Reader Mailbag: Stew

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. Tax software for challenging year
2. Credit cards and dishonesty
3. Shopping strategies in small town
4. Wage garnishment question
5. 100% financing on a home
6. Maximizing wealth after graduation
7. Judging one’s financial position
8. Giving Kindle as a gift
9. Okay not saving for retirement
10. Manage focus, not time

Lately, I’ve been turning whatever vegetables are on sale into stew each week. Turnips? Potatoes? Corn? Peas? Leeks? Onions? Carrots? All of these things work wonderfully in stews.

All you need to do is cook up the vegetables you get on sale along with some beans, then make some vegetable boullion and add a bit of corn starch. It thickens together quite well. Add some herbs and spices (I like some dried thyme) along with a bit of salt and some ground pepper and you have a delicious meal!

Sarah and I prepared a stew like this for guests recently with homemade dumplings on top and it was an enormous hit. It just involved vegetables that happened to be on sale.

Q1: Tax software for challenging year
My husband and I have had a pretty crazy tax year. In 2012, we had two salaries, freelance income, and hobby income, and also bought a house, had a baby, received short-term disability payments, and spent a lot of money on medical expenses (that baby arrived three months early!). I’m pretty sure that we can manage to actually file our taxes with TurboTax with no problem – but I want to do some modeling of our tax picture NOW so I can figure out what else we should do this year. For example, I need some dental work – I’d been planning to schedule it in January when our flex spending account resets, but since we’re over the 7.5% minimum for deducting medical expenses, maybe I should do it now (I’d like to get it out of the way, and was just waiting for January for the tax benefit). There are charitable contributions we could make now or later, or adjustments to withholding or retirement contributions. But I can’t figure out a way to model the numbers without using either paper forms (ugh, no thank you!) or TurboTax, which doesn’t have the 2012 update available yet. Do you have a way to do this?

– Rachel

Given the various side businesses that I run and assets that I’ve sold in the past, I’ve had some crazy tax years. I have never had to use anything other than TurboTax for my tax needs.

Unless you’re pretty knowledgable with the tax rules, it’s hard to do tax estimates on your own if things are sufficiently complicated – and it sounds like they are in your case.

I’d sit down with the TurboTax 2012 update as soon as you can get it and figure out your tax situation, not necessarily as a final filing, but to understand what you may be liable for at year’s end.

Q2: Credit cards and dishonesty
Let’s say I pay with a credit card at a restaurant. The waiter takes my card, writes down my number, expiration date, name, and code on the back, and then returns my card to me. What’s keeping him from using that info to go on an online shopping spree? What could I even do about it?

– Geoff

That’s exactly why you should keep an eye on your credit card statement. The scenario you describe above can happen and does happen, alongside many similar scenarios.

What can you do? For one, never use a debit card as a credit card in such situations. It’s a convenience, sure, but if they take your number in such a way, they now have direct access to your checking account, which is going to cause many more problems than mere credit card usage.

The other thing you must do is carefully study your credit card statements when they come in and make sure that all purchases are legitimate. If you doubt any purchases, call your credit card issuer immediately.

Q3: Shopping strategies in small town
I live in a somewhat rural community in Western New York. We have a Walmart available and I used to go there for everything (the one stop shop). Then, I discovered Dollar Stores (Dollar General, Family Dollar, Everything for $1 etc.) With your thrifty- thinking every morning I have even started researching how to finish my basement on a dime (kind of off topic, but….) It has lead me to buying pebbles by the bag at the Dollar Store for a shower floor in my basement bath- it’ll end up costing me about $0.50 a square foot!!!! That being said, I am not emailing to ask where to buy home improvement or thrifty remodeling items. Instead, I would like to know where to buy paper towels, toilet paper, cleaning supplies, canned goods, dog food, cat litter and the like. I have only recently (since near financial doom and subscribing to your feed) even cared about the price of things. If we needed it, we bought it.

I have always had a job where I could make as much money as I wanted. (to an extent) If we ran low I worked harder, however my job doesn’t pay right away so that can lead to other issues (late payments etc.) A friend of mine would just tell me to budget when truth be told I don’t have a steady nor reliable pay. If I work really hard ( and the work is there to do) I may reap those rewards a month down the road.

So, how do I save on the little things that I use everyday. Where is the best place to buy them? Should I stock up in the event of a sale or really good price? I know you talk about freeing up space and selling things or the box of stuff that you “may” not ever use- does that apply to essentials that you will? Will storing them make my life cluttered and ultimately me less productive? (I work from home)

I know the grocery store is out for paper goods, but Walmart? BJ’s? Or simply- the Dollar Store. How about pop – one of our family’s few non-essential “must haves”?
– Jim

Your best bet is to simply shop around and take careful notes.

Shop at one store and note the prices on the things you’re regularly buying. Then shop at another – and another. See which store offers the lowest prices overall and then stick to that store for your essentials.

Sarah and I have a list of about twenty five items we consider essential grocery store purchases and we check various stores every once in a while to find the prices. The best bargain store around for what we buy is Fareway, with Aldi having even lower prices on most of the items (but having dubious selection).

Q4: Wage garnishment question
Several years ago, I was unable to pay my student loan bills, so I just stopped paying them. Recently, a collection agency has requested that my employer garnish some of my wages to collect on the student loan debt. Can they do this? I can’t afford to see 20% of my check go away.

– Stephen

Wage garnishment is absolutely a tool that creditors have to get back the money that they loaned to you.

There are some limitations on this. You are guaranteed to be able to keep an amount equal to thirty times minimum wage – $217.50 per week. They can also only take up to 15% of your income for student loan garnishments. In other words, they can only take the lsser amount – 15% of your income each week or the amount by which your income exceeds $217.50.

If this garnishment is causing you excessive financial hardship, you can request a form from your loan holder that will enable you to request a hearing to demonstrate such hardship.

Unfortunately, though, you’re probably stuck with this garnishment.

Q5: 100% financing on a home
My wife and I are looking to buy our first home. We have a limited downpayment, however, we are looking into Navy Federal Credit Union, where they have a 100% financing program that waives PMI.

The other option is to do a CDA program which is a $5,000 loan that you pay back when you sell the house.

Do you think the 100% financing is a good option?
– Tom

It depends entirely on the interest rates on offer here.

If the 100% financing comes with an interest rate that isn’t competitive, it’s not a good deal. You can figure this out by comparing the 100% financing rate with the interest rates from their other mortgage products.

If the CDA loan ends up getting you an overall interest rate that’s lower than the 100% financing, I’d go with that route. Make sure that none of your rates are adjustable, however.

Q6: Maximizing wealth after graduation
I’m going to graduate in December with a Ph. D. with almost no debt and I already have a job at [a large research company] that will pay me a salary that has one more zero than I’ve ever made before in my life. I am very used to living lean and while I do expect I will have to dress decently for work, I don’t plan on changing much of my lifestyle for a while.

What I want to do is maximize my wealth. I want to reach a point as quickly as possible where I have the freedom to address my own research questions without economic leverage over my head. I’d like to eventually work for a startup, but I want to be able to do it without being stressed about the money and instead focused on solving interesting problems.

What should I do? Where should I even start?
– Jamie

You’re already doing the right thing by living as lean as possible. That is the key to everything you talk about, not the right investment choice.

The real question at this point isn’t the investments, it’s really a question of how much you need to have in the bank to feel secure in making challenging career leaps. Do those challenging career leaps mean truly no income at all? Or do they just mean lower income? Or possibly enough to ensure that there’s not a major problem if you take lengthy sabbaticals?

Each of those goals is going to have a different timeframe and different investment plans to get you there as efficiently and securely as possible. There’s also the overall question as to what you’re going to actually need for your financial independence. What will you truly need to live on once your career gets rolling? Will your cost of living go up substantially?

Your best bet right now is to simply live lean and build up a fat savings account quickly, then make decisions with that money once you see where your career is going and how it affects your spending and personal choices.

Q7: Judging one’s financial position
Right now, I have my mortgage I just took on (74K), Student loans at about 10K, and credit card debt at right around 1500, and a car loan of right about 1800. On hand, I have 81K in assets, 74K being the house (Yes, it zestimates there), 1500 in cash (I am building an emergency fund at $300 every two weeks), and my van is worth about 4K.

How do I know when I am in a decent position (I know I am better off than some, with my savings), and when I really need to buckle down? My expenses don’t exceed my income, but I do dip into savings for the unexpected (Or, expected, like Christmas coming up). I feel like I am better off than before, but I need to know what level of urgency I have to do the right thing to motivate me to do better, or be able to slack a bit.
– Roger

It’s really hard to say, because it depends on what drives you and how much distance you want between yourself and potential financial problems.

For instance, I’m driven by creating distance between myself and potential financial problems. I have been debt free for years and the thought of being in debt again is not something that pleases me. I don’t mind being without some material things in life if it means maximizing my financial breathing room – in other words, I’d rather have $20 in my savings account than a $20 item I don’t really want or need.

Other people simply want to keep their head reasonably high above water while still enjoying many material trappings.

It’s really about what you want from your life, and I can’t tell you what that is. That answer comes from within.

Q8: Giving Kindle as a gift
I’ve decided to give my wife a Kindle as a gift, but if I understand right, it doesn’t come with anything to read on it. I don’t want to give my wife just a gift card to buy books with. What would be a good way to turn this into a gift for a reasonable price that would give her a ton of books to read for a while?

– Jeff

Here’s what I would do. I’d sign up for a fresh Gmail account for your wife. Give it an address like JennifersKindle@gmail.com and give it a sturdy password.

Now, spend some time shopping the Kindle store for bargains. I highly suggest browsing the Kindle Daily Deals and the 100 Kindle Books for $3.99 or Less for bargains. Watch the Kindle bestseller lists, too, as well-known books that go on discount tend to skyrocket up that list.

You can buy the books on your own account and gift the books to this new address you created, which will send gift emails to that address with a link to redeem the book. Then, on Christmas morning, just give her the Kindle with a note listing the email address and the password for that account. She can just click on the links in the emails to that account to add them to her Kindle once she’s registered it.

Q9: Okay not saving for retirement
My overall estimated financial breakdown:
Net income $2800/month

Savings:
$0

Debts:
Car $300
Credit Card $140 (but I try to pay 200 even)
Student Loan (minimums) $500
Total – ~$1000

Living expenses
$750 – rent
$250 – food/groceries
$120 – insurance (auto, renters)
$80 – gasoline
$40 – cell phone
$60 – utilities/internet (est. average)
Total – $1300

Net income (2800) – Minimum debts (1000) – Living expenses (1300) = ~$500 leftover

My problem is that I have only about $500 a month for things like longer-term saving, retirement, entertainment, clothes, gifts, tithing, and car maintenance.

I would say that there usually is something that comes up in any given month that eats through a lot of that, such as a car repair bill, wedding (all of my friends are getting married it seems…), anniversary, holidays, etc.

Whenever I get to the point where I realize that I have $500 a month for these last expenses and saving, I feel pretty good, but the fact that I’ve been working 2 years and haven’t saved anything for retirement does worry me. I also would like to get some money together to pay back my parents for a few loans that gave me in college (about $2500 in total), but prioritizing has been an issue for me (they didn’t give me a time-frame for repayment, and aren’t charging interest, maybe they would even forgive the loans if I had asked…I just need to talk to them about that).

I guess my major question is: Should I feel “OK” not saving for retirement now, given the amount of debt I have in other places? Would it be worth it to throw, say $50 a month a savings account for retirement (eventually to go to a Roth IRA or something sensible when I have enough to make minimum balances at Vanguard or somewhere similar), and another $50 to emergency fund, leaving $400 (or $100 a week) for those other things?
– Mindy

Right now, you’re drifting. You’re not getting ahead, but you’re not falling behind.

The problem with that is that you’re currently working at a reasonably well-paying job. This is a time where you need to be getting ahead a little, because you won’t necessarily always have that job.

What happens if you lose that job tomorrow? What do you do? If you don’t have a plan for this situation, then you need to come up with a plan. I’d probably do exactly what you suggest, putting some into retirement and some into an emergency fund. For the immediate future, I’d probably put more into the emergency fund, at least until you have two months worth of living expenses in that savings account. So, for the next two years, I’d shoot for $100 a month into an emergency fund and maybe a bit into retirement if you can squeeze it.

You’ll find that emergency fund helps you a ton with things. Day to day, it stays invisible, but when things go down, you are going to be so glad to have it.

Q10: Manage focus, not time
If there’s one thing I’ve learned about time management, it’s that it only really works if you pay attention to your ability to focus and your energy level. You can try to be as efficient as you want, but if you try to do something that requires focus during times of the day when your focus is poor, you’re just wasting time. Do high focus things when your focus level is high and do low focus things wheny your focus level is low.

– Dean

I’ve come to appreciate this, too. I don’t really schedule things too tightly during the day any more.

Most of the time, I just operate by a to-do list, and I try to keep a mix of high-focus and low-focus things on there. When I feel ready for high-focus things, I do high-focus things. When I find myself slacking, I head to low-focus things.

For me, I usually focus best between about 8 AM and noon, with another pretty good focus period in the early evening. I save the afternoons for low-focus things.

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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