Reader Mailbag: Piano Lessons

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What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Credit for new immigrant
2. Kindle MatchBook
3. Good credit moves?
4. Controlling anger about money
5. Alternative to Christmas Club
6. Selling weapons
7. Does everyone need a budget?
8. Reusable grocery bags
9. Small house, then big
10. How valuable are good schools?

As I’ve mentioned many times, our daughter has this natural attraction to and affinity for music. She is constantly tinkering with our piano and seems to be singing or humming almost all the time.

We’ve been waiting for her maturity to reach the point where piano lessons would be fruitful – and, yesterday, she had her first lesson.

Her teacher suggested that, at her age, she practices ten to fifteen minutes a day, five days a week. When she came home from her lesson, she ran to our keyboard and proceeded to practice the stuff she’d learned for half an hour, completely unprompted. Before bed, she spent another ten minutes or so trying to play the simple song she had learned (it’s mostly just an alternation of two notes).

I hope, more than anything, that she keeps this enthusiasm.

Q1: Credit for new immigrant
I’m 29 years old and I recently immigrated to the USA. I just got my first job (I’m a Software Engineer) and I will be making around $100k. My wife is looking for a job at the moment and hopefully she will be able to contribute to our financial life as well. Because I just got my Social Security card I don’t have any credit, for obvious reasons. And I learned that here in the USA is all about having credit or not. How can I build my credit not having credit? I think it’s going to be difficult for me to apply for credit cards, etc. What should I do? What are your recommendations?

- Gil

Credit is pretty useful in the United States. Not only do you need good credit to get loans for a house or a car, you also need it for good insurance rates.

If you’re getting started completely from scratch, the best route is to stop by a local credit union and ask about their credit card offerings. Given your salary and lack of negatives on your credit report, it’s likely they can issue you a card with a low credit limit.

Use that card just for some routine purchases, like groceries, and pay it off in full each month. Before long, you’ll probably get a credit line increase, which is a good sign your credit is headed in the right direction.

Also, be very wary about giving your Social Security number to anyone. That’s often the source of identity theft.

Q2: Kindle MatchBook
Have you heard about the Kindle MatchBook program? It starts in October and whenever you buy a paperback you’ll have an option to get the Kindle version for $1.99 or $0.99 or free. I was thinking this was a good way to buy a book for a friend as a gift and keep the Kindle version of the book for yourself.

- Megan

I’m a Kindle user and that was my first thought regarding the program – give the book as a gift and keep the Kindle version.

The part that really impressed me, though, was the fact that they’re going to extend it to all previous purchases on Amazon. I’ve been buying books – for myself and for gifts – on Amazon since 1997. My order history is a mile long.

If even a significant portion of those books are available for the Kindle for free or for $0.99, I’ve suddenly got a mountain of books to read and re-read.

Q3: Good credit moves?
Can you help me understand my credit score? I’m trying to get my “financial house” in order so I can purchase a home next year.

I received my credit report from Equifax. My credit score is 772. The key factors affecting my score are: (1) the credit line on revolving accounts; (2) no mortgage history; (3) total amount of outstanding balance on credit accounts; (4) percentage of department store accounts to all accounts in my credit file.

Question #1: I have four department store charge cards that I never use. Should I cancel those cards?

Question #2: In my credit summary, it says I have a credit balance of $123 with a credit limit of $10,824 and a 1% debt to credit ratio. Am I doing something wrong with my credit cards? I solely use them to build credit; I’ve never had a late payment in my life. I pay the balance every Friday. Should I be doing something different?
- Janna

I don’t think cancelling the store cards will have much impact either way. It will only really affect your first entry.

As for your debt-to-credit ratio, you’re not doing anything wrong. In fact, that’s a very good ratio. You want that percentage to be very low.

What it’s saying is that if you maxed out your credit cards, you would have to spend $10,824 on them. You’ve only spent $123 on them. You’re very, very far from maxing out your cards, which is a very good thing in terms of your credit score.

Q4: Controlling anger about money
Whenever I sit down and start trying to figure out our money, I get so angry at myself and at my husband that I literally can’t focus at all. I usually go stomping around the house and every little thing sets me off. How can I dig into finances without getting so upset?

- Alice

Have you considered having your husband dig into it? If he’s on board with financial change and has a personality less prone to such responses, he might be better equipped to figure out the basics.

Sarah and I are lucky in that we can both calmly address our money issues without getting upset. However, there are certain things in our life that really bother her, and other things that really bother me. We’re both better off if we let our spouse handle those specific things.

Let him dig in and create a summary of the situation and perhaps some suggestions on how to head down a better path. Perhaps he can give you these to read on your own so you can get past your anger and really think about the wisdom of the options.

Q5: Alternative to Christmas Club
I just read your q&a about a Christmas Club savings account. I know that my CU does offer a program like that, but there is no free payment or better interest rate. I found what I think is a pretty good solution, though. I have an automatic monthly transfer to a Smarty Pig savings goal for Christmas shopping. Then when it is full, I withdraw it as an Amazon.com gift card. Doing so gets my 11% more than I saved, and I do still earn interest along the way. Since I do most of my shopping on Amazon anyways, this is a perfect solution for me. They do have other store options as well for gift cards.

- Alex

If you do at least some of your shopping on Amazon, this is a pretty sensible method. It essentially earns you an Amazon discount.

I’ve had good dealings with SmartyPig in the past and for things like this, they’re just about as good as you can get. The trick is – as always – to have a goal in mind. Know what you’re saving for, when, and why.

If you can keep that focus, SmartyPig can be a big help with certain goals.

Q6: Selling weapons
Several years ago when I was still single, I went through a period where I went to a gun range quite often and learned how to fire a handgun well. I even purchased two handguns which made me feel more safe.

Since then I’ve gotten married and my “gun phase” has faded out. They both have sat in the closet for years. Now I’m pregnant and I don’t want a gun in the house where my kid could find it. What’s a good way to go about selling a slightly used handgun?
- Kelly

One thing worth noting here is that you’re going to have some time for this sale. Your child wouldn’t even be able to open the case and get out the gun for several years yet, so you don’t need to run out tomorrow and get rid of it.

Generally, since you’re not a gun dealer, you can sell a gun to anyone as long as you don’t have a reason to believe they’re not permitted to own a gun (see here). Many gun stores will buy used guns from customers, as will pawn shops. You can also use a site like GunBroker.

If I were in your shoes, I’d probably just get some offers from several local gun shops and sell to the one that makes the best offer. That way, you’re sure that you’re not crossing any legal lines.

Q7: Does everyone need a budget?
We are a high-income earning 30-something couple who have paid off their home loan, have no credit card and no other debt and a under 2-year old. We live frugally and investing in blue-chip stocks for the long-term.

Do we still need a budget? I think it’s an extra hassle for nothing. We track our expenses and cashflow using a double-entry book-keeping program.
- Erica

If you’re using a double-entry bookkeeping program for expenses, the only thing you’re missing from an actual budget is some sort of estimate/target of how much you should be spending in various areas each month. You’re 90% of the way to budgeting already, in other words.

I think that budgeting in some form – the process of keeping track of expenses and aiming for sensible spending goals – is a good idea for everyone. The exact type of budgeting that works best varies from situation to situation.

I also think that when many people think of “budgeting,” they imagine a much more arduous process than it has to be. If you simply sit down with your family and figure out what you should be spending on, say, food for a given month, then try to stick to that and keep track of it (which you’re already doing), then you’re budgeting.

Q8: Reusable grocery bags
I’ve seen several websites (maybe The Simple Dollar? not sure) say that you can save money at the grocery store by using reusable bags. I don’t understand how that works.

- Kelly

Some grocery store chains will reduce your grocery bill by $0.05 for each bag you bring in and use rather than using their own bags. So, if you bring in five canvas or reusable plastic bags and use them all for groceries, they’ll take $0.25 off of your bill.

My wife keeps a few canvas bags folded up in her purse. There are a couple stores near us that offer this discount, so if we’re shopping there, this saves us a few cents.

She uses the bags at every store she goes to, though, for environmental reasons. There’s no good reason to have more plastic bags in landfills, after all.

Q9: Small house, then big
I live in Los Angeles and am considering buying a house in a nice area with good school district. Since it is a very expensive area, I am planning to buy a small house (around 300k-will get a single family house with about 1000 sq.ft) and then add an expansion later on (500 sq.ft or so). Will I save money by doing that instead of buying a big house right away (about 1600 sq.ft-that’s considered big in los angeles unfortunately)?

- Ronnie

Given just what you’ve said here, buying a smaller house and then building on later when your finances can swing it is a far better option than buying a bigger house now.

It will ensure smaller house payments for the length of your mortgage. You also have the ability to decide when expansion makes the most sense, particularly from the perspective of your financial situation.

I am generally wary of large mortgages. I’d far rather have a smaller house with a smaller mortgage.

Ronnie has a second question.

Q10: How valuable are good schools?
Also, how much is good school district worth? Instead of buying a house in a good public school district, i can wait until my kids grow up to be school age and just rent a tiny apartment in a good school district and use that address to get into good public school. Is it a fraud? Otherwise, i can’t imagine buying a house large enough for us in a good neighborhood with good schools.

- Ronnie

You can try the “apartment” method you describe, but it’s not your “domicile” in terms of educational residency requirements as described here by the Education Law Center.

California, however, offers open enrollment, which means you can get your child into one of the schools on the open enrollment list without having to live in the district.

If you can afford a house in a good district with ease, though, it’s worth it. A good district helps your home retain value. Another option would be to buy a less expensive house now, then move into a better district in a few years when your children are older. Another option is private school, which might be worth it on the whole depending on your situation.

No matter what, don’t shortchange your children’s education. You have a lot of options available to you regardless of where you live.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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