Reader Mailbag: Mother’s Day

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. Saving for a house
2. Partner doesn’t trust banks
3. Minimizing grocery store trips
4. Help with investment risk
5. Home disclosure
6. Copying library audio book
7. Board game advice
8. Yard sale advice
9. Getting odor out of items
10. Safe way to handle inheritance

During the week before Mother’s Day, all three of our children fell ill in various ways. Two of them had the same stomach virus, while the third child had an infected tooth.

All of this required some medical appointments, days home from school, and so on.

The problem is that it forced us to put off several things that needed to be done this week, leaving our Sunday full of taking care of errands and other things that would have otherwise been completed during the week.

Still, at the end of the day, we managed to pull off a few nice things on Mother’s Day. We came through for her in a few little ways even in the midst of a storm of craziness.

No matter what happens, we stick together and figure out a good path forward. This Mother’s Day was actually a pretty good example of that.

It may not have been perfect, but I think it was a pretty happy Mother’s Day for her after all.

Q1:
My husband and I are 29. We bring in about $75,000 a year before taxes. We are really trying to educate ourselves about finance because we feel that taking the right steps now will give us a more stable future later and will allow us to spend more time doing what we love and less time working. We are currently renting an apartment and spend about $850 a month for rent (690), utilities (50), laundry (40), internet (35), and insurance (35). We are very fortunate to have no debts.

After reading Dave Ramsey’s Total Money Makeover I developed a 5 year plan (started in January 2014) for us to aggressively save and cut spending so we can put as close to 100% down on a house as we can. I’m thinking $150,000 – $200,000 price range. I realize this goal may be a little lofty, but thinking about how different our life could be if we never have mortgage debt really motivates me. This first year we are really trying to cut our bills, track our spending, make more money, and have a more realistic picture of where our money is going. I started saving about 3 years ago (while still paying out of pocket for grad school and saving for our wedding, so some months were skipped) and have $20k put aside for the house. We have about $9k set aside in an emergency fund, $9k set aside for a (new to me) car when the Saturn I’ve been driving the last 10 years quits, $3k for baby set up and delivery (hopefully in the next 1-2 years), and $2k for vacation.

When thinking about saving and spending I’ve always looked at what I made the year before after taxes and calculated percent of income it takes to maintain basic necessities (the $850 listed above). Then I’ve thought about the other goals I have, and the time frames I have for reaching those goals. After I receive every paycheck I calculate percentages of my take home pay to allocate to the different goals, currently 35% house down payment, 32% basic living expenses, 26% IRA, 2% baby set up, 3% vacation, 2% tablet/smart phone. I know about how much needs to be put away from each pay period to meet my goals within my specified time frame (going off a 24 pay period math not 26 pay period, so I’ll have a couple extras throughout the year). Every six months I usually do the math to see if I’m meeting the goals and if any changes should be made to make them more realistic (e.g., decrease goal amount, extend time frame, work more).

If we anticipate having 5 years before we purchase a home is there somewhere we should be putting house savings to get a better return than smarypig (1%)?
– Shauna

You might be able to find savings rates that exceed 1% by a little, but you’re not going to be able to get significantly higher without either locking down your money (meaning you can’t touch the balance for a while) or by adding risk (meaning you will on average earn a better return but have some chance of earning far less or even losing money).

The disadvantage of locking down your money right now is that you’ll lock it down at something like 2%. If rates start to go up, you’ll either be stuck at that low rate or you’ll pay a fee to “break out,” meaning you’ve lost most of what you’ve gained.

Honestly, in your situation with a five year timeline for a down payment, I’d keep it in a savings account. I don’t think the timeframe is long enough to warrant investing in stocks. If you’d like a slightly better return with only a relatively small amount of risk, I’d look at a bond index fund like the Vanguard Total Bond Market Index Fund. It has a ten year history of returning around 4.7% annually, though it has actually slightly lost money so far this year.

Q2: Partner doesn’t trust banks
I am 33 years old. I was widowed in my twenties and have finally started a serious relationship. It is going very well except he does not trust banks at all. He uses check cashing services and keeps as much money as possible in cash. He pays bills via money orders or in cash if he can. Every time there is a news story about a bank or something he says it is proof about how corrupt they are and he stays “safe” by avoiding them. This seems like a very difficult financial life to live. Do you have any ideas on how we can balance this with some ability to live a normal financial life?

– Chris

I would feel significantly less secure with a lot of cash in my home versus cash sitting in my checking account. If you keep a careful eye on your checking account, you can see every dime that goes in and goes out. Most checking accounts at reputable banks have a lot of consumer protection if you keep your eye on the account.

On top of that, virtually all bank accounts in the United States are covered by FDIC insurance to protect against bank failure. If your bank goes under, your cash is safe.

Unless you live in a fully cash-based system where you buy everything exclusively from local sources, it would be extremely hard to conduct day-to-day life without the ability to use checks at the very least. That restriction alone would cost significant money.

I don’t think there really is a compromise here other than keeping your finances separate. In that case, he could give you money for some expenses and you could write checks or use online bill pay, I suppose, but that seems rather difficult, too.

Q3: Minimizing grocery store trips
Do you have any suggestions for minimizing grocery store trips? I’ve seen articles and books about shopping once a month but I don’t understand how you can have fresh produce and do that?

– Alicia

Very few produce items last for a month, so if you’re going one month between grocery store visits, you’re either eating very little fresh during the latter portion of that period or you’re getting it from other sources (like your garden or something similar).

Many families that attempt this typically rely on flash frozen vegetables for at least some significant portion of their vegetable intake. They also prepare meals right at the start of the month, freeze them in their entirety, then cook them late in the month, which again takes advantage of the freezer. Other options include using canned items.

Still, if you eat lots of bananas and apples, you’re probably not going to make a strict “once a month” plan work. My suggestion is to occasionally have “produce-only” shopping trips where you only visit the produce area of a grocery store and then spread out the “big” trips.

Q4: Help with investment risk
I am 73, my husband is 74. We have 6 grown and gone children, happily married and frugal. We adopted a special needs baby and she is 16. I have a trust fund set up for her, about 100,000 and growing.

My husband is now unable to function mentally, after several strokes. I am paying out of pocket for his assisted living facility.

I recently sold some property that he was managing, and took a huge loss in taxes as I cannot find the original price he paid in the 1980s.

I have the money, about 500,000 sitting in a saving account with very little interest. I would like to put it where I could get a bit more interest, but without a huge risk, as Social Security and military pension is not enough to live on and care for our daughter and pay for my husband’s care.

I am so afraid at time of losing it all with a silly investment as we lost a huge amount of money in the 60s when my husband was in Vietnam with a stock broker who ‘managed’ our account when he was gone and nearly decimated our savings at that time. I have saved and passed on to the older children many of your things but I cannot find one for older folks who need a bit more from their savings and not at a huge risk.
– Marilyn

Honestly, my recommendation to you would be to buy a diverse selection of bonds, much like I suggested to Shauna above.

In your shoes, I’d probably keep about half of the money in cash and the other half in Vanguard Total Bond Market Index Fund. That investment has returned an average of 4.7% each year, though it has slightly lost money over the last year.

A diverse bond fund like this one has far less risk than stocks. Vanguard is an excellent investment house and if you do it yourself, you don’t have any middle men messing with your money. You can do it yourself at Vanguard.com.

Q5: Home disclosure
When selling a home, what information needs to be disclosed? We are considering selling our home but before we owned it there was a murder here which received tons of local and some national attention. We occasionally get weird people who want to take pictures of the home. Does that have to be disclosed?

– Erin

Most states have seller disclosure laws that require you to share quite a bit of information about the home. I looked at the disclosure forms for several of the states and none of them required mention of this kind of issue.

Naturally, a homebuyer who does their homework will discover this with a bit of research, so it will probably affect what you can get for the property.

If I were you, unless the state required disclosure, I wouldn’t mention it unless it affects the physical condition of the property.

Q6: Copying library audio book
If you check out a music CD or an audio book from a library, is it okay to make a personal copy to listen to later? I check out audiobooks sometimes but rarely am able to finish them before the due date.

– Andy

Legally, it’s no different than copying a CD that a friend loaned you or downloading an mp3 from the internet. If you don’t own it yourself, it doesn’t fall under fair use.

Morally… frankly, there’s a lot of moral ambiguity in issues like this. Modern copyright law hasn’t really evolved yet to deal with the internet era.

Does that justify copying an mp3? Not to me. That audiobook was sold as a package that didn’t include infinite copies, so I’m willing to abide by that. However, I tend to support companies and organizations that have better policies when it comes to copying and sharing data. In other words, I’m not likely to buy audiobooks or CDs in the future that inherently prevent me from doing whatever I want with that content.

Q7: Board game advice
Please suggest some top quality strategy games like you play with your son. Also where do you find these games to purchase?

– Alice

I play board games and card games with my oldest son (who’s eight years old) two or three days a week after school and often on weekends. Sometimes, his younger sister (who’s six) plays, but at other times she’d rather draw (as she’s very passionate about art).

In terms of games that we both enjoy that also encourage him to think, I would recommend Cartagena, Arimaa (which can be played with a chess set), and San Juan. Only San Juan requires reading and it only requires a little bit.

I usually buy games from CoolStuffInc. I usually save money for a while and order games together with friends to get a single order with free shipping. CSI consistently has the best prices on board and card games.

Q8: Yard sale advice
Our town is having a citywide yard sale this weekend. We’re having a sale, but so are three other families on our block. How do we make ours stand out and sell more stuff?

– Angie

It’s likely that anyone who visits one sale on your block is likely to visit most of or all of them. In other words, you’re probably going to have similar traffic to the other sales no matter what you do.

If you want to sell stuff, price it to sell. Don’t worry about what it’s worth. Worry about getting it off your hands with just a little return.

An approach I’ve always been a big fan of is sticking up a sign announcing that prices will drop later in the sale. Make it big and clear. Something like “all items 25% off after noon on Saturday and 75% off after noon on Sunday” will get some attention and likely pull in some bargain hunters on Sunday afternoon.

Q9: Getting odor out of items
I recently bought a box of books. When I bought them they were outside and my allergies kept me from smelling anything. Now I have them inside and they have a faint musty smell and a faint smoky smell. I want them to be odorless. How can I save these books?

– Brandy

The best method I’ve found is to get a cake pan, put a thin layer of baking soda all over the bottom of the pan, then place a book on top of the soda. However, you should put the book in there standing up with the pages spread out a bit. Imagine the book standing up with the covers open fairly wide with all of the pages spread apart as much as possible. Leave the book sitting like that for 24 hours or so. (This tactic works well with kitty litter, too.)

This helps with a lot of book odors and should take care of the faint remaining odors.

If that doesn’t quite do it, try sprinkling a bit of baking soda between every few pages in the book, then close it up and leave it for a few days. Then get as much of the baking soda out of the book as you can by shaking it. This can leave a little baking soda in between the pages that you won’t notice until you’re reading it, but the odor really should be gone at that point.

Q10: Safe way to handle inheritance
I recently became of age and got control of an inheritance I received while in my teens, the COD it was in just matured and wasn’t earning very much interest at all. It’ll be about $70,000 once I pay for grad school which I will be starting next month. I recently went to a Dave Ramsey certified financial planner and they were going to take 5.75% out of every dime I put into a Roth IRA with them, which I thought was ridiculous. This experience has made me a bit leery about using a professional due to losing a chunk to fees, but I want to know what the best way to use this is.

I have no debt at all, savings of about $20,000 and rent with enough excess each month for savings. I also contribute about 13% to retirement excluding the 6% match my company offers. What do you recommend?
– Jodie

I think you’re doing fine with your current retirement. 19% of your income is a healthy amount to be putting into a 401(k) (or 403(b), depending on where you work) and I don’t think you’re particularly old as you just “became of age” and are starting graduate school.

Now, as for that $70,000 you’ll have left after schooling, I’d hang onto it until I was ready to buy a home and use it for a large down payment. I don’t know what the future holds for you in terms of studies or relationships, but there’s some chance you’re going to want a home in the future and $70,000 will make a good down payment. You might also want to use it to launch a business of your own… I don’t know if you’re entrepreneurial or not.

Spend some time thinking about the general timeline you see for the future. How far off is that goal? If it’s more than ten years off, I’d put that money into stocks, probably through an investment account at Vanguard. If it’s significantly less than ten years, I’d keep it in savings.

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.

If you enjoyed reading this, sign up for free updates!

Loading Disqus Comments ...
Loading Facebook Comments ...

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>