Reader Mailbag: Starting Seeds

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 card advantages
2. Trip annoyances
3. Priorities and student loans
4. Early spring garden preparation
5. Paying off loan early
6. Starting a community garden
7. 15 year versus 30 year
8. Inexpensive record player
9. Name transfer question
10. Party tricks as inexpensive hobby

With March comes the beginning of seedlings grown in our kitchen, near the large windows. We put some seedlings in a tray near the spot that gets the most sunlight in our house, hook up a grow light for a few more hours of sunlight a day, and watch the little plants start to grow.

In a month or so, these plants will migrate out to the garden. For now, they fill our home with more greenery than usual, particularly as March gives way to April.

Q1: Credit card advantages
I just saved several hundred dollars by using a warranty benefit from my credit card. My iPad was out of warranty but my CC doubles the manufacturers warranty. Not only did I get my iPad replaced after it was out of warranty, I didn’t have to buy apple care because it is a benefit I already have. The only thing you have to do is purchase the item with that credit card. There are a lot of benefits that come with a major credit card. If you familiarize yourself with them you can save money. Another way is with renting cars. You don’t have to get the extra insurance yet you are still covered.

– Louis

I am strongly in favor of making purchases with credit cards rather than debit cards and, in many situations, rather than cash. Credit cards typically offer warranty benefits like the ones you mention, bonus point programs, and, if someone steals the number, they’re not accessing your checking account.

The problem, of course, is that credit cards encourage overspending if you’re not careful. It can be very easy to lose track of your spending when you use plastic and aren’t used to tracking your purchases carefully.

That’s why I usually suggest that people who are in a debt crisis stop using their card for a year or two and instead switch to pure cash for as many of their purchases as possible. There needs to be a strong connection between the things you buy and the money leaving your checking account that some people miss with the abstraction of plastic and of delayed bills.

Q2: Trip annoyances
My wife and I go on a few weekend getaways a year. Most of the time, my wife is very frugal, but when we are on these getaways, she spends like it’s going out of style. She always seems to find these artisan shops when we’re traveling and then buys several things at each of them. The last weekend getaway we went on, she bought more stuff than the cost of the entire rest of the trip like hotel and travel and food. I don’t know how to talk to her about this, but it’s having a noticeable financial impact on us.

– Andrew

Wait for at least a month after your last trip, but more than a month before your next trip, then have a conversation about it. Talk about setting an annual budget for travel and include shopping on trips within that budget.

She sounds like she’s largely a financially sensible person, so she’ll see the logic in this move.

I would not do this on a date that’s close to your return or close to your next trip, however. Keep it as emotionally distant from the actual travel experience as possible. Then, reassess your travel budget well after each trip and see how it’s working and what additional trips you can afford.

Q3: Priorities and student loans
I am 32 years old living in NYC with a $50k salary. After a few good years of increasing salary and budget-making, I feel that I am on decent financial ground. I have over $8k in savings, am contributing an employer-matched 3% to 401k, and in a given month, after all is said and done, typically $400 dollars ends up going into savings. I rent, have no dependents and credit cards are paid off in full monthly.

I have $18k in student loan debt as my only obstacle to a debt-free life. I am paying roughly $300 toward that debt every month. The balances and interest rates on the various loans break down as follows: $5k at 7.25%, $9k at 5.5%, and $4k at 2.4%.

I want to start attacking that debt aggressively. What is the best way to do that? Should I increase my monthly payments or should I dip into my savings to throw a few thousand dollars at the loan with the highest interest rate?

Or should I be directing the focus of my money in another direction, such as savings or investing? I should mention that I did not start saving for retirement until a few years ago. I feel that making a strong push now to get rid of my debt will allow me to save more in the long run than letting those loans naturally diminish. Am I right or wrong?
– Carrie

As long as you’re maintaining at least two months of living expenses in your savings account, I wouldn’t hesitate to throw any of the excess balance at the debt.

The reason you would want to maintain some savings is for emergencies. Emergencies become worse when you’re unprepared for them and don’t have the resources with which to easily handle them.

Don’t deplete your whole emergency fund just to pay off debt quickly. You might get lucky and not regret it, but if something unexpected happens when your savings are low, you will seriously regred it because you will have swapped low interest debt for very high interest debt.

Q4: Early spring garden preparation
I am thinking about tilling up a spot in our back yard to serve as a small garden in a month or so. One of our neighbors is letting us use their tiller, so we don’t have to worry about that. I am wondering what kind of preparations I should be making for a garden though.

– Robyn

I would immediately start figuring out what you want to plant. I would do this right now.

Once you have some idea of the herbs and vegetables and flowers you want to plant, look up planting information for those plants in your area. When are they usually planted? What temperature is needed?

You should also find out if the plants you want to grow are available as seedlings rather than seeds, something that a stop at a local greenhouse will tell you if you can’t find the information online. If you’ve never gardened before, seedlings will make the process easier for things like tomatoes.

Also, ask your neighbor lots of gardening questions. I’ve never known a gardener who doesn’t love sharing basic gardening knowledge.

Q5: Paying off loan early
I have the ability to pay off the remainder of my loan ahead of time (private student loan). It’s a large amount, around $4000. Do I have any leverage here? I’d like to get a few credit dings fixed or removed while they were somewhat out of my control.

– Sharon

You can certainly ask, but it’s not a requirement for them to do anything in this situation in terms of your credit report.

Some lenders do this quite easily. Others will do it if you escalate your call and bug them a lot. Many lenders simply won’t do it at all. It depends wholly on their internal policies.

Getting rid of your debt is a great idea, of course, as is cleaning up your credit report. Whether or not your lender will help you with removing the negative reports shouldn’t influence your decision here.

It never hurts to ask, though.

Q6: Starting a community garden
How does one get a community garden started? You’ve talked about one a few times but I don’t even know how to begin organizing one.

– Kelly

Community gardens are tricky things. While they can be wonderful if they work well, they require everyone involved to be like-minded or else you find people who don’t carry their fair share of the work or pick more than their fair share.

When it clicks, though, it’s wonderful. The benefit of such a garden is that it makes it really easy to trade produce back and forth. When you have a bumper crop of tomatoes, you give a bunch to the people sharing the garden. When they have a bumper crop of pole beans, they share with you. You both win.

If you want to start one, the best way to start is with other people that you think will be reasonably reliable in terms of sharing a garden, meaning they won’t pick what they shouldn’t and they’ll actually help. It’s the other people more than anything that will make this succeed or fail.

The best ground rule at first is to simply invite one other person and split the garden in half and treat it as two separate gardens except when you give the other permission to pick certain things. As you become more familiar with each other’s patterns, you can agree to share more and more of the space and the work. You can also invite other people as it grows.

Q7: 15 year versus 30 year
Is there any advantage to getting a 15 year fixed loan versus a 30 year fixed loan and paying it off within 15 years with extra principle payments? I know the interest rate would be slightly lower for the 15 year loan, but if you were to pay off the 30 year loan in 15 years, would it cost that much more? My husband and I’s financial style would have us lean toward a 15 year loan, but in the instance of one of us getting laid off, it seems like the 30 year would give us a safety net if we had to go down to minimum payments for a while, perhaps paying it off in 20-25 years if need be.

– Terry

The best way to see the savings is to look at a mortgage calculator.

Let’s say you’re looking at a 30 year fixed loan on a $200,000 mortgage at 3.375% (I’m going to use rates that are in the ballpark of what you can get right now). Your monthly payment would be $884.19 and you’d pay $318,309.27 over the life of the loan. This is the worst path.

Let’s compare that to a 15 year fixed at 2.75%. Your monthly payment would be $1,357.24, but you’d only pay $244,303.79 over the life of the loan and you’d be done with it fifteen years early.

What if you took out the 30 year and made double payments? You would pay $1,768.38 per month, pay it off in about eleven and a half years, but still pay $241,061.26 over the lifetime of the loan – just about as much as the fifteen year mortgage. You’d only have to miss about four double payments to end up with a total equal to the fifteen year, except with higher payments.

I really would go with the fifteen year mortgage. The reason is that it’s incredibly easy during the long slog of mortgage payments to convince yourself to not make that double payment, and as soon as you start doing that, you wind up paying a lot more to the bank over the long run.

Q8: Inexpensive record player
I just inherited approximately 1,000 records from my aunt. Most of them are ’60s and ’70s rock music, which I love. I really want to listen to these records but I don’t have a record player and every one I find is really expensive. Where can I find a cheap record player?

– Amy

Goodwill would be my first stop. See what they have available there. If you live in a large urban area, check Craigslist.

If there are any stores in your area that sell records, like an independent music store, stop in there and ask about an entry-level record player. They may have a great lead for you in the local area.

Another option would be to buy a record-to-mp3 converter, like this one, then start converting your music directly to mp3.

Q9: Name transfer question
I graduated about a year ago as an engineer. I make ~60k a year, as a single 23 y.o. guy. I put ~15% including company match into a 401k and fully fund my Roth IRA. I recently bought 100ish acres of farm land on contract from a family friend as an investment. I did this half and half with my mom. I’ve since taken over full payments of the farm land. They are stupid with money. My brother and I have also taken possession of a 5th generation lake house. We are both easily covering payments. But alot of stuff is still in their name. How would you approach this situation?

– Jerry

If you are making the payments on these properties, they should be in your name. I’d have a conversation with them about it face to face and if they’re unwilling to make this transfer easy, you’re going to have some tough decisions to make.

You can either just let it be – which seems to be bothering you – or you can go visit a lawyer and attempt to get this straightened out.

In either case, keep very careful records on what you’re paying and what the mortgage statements look like. You are going to want a clear history of the fact that you’re the one making all of the payments.

Q10: Party tricks as inexpensive hobby
One great inexpensive hobby is to completely master a party trick. Not only is it something that can eat up a lot of hours, but it’s something you can do in a social situation to start conversations and get people to open up. There are lots of things you can do, like juggling four or five balls, solving a Rubik’s Cube quickly, doing a simple card or coin trick, or mastering a pocket musical instrument like a harmonica.

– Jim

All of these are good ideas. They’re inexpensive to acquire the items needed, they can eat up a lot of spare hours as you learn the trick, and they can provide entertainment at many different types of social gatherings.

I have one friend who seems to always have his acoustic guitar in his trunk, and he’ll pull it out any time a party starts to get a bit dull. I have several friends who are very good piano players and will often use their skills at social events (or even at other surprise impromptu events – I know a person who spontaneously wound up playing the piano for a wedding).

Even the simpler things, like solving a Rubik’s Cube quickly, can often break the ice open at a social engagement. It’s not a useful skill on its own, but learning it requires patience and the skill itself can be a nice social lubricant.

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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