Reader Mailbag: Packing Books for Trips

My wife and I recently had a long discussion about how many books we should pack for a trip. I usually tend to read more when traveling, so I usually pack one book for every two days’ worth of a trip.

So, let’s say we go on a ten day trip. That would mean five books. Does it make sense to tote that many books back and forth?

Our idea is this. We each take one book with us and look to borrow stuff when we’re there. If that doesn’t work, we hit the bookstore. If we finish a book and aren’t sure if we’ll read it again, we do the ol’ “put a read-me note inside the book and leave it on a park bench” technique that I often use to pass along books.

That way, we don’t weight our luggage down with books either coming or going.

I am 30 years old and have finally found my dream job at a non-profit after years of working in a very fast-paced, stressful environment. Of course, my dream job pays much, much less than my previous job. And the work is fairly easy for me, based on my previous experience, but is very fulfilling. I also have very reasonable, flexible hours. However, there is also not much room for me to grow beyond my current position at the non-profit.

My husband thinks I am being undervalued and not utilizing my hard-earned skills, and should be maximizing our earning power right now while we are young (we don’t have kids yet). Especially since, right now, we depend primarily on his income and would be in trouble if he lost his job. Theoretically, he is right, I am very capable of getting a much higher paying job and would probably be able to do so fairly easily, based on my past work experience. But would probably lose the stress-free, fulfilling environment I have grown to love.

What do you think I should do?
- Meg

You’re comparing two sets of values to each other, and that’s more of a question of what you personally feel is important. There is no black-and-white answer to a question like this.

How much, dollar-wise, are the positive attributes of your current position worth to you? For some, they might not be worth much at all – for others, they’re worth a lot. It all depends on your personal makeup.

It sounds like the positive attributes of your job are worth a lot to you. If they are, they should trump earning more money. Of course, they should also point you toward having more energy and initiative to take on endeavors in your personal life outside of the workplace.

I just looked at the anticipated tax brackets for 2010 from the link on your site. It’s anticipated that $34,000 is the cut-off between the 15% and 25% brackets. So I make $35,000 as a single person. 25% of my salary goes to taxes ($8750) but if I only made $34,000 then I’d be in the 15% bracket and 15% of my salary ($5100) would be going to taxes.

So, I am very new at all of this stuff but am I interpreting this correctly? If I made $1000 dollars less each year, I would actually pay $3650 less in taxes?

This can’t be true…can it? I either need to ask for a big raise to make the jump to the 25% bracket “worth it” or I need to ask for a small pay cut? Oh, and I always seem to take the standard deduction. I work for a non-profit (not sure what other info you need). How do I decrease my taxable income so that I am in the 15% bracket…I think that’s the place I need to be.
- Amitra

Amitra is referring to a link to my old pal Jim’s site that lays out the predicted tax brackets for 2010. This question also shows one of the biggest problems with our tax system – it’s just simply very confusing.

OK, let’s use your example. Let’s say you make $35,000 as a single person (after deductions and the like – $35K is your actual taxable income). The tax brackets on that link are:

10% Bracket: $0 – $8,375
15% Bracket: $8,375 – $34,000
25% Bracket: $34,000 – $82,400

Here’s how it works. Of the $35,000 you’re paying taxes on this year,
$8,375 of that income is in the 10% tax bracket.
$25,625 of that income is in the 15% tax bracket (the $34,000 maximum of the bracket minus the $8,375 minimum).
$1,000 of that income is in the 25% tax bracket (the remaining income).

Your total tax bill for the year would thus be the total of:
10% of $8,375, which is $837.50
15% of $25,625, which is $3,843.75
25% of $1,000, which is $250
which adds up to $4,931.25. That’s what you’d pay for the year.

Now, if you earned $1,000 less, you’d owe only $250 less in taxes. If you earned $1,000 more, you’d owe $250 more in taxes.

The paranoia about higher tax brackets is just that, paranoia. You’re always better off earning more money.

Do you ever get a question or request for advice that just makes you say “What were you THINKING?!” Do you ever find it hard to give the patient, thought-out answers you do?
- Jess

The only questions I get that make me really uncomfortable are the ones where people are basically asking me permission for them to do something unethical or illegal. I usually just delete those without any kind of response.

People will write to me about how to commit Social Security fraud in various ways. I get questions about how to avoid paying any and all taxes. I’ve had questions about money laundering schemes. That’s the kind of stuff I don’t like – breaking the law to take more than your fair share or pay less than your fair share.

I don’t really mind when people are struggling with the ins and outs of how a complicated situation works. For example, in a question below, I address a family trying to deal with a nanny employment and being unsure how to do it. In these situations, it’s clear to me that the person wants to do the right thing, but the right thing is made difficult by confusing and draconian laws and regulations. If a person’s heart is in the right place, then shaky legal standing doesn’t make me feel bad.

Jointly, my husband and I make a pretty good income. We have no debt, besides our mortgage, and we spend about 80% of our after-tax income, which does 401K contributions as they are taken out pre-taxes. Our savings equal about $2,000 a month.

We currently max out my husband’s 401K at $15,000 a year (my company does not offer a 401K program). We have one IRA with about $10,000 and one Roth IRA with about $21,000 (I don’t know the difference between Roth and non-Roth, whoops) but do not contribute to them regularly.

However, we still don’t know how to invest the rest of our savings and I am embarrassed to admit that we have about $20,000 in our checking account (no interest!), which serves partially as our emergency fund/save up for house purchases fund, although we do not need this much in checking. I thought about investing the extra cash in a CD, but the rates seem so low right now. I am not sure if we should add more $$ to our IRAs or invest is somehow else?

Any advice?
- Megan

Quickly, a Roth IRA is one that takes in after-tax money and pays out after-tax money in retirement. A normal IRA does the same with pre-tax money.

At the very least, you should have that extra cash in a savings account earning at least a little interest. Your own bank can be a start, but you’ll probably find a better rate and better service with an online bank like ING Direct or SmartyPig (I use both, actually). At least then, it’ll be earning 1-2% interest and can still easily be accessed pretty much whenever you want it.

Most of the time, CDs are a great way to get a little more guaranteed return for your dollar, but interest rates are in the basement right now and they don’t really return much better than a savings account. I wouldn’t worry too much about CDs for the time being.

Beyond that, you may want to consider investing it in something with a greater return but a bit of risk, like a very broad-based index fund through Vanguard. Yes, the investment will go up and down with the stock market, but you’ll be earning at a better rate than the 1-2% you’ll get in savings.

So here I am, 20 years young, without any form of aid from either my family or the state, with a credit history that prevents me from getting a ‘good’ or, perhaps ‘any’ loan and trying to pay out of pocket for my Gen Eds working night classes because my data-entry job is a 9-5 ordeal that precludes regular class hours. There are worse stories out there so I don’t want to sound like I’m something special. ‘Falling throught the cracks’ sounds about right.

How do I manage this? What is it going to take for me to get a degree?

I was wondering if you could cretique my current plan for me, hopefuly there is something I am missing, something that will makes this more affordable.

It is my goal to save 30% of my income (aprox: 7k yearly) into a savings account and pay for community college through my gen eds. Then transfer in 3 years when I can apply for an independant FAFSA praying to God in heaven that my credit will somehow be fixed by then. Hopefully my savings (which will be between 40-50% of the college costs depending on if I need car repairs, bail out someone in need or my expenses change between now and then) will be enough to get me through. Maybe I can get aid then and finish a degree without debt.

Is there some key I’m missing? I’m willing to take this route of frugality to do what I want to do but I’m nervous that I’m missing something that will make it a little easier. I guess I just want to know if there is a better way.
- Andrew

You’re not missing any key, except that you’re probably better off putting the money into a 529 plan. That way, you have at least the opportunity to earn better returns (though you can also treat it as a savings account with low guaranteed returns), plus the interest you earn is tax-free if you use it for educational purposes. We use the Iowa plan, which is open to everyone; other states, like Utah, have good plans as well.

Other than that, the best thing you can do is simply wait. Wait for your credit to recover. Do everything you can along the way to improve your credit so you can get good rates on your student loans. Save what you can.

You might also want to consider residency in a state with low-cost state schools that you might be able to afford out of pocket while also working.

We were married in October of 2009, and had lived together for 3 years prior to that. I’m 38 he’s 42. My husband makes about 20-25,000 per year as a self-employed carpenter (his bachelor’s degree in bronze sculpture hasn’t really been profitable) and pay can be sporadic depending on work he has at any given time. In addition, he has about 25,000 in consolidated debt. I on the other hand, work as a physician assistant and make about 125,000 per year – getting paid once per month. I have approximately 8,000 in credit card debt, 70,000 in student loan debt, and 42,000 line of equity against a rental property that I own. (I had owned the 2 rental properties before we married, and together we maintain both. Both have rents which cover their mortgage payments, but several needed renovations on the properties led to the line of equity. Sadly, the equity line was granted at the peak of the market and now the rental house is worth far less. About 42,000 to be exact.)

ok, onto the question. Since I make a substantially higher salary, and have more bills, we have kept our finances separate. I pay the mortgage, the cable/internet, and cell phone. He pays the electric, water, and alarm bill. Our house is modest, w/ a $160,000 fixed 30 year mortgage at 6.25%, but is 110 years old and the electric can be high. Should we combine our finances? Do we set budgets for ourselves once the bills are paid? We discuss our finances with each other, and I don’t feel like we have marital issues. What would you recommend?
- Kim

I would recommend combining them. It’s much, much easier to budget and plan for coming months if all of your money is in one pool.

My wife and I didn’t combine our finances at first in our marriage. We kept our money separate and were each responsible for certain bills. I paid the rent, she made the car payment, and so on.

Over time, we found that we were pretty much just paying each other’s expenses anyway and that with separate finances, it was very hard to plan ahead for mutual goals, like saving for a house. It was much easier instead to spend our money on individual things we wanted because we weren’t financially responsible to each other.

So we combined them, and it was one of the best things we’ve ever done.

We have a full-time nanny to watch our nine month old daughter. We spent roughly $2000 a month on her care (out-of-pocket and under-the-table). This is our first year employing our nanny, and I’m starting to question if we should be doing this in accordance with the law (i.e. the nanny tax). We’re both 29, have a mortgage with roughly $500k left (small house, high cost of living area, 30 year fixed mortgage with good interest rate), and have a combined income of around $200k per year. We have no debt (beside our mortgage), max out our 401ks, as well as save about 10% of our income per month.

How much “extra” will the nanny tax cost us? How much will our employee/nanny be taxed? Are there any tax benefits (e.g., write offs) to us by using the tax? How do I even go about setting this up?
- Erica

The Cradle offers a great summary of the ins and outs of employing a nanny. It certainly sounds like, in your case, the nanny falls under the umbrella of “employee” rather than “independent contractor,” which means that you are legally liable for taxes (and if you don’t pay them, you’re going to get hammered – * paying all back taxes, penalties, and interest, charges of perjury and tax fraud, up to $250,000 in fines and up to 5 years imprisonment, and possibly ruining your reputation and career).

The best thing you can do is contact a tax attorney who can help you set all of this up correctly and provide some guidance as to the cost. Once you get it set up, it’s actually pretty easy to keep the ball rolling – you just put money aside in a separate account and make regular tax payments.

An aside: I consider the laws for doing this to be ridiculous and the penalties for not doing it right to be utterly draconian. The government would save a lot of money and probably increase their revenue, too, if they made such arrangements blindingly easy. They could just say “if you’re going to pay your nanny or domestic employee $X per year, you simply need to place $Y per year in that person’s ‘taxes and domestic service’ account with the IRS.” That’s all, it’s done – incredibly easy for both sides to verify and complete. Instead, we’re talking about tax attorneys and complicated procedures.

I have recently been intrigued by the idea of raising rabbits as a way of…

A. Supplementing our grocery bill
B. A green way to dispose of edible waste
C. Supplementing income through the breeding of rabbits

I am hoping you might have some input as to the profitability of this idea….
- Sarah

When I was young, we raised rabbits for several years for just these reasons. However, the return on the time invested in rabbit farming is pretty small.

First, there’s a lot of time invested in rabbit care. From daily feedings to making sure they’re all healthy and maintaining cages and removing waste, it’s not just about tossing rabbits in a cage and waiting.

There’s also a lot of startup costs, as you need to build individual cages for the rabbits as well as make sure there’s an easy way to provide food and water to each one.

Once you’re past all of that, the actual cost (food, water, cage repair, startup costs) versus reward (income from sales, food, reduced groceries) isn’t all that great.

Rabbit farming is a great hobby if you love rabbits. It’s not a money maker unless you’re doing it at an industrial scale.

I just started a new job at a small company with about five people in my office, myself included. My coworkers go out for lunch everyday as a group. I’m eager to get to know them better and to be included in the work-related conversation that occurs during lunch, but I simply can’t afford to eat at restaurants everyday. You know better than I that $7-8 everyday for lunch adds up fast. I have decided to only join them for lunch twice a week, and bring my own lunch the other three days. What is the best way to politely decline lunch without highlighting the fact that it’s money-related?
- Anna

First of all, you have to state some sort of logical reason for not going or else your co-workers will believe you’re avoiding them, which can be very damaging in terms of workplace politics.

You have two choices. You can either be honest about it or you can come up with a good excuse – say, something dietary related, and use that.

I vote strongly for honesty. Simply tell them that you’re trying to cut back on personal spending and that you’re brown-bagging it a few days a week. Encourage them to do the same. In one workplace I’ve experienced, they had group “brown bag” days as well as days where one person would bring in materials for lunch for a group of twelve and they’d rotate the “host” on a regular basis. This would take up two days of their week for lunch, adding some variety and also cutting costs.

If I were you, I’d suggest those things. Why not have a group brown bag day once or twice a week? It saves you all money, adds some variety to the meals, and maintains the social aspect of lunch.

I unfortunately made a terrible decision to pursue a masters degree two years ago and rack up about 90k in student loan debt. The degree is in liberal arts and has been and most likely will be all but worthless insofar as raising my earning potential. I have not been able to find a job in my field (international relations) and stopped trying about a year ago. It has been a rough two years of unemployment but I finally acquired a decent job with a salary that is high enough to pay the monthly loan amount, save about 15% of my income in a retirement account (403b university account) and start creating an emergency fund. I have no credit card debt. I also own stock with BP totally roughly 90k.

My question is what should I do with the stock? I could sell it now, take a big capital gains tax hit and pay off most of the student loans. I could pay the regular monthly payment on the student loans and wait for the stock to (hopefully) regain some of its lost value over the next 5 years or so – perhaps the stock will increase at a value greater than the 7.25% interest rate of my student loans?. I am also not sure what to do about retirement savings….should i forgo saving for retirement in order to throw every additional dollar towards the student loans? Or will the compound interest of the retirement account outpace the interest that i am paying on the loans over the next 30 years?
- Chris

If I were you, I would sell the stocks, take the tax hit, and pay off your student loans. It’s a safer bet (given the 7.25% interest rate on your loans) than betting on a single undiversified stock to do better than that.

The reason for this is your monthly cash flow. Each month, you’re saddled with that loan bill. What happens when life inevitably comes along and you lose a job or get a pay cut? Or you fall in love and get married and switch jobs to something lower paying near her? Or your car breaks down and you have to start racking up credit card debt to deal with it because you don’t have enough monthly cash on hand to deal with it?

From a strict dollars-and-cents comparison, there are good arguments to be made both ways about the stock. When you include the realities of day-to-day life and the usefulness of having a low amount of required bills, the scale tips toward selling, in my opinion.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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  1. Gretchen says:

    You read a book every 2 days on vacation?

    Yup, the kids will have fine memories of this when they are older.

  2. Katie says:

    (1) My Kindle is worth its weight in gold for this sort of situation, especially since so many free or heavily discounted books are available for it. Love it – a luxury gadget but one that has really improved my quality of life.

    (2) Aren’t you talking about driving trips? Why on Earth would it be that much more work to toss ten books in your car than risk having to buy them?

  3. Andi says:

    @Sarah
    As someone who has some small scale livestock experience (we direct market to the consumer), my biggest piece of advice for any venture like this is to make sure you can cash flow everything you do – don’t borrow money on a venture like this. There are people out there doing small scale stuff and making a profit. Read Joel Salatin, do some internet searches on what you’re interested in, find people that are doing what you want to and see if they have wisdom to share, find a market. Scavenge, scavenge, scavenge – materials for housing, feeders, whatever.

  4. Maria S says:

    WHAT??? SELL THE BP STOCK??? No way! The stock pays a great dividend and taking the tax hit now is totally unnecessary as long as the 403b is bringing in some diversity. With the oil spill right now, that 90k just took a dive and this would be a bad move. Re-invest the dividend this year until the earnings return from this spill then start taking the dividends and using them to assist in paying your student loans. At the end, you will STILL have the stock and your loans will be paid off – THEN you can worry about your diversity!

  5. Ed says:

    Andrew, it sounds like you have the right attitude to excel at your college courses, which a lot of college age students don’t have (me included at the time). If you keep your grades up, most scholarships look for a C or B average for GPA and require you to have filled out the FAFSA, even if you aren’t receiving any money. I would be looking for all opportunities to apply for scholarships, whether broad in their nature, or specifically tied to your major (if you know what that is). You can search both locally to your area, or for national scholarships, maybe talk with someone at the financial aid office to see if they know of any resources you haven’t tried. My wife will be applying to a scholarship at her place of work even though it is for Alaska Native/Native Americans, she is not either. She was told to apply by her boss since many times, no natives apply for the scholarship anyways.

    Another thing you could look into is asking your employer to help out with expenses, if they aren’t willing or not in your area of study, maybe you could find an internship, or job with advancement opportunities if you get a degree in their area of work. The only other thing I would suggest is to be proactive in making your credit better. The simplest solution to that would be to get a secured credit card of $500 or so, assuming you can’t get an unsecured card. Just use it for small purchases and pay it off every month. Over 3 years, that should help your credit score.

  6. Johanna says:

    @Meg: You’re not the only one whose values and well-being are relevant here. By taking the lower-stress job for yourself, you’ve put your husband in a higher-stress position, where he’s tied to his job even more strongly than he was before, he needs to make sure he doesn’t get laid off or fired, and he doesn’t have the freedom to leave for *his* lower-stress dream job should he want to.

    And if you haven’t cut your expenses to match your drop in salary, you’re not really looking at a trade-off between more money and less stress, since you’re enjoying the same level of spending – from your husband’s salary – either way.

    Can you and your husband agree to cut your joint expenses enough that you wouldn’t be in trouble if he lost his job? (You don’t necessarily have to be able to live on your income alone – but you do need to be able to accumulate savings that would last a good long time if he lost his job.) If not, then you need to be earning more money.

  7. Jonathan says:

    @Gretchen:

    I know I shouldn’t feed the troll, but that’s a pretty outrageous statement. Care to flesh out your argument that Trent is somehow failing his children by reading on vacation?

  8. Jeremy - fasthabits.com says:

    @Anna,

    Don’t forget about the healthy aspects of bringing your lunch as well. A sandwich with some goldfish crackers and a piece of fruit is a great cheap and healthy lunch versus what you will usually get eating out.

    It may be awkward, but I agree with Trent that you should pitch the idea of both saving money and eating healthier to your group. You may be surprised at how well the suggestion is received. If you don’t have a good cafeteria at work, there are other options like public parks or mall food courts.

    Having lunch with a group is great, but there are also great benefits of having lunch with yourself every once in a while, spending lunch at a park taking in the serene atmosphere or reading a good book.

  9. Laura in Atlanta says:

    Oooh. Books!

    I’m big reader too . . . always have something going. I tend to read 2 books a week. For vacation, I’ll read maybe three. When I pack, I usually pack a ‘big’ read – something long. A classic usually. (Last trip to Vegas, I re-read Hugo’s LES MISERABLES!) Something hefty. And then I usually pack a ‘light’ read, something like a murder mystery, or police procedural. And if I finish both, I will shop for another ‘light’ read, mass market, cheap book. And yes, like Trent, I have left a book on a park bench for someone! I find you can leave books at Starbucks too. Include a post it note, saying it’s free. Otherwise, the staff will hang on to it, thinking the owner will come back looking for it.

  10. Johanna says:

    @Amitra: Trent hinted at this, but I think it deserves more emphasis: Earning $35K does not mean that you pay taxes on $35K. The tax brackets refer to your income *after* you subtract out deductions and exemptions.

    You say you take the standard deduction. For a single person, that’s $5700. If no one else can claim you as a dependent, you get a personal exemption, which is $3650. Subtract those from your $35K, and you’re only paying taxes on $25650. So you’re not even close to the 25% tax bracket.

    But even if you were, Trent’s right about the way tax brackets work.

  11. Laura in Atlanta says:

    Also, follow up to my book post: I also have an iTouch that has a ton of books loaded into it. If I am REALLY strapped for something to read, I have a bunch to choose from there. ;-)

  12. asithi says:

    I pack only one book when on vacation. But end up coming home with 2 or 3 books and a few magazines. My husband only pack one magazine that seems to last the whole trip for him. He likes watching cable in the hotel room because we do not have cable at home.

  13. M says:

    Meg – I wonder if part of what’s going on is that by your taking your dream job your husband feels he CAN’T change his job/career path. He may suddenly be feeling pressure even if he had previously agreed that your changing jobs was a good idea. He could also feel that in the time before you have kids you should both be maximizing your incomes (and savings) to allow more options at that point. I don’t think there’s a right or wrong answer here, just the need for some good conversation about what you as a couple value and how you both FEEL about this situation.

    Megan – I’m in a similar situation, so I’ll share what we do. We’re working towards a $20k emergency fund and a $20k ‘life happens’ fund (home repairs, airline tickets for weddings out of state, etc). You may make too much for a Roth IRA; in that case you can do a normal IRA (but it may not be tax deductible). I also put money into index funds – 20% bonds, 50% US based stocks, 30% international. Vanguard is great for this. I think of that money as my future kids college fund and invest it assuming I’ll use it in > 20 years. You might like the book ‘Smart Couples Finish Rich’ by David Bach. It’s a good introduction in how to start managing your money. The Boglehead’s Guide to Investing the the BEST book, especially good for guidance on non-retirement investments.

    Gretchen – I’m laughing here. I think a lot of people have no idea how FAST people who read a lot read. I have no doubt Trent can do all that reading after his kids are asleep. (Just like anything else, you get faster the more you practice). I easily read 3x faster than my husband, and he would admit that. My brother was accused of cheating in school because another student couldn’t believe he had actually read the exam as quickly as he had; well, he had.

  14. Hannah says:

    M- I completely agree. People who don’t read for pleasure usually don’t understand how quickly us readers can devour a book.

    As someone who loves reading but isn’t interested in amassing a huge collection of physical books, I have made the switch to a nook (eBook Reader).

    Trent, I am totally with you on breaking the obsession with having the newest gadgets, but having an eBook Reader seems like it would be right in line with your values. Less material goods cluttering your home (or your car in this case), easier access to literature.

  15. Jon says:

    I’m curious as to how fast people can actually finish a 250 page book. Depends on the book I guess. How about a mystery novel? How about a personal finance book?

  16. Dee says:

    I loved Johanna’s answer (#3).

    Also @Anna: In the long run, I think it would just be easier to tell your coworkers that you are trying to save money so you can’t eat out every day. It’s that simple.
    I think at this time, with the economy being what it is, people are more understanding of money-related reasons for not doing things.

  17. OK… Trent, I completely understand your suggestion that the reader with the BP stock should sell the stock because of lack of diversification. And, the latest Oil spill isn’t helping things any.
    However, when taking into account total returns on a stock, we shouldn’t forget about the dividend. BP’s dividend is currently upwards of $3/share. That’s cashflow that can cover other liabilites. And, I’d venture to guess that the capital gains potential for BP going forward is large. Look at Exxon’s returns since the Valdez spill.
    - Tyler

  18. Finance Nerd says:

    Buy an ebook reader (I prefer the Kindle, but there are several options). If you don’t want to spend $ on a kindle, just download the Kindle for PC app and bring your laptop.

    I read over 200 books a year, so I used to bring 5-7 books on a weeklong trip/vacation, and now I just bring my Kindle.

    @Jon — a 250 page novel would take me anywhere from 2 hours (James Patterson, short chapters, lots of blank space) to 3 hours. Something more technical might take me 4 hours (a minute a page).

  19. Jane S says:

    re: Rabbit Breeding question. As someone who volunteers for a Rabbit Rescue organization – I beg of your reader, and all others to NOT BREED RABBITS as a way to make money. Sadly, there are so many precious rabbits that get dumped at shelters – often just a few months after Easter. Most shelters can’t handle the level of rabbits they recieve – so they are KILLED. PLEASE – don’t encourage breeding – support adoption. It is not worth making a small profit for the damage this does. thanks

  20. Mike says:

    @Chris: In addition to Trent’s advice, I believe the long-term capital gains tax is increasing in 2011, so now is a good time to sell if you’re thinking about doing it.

  21. Michelle says:

    Something is not adding up with Andrew’s situation. He says he works at a 9 to 5 job but only makes 7k a year. A 40 hour work week at minimum wage would more than double that salary. (This is based upon an assumption that he is in the US). It sounds like his best option is to find more income – find full-time employment during the day for the highest wage possible and continue school at night.

  22. Laura in Atlanta says:

    @Michelle: I think Andrew wants to save 7K a year, not that he makes 7K a year.

  23. Crystal says:

    Meg, I highly value my personal happiness and a stress-free life, so I’d stick with the job you love. Most people can never find a job they love…I hope you and your husband can find a way to make it work.

    Megan, we also use ING (1.1%) and Smarty Pig (2.15%) for long-term savings like emergency funds.

    Kim, combining our finances makes budgeting much, much easier.

  24. kristine says:

    Jane, are the rabbits that are killed used for their meat and fur? It seems wasteful when people are going hungry, and animal carcuses, no matter how cute the animal when they were when alive, get thrown in the garbage. Perhaps they can be donated to a butcher, who chose to donate the meat to a shelter, and he could sell the fur? Just a thought. I hate waste, and rabbit is not culturally taboo to eat in our country.

  25. Des says:

    RE: Kim

    Though I normally think it prudent for married couples to combine finances, I question this advice when there is such a disparity in their incomes, at least at first. Managing $25k is very different than managing six figures. Usually, someone in that position has worked their way up (first, earning minimum wage, then living wage, and so on…) learning at each new step how to handle their new income appropriately. The temptation for someone going from $25k to $150k combined might be to simply assume you now have an extra $10k a month to play with, which is far from the case.

    I would say if she believes her husband is just as good with finances as she is, and she is comfortable combining, she should go ahead. If it makes her uncomfortable AT ALL, I would say wait. Just because you love someone and want to grow old together doesn’t automatically qualify them to control your money.

  26. Cheryl says:

    I have a Kindle and love it. It doesn’t save money, but it sure saves space. We live and travel in our RV most of the year, so space saving is important.
    There are many classics available for free and usually 1 or 2 books a week on the Amazon site are free (if you aren’t too picky about what you read). Sometimes a book will be free for a few days, then they start charging for it, so I check every day. My son (age 9) also has some books that he reads on the Kindle. All of his daily lesson plans are on there, too (for homeschooling).

  27. Patty says:

    Kim: I can’t swear what works b/c its trial and error for everyone but there are more ways than just seperate income vs combined income. My sister and her husband each took 50% of their salary and put it into a ‘family account’ that was used for all of the household bills and the like. My husband and I each take a fixed amount from our paycheck and put it into our joint accounts for the same use. We re-adjust that fixed amount as needed based on our budgeted expenses. (We put more than just our fixed bills in that account so there is a buffer for annual, semiannual or sporadic expenses). Currently our incomes are more similarly aligned then Kim’s but it works for now. If I was to leave work to raise children we’d have to re-evaluate but its nice to have some of our own money for the things we value or in order to surprise the other person. (I’ve had friends that went so joint that the moment he swiped the debit card she got a notice about where and how much…that doesn’t appear to be a trusting environment). The ‘his’ vs ‘hers’ money does get more complicated as the marriage moves forward (or kids are introduced) and as we live in a community property state it wouldn’t matter who has what b/c if there ever was an end it would be split 50/50. I was just raised in a way that a woman should have a just in case stash and believe the man should as well. I believe Suze Orman suggests that individuals have a 3 month emergency fund beyond the families 8 month emergency fund in a similar manner. I’m rambling now but in any case its not black and white. Pick a plan and try it for a while then adjust as necessary. Have seperate accounts or combining them doesn’t mean your not loyal to each other and trusting in your marriage. Biggest thing is keep communcation lines open. Good luck.

    I was going to ask if that last one was written before or after the BP spill and how that might affect the response.

  28. J says:

    @Meg — I concur with Johanna. Be sure to communicate with your husband and figure out what he’s getting at. Your “marital equality balance” has shifted — it would not necessarily be unreasonable for you to do what you can to take some things off your husband’s plate since it seems that you have no interest in changing your employment. What gets given or taken will differ for every couple. I also would not count on being able to find work easily nowadays and you should likely work your finances to make sure that you are in a position to live without one or both of your incomes for some time.

    @Meagan — you need to figure out how much of that 20K is emergency fund and how much is saving up for a house. The emergency fund should basically be cash — instantly accessible and not subject to the whims of the market. For the house money you might want to look into something like a CD, money market account or high-yield savings. If you want to buy a house soon then you should keep it in a low-risk thing, if you are looking at a few years then go with the higher risk thing to do a little better. But don’t go house shopping with your down payment money subject to market whims!

    @Erica — pay the nanny correctly. Getting a thick letter from the IRS is never a good thing, and with the government being a little short on cash, they do come looking. If somehow your relationship with the nanny goes downhill and you need to fire her for some reason, one phone call and you are on the hot list.

    @Sarah — check that you can actually raise rabbits where you live. There’s been an uptick in this “backyard farming” idea recently, and your neighbors may not appreciate your sudden interest in livestock, and it could result in some sort of legal trouble.

    @Anna — tell them the truth, that you like going out to eat with them but you are on a tight budget. With today’s economy, no one will not believe you. You could also suggest going to to places that don’t care about brown bagging. For instance, I’ve brought my lunch to the mall food court when my co-workers have wanted to go out there. Also you could suggest ordering pizzas and just eating in the office, too. But I do think going out to lunch with people is a great way to get to know them.

    Another alternative is that you could tell them you are working on losing weight and you walk 2-3 times a week at lunch, and that they are welcome to go with you.

    @Chris — What would you do if I told you to go to Vegas and bet that 90k on one number on the roulette wheel? That’s pretty much what you are doing. And in case you haven’t noticed, BP isn’t exactly doing gangbusters in the PR department now. Check the stats on Exxon after the Valdez. Yeah. Take that 90k in stock, sell it, and kill off those loans.

    I remember telling my future bride “we’ll have a nice down payment for a house in three months when some of my options vest”. Then the company missed earnings and the stock never recovered it’s value. To this day those options would still have made me 0 money.

    You are also losing a guaranteed 7.25% a year on interest.

  29. Nicole says:

    Meg: I would encourage both you and your husband to sit down and talk about long-term goals and how to get there. Your daily happiness at work is very important, but at the same time there’s a larger financial picture that should be looked at. If he wants more security or stuff or to cut back his own hours, are there trade-offs you can make as a family or as individuals in terms of spending in order to keep everybody happy. Working a less pleasant job for more money is worth it in some cases (ex. you have lots of debt, you place a high value on having a SAHP, etc.) but isn’t worth it in others– it all fits into a general overall plan. This question is something that you need to talk about more in terms of goals and all the different ways you have of getting to those goals. Wanting money for money’s sake doesn’t make sense– there needs to be more of a context.

    Andrew– If you have a strong academic record, I would apply to several colleges/universities for next year, not just a local community college. Fill out a FAFSA, talk to the financial aid office of the places you apply/are accepted about being an independent student so that your parents’ income does not count for you (which it should not given your situation). You may find that you get a lot of grants and loans through the school itself (not taking into account your credit history… note that student loans are not dischargeable in bankruptcy so they’re less risky for the lender) and you end up better off than working 9-5 and taking night classes. If you don’t have a strong academic record, it will be harder to get free money. Get some SAT manuals and study them, take practice tests, get good grades in your night classes, have a friend proofread application essays.

    Kim– Whether or not to merge finances and how to do it is a very personal question. Trent’s one-size-fits-all advice isn’t necessarily the right advice (note: JD at Get rich slowly does not merge his finances with his spouse). If you merge, will either of you feel resentment (you for giving more money, him for having to accept more money)? Does he feel resentment about the situation now? Maybe contributing a percent of income would be better. Maybe continuing doing what you’re doing is better. Are there life goals you have as a family that you are working towards that would require more money? You’ll need to, again, sit down and talk these issues about about what both of you want to do and how it fits into the big picture.

    Chris– Nobody can predict the stock market. BP has been hit really badly now, and it may do worse in the near future… it will probably recover eventually (look at Exxon!). Having all your investments in one stock is not diversified, but selling at a low point is difficult too. How soon do you need the money? If you’re looking at some of that as retirement, then sure, you can keep some of it… it will recover eventually. It’s really hard to say “sell all of it now and pay off debt” when it’s been hit so hard. You will be giving up long term gains, but it may go down even more in the near future. I would think about how you feel about being in such a bad situation and if you want to get rid of that problem now, knowing you will take a loss, or have to deal with the bad risk later again and again as you gradually sell it off and diversify.

  30. J says:

    @Chris — another approach you might want to look into is to diversify the BP stock. Rather than tie your finances to the fortunes of only one company, re-invest your earnings.

    Oh, and with 90k at stake I would definitely recommend talking to a qualified financial professional and not trusting the Internet. Find a CPA (or financial planner who is a CPA) and see how you could structure the sale, or set up a plan to diversify that will lower the amount of taxes you will owe. An investment of a few hundred dollars for advice could save you literally thousands in taxes.

  31. GT Billings says:

    @Finance Nerd – a great idea in theory for many, I’m sure, and an e-reader or Kindle is probably on many wish lists, but buying all those books will add up and you can’t really leave them with “read me” on a bench or donate it to a library that might be able to use it in its circulation or to sell for fundraising.

  32. Suzie Bee says:

    Re: Rabbits

    One has to remember that the rabbits are actually living creatures. Don’t breed them for money unless you love them – and if you love them, any money will just be a nice bonus, not ‘income’.

  33. Nicole says:

    I thought people bred rabbits as food…

  34. Katie says:

    People seem to assume that he’s talking about breeding the rabbit as pets – I thought he was going to breed them for food, which makes concerns about overcrowded shelters and the like unnecessary, no? Anyway, if I remember correctly, the British government really encouraged citizens to do this during World War II – might not be a bad idea today either.

  35. Meg says:

    Hi everyone, Meg here. Thanks for all the advice on my job situation. I forgot to mention is that the income from my non-profit job is primarily put towards savings and “fun money” since all our basic living expenses are covered by my husband’s income. However, our budget would be a little tighter if I had no income at all.

    But, our long-term plan is for me to eventually leave the workplace completely in 2-3 years when we have kids and be a SAHM. So, if I was making more money now to put even more into savings (ie. could eventually turn into a college fund, too) , we could be more comfortable without my income at all in a few years with a nice fat savings account. I guess my question is, do we both work high-stress, high-paying jobs now to save for the future and hopefully lead to more financially comfortable, less-stress family life later?

  36. Ruth says:

    @Meg – Regardless of what you decide, you should come to an understanding with your husband. Right now it sounds like he might be resenting you a little for taking a lower paying job when you could be making more money for the two of you. That might be the best thing, but you need to acknowledge that your choice affects him too.

    @Andrew – It wasn’t clear from the segment of your question that was posted – have you been to the financial aid office at your school? That is absolutely a MUST. They know a lot about your options and might surprise you with a loan or with aid that you didn’t know you qualify for.

    @Kim – I think the best way is to combine your finances. You two decided to stick together through thick and thin, and in my opinion that extends to finances. Think about what will happen if one of you is injured or loses a job, if you decide to have kids, or when you both retire. You should be planning and preparing for those things together. My suggestion is a joint account where all pay is deposited, with monthly transfers to individual accounts for personal expenses (gifts, clothes, whatever).

    @Jon – 250 pages, if it’s a light read (mystery novel or some such) would take me about 1.5-2 hours, for something like a personal finance book more like 3-4 hours.

  37. Johanna says:

    Re: Nannies

    Given how utterly bewildered so many people are by even the simplest aspects of their own income taxes, somehow I really doubt that “the government” will ever manage to make employment taxes “incredibly easy” for everyone involved.

    As for the “draconian” penalties, they look like just the standard penalties for tax evasion. If you haven’t been paying the taxes that you owe, obviously you need to pay them, plus interest, and obviously there needs to be some sort of fine or penalty on top of that – otherwise it would be in everyone’s best interest to not pay their taxes to see if they could get away with it.

    And note that it’s “up to” $250K in fines and “up to” 5 years imprisonment – somehow I doubt that someone who tried to pay her employment taxes correctly but made an honest mistake with the paperwork is going to get thrown in jail for five years. Correct me if I’m wrong.

  38. Jackie says:

    Depending on the trip I bring one or two books. If I need any more I go to a used book store or ask to borrow from whoever I’m visiting. Most readers have books they want to pass along and are eager to give away. I happily read whatever they suggest, usually not something I’d have picked up on my own. Its a great way to try something new.

  39. Ruth says:

    @Andrew – another thing – Definitely not disputing God’s power, but I feel that the most likely way to improve your credit is through work, not just prayer. Investigate your credit score and what factors are lowering it, and then do your best to improve them. Things that you can do may include: applying for a secured credit card right now it improve your credit history in three years (limit doesn’t matter as much as a good history of paying on time does), paying down high balance cards to below 35% if you can, and disputing any incorrect information.

  40. MattJ says:

    Count me among the people who just assumed that ‘breeding rabbits’ meant breeding them for their meat, not as pets to be sold.

    I also wonder if Meg’s description indicates the entirety of her husband’s likely objections to her work situation. Is he in a wonderful, no-pressure, fulfilling, low-paying job as well? I think Meg should talk this over more thoughtfully with her husband. Does he resent her job situation and the fact that she’s no longer really pulling her weight? (It seems quite reasonable that he might – he married a driven career woman who now seems content to let him carry the load)

    Maybe the answer is as simple as recognizing his contributions. When you talk with your friends/family about how much you love your new job and how fulfilling it is to do good work at a nonprofit, do you tell them how none of it would be possible without hubby’s financial support? Do you appreciate him for it? Does he know?

  41. MattJ says:

    Count me among the people who just assumed that ‘breeding rabbits’ meant breeding them for their meat, not as pets to be sold.

    I also wonder if Meg’s description indicates the entirety of her husband’s likely objections to her work situation. Is he in a wonderful, no-pressure, fulfilling, low-paying job as well? I think Meg should talk this over more thoughtfully with her husband. Does he resent her job situation and the fact that she’s no longer really pulling her weight? (It seems quite reasonable that he might – he married a driven career woman who now seems content to let him carry the load)

    Maybe the answer is as simple as recognizing his contributions. When you talk with your friends/family about how much you love your new job and how fulfilling it is to do good work at a nonprofit, do you tell them how none of it would be possible without hubby’s financial support? Do you appreciate him for it? Does he know?

    (reposted because the first time it went into moderation – a place I’ve never gotten a comment to come out of)

  42. Inder says:

    Love this blog!

    @Anna: I’m a huge fan of the group brown-bag lunch. I work in a law firm, where going out to lunch is an important social break in an otherwise sometimes isolated day of day.

    It took some time, but several of us associates started pushing for brown-bagging, and now we brown-bag (or “picnic” – we all get/bring food to a nice spot in the sun somewhere) three or four days a week. The savings is enormous, and it’s a lot of fun!

    We still eat out one or two days a week (sometimes at a cheap place, sometimes at a nicer place), but now we appreciate the good food even more.

    On the rabbits topic: I have to say, it takes a special kind of person to be able to raise rabbits solely for food. You need to know how to butcher, and you need to not get attached to your bunnies! I couldn’t do it myself. If you have no problem killing and eating your rabbits, I don’t see an ethical problem with that, per se, as long as you treat them well and kill them humanely.

    But I agree with a prior poster that breeding them to sell (as pets) could be considered irresponsible if many rabbits are abandoned at local shelters. I know that my local shelter always has a LOT of rabbits for adoption.

  43. Carey says:

    Unfortunately, there are far too many people out there who don’t understand marginal tax rates. Often these people are on the front lines when it comes to complaining about taxes. One of my biggest pet peeves is someone spouting off about something they are very clearly ignorant about.

    Trent, thank you for explaining the concept for everyone. Your explanation was very clear.

  44. jim says:

    “, it’s not just about tossing rabbits in a cage and waiting.” LOL

    Meg: Keep your job. If your husband loses his, then you could find a better paying job. But.. I’m wondering if your husband might be a little envious of your cool stress free job. What if he also found himself a low paying job he likes? How would you think about that? Would that work for both of you or would that not be enough for you 2 to live on. If you could reasonably live on 2 low paying jobs then OK. But if he’s working hard at the high paying job to allow you the luxury of low pay fun job then how fair is that? Just food for thought.

    Kim: Generally I’d agree that married couples should merge finances. Unless one of you is really bad with money and the other is really frugal, generally I think married couples should merge finances. I would also consider your husband’s ego. Many men have a hard time when their wife makes a lot more then them. We’re programmed to be the provider. So that is something to be aware of when you’re planning this. If he pushes back on the idea it may be cause he feels better about paying his own debt and not having you bail him out or something like that. BTW, your debt is higher but your income is equally higher. His $25k debt / $25k income is about same burden as your $120k debt / $125k income. Also consider that he may be paying higher taxes cause you’re married and filing jointly.

  45. chacha1 says:

    Just chiming in with another smack at Gretchen.

    Trent’s kids are all toddlers. So first, they are not going to remember much of anything about this year’s trips – if anything, they’ll remember that they got to travel with the folks to see relatives.

    Second, toddlers nap a lot, but can’t be left alone. As noted above, frequent readers read fast. Two books a week seems marginal to me under those conditions! I easily go through one a day on vacation.

    I like to find a used bookstore in our destination town, and get a pile of cheap paperbacks. And then leave behind the ones I finish.

  46. jim says:

    Chris: fears taking “a big capital gains tax hit” if he sells his BP stock. Has he held the stock for over a year? If so its a long term capital gain and should not be taxed higher than 15% and could be as low as 0%. 15% tax rate is not high. Capital gains are likely to go up in the future. Would be worth talking to a CPA about to figure how best to do it. But I wouldn’t really fear the taxes.

  47. Gretchen says:

    One of Trent’s arguments for taking said children on vacation was that they would remember these vacations.

    I do much less reading on vacations unless my husband is doing all the driving, and even then I only like magazines and shorter articles as 1. You can’t see the scenery
    2. Dh likes someone to talk to on the long streches.

    I also assumed the rabbits were for food.

  48. Inder says:

    Oh yeah, and I’m a really, really fast reader and mother to a one-year-old. It’s hard to merge the two, but it can be done. I mostly read in the evenings after he goes to bed but before I do. That said, I question that first poster’s basic assumption: I grew up around parents who read a lot, and I don’t remember it as a bad thing at all! On the contrary, it was my parent’s love of reading that got me hooked on reading! My parents always put their book down when I needed them, but also, they encouraged us to read or play quietly sometimes so that they could relax with a book. Heaven forbid.

    So that first post is just ridiculous on several levels.

  49. WendyH says:

    Trent: how about a cost comparison/break even point between e-books and paper books for a future topic? I looked into one when they first came out and realized that many of my favorite authors didn’t have e-books (or a few did but only for recently published books) so I didn’t think it was worth it for me at the time. I would be curious if it’s worth it for the type of reading (personal combined w/ professional) that you do.

    @Meg – my husband has found me easier to live with working a less stressful job, but the other commenters are right in that it locks him into his current earning level!
    How soon are you planning children, and are you going to continue working after they arrive? Will this position allow you a more flexible schedule so you’re able to easily continue working, or if the plan is to quit work and stay at home, why not go back and earn as much as possible before quitting? I had a friend who calculated that after all daycare, travel and clothes expenses, she earned $250 a month to work and keep her child in daycare.

    @Sarah – if raising for food, are you willing to do the “processing” necessary? My brother raised them when I was young, and that isn’t something that I had enough stomach to witness. It lasted less than a year, too much work for too limited return.

  50. Ariella says:

    OK, here’s a question for the next reader mailbag. I just inherited around $85,000 from my grandfather at his death. I am nearing 30, married, and own a home. We are debt-free except for the mortgage and student loan debt (which we do not intend to pay off early because the interest rate on our SLs is approximately 1.5%). We also max out our Roth IRAs and his 401(k). I don’t get a 401(k) through my work, but my company contributes 15% of my gross salary to a Keogh on my behalf.

    What do I do with this money? I know I should invest it, but I am terrified of “losing” my grandfather’s gift to the market! How should I subdivide it? Should I keep some of it liquid and invest some of it in longterm investments? And, if so, what percentage? My grandparents worked very hard to save, and I am committed to keeping this money and basically saving it for our children’s college. Any thoughts?

  51. Ariella says:

    Oh, also, I suppose I should add this: because it is a gift and an inheritance, I am keeping the money separate from our joint expenses. Some readers may not agree with this, but I come from a fairly wealthy family and my husband does not. Even though we have a happy marriage, I still believe in keeping family money “in the family,” especially since we have no children at this point. Thus, I will not consider using the money to pay down our mortgage or any other venture that would arguably make the money “joint” rather than “individual.”

  52. Jenelle says:

    Andrew,

    Have you talked to the Financial Aid office at the 4 year university you would like to attend? Have you already tried filling out a FAFSA? Stafford Loans are given need based and do not take into consideration your credit score. Additionally there are scolarships and grants available.

    Is the reason you cannot get Financial aid because your parents make too much? Have you looked to see if you can qualify as an idependent student, and therefore not need to include their income?

    I think you best bet right now is scholarships. Your financial Aid office should be able to give you a list of ones available. Good Luck!

  53. Erin says:

    Trent – I don’t agree with your advice to Andrew to invest in a 529 plan. It sounds like his timeline for when he will need the money is much too short to be investing in the stock market. 529 plans typically invest your money in mutual funds and the like, similar to a 401k. If the market goes down again then he could be stuck without all the money he’s saved.

  54. Doug says:

    Re: Books . . . ah, I remember those days. These days, the vacations seem to include an inordinate amount of time with either my son (seven months old), or family who wish to chat with me.

    Although during our last vacation I began the registration process for Gen Con, so I guess I can’t complain too much . . . .

    Ariella, I’d like to comment on your comment. “In the family” means in your family – you and your husband. Before blowing off your responsibility to the man you promised to spend the rest of your life with, thru richer and poorer and all that, please reconsider your stance. Would your grandfather be happy knowing you and your husband have a paid-for house/paid-for education, or would he be happier knowing you decided that $85k trumps marriage vows?

  55. Kat says:

    Ariella, last time I checked, a husband is your family.

  56. Katie says:

    Sorry, Ariella, but if you’re planning to be married to your husband permanently when exactly ARE you going to use the $85k? Are you going to wait until you’re a widow? Or pass it onto your kids who will sufficiently be family?

  57. alilz says:

    Don’t have an answer for Ariella but a 250 page book takes me maybe 2 hours to read. Depends on what it’s about and how much I really like it.

    If I really get into a book it can actually take longer because I read slower but 250 pages is nothing for me.

  58. lokelani says:

    Reading is great and I have a Kindle because I used to travel with so many books. However, I do not like the idea of leaving a book on a park bench where it can turn to rubbish littering the park. Donate the book to a library, hospital or the little bed and breakfast in you are staying in where you know it will be used.

  59. Katie says:

    I support taking physical books on vacation – it’s a matter of preference. My mom has a Kindle (and so does Trent’s wife!), so I am pretty sure he and I know what we’re missing.

  60. cathleen says:

    Ariella, with that attitude you might want to sock away the inheritance for a divorce lawyer.
    And I’m not kidding.

  61. cathleen says:

    I’m a huge fan of audiobooks (have about 30 on my iPhone at the moment) and for reading and traveling I use iBooks on my iPad. Heaven.
    I tend to read multiple books at once rather than just one at a sitting. Reading is very personal, we all have our habits and preferences :)
    I do have a large library of physical books but these new technologies are a huge deal for avid readers.

  62. John says:

    One comment about devices like the Kindle: It is my understanding that the “books” you buy for these devices aren’t actually owned by you–you only buy a license to read them. I believe this license CANNOT be transferred to others. For some people, this may not matter. But one reason I like real books is that if I decide at some point to get rid of the book, I can resell it, or–more likely–donate it a charitable cause like the Friends of the Libray, who can sell it, and raise money to help the library. I also worry about long term usability of these books–will Kindle devices of 2025 read 2010 books? (If this seems paranoid, think of how much computer data from 1996 is hard–sometimes impossible–to import into a modern system.)

    One interesting exception is Project Gutenberg (www.gutenberg.org), which many probably already know. It has public domain books for free download–mostly “the classics.” But there is a little “lighter” vacation type reading, too.

    As for taking books on vacation, I’m not sure what I’d do. It’s been so long since I’ve had a vacation I almost had to look the word up! But, while it’s nice to travel light, I think it’s not totally unreasonable to carry a bit more reading material than I might actually read. That way, I wouldn’t have to worry about finding more books. I also wouldn’t have to go book shopping–unless I wanted to (visit an interesting store, etc). Vacation time is so limited, why spend it doing shopping that I can do at home?

  63. mk says:

    #35/#36 to Ariella – I agree that you should keep family money separate. But this doesn’t mean that your husband can’t benefit from the inheritance.
    I too come from a fairly well-off family (compared to my husband). Partly because of this and partly because we live in a community property state (TX), my husband and I agreed on a pre-nup when we married 25 years ago. It has worked out well but we have complicated records since we have “his” accounts, “my” accounts and “joint” accounts. Most of the cash gifts and inheritances I’ve received from my family go into “my” accounts, except that I always put at least 10% into our joint account so we can both enjoy some of the windfall immediately. The rest is saved. I started out putting all of it into Vanguard SP500 Index Fund but after reading Scott Burns (a financial writer whose column appears in the Houston Chronicle), I started using his Couch Potato portfolio(s) to allocate the investments. When we had a child, I used the money to send her to Montessori daycare when she was a toddler and to fully fund her college expenses through a guaranteed tuition fund sponsored by my state (TX) which is no longer available and a 529 (from Iowa since it was run by Vanguard) to fund living and other expenses such as books. Since my husband and I both like to travel, we’ve used income from my investments to go on some pretty amazing trips with our daughter. Note that because we did not have to use “joint” money to fund college savings, we were able to pay down our mortgage early (after 10 years).
    When my husband recently received an unexpected legacy from a relative, it was handled the same way — 10% for joint use and the rest to “his” accounts.

  64. Petunia says:

    Regarding the nanny tax question, do you have an accountant who prepares your income tax return? Tell them about your nanny.

    I am a staff accountant in a small CPA firm, and preparing payroll returns for household employees (including nannies) is all in a day’s work. (Quarterly returns are required in my state, most likely yours too.) The federal tax is reported and paid right on your 1040.

    For an existing client, the incremental cost is quite low, typically $150 per year.

    Regards.

  65. Paige says:

    @ Jane S.

    I read it as they mean to breed rabbits as food, not pets. Pets don’t do a very good job when it comes to “A. Supplementing our grocery bill.” Livestock, on the other hand, do.

  66. Janie Riddle says:

    your rabbit question. there is some info on building a cage for multi rabbits and letting them breed at will for less work. When it is time to harvest open cage and harvest

  67. Geoff Hart says:

    Trent talked about packing books, so a couple thoughts that are so obvious many people miss them!

    First, I’m endlessly amazed at the number of tourists I see sitting on the airplane or on the beach (or wherever) reading hardcovers. Apart from spending 3 to 5 times as much money as you’d pay for the paperback version, hardcovers take up twice the space in your luggage. Go with the paperbacks every time. (If something’s only available in hardcover, wait a few months. There are plenty of older things worth reading.)

    Second, if you’re buying something new (or used from Amazon), have it shipped to your destination so it’ll be waiting for you when you arrive. My wife and I do this all the time when we’re visiting her family in the U.S. (we both live in Canada and shipping is often free in the U.S. but pricey to Canada). You can often have books shipped to your hotel, particularly if you’ll be there a long time. Just be sure to check that the hotel does this happily: some charge insane fees for receiving a package; others treat it as just part of the customer service.

  68. Kevin says:

    I disagree with Trent’s response to Meg. Meg has taken a lower paying job with less stress. According to Trent, that’s just fine, if that’s what she values and she’s willing to make that trade-off. Extending this line of logic, then if Meg could reduce her stress even further by quitting her job completely, then that’s what she should do, as long as she “values” having less stress in her life.

    The person being left out of this discussion (at least on Trent’s side) is Meg’s husband. How do you think he feels, carrying such a disproportionate portion of the household’s finances? Do you think HE doesn’t feel stressed? Meg needs to consider that she has an obligation to her family. She owes it to her husband to pull her own weight.

    Where do people like Trent get the idea that everybody deserves to never have to feel any stress at work, that every job should be a joy to go to every day, and the second it’s not, it’s time to move on? Newsflash: sometimes work is hard. That’s why it’s called WORK and not PLAY. That’s why people PAY you to do it instead of expecting you to do it for free.

  69. Kevin says:

    Re: Megan’s question on IRAs:

    “A Roth IRA is one that takes in after-tax money and pays out after-tax money in retirement. A normal IRA does the same with pre-tax money.”

    This is incorrect. Withdrawals from a traditional IRA are treated as BEFORE tax money, meaning withdrawals are taxable. Trent is correct that withdrawals from a Roth IRA are NOT taxable.

    The benefit of a traditional IRA is that contributions are usually tax-deductible (meaning you can contribute more under an IRA plan than if you were investing using a regular, taxable brokerage account), and assets in the IRA are allowed to grow tax-free until withdrawal.

  70. valleycat1 says:

    As soon as I know I have a trip coming up, my first thought related to packing is what books to take. But, I don’t read in the car. Have traveled in the past with a small child, & if in a hotel room once they’re abed, you need something quietly entertaining unless you want to go to bed at 8 or 9 too.

    However, this summer we’ll be flying across country & staying at a place with family, no TV or radios. We get a lot of visiting & sightseeing done, but there is down time most days & my entertainment of choice is reading. I generally read at least 3 books a week, sometimes more.

    For airplane trips, I’ve started taking a couple of magazines on board – can tear out items of interest & leave the remains behind for recycling (or re-use if not too decimated!). On this type of trip, I will be able to swap books with other readers in the family, or hit the used book store.

    @ Geoff Hart #45 – Hardback or paperback is a personal choice & I would say that most anyone who reads at all knows the difference in price, weight, size, etc. I have a favorite book I reread frequently, often taking it on trips as I know it’s reliably entertaining, & finally bought it in hardback because the paperbacks kept falling apart. And if it’s a hardback someone’s bought but haven’t gotten around to reading before vacation, why not save money by taking it along instead of buying paperbacks just for that purpose?

  71. Kevin says:

    Re-reading my previous comment, it appears that Trent may have meant that traditional IRAs are both funded with, and pay out with, “pre-tax” money. I read his comment to mean that a traditional IRA pays out AFTER tax money with PRE tax contributions (which is, of course, not true). I apologize if I misinterpreted Trent’s explanation.

  72. tony says:

    Trent, you suggested to a reader that he put money into a 529 plan. You probably know, however, that these vary a great deal from state to state. Some are decent but some states have limited options for where to put your money. Here in Florida the plans force you to go to big front-end loads and high fees. John Bogle is not on their advisory board… I’d suggest that any of your readers check out the books by William Bernstein, such as The Four Pillars of Investing.

  73. margaret says:

    Andrew: “Hopefully my savings (which will be between 40-50% of the college costs depending on if I need car repairs, bail out someone in need or my expenses change between now and then) will be enough to get me through.”

    I think, at this point, YOU should not be bailing out anybody. It’s the old take care of yourself so you can take care of others deal. Think of yourself as being in a crisis situation — e.g. that you have to find a way to pay for your education — and you cannot deal with anyone else’s crisis right now.

    ————–
    I read an easy novel (about 200 pages) in 3 or 4 hours. It is exemplary for parents to read for pleasure in front of their children.

  74. Kevin says:

    @margaret:

    “I read an easy novel (about 200 pages) in 3 or 4 hours. It is exemplary for parents to read for pleasure in front of their children.”

    Sure, but … two per day? While on vacation?

    What exactly are the kids supposed to be doing during those 8 hours EVERY DAY, while on vacation? Can you really concentrate on your book while you’re all cramped in a hotel room in Florida, with 2 kids pulling on your arm asking, “Hurry up Mommy, I wanna go see Mickey and Goofy! Are you almost done? How much longer? Mommy I’m bored! Why did we spend $1,500 and fly 2,000 miles so you can sit around and read all day? Couldn’t you have done that at home for free?”

  75. AnnJo says:

    @Meg, I too think Trent left Meg’s husband’s needs out of the picture, and marital finances are almost always a team effort or should be.

    Meg, you need to look at WHY your husband is not happy with the situation and either persuade him to change his mind or deal with what is bothering him.

    Is he more frugal than you are? If so, it may not be the low income alone that bothers him, but the combination of your low income and high (by his standards) spending. Cutting way back on your own discretionary spending (clothes, trinkets, housewares he doesn’t value, lunches out, etc.) might make him feel more comfortable with the situation.

    Or are you more frugal than he is? If so, he may be resenting that the higher income he earns, that he thought he would be able to use to buy toys, entertainment, travel or other fun things, is going to basic needs because you don’t earn enough to carry your share. Then maybe you can show him that he can have those things if he lets the frugal shopper (you) use her talents to find them at a reduced price.

    In either case, right now you’re asking him to make all the sacrifices from your choice while you seem to reap all the benefits.

    It’s also possible that the two of you have never talked about your current financial situation, your long-term financial goals and how you’re going to get from here to there. Is having a low stress fun job more important to you than having children, for instance? Or having a secure retirement? Or having an unstressed husband? How important are those things to him? Can you both have it all or will something have to be sacrificed and if so, what?

  76. megscole64 says:

    My advice for Andrew is to look into earning an online degree from a reputable school. That’s what I did while I worked full time and pretty much paid for everything myself, with very little help from family or loans.

  77. Katie says:

    Sure, but … two per day? While on vacation?

    He said one every two days not two per day. Side benefit of reading a lot for pleasure: increased reading comprehension.

  78. Andi says:

    Comment #50

    Depends on what you do for vacation. In my mind, Disney World does not constitute a vacation – at all, for anyone. A great opportunity but not a relaxing one.

    We are working on clearing up farm debt and do not travel far with our family of 5 right now. We have a trip to the lake planned for early June and a good part of that time will be sitting around and relaxing – watching kids play (joining them often), visiting and reading. I don’t intend to read for 8 hours but I do intend for this to be MY vacation too.

  79. Kristine says:

    Andrew,
    It may be possible to find a job with a company that has a tuition benefit as well. I finished my bachelor’s degree while working for a company that paid for my classes – all but the textbooks. Some companies only pay on work-related classes, but some will pay for all degree-related classes. Look around your area and see if this is a possibility.

  80. t says:

    A 250 page book? Depending on the book easily one – two hours.

  81. Nora says:

    Rabbits: Spinners and knitters spend a small fortune on Angora fiber from rabbits. It is a very soft, luxurious and expensive fiber. If the “breeder” can find a market, they can cut their losses. Angora rabbit owners that I know have other income.

  82. M says:

    Ariella, I think you are being wise. You might consider calling that inheritance your (possible future) children’s college fund. That way the money stays in your family, and there’s nothing for anyone to be resentful about. You and your husband are being wise financially with the money you are earning jointly; this is a gift to YOU and your children. Using it to pay for college will certainly benefit your husband, and be very meaningful for the kids. And if you use it for something else – illness, divorce, caring for your parents, those are all the types of things which would make your grandfather glad that his money could help. Merging it into your joint finances is unnecessary and messy. Last word of advice – I’d just avoid mentioning it much. Out of sight, out of mind.

  83. Michele Boulanger says:

    I too am a heavy reader (my addiction) and have had the book weight issue. At home it’s books as usual and on frequent traveling it’s Kindel. It is small enough to fit in my carry tote, light weight and can hold up to 100 books. At about $9.99 a book, I can fill it up for less than buying a book at a store (verses new or used on Amazon). I save the hardcover or paperback book purchases for home. I donate around 50 to 100 books to public libraries, VA hospitals and women’s shelters. Mostly novels to those two each year, libraries will take everything. I had a beautiful library in my last home but have next to no room for them now that I have downsized major (to try and cut expenses to bare minimum but not feel like I’m poverty stricten). Another plus for the kindle but I still like the feel of a nice hardcover book.

  84. Bill says:

    Ariella, I think the your husband will get half that money in a divorce in most states and how are debt free with student loans at 1.5%?

  85. Steffie says:

    Vacation to my man means sitting in a boat on a lake fishing for hours on end. I go with him to spend time with him by being there. I take a book to read so that when he is not talking to me I have something to do. Yes I enjoy fishing because it is quiet enough to read an entire book. Vacation to me means going somewhere to see what is there, museums are a favorite of mine, he goes with me to keep me company and to spend time with me doing something I like. I don’t take a book then, I don’t have time to read. Plus I’ve spent a lot of money to go somewhere, I can read at home for nothing.

  86. deRuiter says:

    Sarah, Raising rabbits for meat is a good way to cut your grocery bills. Contact any produce market or the manager of the produce department of your local super market. We used to get loads of free greens for our rabbits that way, which kept the bunnies occupied and cut down on the amount of feed we had to buy. Are you ready to whack those cute bunnies on the head, skin and gut them, and cut up the carcasses? The price of pet market bunnies is really low. Also, are you going to feel responsible (you should!) for the lives of those pet bunnies you sell? And which are invariable dumped in the woods to be torn apart by coyotes or foxes, or dumped on already over loaded animal shelters when the child owners get bored with them? Are you ready to cope with an every day supply of rabbit manure? It’s great for the compost heap or the garden, but you have to move it to the garden every day.

  87. Ariella says:

    Thanks for the comments about how my husband is my family. I completely agree that he is my family. First, under the inheritance laws of my state (and most states), he is not entitled to half of that money unless we comingle it in joint accounts. Trust me on this; I AM a lawyer. So, no, he’s not entitled to half “just because.” I would have to do something to actively mingle that money with our joint accounts.

    Second, I don’t need a divorce lawyer and I don’t think that comments suggesting that I need a divorce lawyer are very constructive. We had a prenuptial agreement because of a previous inheritance I received from my mother, and this is really just an extension of that prenuptial agreement. He is not bitter about it, it does not cause problems, and I do not spend the money in an extravagant manner.

    So, to everyone who wants to counsel me that I should “share” it with my husband: OUR choice as a COUPLE is that it’s my money to do with as I please. My plan is to use it for our children’s college tuition. If the children don’t go to college, then I guess we’ll blow it on a cruise around the world.

    Third, I consider it “debt free” because it’s not worth it to me to pay off those student loans. I can unquestionably make more than 1.5% interest if I invested the $85k, so I would not choose to pay off the student loans.

    Fourth, my question was, how do I invest it? Other than some judgmental comments about how my husband and I choose to manage our marriage, no one has answered that question.

  88. alilz says:

    @Kevin, that was never the kind of vacation I had growing up, when I was growing up there was always reading on vacation by my parents and my brother and I. Mostly we went to the beach but sometimes camping and there was always down time when we’d rest and read esp durign the hottest parts of the day. Even when we were at Disney as kids we still had our books that we brought to read. It wasn’t just my parents reading on vacation but all of us, even when I was 8 adn we went to Disney my brother & I brought books.

  89. M says:

    Ariella – here’s my thoughts on how to invest it. Kid’s college is 20 years away, so I’d choose an asset allocation like 30% bonds, 70 stocks. Then, because the stock market has been so volatile, I’d dollar cost average in into the market, buying some stocks/bonds every 2/3 months for the next, say, 3-5 years. (And if the market crashes again, I’d buy more).

    I’d open up an account at Vanguard, and use their index funds – total stock market, an international fund like VEU, and bond fund like BND are good/easy starting points. I would do 30% bonds, 40% total stock market, 22% VEU, 8% VWO (emerging markets)- that’s more international than many would choose, but I think international is a good way to go for the long haul. Hope that helps. (Also, I listed the tickets for the exchange traded funds, not the mutual funds, because that’s what’s in my head, but there are mutual fund equivalents of those). I’m curious what other people would do!

  90. J says:

    @Ariella — Talk to a person who is qualified to handle investments. It sounds like your family is not unfamiliar with handling money successfully, perhaps there is an accountant or other trusted advisor who has helped with the family finances and has a long and positive history? That would probably a better source of advice than the comments section of a PF blog.

    This isn’t to say you shouldn’t understand what you are investing in — far from it — but I’m continually amazed at people who will gladly drop money on things they likely can do themselves (auto maintenance, simple home repairs/upgrades, etc — think a few hundred dollars), but will go asking the Internet when there is something real at stake (like the potential of losing $85K in poor investments or self-diagnosing medical conditions), especially when it’s the same amount of money to talk to a financial professional.

    I’m not trying to be mean here, but the advice on the Internet is generally worth about as much as you paid for it.

  91. beth says:

    If earning $1,000 less puts you into a lower tax bracket that would result in disproportionately fewer taxes, then put $1,000 more into your 401(k) (which is BEFORE TAXES) thereby bringing your taxable income into the lower tax bracket.

  92. Kat says:

    Ariella, if you are a lawyer who has already received a large inheritance once before, got another one, make a good salary, WHY are you asking a frugality blogger how to invest? Ask your financial planner. Get a financial planner if you somehow already stumbled through what is obviously overwhelming to you last time without one. Do not ask a blogger who writes about making your own laundry detergent and washing ziploc baggies and how to pay off debt for his expert advice, I am sure he would be the first to say that he is not an expert on what stocks or funds you should buy!

  93. beth says:

    RE: “I have recently been intrigued by the idea of raising rabbits to supplement our income.”–PLEASE WATCH “ROGER AND ME/”

  94. J says:

    Agree with Kat, I have a similar comment that’s stuck in moderation-queue-purgatory.

  95. Doug says:

    Ariella, you want advice on how to invest the money? Okay. Invest in a good counselor.

    There is no “mine” and “his.” There’s “ours.” The mine/his stuff should’ve gotten left at the altar.

    Any “not worth it” to pay off a loan? Your math is wrong. You get a guaranteed return of 1.5%, plus the absolute reduction of risk in your life (quantified by ‘theta’ if I’m not mistaken).

  96. AnnJo says:

    @Ariella and those criticizing her concerns – If Ariella’s grandfather had wanted her husband to share in this inheritance, he could have named him as an equal beneficiary. Doug says it is her responsibility to put this money into the marriage. If her husband has put his inheritance into the common kitty at her request, then maybe so, but otherwise I don’t see it that way. The words “with all my worldly goods I thee endow” haven’t been in the marriage vows for a long time, and when they were, they were only said by the man, because women had few legal rights to own property, and were expected to keep separate what little was allowed.

    There is no real way to predict which marriages will end in divorce, and I think Ariella is right to preserve this inheritance for her own long-term security and the next generation or failing children in her own marriage, then for whoever she thinks best and most consistent with the giver’s intentions.

    If Ariella’s husband is an honorable man he won’t have any problem with that because honorable men don’t resent others’ good fortune or covet what they have not earned. And if he isn’t honorable then she’d be wise to protect herself anyway.

  97. AnnJo says:

    @Ariella, I hesitated to suggest this investment option before but since you’re a lawyer with a pre-nup you’ll understand the pros and cons of this:

    Have you considered using it to pay down or pay off your mortgage on the basis of a loan from your separate estate to the community, secured by a deed of trust and with payments (perhaps interest-only while you finish paying off your first mortgage) into a separate account; you could add a balloon payment provision for the date as of which you might want the principal available for college.

    You might want to make an amendment to your pre-nup to make it clear the Note and the separate account remained separate. Assuming there’s enough equity in your home to adequately secure it, you’d get a better rate of return than on CDs, you’d have better security for principal than with stocks and bonds, and no volatility. Risks would be possibly rapidly escalating inflation and lack of liquidity.

  98. alilz says:

    I’m reposting since my comment looks like it got held up in moderation–

    @Kevin. My vacation experiences have been very different from yours. Most of our vacations were spent going to the beach and there was always time for reading. A typical day went – mornings -fishing/swimming/playing – Lunch – then rest/naps/reading/playing games during the hottest part of the day – late afternoon – more playing. Dinner -after dinner – reading/games/socializing. Staying up reading.

    That’s the kid and adult schedule. There was a lot of reading not just by the adults but also by kids. even when we went to Disney when I was like 8 my brother and I took books.

    But my family, including my extended family, are readers. We have books stashed everywhere – laptop bags and purses, in our cars.

    I can remember a few times when we weren’t stocked well enough with books on vacation –that’s tragic either spent rereading something or going on a hunt for a used bookstore.

  99. Skirnir Hamilton says:

    Andrew: I go along with what others said talk to your financial aid office. IF you believe you can’t file an independent FAFSA until a certain age, I am not sure that is the case, or even if it is financial aid offices can hear special cases. I have heard of people being declared independent early because their parents were not supporting them in anyway. I don’t know how it is done, but at least 15 years or so ago, it could be done.

  100. anne says:

    for meg:

    you write: “I also have very reasonable, flexible hours.”

    does this arrangement benefit your husband? i’m thinking it might, in that it might free you to be a helpful and available spouse, better homemaker, etc.

    if you give up this job and maximize your earning potential like he wants you to, will the quality of your lives suffer? will the money you will increase your earnings w/ end up going to take out food, dry cleaning, etc? will you be too tired and drained from a stressful job to be the partner he needs?

  101. Laura says:

    In regards to Sarahs question about rabbits… we also raised rabbits for years and I found them to be very low maintenance animals. Sure you go check on them twice a day, but it sounds like she would do that to give them scraps. The addendum to this is if you live in a very hot area (i.e. Texas it is HARD to raise bunnies, they don’t deal with heat well) and I don’t think it would yield a ton of profit, but if she plans on eating them it is a good way to supplement your diet, and if your pens are arranged high in the air it is easy to scoop the droppings a couple times a week into your compost bin. Guess it also depends on the amount of rabbits she was thinking of, but I would highly recommend talking to your local ag extension agency, or even your local 4H office.
    In regards to Janes comment above – yes, there are a lot of animals needing rescue, but it sounds like these would be meat animals. Primarily raised for food, and thus not the general type to go to rescue. If she sold them, hopefully they would be sold for the same purpose, as rabbits that are good meat animals generally do not make long lived pets.

  102. Morgan D. says:

    @Anna:

    You could eat before they leave and then go to the restaurant with them, ordering on a drink or something similarly small. I used to do this all the time when I worked with a group of people that liked to go out to lunch often. They knew I didn’t want to spend the money, and appreciated that I wanted to spend the time with them.

  103. Meg says:

    Hi everyone, Meg here. Thanks for all the advice on my job situation. I forgot to mention is that the income from my non-profit job is primarily put towards savings and “fun money” since all our basic living expenses are covered by my husband’s income. However, our budget would be a little tighter if I had no income at all.

    But, our long-term plan is for me to eventually leave the workplace completely in 2-3 years when we have kids and be a SAHM. So, if I was making more money now to put even more into savings (ie. could eventually turn into a college fund, too) , we could be more comfortable without my income at all in a few years with a nice fat savings account. I guess my question is, do we both work high-stress, high-paying jobs now to save for the future and hopefully lead to more financially comfortable, less-stress family life later?

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