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. Tankless water heaters
2. First step after rehab
3. Prioritizing spending and saving
4. Does faith matter?
5. Refinancing with a twist
6. Board games with little space
7. Difficulty getting ahead
8. Best of Dickens and Twain
9. Financial plan for the future
10. Endorsement for President
Each day over the last week, I’ve been going on a 4 to 5 mile walk. I’ve noticed a few things as a result.
One, my calves ache a little, but my feet are fine. I didn’t expect the calf soreness (although it’s not bad), but I did expect sore feet. I think the reason my feet are fine is that I’ve become accustomed to more activity throughout this past summer – in other words, my feet are already toughened.
Two, I feel great for about two hours after the exercise, then I hit a huge energy valley for about an hour. I simply want to go to sleep at that point. After that, I feel fine, though, but I’m learning to plan my activities around that valley.
Three, drinking lots of water makes it easier. I didn’t bring enough water along on one of the walks and the last mile wasn’t very enjoyable. Other days, when I’ve had a water bottle along, have been great.
It really depends on your home. If you live alone or with just one other person, a tankless heater will probably work wonderfully. If you live in a household with a lot of people, you’re going to need to buy a very big one, which will be very pricy (especially if your energy company has a demand charge).
The problem with tankless heaters is that they don’t handle a lot of simultaneous demand very well. If one person is washing dishes, two people are taking showers, and the washing machine is running, it’s going to suck down a lot of power and not provide adequate hot water to all of these people (unless you have an enormous heater).
If you end up buying a large heater, you may find that you need to re-wire portions of your home to provide enough power to the heater during those peak usage moments or else you’ll find yourself flipping breaker switches.
Q2: First step after rehab
My brother is about to get out of rehab for a drug addiction. He’s been in there for almost six months and I think he might really be cleaned up. Anyway, I’m wondering how much help I should give him when he gets out. I don’t mind helping him, but how much is too much in terms of keeping him from getting back on his own two feet?
It really depends on the type of person your brother is. I’ve seen incredibly self-motivated people get sidetracked by drugs and then eventually get their life back on track. I’ve seen other people become permanently derailed by drugs. I’ve also seen people who burnt their twenties in a drug haze become incredibly productive people in their thirties and beyond.
I’m a big believer in helping those who are trying to help themselves. If he comes out of rehab with a strong desire to build a career and a new life, then give him as much help as you feel comfortable giving. If he comes out only to fall back into old habits quickly, minimize the help.
I’d suggest greeting him with open arms, but watching what he does very carefully.
Q3: Prioritizing spending and saving
I have recently (a month ago) started work at a job I really like and am trained for. I’m only working two days a week at the moment, which is the only real drawback, and I am making minimum wage, which works out to £85/wk (UK). I’m making more than I previously was on JobSeeker’s Allowance (JSA).
Currently I live with my Mum and stepfather, and pay board at £25/wk (I know this is a great deal! On the other hand, it can’t go on forever). My other expenses, namely, transport – to work, church, the jobcentre (I still have to go once a fortnight) and the voluntary project I run – add up to about the same as the board I pay. It is so expensive because there are no buses my way on a Sunday, so I am relying on taxis to get to church. Whilst occasionally I can get a lift from Mum or someone from church, this is not reliable. Re: the voluntary project – the costs of running it come from another organisation, and whilst I will get expenses back, it’s generally every quarter, so I still need it up front. This estimate is not including any socialising (including transport costs) or any other costs. Generally I have also been spending about £5/wk on items to eat/drink at work, like some nuts to munch on throughout the day or a dessert to have with my lunch (that I bring from home). For just ‘wants’ like this, I think it’s fair that these don’t come out of my board, which covers what I need.
My question is regarding the remains of my money, what may be called discretionary income: I am struggling with prioritising what to spend it on! I am, by conscious effort, living within my means every week so far, which is an improvement from the JSA days when I ‘straddled’ that line – often borrowing £5 or £10 until the next payday.
* I know you recommend an emergency fund. Currently I don’t own a house, car, or pet, am single and don’t have any children, and could claim JSA again were I to lose my job, so I can’t really see why I need one; Mum has also out and out said that for any genuine emergency, she is happy to be my emergency fund and either give me the money or we would work out a repayment plan as and when an emergency occurred depending on the circumstances. On the other hand, I know that extra savings wouldn’t hurt any, of course.
* Both she and my stepfather have been saying for a long time that they want me to move out. I can’t currently afford to pay rent elsewhere with my income levels, although I know I will need some money in the “moving home” fund for rent deposits, additional furniture, etc etc when that time comes. But how much ought I to be saving for that?
* I’m nearly 27 and don’t have any retirement savings so far. My Dad out and out told me that I didn’t need to even think about it until I had been paying my own bills for a year, but, I keep thinking about the 9 years I have already “lost” in this regard, and therefore should I start before I move out?
* I owe my Mum approximately £3000, which is a combination of times I couldn’t afford to pay the board because I wasn’t working or claiming JSA, a repayment of some of my tuition fees for my training for the job I have, and various other miscellany that I don’t remember. Probably more if I include all of the times she’s bought clothes for me in the past nine years. This debt is years outstanding, no interest, to be paid back on the never-never/at an undetermined time (I don’t know if Mum even views it as a debt any longer, although it started out that way). Especially given that some of it is previous board payments, I want to pay it back before I move out, but then given how frequently they talk about me moving out, would I be better just focussing on that? Finances aside, I don’t actually want to move out until I’m in a position to get married, because I don’t want to live by myself, and the house-share thing seems really really hit and miss, to me.
* Speaking of getting married, I also feel it would be sensible to have some money in the pot for if and when that day comes – I wouldn’t want to have to be engaged for two years just to be able to afford a wedding, even a simple one.
* I need some new clothes – the ones I have are falling apart, are not in any way flattering, don’t fit particularly well and make me miserable just to look at them. Being plus sized, I generally have to get clothes from specialised shops, that are therefore generally pricier than clothes for thin people. I have some new work clothes, but I need to replace my play clothes. I also need a haircut.
* My laptop will need replacing soon because the battery is pretty much shot on it, and although a new mobile phone is definitely a ‘want’ and not a ‘need’ right now, mostly I don’t top up my pay as you go phone and just use it for incoming messages, so if I’m putting aside for that, obviously there is less cash around for other things too.
* I could really really do with a holiday, once I’ve earned a bit of leave from work. Just a week away in the sun (in this country) where I’m away from my Mum and Stepfather, away from the house and making my own decisions and can just relax for a while.
* Whilst it’s still a while a way yet, Christmas is obviously coming up in six months and if I can spread the cost of the gifts rather than scrambling for them come December, so much the better.
As I said, this is not including any socialising, or other short term costs I might want to incur.
So my question is, how do I prioritise all of these legitimate/semi-legitimate potential spending areas? Over time, the examples may change, but the basic problems will remain. There are long terms goals like retirement or a wedding, semi-long term goals like saving up to move out or repaying this £3000, semi-short terms goals like a new laptop (reconditioned) or a cheap holiday, and short term goals like new clothes or a haircut, plus costs for things like socialising, topping up my phone, or other short term costs.
Do you have any kind of idea about how much I ought to be saving vs. spending? And most particularly, if the savings figure comes out as “save as much as you can”, how do I decide what to save for? That’s my real problem. Currently I am working on one short term goal per week (I get paid weekly), like one item of clothing, plus one item of socialising per week, depending on the price of the clothing, and then any money left when I get paid just gets put in a jar of “savings,” for an undecided purpose. It’ll go in the bank when there’s a substantial amount in it, but seeing as I get paid in cash and don’t routinely visit the bank, a jar is just easier right now.
It’s about prioritization. You have to figure out which of these things is the most important in your life and focus on that goal above all else.
The first thing I’d do is go through my goals and eliminate the ones that simply aren’t realistic right now. For example, can you realistically move out on 85 pounds a week? If not, hold off on that goal. Instead, look to make progress in other areas. You can certainly make some debt payments with that amount of money, which would make it easier to move out and be independent if your income improves.
Also, it seems like some of your goals may be prerequisites for other goals. It is harder to find work without at least one presentable set of clothes, for example.
I can’t tell you what things to value, though. You just have to sit down and figure that out for yourself.
Q4: Does faith matter?
Do you think being religious helps people succeed in life? It seems like in my community most of the people who are doing well belong to one church or another. I’m not really very religious, but I can’t help but notice it.
I think that, for many people, religion can be incredibly comforting. It can help them understand the world better and help them reinforce a sense of what’s right and wrong. It can also provide a strong social network. All of those things have real value.
It’s likely that many of the people in your local church that you see being successful have networked effectively with each other. Church can be like a club of sorts, where people get together once a week (and sometimes more often than that). That can facilitate deep social bonds, and those bonds often translate to the professional world.
Does the religion itself matter? I’m not sure. That’s a theological question I’m not prepared to answer. However, seeing a church strictly as a social construct makes it easy to see how it might help lead to success.
Q5: Refinancing with a twist
We will be refinancing our mortgage within the next month or so, and I’m debating about whether to take a shorter term with lower interest, or longer term with slightly higher interest.
The 15-year option will save me about $100/month in payments (I currently have 15 left on my existing mortgage). The 30-year will save me about $300/month. Of course, the interest charge for the 30 year is more than double the 15 year, so it seems like a no-brainer, right?
But what do you think about taking the 30-year option to create a kind of “financial hardship buffer zone?” Under normal circumstances, we could pay the 15-year rate every month, but if something happened (change in tax law, minor illness, job loss), we could pay the agreed-upon 30-year rate for a while, which would be better than not being able to pay at all?
I realize this would take some financial discipline, but I think we could do it. We’ve never had trouble paying our bills, and we have no consumer debt. However we have very little in the way of savings, so having a “buffer” seems like a logical move. Does that make sense, or am I just dreaming?
The reason you give for taking the 30 year loan over the 15 year loan is why so many people go the 30 year route. It’s easier to see the impact in the next month than it is to see the impact during that fifteen year stretch down the road where you wouldn’t have a mortgage at all.
I agree that it makes sense to have a financial buffer of sorts. It is always a good idea to have an emergency fund.
The part of your plan that concerns me is the lack of savings up to this point. Why has that happened? Has it genuinely been due to a lack of income? Or have you just spent the money because you’ve had it? If you don’t have a history of saving, what has changed that would make you start saving right now?
I wouldn’t make a long-term decision based on how you’re feeling in the moment. Instead, I’d try to start saving now and see if you actually have the willpower to do so. If you’re finding that incredibly difficult, all the 30 year loan will do is give you $200 more in spending money per month but tie you to a mortgage for another 15 years. That’s not a bargain at all.
Q6: Board games with little space
What are your favorite board and card games that do not take up a whole lot of room? We have basically a small shelf in our closet that we use for board games and it’s mostly full. We have friends over to play games at least one night a week and my wife and I play games two or three nights a week, so this is a pretty major hobby for us. What games do you really love that don’t take up much space?
There are a lot of games that don’t take up a lot of space that we greatly enjoy.
For starters, a deck of normal playing cards can open the doors to countless games, from gin rummy and pitch to 500 and bridge. There are many, many great games you can play with an ordinary deck of cards.
Aside from that, our favorite games that don’t take up much space are Innovation, The Resistance, Citadels, and Glory to Rome. All of these games combined could easily fit in a small board game’s box, but they’re all incredibly enjoyable and get pulled out frequently at our game nights.
Q7: Difficulty getting ahead
My husband makes a good salary (I am a SAHM), but is paying on a modest car to get to work – a family business – 1 hour each way. Work pays for his gas, thankfully. We just moved to a house with the extra bedroom we needed (we have triplets), but in the process gained a pool and are fiinding that although it’s more conveninet than taking the kids to the local pool…it’s costly. Going out to movies and restuarants is minimal. It’s expensive to do those things with 5 top pay for, let alone the $10 per hour babysitter cost if we choose to go out on our own (no family close by.) We do have Comcast phone, internet and tv bundle with no “extra” channels (HBO etc…), and no netflix. Although I do not work outside the home….taking care of 5 year old triplets and a house is lots of busy work. Lots of laundry, pool cleaning, meal making, house cleaning, shuffling, grocery shopping and now kindergarten preparing. My husband works from 5:30a.m. to 6:00p.m. and is still battling the aftereffects to colon cancer (IBS) so upon getting home he usually is indisposed for sometime and we eat dinner. Then he is wiped out – no feeling well usually. He might help with baths for the kids and help put them to bed. So….my point in telling you this is that becuase I feel I’m on my own and super busy most of the time (1 step forward, 2 steps back, I feel) I find myself not being able to take advantage of common sense frugal tips: #1 We need the cable – it IS my sanity, not to mention our date night on Saturday night when we watch a movie – since we don’t go out. #2 there is no time with three kids to coupon, let alone analyze prices at the grocery and stock up….I choose to buy as basic as I can….we don’t eat junk. #3 We have a garden, but due to picky kids and a husband who cannot tolerate veggies due to his condition…I am the only one who eats anything from it. #4 We have no-one to give us any hand-me-downs, and I am not able to get away to shop frugally from store to store for our clothing (especially the kids – they grow so fast) so I choose to take advantage of the 30% off at Kohls. So..that covers it right? Entertainment, Clothing and Food? What kinds of drastic measures did u take initially? Were you up until midnight cutting dryer sheets in half? Should I be baking batches of bread at 5a.m.? We are about $50,000 in debt not including a mortgage and car payment. Can’t seems to get ahead….something has to change and I feel that the cost of my time/sanity vs. the money I would save from say baking my own bread would be more. Groceries are about $1000 per month, sometimes more when I need medicine and paper products from Costco.
The first thing we did when we realized that our finances needed a turnaround was to go through our closets and sell off everything that we knew we probably wouldn’t use very often in the future. The vast majority of our DVD collection went away, as did much of our CD collection and some of our book collection. I got rid of many of my vintage baseball cards as well as some other collectibles I had. We used that initial bump to pay off some of our worst debts and that set us down the right path.
In terms of changing our spending, it was far more important for us to focus on changing habits than to make big single moves. If you stay up all night doing the things you mention, you’re going to be in worse shape than you are right now. You just need to focus on what you do routinely now. What can you change about each thing in your normal daily routine to make it cost less? Are the things you’re spending time on worth it for what you get out of it? (For example, gardening isn’t a good fit for everyone and it sounds like it might not be for you if you can spend the time more productively elsewhere.)
Everyone has a different life and different things work in those lives. When you look at frugality tips, don’t feel like you have to follow all of them. Just seek the one or two tips that seem genuinely useful to you and apply them.
Q8: Best of Dickens and Twain
I loved your recent article on free books off the internet. I noticed that you mentioned both Charles Dickens and Mark Twain multiple times in glowing terms. I know that they’re among the great authors of the 19th century. What books would you suggest if someone hasn’t read anything by these fellows?
Mark Twain is far easier for a modern American reader than Charles Dickens is. Most of his writing was written decades after Dickens, plus he uses American English rather than British English. People are sometimes daunted by the language in Dickens, but rarely by Twain.
So, what should you read? I’d start with Twain, and I suggest Tom Sawyer (it’s a bit simple, but it has valuable pieces for the next book on the list), Huckleberry Finn, A Connecticut Yankee in King Arthur’s Court, and Roughing It.
Q9: Financial plan for the future
I’m a 28 year old attorney and graduated from law school in May 2010. I am thankfully employed, I like my job and earn roughly $70,000 per year before taxes. I rent an apartment in a relatively big city for $850.00/month (includes all utilities). The bane of my existence is currently the one Federal student loan which sits with a whopping balance of $87,500 at an interest rate of 6.13%. The loan was originally $100,000. I currently pay $1,200/month on the loan, which is above and beyond the minimum payment. If I keep paying at this rate, I should have the loan paid off in a little over 7.5 years, or around my 36th birthday. I have no other debts.
I also contribute 13% of my income to our company’s 401(k) for which my company contributes another 2% for a total of 15%. My 401(k) balance is currently sitting at $24,000. However, I do only have $1,000.00 in savings. The balance is typically higher, however, a string of emergencies depleted a significant portion of that savings. I typically save $600/month for my emergency fund.
For the purposes of this scenario, you should know two things about me. First, I hate my student loan debt with a passion and want to pay it off as quickly as possible. I simply cannot wait until I free from that tremendous burden. Second, I want to save as much as I can for retirement so I may actually retire around age 65, live well and truly enjoy it.
So here’s my question: Do you believe my strategy is a sound plan or would you recommend I make changes?
Assuming you have the will to stick with it, I think your plan is a very strong one.
I don’t blame you at all for being aggressive with the student loan. Having that out of the way will make life much easier for you and I fully understand the deep desire to get rid of debts.
My only suggestion is that you make absolutely sure you get that emergency fund back up quickly. Life can change rapidly when you’re single and interesting opportunities come along. I’d even reduce the monthly loan payment for a while to bump that emergency fund back up.
For starters, I don’t think the president has a lot to do with what actually happens in America. I think Congress has far more power than the president, to the point that I think one’s local Senate and House campaigns are more important to the future of the country than the presidency.
For another, my feeling is that Obama has not been as good as the Democrats often say, nor has he been as bad as the Republicans often say. At the same time, I have no idea what Mitt Romney stands for other than being “not Obama,” which isn’t enough for me.
So I have no interest in “endorsing” either one. I actually haven’t made up my mind fully about who I will even vote for when it comes to the presidential election.
I mostly answered this question because I get a lot of messages on the topic.
Got any questions? Email them to me or leave them in the comments and 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 hundreds of questions per week, so I may not necessarily be able to answer yours.