a few years so I don’t want to buy a brand new one yet unless we can just find a great deal. I know you’ve given tips on refurbished computers before and I’m a little skeptical about buying a refurbished iPad online, so I didn’t know if you had any tips on this or if you knew of any reputable places online to buy one. I’m also curious to hear your opinion on whether you think an iPad is worth the cost.

- Tessa

I generally don’t encourage people to buy refurbished items unless they come with some sort of guarantee from the refurbisher.

In the case of Apple products, then, the only place I’d buy a refurbished item from is Apple themselves. However, as you can see from Apple’s refurbished iPad marketplace, the discounts aren’t really big.

Buying refurbished or used items from sources that don’t guarantee them is a giant risk, since you don’t have much ground to stand on if you get ripped off. However, the prices tend to be much lower if you go that route. I’ve seen some very strong deals for iPads on places like Craigslist, but I absolutely wouldn’t buy one without at least trying it out extensively by running a variety of apps, touching the screen all over, and carefully examining the item.

Q4: Ending allowance
At what age should you stop giving your children an allowance?

- Brian

My wife’s family stopped giving her an allowance at age sixteen, which seems like an appropriate age. That’s an age where a teenager is easily able to find work if they want more spending money and are beginning to really be introduced to bills and adult-level expenses.

Sarah and I haven’t specifically discussed it, but I would guess we’ll adopt a similar timeframe for ending allowance.

I don’t ever advocate giving a child a large allowance. It should be a small one, so they can learn the value of saving for future goals. If you provide a large allowance, a child never has to learn how to save for the future.

Q5: Retiring young
I currently have 15000 invested in the stock market all JP morgan mutal funds I think my expense ratios are high but that is besides the point. I also have 500 in my 401k and 5000 in my savings account earning a 1.25%APY. If I took 20% of my earnings off could I retire early ?

- Geoff

You have a very good start, but you’ve got a very long way to go.

One big factor is your age. If you’re 22, saving 20% of your income per year towards retirement, assuming a decent return, will put you in a position to retire at age 50 or so. The exact year depends on a lot of factors: the performance of stocks over the next three decades, the amount of income you want when you retire, and so on.

If you’re already in your late thirties or later, you’re basically going to need to save at that rate to have a strong retirement at a traditional retirement age.

Regardless, you will never regret having that money in the bank.

Q6: Starting a community group
In the town where I live, there’s this wonderful park in the center of town that has a series of incredible sculptures. Unfortunately, our town doesn’t do much at all with them. The sculptures fall under the control of the town’s parks and recreation department, but they do nothing at all really to maintain them and not much to promote them, either. The sculptures are listed in a lot of “roadside attraction” guides which attract a decent number of visitors to town, but all they find are some run down sculptures in the park.

Several people in the town feel the same way I do and would love to improve and promote the sculptures and maybe attract more tourism to the town, and many have said they’d volunteer time for this project. I would be willing to take charge of it, but I don’t know what the next step is.
- Mark

If I were in your shoes, I’d call up the chairman of the city council in your town and run the idea by him or her.

It’s hard to tell what sort of laws and regulations are in place regarding the statues. In some towns, monuments are heavily protected. In other towns, they’re basically left alone.

You will probably face some “turf wars” in the process of getting this started, as there may be people in the town who are professionally charged with caring for the statues. Be patient and persistent.

Q7: Life insurance advice
About 30 years ago my husband and I both signed up for life insurance. He has a $100,000 Universal Life, which now has a cash value of slightly more than $25,000. My $50,000 whole life policy has a cash value of only $9,000. I’ve done some checking on the cost of term life and we could be saving big bucks if we dumped these 2 older policies (even at our older age). Should we? That $25,000 would pay off all our debt plus put a new roof on our house. Would we have to claim this money on our income taxes too?

- Erin

You would only have to pay income taxes on the money if you get more money out of the insurance than you paid into it, which is pretty unlikely.

Before I would do this, I’d make absolutely sure that my insurance needs were met by other policies. If you cash in these policies, what would happen if one or the other of you passed away suddenly? Would you have enough insurance to pay for funeral expenses and move forward with your life?

If you don’t have adequate insurance, get more insurance (preferably in the form of a term policy) before cashing out these policies.

Q8: Ads in magazines
I’m really frustrated with the pervasiveness of advertising in our society. I watch little television and I mostly read in my spare time, yet advertising is effective enough that I recognize an awful lot of the brands I see when I visit a store and I often even recognize specific products. Ads are everywhere, and they’re at least effective in getting you to recognize products, and a lot of times that’s enough to make the difference when buying them.

So I’m trying to minimize the amount of ads that I see. I receive a lot of magazines in the mail (that’s mostly what I read), but many of them have a lot of advertisings in them. What can I do to get rid of the ads in magazines?
- Candace

I feel the same exact frustration you do.

My policy with magazines is that they’re not items that I’m ever going to save for the long term. So, what I tend to do is, when I first get a magazine, I tear out all advertisements that don’t affect the content of the magazine. It doesn’t take too long to do it, plus it gives me a reason to leaf through the magazine.

Naturally, you’re still going to be left with some ads, but a reduction in ads is a good thing.

Lately, I’ve been focusing on cutting back my subscriptions, sticking mostly with magazines that are very low in advertisements.

Q9: Dream job and pregancy
My husband currently works full-time and I work part-time, both from home. We have a 22 month old daughter and another one due in November. Our only debt is student loans and the mortgage on our home (we also own another home nearby outright that we rent out). We live within our means and are pretty comfortable, but we are both anxious about not saving enough for retirement. I recently got a job offer for a full-time position that I applied for before I was pregnant. They want me to start in a month. I’m having a bit of a dilemma on whether or not to take it and would love your input. Pros: 1) Lots, lots, LOTS more money for a 40 hour a week job (no overtime/weekends) 2) I would be doing my dream job and would be building skills that are far more transferable than my current position 3) I probably will not be able to get this position or its equivalent if we wait. 4) I love to work Cons: 1) we would have to relocate to a new town about 2 hours away. I grew up there, so I have ties, but I do love where we live now. 2) Current house would have to go on the market, which means home improvement projects have to get completed, etc. Thankfully the tenant at the rental house is willing to “baby sit” the property for a break in rent so at least we would have someone coming by for yard maintenance. Unfortunately, renting our current house would be difficult due to location and size so selling is our only option. 3) Packing and moving in two weeks! Finding a new OBGYN and hospital! Toddler adjustment to new house and her mommy being gone all day! Finding a new nanny for during the day! To say I’m overwhelmed is a complete understatement. 4) Leave after the new squishie comes – I can probably negotiate 12 weeks unpaid, but I am really, really unsure how to handle going back to work full time with a 3 month old at home. I feel guilty that I’ve been basically at home with my first (even with a nanny here, I’m still available and we eat all meals together) and I wouldn’t be giving that to my second. If I wasn’t pregnant, I think that I would be running towards this job with glee. (Did I mention I would be making three to four times what I currently make?) I’m just worried that we’ll make this big change and then an unknown something will click in me and I won’t want to work / this job will turn out to be awful/other ending of doom. My husband is fine with whatever I want to do and I can’t figure out how much of this is pregnancy hormones and how much of it is me being legitimately scared of the unknown.

- Linda

The dilemma really comes down to what you think puts your family in a better position down the road.

Is your family better off if you take the higher paying job? Or are they better off if you spend more time at home?

You’re going to get as many opinions on this as there are grains of sand on the beach. Given these choices, though, if I knew we would be financially stable without the job change, I wouldn’t take it. I would rather earn less and be more available and stable for my children.

Q10: Speeding and saving money
My husband and I have been arguing about how useful it is to speed. If we’re flying down the interstate, it doesn’t take much to notice that we eat more gas than if we’re driving 55 on a two lane road. However, if you’re going 75 on a 300 mile trip you get there in four hours. If you go 55, you get there in a little under six. My thought is you should drive at least with the flow of traffic and maybe even a bit faster than that because you’ll get there a lot faster than if you go 55. Even if it costs a little bit more, time is money. My husband thinks it’s better to go the speed limit and he usually prefers a two lane road to an interstate. He’s saving a little money, but costing us hours in the car. Who’s right?

- Dawn

There are a lot of factors to consider here. According to the Department of Energy, a car traveling 75 miles per hour is 23% less fuel efficient than a car traveling 55 miles per hour.

The trip you describe is a 300 mile trip. At 75 miles per hour, you can make that trip in 240 minutes – four hours. If gas is $3.50 a gallon and you’re driving a car that’s advertised at 25 miles per gallon, you’re actually getting 19.3 miles per gallon. Thus, your fuel cost for the trip is $54.40.

On the other hand, if you’re driving 55, you’re going to take up 327 minutes for the trip – five hours and twenty seven minutes. You’re going to actually get that 25 miles per gallon, so your trip will cost you $42.00 in fuel. In other words, your extra hour and twenty seven minutes will earn you $12.40 in saved fuel – a bit better than minimum wage.

If you’re driving a 20 mile per gallon car, your savings jump to $15.68 for the trip, which is above $10 per hour saved just in fuel costs.

The other factor is that, when you’re speeding, you’re running at least some risk of getting a traffic ticket. That traffic ticket adds significant time to your trip (while you’re pulled over) and an enormous cost. If you have a 5% chance on your trip of getting pulled over while going 75, and getting pulled over means an extra 10 minutes and $100 in cost, you’re effectively adding $5 and an extra half a minute to all trips while speeding (on average, of course). That bumps the savings up even higher.

So, the less fuel efficient your car is, the better off you are going the speed limit. Either way, when you’re comparing 75 miles per hour to 55 miles per hour, you’re saving more than minimum wage by driving slower.

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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