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. Elevation Group question
2. Income and home ownership
3. Prime price change
4. Struggling with expensive housing
5. LED bulbs break even point?
6. Buying gift cards
7. Handling an art collection
8. Ashamed of overspending
9. Praying for financial change
10. Basic budgeting question
I’m a pretty low-key sports fan, but the one time of the year where I get really into sports is during the NCAA men’s and women’s basketball tournament. I absolutely love the intensity, the upsets, the process of selecting a champion. I love the whole “win or go home” attribute of every single game. I love watching some team I’ve never seen before that barely crawled into the tournament playing their hearts out and knocking off an overrated higher seed.
I love March Madness, in other words.
Have you ever heard of this program? If so, what are your thoughts about it, and do you think it is valid?
Any insights would be very helpful, as I’ve invested lots of money in programs that don’t work and I want to be careful.
The Elevation Group basically sells the “bank on yourself” idea wrapped up in a pretty package at a very expensive rate. (The “bank on yourself” idea boils down to trying to leverage insurance that works well if everything goes perfectly but ends disastrously if there are problems.)
It’s also got a healthy dose of affiliate marketing involved – people who join can make some of their money back by selling the package to others. Naturally, that’s going to encourage people who have already sunk $600 into the plan to try and get some of their money back by making amazing claims about the item.
The only financial advice I would pay $600 for is a healthy block of time with a fee-based financial advisor – and I’d only do that if I had a ton of financial questions.
There isn’t really a hard number. It depends on where you live, what kind of house you are shooting for, and whether you’re married (which generally makes it easier).
I think the clearest sign that you are moving towards home ownership readiness is that you’re able to sock at least a few hundred in the bank each month after all of the bills are paid. If you can’t do that, then you’re either overspending or your income level is too low for the basic costs of your area, which means home ownership isn’t in the cards without some other life changes.
I encourage everyone who is thinking about home ownership to start saving for a down payment. If you “can’t,” then you need to reassess your other choices.
If you’re using it as a package deal – meaning you’re fine with using Amazon Instant Video instead of Netflix as a cable replacement and/or take real advantage of the Kindle Lending Library – then it’s still a great deal.
If you use it primarily for two day shipping, it really depends on your uses, as it did before. If you use the two day shipping frequently because you’re finding better prices on Amazon than on local items at Wal-Mart or Target, then you’ll still save money.
I’m not sure yet whether we will renew. I felt like we got our money’s worth at the earlier price, but the new price will make us think about it all over again.
Q4: Struggling with expensive housing
I’m 25 years old, single, a preschool teacher with a steady job (very little chance of unemployment) and steadily growing income. I currently live with my parents and sister about 2.5 kilometers (less than 2 miles) from work.
Moneywise I think I’m doing good for my age: I don’t have any debts, I just bought a car without a loan (I saved the amount gradually over the course of five years. I did try to go without the car, because it would enable me to save more money, but it was to impractical with the lack of public transportation in the area + I am willing to pay for the freedom it gives me).
I have a monthly income of € 1600 (= $2158), I pay € 260 ($350) rent to my parents, all costs included (internet, water, electricity, food…) and save more than € 1000 ($1384) a month (€ 1000/month goes into a savings account toward my own house, all other savings are divided between my emergency fund and savings account for big things like a car).
I just read your article about parents, children and loans. And I agree with it. If I were a parent, I too would try to do things the way you do: save money for my children and gift it when they need it for education, investment or housing.
The thing is that, being single in Belgium where the housing market has not inflated, it is really hard to buy a house. A modest house costs about $472,000. I have saved $55,300, will save for two more years adding $32,370 and will be able to take a mortgage of about $202,000 with my income. That means I’m short $182,330. I could save longer, but I really feel I have to find a place of my own before I turn 30. My parents are thinking about loaning me money (although they can’t loan me as much as the $182,000 I probably will need). I’m not in favor of loaning money from my parents, because as you described, I don’t really want to have that burden on our relationship, but I don’t see how I will be able to afford a place of my own without loaning from someone else besides the bank.
What advice could you give me? What would you do? Are there things I’m overlooking? I don’t want to rent a place because I feel like I’m throwing away money. And I don’t want to keep living with my parents for more than a few years because I feel like there is a strain growing on our relationship because I’m an adult, making my own decisions and values, and though I love my parents very much, I don’t always agree.
I would rent, at least for now.
What you need to do is sit down and figure out what a year of home ownership would cost you compared to a year of renting. You should include things like the mortgage, property taxes, utilities, and home maintenance in this calculation. (It’s okay for the home costs to be somewhat higher because you’ll be building equity, but it shouldn’t be thousands of dollars per month higher.)
As long as the home ownership costs are significantly higher than the rental costs, you should be renting. If you want home ownership, you should be spending far less than you earn and saving up the rest, because the larger your down payment is, the easier it becomes.
They’re already at that point, at least in terms of what I can find at my local hardware store. Electricity costs more than you think.
Let’s say you’re paying $0.12 per kWh for electricity. You can buy a 60 watt incandescent bulb that lasts 1,000 hours for $0.50 or a 13 watt LED bulb that puts out the same light and lasts for 10,000 hours for $10. That’s pretty accurate based on the prices I’ve seen around here.
Over 10,000 hours, you’ll have to buy 10 incandescent bulbs, totaling $5, or 1 LED bulb, totaling $10.
Over 10,000 hours, the incandescent bulbs will eat 600 kWh of energy while the LED bulb will eat 130 kWh. With a cost of $0.12 per kWh, the incandescent bulbs will eat $72 in electricity, while the LED bulb will eat $15.60 in electricity.
Total costs? Over 10,000 hours, incandescent bulbs will cost you $77 while the LED bulb will cost you $25.60.
You can amp up the price of the LED bulbs and drop the lifespan quite a bit and the LED still winds up on top.
Q6: Buying gift cards
I’ve seen sites where you can buy gift cards at a big discount over face value. How can you be sure that the gift cards will actually work, though? What if I buy a used-up gift card?
You can’t be entirely sure. A reputable site will have checked the gift cards and would have a reputation for living up to their customer service policies, but some won’t.
I wouldn’t buy these kinds of cards on Craigslist, but if you’re looking at something like Cardpool, where their entire business revolves around gift cards, I’d feel reasonably confident doing so.
If you’re unsure, Google the company’s name plus “bad experience” and see what you get.
Q7: Handling an art collection
My late husband was a keen art collector. He never had a lot of money but he was very savvy about finding bargains in local/regional artists’ works. We are talking fine art here, not garage sale level art. The artists I have hanging on my walls are also hanging on some of the best museums around the world. They are “lesser” works, to be sure, but fine nonetheless. He really knew what he was doing. After he died, I had a professional appraiser come in and appraise every piece. (The bill for that hurt but it had to be done for insurance purposes.) Now, I want to sell a few items – the biggest ones in size, in particular. But I have zero knowledge of the art world, except I know it is full of sharks. I have talked to galleries around town, and shown them photos of the works – but if they used to sell pieces on commission, they don’t now, after the 2008 financial catastrophe. None was interested in educating me as to how to sell these pieces, except one said “go to galleries in Kansas City or Chicago.” I wouldn’t know how to begin!
Anyway, do you have any knowledge or insight as to how I should proceed? I know that the appraised value doesn’t necessarily mean one can sell a piece for that much. But as I’m retired now, on a very limited income, I would like to liquidate a few of these pieces and stash them where the money can earn, and be a bit fatter emergency fund for me. (Low five figures.)
If I were you, I’d take this same approach at large galleries in larger cities. The local market is probably too thin to justify galleries taking on those paintings.
You can also try working with an art brokerage like ArtBrokerage.com that specializes in these kinds of things. You could contact local galleries or framers/restorers and see if they would help you in terms of packaging the paintings for shipping if you decide to go this route. You’ll probably earn a little more this way, but you’ll significantly increase your work load.
Honestly? In your shoes, I’d probably email a few galleries in the large cities near you with digital images of the works.
Q8: Ashamed of overspending
Whenever I go out with my sisters, I usually end up buying several things without really thinking about it. I’ll come home and sit the bags in the bedroom, but half an hour later, I get really ashamed of what I bought. I’ll just jam them in the back of the closet and feel bad about it for days and then I’ll end up crying and telling my husband about it. He just hugs me and tells me it’s fine but I know that doing this really hurts our savings goals. What can I do to stop this cycle?
Leave your wallet at home. Or, more specifically, pull out all of your credit and debit cards and leave them at home. Decide before you go how much you’ll spend that day, withdraw that much in cash, and take only that much.
You should talk to your husband about how much you should spend on these trips. I don’t think anyone would want you to spend nothing, but there’s probably a reasonable number that would work out here.
If you are finding it hard to control your spending, find a new way to control it.
Q9: Praying for financial change
My wife is very religious. She often prays for solutions to the problems in our life. She prays a lot for financial change. However I believe like you do that change has to come from what you choose to do. Do you think prayer helps financial change?
I think that prayer can help anyone with any problem. Regardless of whether you’re actually communicating with God, prayer can help calm you and bring about a sense that you can handle the problems of your life. It can sometimes lead you to answers as well, as it’s a moment when your mind is calm and receptive.
However, prayer without action isn’t going to change things. If you want financial change in your life, you need to be making personal choices that lead to that kind of change.
I guess what I’m trying to say is that I believe prayer makes the steps that people need to take for financial change easier, but it doesn’t replace taking those steps. You still have to go down that road.
Q10: Basic budgeting question
I have created a balanced budget for my boyfriend and I that covers all of our costs as well as designated joint savings for things like travel, a house, and a new car when the day comes. We each contribute the same amount to the budget per month and equally share the cost of everything. The difference in our income (I make about $500 more a month then my boyfriend) means I can put more into personal savings account.
Okay, so how do we stick to this? Right now we write down everything we spend into a book and designate it to a category from the budget. But the problem is that I will usually add everything up at the end of the week and by that time it might be too late to know we are $20 over in the grocery category. Is there a better way to know where we stand on the budget in real time?
Both of these are available on smartphones, tablets, and desktop computers. Whenever you have an expense, you just log it in the program and it automatically updates things. If you both have the same app with access to the same data on your respective devices, you can both see things as they happen.
This is an example of how technology can really help with budgeting.
Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. Iíll 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.