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. Selling everything
2. Spouse wasting money on politics
3. Dental insurance
4. Thrift shop
5. Car buying question
6. Cash in car
7. Tax allowances
8. Netflix as TV replacement?
9. Bullied by financial advisor
10. Best books of 2013?
I have a ton of respect for single parents.
Sarah sometimes goes on solo trips to visit her sisters, who are spread across the country. (She does the same for me when I go with friends to Gencon.)
During the periods when she’s traveling, I really get a healthy taste of what it’s like to be a single parent. I see how many of the tasks Sarah and I do are almost shared without thinking about it and when the other one is gone, there’s no one to pick up the slack. Not only does it add to the work and focus needed, it also means stumbling over unfamiliar tasks like making sure our daughter gets her medicine correctly (something Sarah always handles).
Kudos to single parents everywhere, particularly those raising their children well.
Q1: Selling everything
I’ve been a big fan of your blog for quite some time, and I’ve come into my own season of wanting to purge EVERYTHING. I have lived in my home for 6 years, 40 yr. loan, with a lien of about $10,000. I was unemployed for almost 2 years and had to take a loan modification to my mortgage insurer.
I am at a point where I want to sell everything that I am not using. I have rooms that are not being used — but furniture in them. Clothes that are in separate closets, but not being worn (or seen for several years). I am trying to cut back on everything — consolidating student loans ($40k); repaying credit card debt ($5k); and reducing living expenses (on avg. $300/month).
I’ve heard you talk about extra income and creating opportunity by getting rid of things that one does not need. Would you recommend selling everything in my home that I am not using? I also want to see my home or refinance in order to downsize to a smaller more accommodating home to fit my lifestyle.
I see no reason not to sell everything at home that does not have significant personal value and isn’t being used. If it’s not something you use and it’s not a memento, it’s just taking up space.
I go through purges like this every once in a while. The first one was the largest by far, but I’ve found it is worthwhile to re-evaluate what you’ve got in your closets pretty regularly.
You’ll almost always find that if you even have a sense at all that you should sell an item, you probably won’t miss it once it’s gone.
Q2: Spouse wasting money on politics
My wife has begun to get very involved with [politics]. She donates to a lot of candidates and spends quite a bit of time making calls at a phone bank and going door to door and going to meetings. I think it’s great that she’s found a passion but she donated almost 12% of our income to politicians and [her political party] in 2012 and I expect her to donate at least that much next year. I agree with her political stances (mostly) but how can I convince her this is a problem?
I edited out some of the specifics of her political stances so that this wouldn’t turn into a political argument. The party/candidates she supports are basically irrelevant to the question.
Having said that, political donations should be a mutual decision between the two of you. I don’t see any problem with the free time she spends being politically active, but when you’re a married couple, the money either one of you spends affects both of you.
I also don’t think political donations are an unreasonable expense. I view it as a form of putting your money where your mouth is, particularly if you’re a politically active person. Like it or not, dollars shape the political environment of America.
Q3: Dental insurance
As I sit here reevaluating every expense we have, I see that we pay $119 a month directly to Delta Dental for our private policy, since my husband’s benefits package doesn’t include dental. However, we have healthy teeth in this family, so the four of us get our routine cleanings every 6months and the X-rays along with cleanings once a year. Even when I had one small cavity last year, only my second in 35 years, I paid half of the $190 cost to fix it. The cleanings are bills to Delta $87 per person, and when X-rays are due it’s another $49. That’s $892 a year for the total of 8 cleanings and 4 sets of X-rays, but we are spending $1492 for insurance. Am I correct in thinking I should cancel this insurance and budget in the out of pocket cleanings? Even if an unexpected filling came up, I think I’d be better off. What do you think?
The insurance is there to cover things you’re not expecting, like someone getting a tooth knocked out or a root canal or a bridge.
Imagine, for example, that you wake up tomorrow with a horrible toothache, one that’s drawing all of your focus. That’s the moment when you’ll be glad to have your insurance.
Now, is that something you should be spending significant money to insure against? You can make arguments either way. For me, if I dropped that insurance, I would probably desire having a somewhat larger emergency fund to cover things like that.
Q4: Thrift shop
I recently found out that my son and his girlfriend do most of their clothes shopping at a thrift store not too far from them. The inspiration for it wasn’t me but the song Thrift Shop by Macklemore.
Here’s a link to more info about the song.
To summarize, it’s about a guy who buys outdated styles at a thrift shop because they’re (a) cheap, which enables him to save his money, and (b) he won’t be dressed like everyone else when he goes out.
It’s got some rough language, but I still love the song and the message it sends. I’d far rather have my kids (or me) singing along to this than to some song about spending thousands on champagne and making it “rain money.”
Q5: Car buying question
-We use a credit card for all purchases that we pay off every month
-Our only debt is a land note that I’ve eased up on aggressively paying in favor of keeping some cash in the bank. We owe $8500.00 on it and could knock it out in two months if we wanted, but I’m planning on 5-6 months. Its “only” costing us about $30 in interest a month at the moment and our emergency fund has dwindled due to a large retirement contribution in April.
The car that I use every day to drive to work is 7 years old with 146,000 miles on it. My parents bought if for me while I was in college and it is paid for. I get the recommended $600 service every 30K miles and have been incredibly happy with the vehicle. However, I put about 20,000 miles on it per year and I’m starting to get alittle antsy about how much worry-free life I have left in it. I have a 2.5 year old daughter that rides with me every day, and occasionally I have to make +200 mile trips for work on a whim. In fact, the other day I had a 10 hour day driving, but such trips are sporadic. I have no reason to believe my car is starting to fail, but I would be in a pickle for it to break down while I am 5 hours away from home. According to all estimates, I could trade it for about $10,000 or sell it for maybe $12,000. In fact, I love this car so much that I would be in the market for the same vehicle but would not be interested in paying more than $13,000 (net after my trade or sell). Also, the new (used) car would have less than 50,000 miles for it to be worth buying so that I have at least 5 good years left in it. For the $13,000, I could finance it for a year at around 5% (since it would be 5-6 years old) or pay cash and be left again without much cash in the bank. Basically, my question is, do I take the risk and just keep driving until my my car breaks down, or do I keep my eyes peeled and take the risk on financing a car for a year, OR do I take the risk and pay cash for the newer car?
I’ve read every forum, review, and anything else I can get my hands on, and this car is incredibly reliable and can go seemingly forever; I guess its just fear of the unknown that is making me nervous, especially since public transportation does not exist where I live and carpooling is not an option. I am self-employed and I am dependent on my vehicle.
My advice would be to just watch your car very carefully for any signs of failure. Listen to the engine sounds and note anything that sounds different at all. Keep to the maintenance schedule, too.
I wouldn’t sell the car before a sign of trouble. Some cars simply keep running and running and running.
I would try to make sure you have some method of getting to work in the event of a failure. What’s your gameplan if you went out tomorrow morning and your car didn’t start? Given your situation, you should have an answer to that regardless of whether your car is “new” or not.
Q6: Cash in car
I keep a bunch of fives, ones, quarters, and dimes in my car to pay for a toll bridge near where I live. I usually keep this in the little change drawer in my car. How much money do you think is safe to keep there? I try to keep it under $20 but sometimes I run out when it’s really inconvenient.
I wouldn’t worry about it too much.
If I were in your shoes, my main concern would be keeping enough in there so that I would never run into toll issues. If I noticed myself getting low at all, I’d remind myself to get a bit more cash for the change drawer.
If your car gets stolen, yes, that cash is likely lost. However, the odds of your car getting stolen at any given moment is small, while the time cost of regularly running out of toll change can really add up.
There’s no need to keep hundreds in your car, of course, but I wouldn’t stress out about the $20 limit.
Here are some basic facts:
- Just myself and wife (daughter is grown)
- Renting, no mortgage or rental properties
- Maxed out 401(k) contributions, Roth also for me through work, nothing for wife
- Wife is FT student, will graduate with Bachelors in June 2013
- Claim 0 on W4
- 2012 refund was $12,555
- Gross claimed 157,000
- Federal Taxes 37,500
- State 8,200 CT
So I went out to IRS site and did the W4 calculator, filled in the values and it recommended 35 allowances?!?
You hit a software bug or you mis-entered data – that’s my guess.
I just ran through the calculator and it suggested 0 allowances, though I did not have your full data and had to enter guesses.
38 seems way off.
Given the huge variety and volume of material on Netflix, I think it’s a very reasonable replacement for cable under the right circumstances.
The biggest drawbacks to Netflix is that they don’t have the latest episodes of various television series, which can hinder you when it comes to water cooler talk. There’s also no sports programming, which can be a big limitation for some.
If those two things aren’t an issue for you, Netflix is fantastic.
Q9: Bullied by financial advisor
I’m a 27-year-old guy who lives a really healthy and low-risk lifestyle but I still have a life insurance policy that covers me in the evident of disability, long-term illness, and so on. My premiums have been quite high because the coverage is high so I decided to approach an independent financial advisor to review the policy.
He mentioned that someone like me (no dependants and no debts) doesn’t need this much coverage and suggested decreasing the amount. But when I explained this to the financial advisor who originally sold me the policy, he seemed adamant about keeping the coverage high (or making a few internal adjustments so that I end up still paying the same amount). I get the impression that he’s simply trying to keep me paying the same amount so that he can continue to earn the same commission.
So now I’m stuck. A part of me wants to decrease the coverage so that it better fits my lifestyle (and saves me about 15% of the monthly premium) but another part of me is afraid that if something were to happen (unlikely) that I’d want as much coverage as possible. I can afford the premiums right now but it seems like a waste to be putting money into something that I might never even need.
Life insurance is always about risk assessment. It’s about making sure that if something unlikely happens, you are cared for and your family is protected from financial liability.
Given that you have no dependents, it’s likely that you don’t need significant life insurance right now. It sounds like you have a policy that might be more suited to someone who had a more complex financial situation with quite a few dependents.
If I were you, I’d get multiple assessments of the situation. My guess is that you should probably be going with a smaller policy, but I don’t know that for sure without knowing a lot of specifics about your life. I’d also spend some time boning up on life insurance. A good place to start is The Simple Dollar’s life insurance section.
If you’re looking for a novel, my favorite new book of 2013 is The Son by Philipp Meyer, which traces the history of a family in Texas from Comanche raids to the rise of the oil industry.
If you’re looking for nonfiction, my favorite of 2013 so far is Bunker Hill by Nathaniel Philbrick, one of my favorite nonfiction writers, who brings the early part of the Revolutionary War to life in a splendid way. I read this while on our trip to Boston and it added a great deal of life to the places we visited.
My favorite book of all time is Invisible Man by Ralph Ellison. I’ve thought about the question of “what’s your favorite book” many, many times and I keep coming back to that one.
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.