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. Repetitive car repairs
2. Keeping oldest credit card
3. Rethinking decision to buy home
4. Thanksgiving place settings
5. Eliminating debts before grad school
6. Dividing up Thanksgiving leftovers
7. Which refinancing option?
8. Thanksgiving prayer
9. Making money with surveys?
10. Game for family this week
Each year, I see a notable drop in traffic during Thanksgiving week (as well as the two or three days on either side of Christmas). An awful lot of people out there are going about their business, visiting family and breaking bread with them, and getting in touch with the elements of their life that are really important.
I’m doing the same thing this week, and I hope you do, too. Just a reminder that posting will be a little bit slower later this week (Wednesday through Sunday).
The power steering breaks every three months. My warranty company will not pay for all of the repairs, so I have to pay $150-$800 every time it breaks. Right now, the power steering is out. I can pay $150 to fix this short-term, or $400 for a more hefty fix, which the auto repair shop says has a 50% chance of breaking again.
It seems clear to me that I must sell this car, but I have a few challenges:
1) I still owe $8000 on the auto loan, which is more than the Blue Book price.
2) It’s rainy season where I live, so I do need a vehicle (not my bike) for the next four months or so.
3) I’m not sure how to handle the current repairs.
How would you recommend that I handle this situation?
The first thing I’d do is find a new mechanic, because a repeated breakdown like this is an indication that something else is wrong with the vehicle that your current mechanic is not dealing with.
Take this car around for estimates when it’s roadworthy. Find out what’s really going on with it and see what it would cost to get the real problem fixed.
Since you’re underwater on the car, you’re going to have to resolve the car loan before you can sell, which means you’re going to have to come up with out of pocket cash any way you go. Focus on trying to figure out the real problem here, as that will get you much more life out of the car.
Q2: Keeping oldest credit card
I recently received a letter from my credit card company changing the terms of my credit card. I will now be charged an annual fee of $55. This credit card does not have a balance. It is my oldest credit card (the first I ever applied for). I’ve had it for about twelve years. It has a high interest rate and a high credit amount. I’ll never use the card, but I keep it for credit history. My first inclination was to close the card to avoid being charged a fee. Then, I thought about it more. I have two other cards. One with a balance that I’ve closed because the interest rate was being jacked up. I’m still paying it off. I also have another with a low limit and no balance that I’ve had for maybe five years. If I close the card, I’ll be left with a high debt to credit ratio and a shorter credit history.
Should I close the card? Might that jeopardize my ability to obtain credit for a home or auto loan in the future? My husband and I would like to buy a home in the next few years once our credit cards are paid off and we have a downpayment. I would hate to keep a card I don’t use and pay the fee but I don’t want to be too focused on the short-term.
Your credit history stretches back only seven years for credit cards, so it looks like your other cards are nearing that limit anyway. I wouldn’t worry about cancelling this card with regards to the length of your credit history.
My only concern with that would be your fairly high debt-to-credit ratio if you do choose to cancel the card. This means you are sitting on some level of credit card debt, which you should take care of as intensely as possible.
Still, I wouldn’t let the fear of canceling this card keep you from walking away from it. I don’t think the drawbacks for you, if you are forthright about paying off the other cards, are that big of a deal.
Q3: Rethinking decision to buy
I am just curious how you would [think of your home purchase] now, sort of as a revisit, after the markets fall, and any changes or discussions you would have with your wife with regard to making such a monumental purchase relatively against your internal wishes. I’m sure you had much communication with her with regards to the pluses and minuses to buying without down payment vs continuing to rent. I don’t know much about Iowa, but I simply assume you are facing the same challenges everyone else is. Also, how does the concept of multiple payments in order to pay down the mortgage quicker change with depreciating values as opposed to appreciating?
I don’t regret buying for one simple reason: our house payments aren’t much more than we were paying per month in a very tiny apartment. In our area, rental prices are elevated because of the sheer demand for rental space since we’re close to a college town – in our case, Iowa State U. and Drake U. are within 30 miles.
Our move wasn’t precipitated by whether a home was a good buy in that particular market. Our move was precipitated by “we live in an apartment that’s too small for two adults, a toddler, and an infant … what’s the best sufficient housing per month we can get for the buck?” It turned out that a home was the answer.
My apprehension was mostly due to the prospect of homebuying, which seemd like a very daunting task at the time.
As for paying down that debt with multiple payments, I think it depends more on how long you intend to stay in the house and whether you’re considering walking away from it. If you’re sticking with the mortgage, extra payments are nothing but a benefit.
Q4: Thanksgiving place settings
How do you handle Thanksgiving dinner seating? In our family, most of the adults sit at an enormous table. In previous years, this wasn’t a problem, but over the last year there have been several conflicts between individuals. I don’t want to “force” anyone to have to sit next to someone they’re not getting along with. How would you handle this?
We typically don’t have this problem at our Thanksgiving celebrations, as mostly the house is filled with people who don’t get to see each other often enough and are very happy to renew an acquaintance.
If you do have this problem, the best move is to simply assign seating with placards so that people know where they should sit. This way, you can keep problem pairs away from each other so that the event isn’t ruined for everyone.
Simple 3″x5″ cards, printed nicely and placed on plates, should do the trick here!
Q5: Eliminating debts before grad school
I am in my twenties, and live in the Madison, WI area. I graduated from college with a B.A. shortly before the economy tanked in 2008. Since then, I have only been able to secure a crappy data entry job, where I make about $27,000 gross per year but luckily have fairly decent health insurance. Additionally, I have a part time job in retail (very part-time, which brings in $150 per month gross) and try to use my journalism degree by doing some freelance writing in my spare time. (ha!) After almost two years in a dead-end job that I hate, and countless job hunting in the area, I have decided to go back to school and get my master’s next fall. It’s something I always wanted to do, but I just thought I would be able to be in the workforce a bit longer.
Anyway, over the past year, I ended up accruing some credit card debt and also wiped out my small savings account when I moved in with a very irresponsible boyfriend, who not only stole from me but left me with all of the household bills for the term of our lease! I broke up with him, and began to live by myself, but the rent and cost of living in Madison is so high that I now have a roommate. I live pretty frugally by shopping at thrift stores, and cooking at home. I have managed to pay down my credit card debt (under $1000 now!) but am confused about what I should focus on when I pay off my credit cards. I have a $9k auto loan (4.99%) and about $11k in student loan debt from my undergrad work. I also have nothing in savings right now because of the ex-boyfriend situation. Of course, there is the looming possibility that I won’t get a teaching or research position in graduate school, which will result in accumulating much more debt, especially since I am more than likely going to have to attend college out of state.
I know that I won’t be able to pay off either my student loans or my car loan completely before I go to school next fall, but I want to reduce this debt as much as I can. Should I focus on reducing my student loans or should I work on the car loan? I am still uncertain about whether I will try to keep the car while in school, but since I don’t have any savings, I can’t even afford a junker so I need a car for at least another 10 months.
In your situation, I would get rid of the high interest debt, then start making minimum payments on the other debts while building up an emergency fund.
The reasoning here is simple. Once the high interest debt is out of the way, the minimum payments on the remaining low-interest debt are small and they aren’t accumulating interest very quickly. If your future is uncertain, a hefty emergency fund will keep you from falling back into a credit card financed lifestyle.
If you do find that you have a teaching position, you can certainly use the emergency fund to pay down one of the debts (probably whichever one has the highest interest rate).
Q6: Dividing up Thanksgiving leftovers
Each year, we have a potluck for Thanksgiving dinner and, each year, everyone brings enough to feed a small army. After the meal, though, there ends up being a lot of uncomfortable feelings about splitting up leftovers. How do you do this without resenting each other over who got the most leftovers?
Make everyone equal.
Buy a bunch of those small Ziploc tubs that enable people to take leftovers with them. Let people take turns going through the line and putting whatever they want into one tub. If everyone has gone through, the line can happen again with a second tub and a third tub.
This way everyone ends up with the same amount of stuff if they want it. The only possible route of complaint with this method is who gets to go through the line first and, if that’s an issue, draw numbers out of a hat to determine the line order.
You can’t get much more equal than that!
Q7: Which refinancing option?
We are in the process of refinancing a home we purchased 5 years ago with a 30 year loan of $142,000 @ 6.25% w/ a monthly payment of $1,153 w/ insurance and taxes included.
Now we have the options to refinance a loan amount of $136,500
15 years @ 4% monthly payment of $1,195 w/ insurance and taxes included
25 years @ 4.5% monthly payment of $1,040 w/ insurance and taxes included
30 years @ 4.5% monthly payment of $975 w/ insurance and taxes included
I am struggling w/ which option to choose. I like the idea of not having a mortgage and paying considerably less in interest with the 15.
However, this is not our final home. I would like to keep it as a rental when we move into a larger home to accommodate our family as the kids get older and subsequently bigger.
So, in my head, the 30 or 25 would make the most sense as someone else would be paying the mortgage and we would benefit on our taxes as well as be able to fully fund an emergency fund with the $180 or $115 difference.
The tax assistance is negligible on a home. Unless you’re already filing long form, the actual interest you would pay on any of these loans near the end would make little or no difference on your taxes.
What you’re really asking yourself is whether you’re more concerned about now or you’re more concerned about later. Right now, in the very short term, the slightly lower payment is better. If you get more than a year or two out, though, the 15 year mortgage is much better, and it gets better every. In fifteen years, there are no more mortgage payments and you own the house free and clear.
Not only that, the total interest you’ll pay on the 15 year loan is about half as much as you’ll pay on the other loans. We’re talking $100,000 in savings here.
Q8: Thanksgiving prayer
My brother and I and our wives are having another couple over for Thanksgiving dinner. I’m a lapsed Catholic (as is my wife) but my brother and his wife go to church every week and are very strong in their faith. The couple we chose to invite this year are atheists. My brother often leads the saying of “grace” before the Thanksgiving meal each year and I’m afraid this will be an issue. How should I handle this?
Talk to each of them individually and explain the situation to them. Provided that you’re dealing with rational people, the situation will resolve itself quite well.
With the atheist couple, I’d simply explain that my brother is a Catholic and it’s a part of his Thanksgiving tradition to say a short prayer before the meal. With your brother, I’d simply explain that the other guests do not follow the same religious views as he does, so it would be polite to keep it short.
Most reasonable people can meet in the middle on things like this. I know that if I were dining with any person of a different faith who wished to pray before a meal, I wouldn’t be bothered at all.
You can, but you won’t make very good money for your time. You will make far less than minimum wage, and much of that return will be in the form of store credit at some shop or in the form of prizes that you don’t really want.
To put it bluntly, there is no way to simply sit down at your computer whenever you feel like it, click your mouse a few times, and make a lot of cash. It simply doesn’t happen – there’s no one that’s going to pay you more than a pittance to do this.
Having said that, there are some programs that will reward you small amounts for filling out surveys and the like. This is the type of thing that some people do during commercial breaks on television shows, for example. Don’t expect a great return for your time, though.
Q10: Game for family this week
You’ve written many times about your love for board games and you’ve now got me interested! When I was a kid, my two brothers and I used to play a lot of Risk and we often play a game or two of it over Thanksgiving week. What would you suggest as a game we might like?
It depends heavily on whether it’ll just be the three of you or you’re going to try to convince others to play.
If it’s just the three of you, I would probably suggest either one of the “revised” Risk games (probably Risk 2210 A.D.) if you just want to mix up the experience of playing Risk, Memoir ’44 (my favorite wargame, which can be played in half an hour but only allows two players, which means you’d have to alternate), or a deeper game like Tide of Iron or Axis & Allies (both large-scale war games with more complexity than Risk).
If you can rope others into playing, I’d get one of the big so-called “gateway” games, probably Ticket to Ride. I’ve had a lot of success getting people who have basically never played a board game before to play TtR.
If you’re the type of siblings who are sneaking in multiple games of Risk during Thanksgiving, then these games will be right up your alley and will almost assuredly be well worth your time and money over the years.
Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.