Reader Mailbag: The Innocent Man

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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. Worried about student loan debt
  2. Accepting lifetime debt
  3. Community service suggestions
  4. Charity while in debt
  5. Cost of second child
  6. Starting a financially equal marriage
  7. “Freemium”
  8. Emergency fund paradox?
  9. Home maintenance “troubles”
  10. Geocaching

The Innocent Man, first published in the November 2012 issue of Texas Monthly, is one of the most powerful things I’ve read in a very long time. It’s the true story of a man wrongly convicted. I virtually guarantee that it will hit you emotionally on some level (and probably many levels) and make you think again about how our justice system works. Please, give it a read. It’s well worth your time.

Q1: Worried about student loan debt

I wanted to get your advice on my personal debt. I have an average of 101,000 in student loan debt. I graduated 3.5 years ago and have yet to secure a full time job with benefits. This is the only legitimate debt that I have. 42,000 of that debt is federal loans that I haven’t paid much to since graduating. 60,000 is private loans that are incredibly worrisome I haven’t earned more than 12,000 in a calendar year.

I am worried about what this means for my financial future especially when it comes to retirement or a 401K? My parents and I have discussed taking out a better loan to pay off the private loans that I have. Is that a good idea or a terrible one? I am 26 and have virtually no savings. Is there a backup plan I should have like remaining a beneficiary on my parents life insurance? I live with my parents for the foreseeable future until I can become financially stable. I would like to get a Masters degree at some point and maybe even a PHD. Does any of this seem possible considering the state of my finances?
- Chris

I’m going to assume that $101,000 is actually your total student loan debt.

If you are able to take out a lower-interest loan to pay off a higher-interest one without adding collateral or increasing your monthly payments significantly, then that’s a move you should make.

As for additional schooling, if your debt consists almost exclusively of student loans and you’ve not been late on your payments, your debt situation shouldn’t prevent you from furthering your education. However, you would be looking at a future where you walk into the workforce in your mid-thirties with a Ph.D. in some unknown field and $150,000 in student loan debt. That Ph.D. better be one that you can use pretty quickly.

Q2: Accepting lifetime debt

My wife and I have had several conversations about personal finance lately. Her feeling basically is that she doesn’t care whether we’re in debt for the rest of our lives. She basically views that as normal and compltely acceptable. When I suggest that we’ll have more money each month if we get rid of the debt, her response is that the only way for us to get there is by living a “terrible” life now.
- Shane

It sounds like you have a fundamental difference in perspective about personal finance, at least at this point in your lives. That may change, of course, but right now it really sounds like you’re very, very far away in terms of your money and your lifestyle.

I have found that it’s very hard for people to really succeed with significant changes in their behavior if their motivation for that change is external. In other words, you have to wait until they’re ready for themselves to make the changes they need to make.

What should you do? My honest reaction to this is that, if further discussions don’t achieve anything, you should seek some form of marriage counseling, because this is an extremely fundamental disagreement that affects many, many different avenues of your life.

Q3: Community service suggestions

Do you have any suggestions about how to start volunteering? I realized recently that it is important to me to make a difference in my community, and yet I haven’t done much except one time things.

My main considerations in looking for fitting volunteer opportunities are 1) they would ideally be fun or impactful, since I only have limited time; 2) the tasks wouldn’t be mundate, ie no stuffing envelopes.

I understand that it would be really hard to recommend ideas without knowing me well. What I’m looking for is more of the thought process of identifying and narrowing down volunteering choices.
- Caroline

My honest suggestion would be to start with VolunteerMatch, which will do just that for you. It does a great job of helping you sift through a lot of volunteerism possibilities.

The one problem with VM, though, is that it works best in a large metropolitan area. If you live in a small city or a town, you’re going to have to do more footwork because the volunteer ideas aren’t going to be as readily apparent.

If that’s your situation, my honest suggestion is to contact someone in city government about the subject. Send an email to a city councilperson or the parks and recreation director and just ask what kind of volunteerism can be found in the area.

Q4: Charity while in debt

How can you justify someone giving money away when they’re facing debt at home?
- Fred

Different values, basically.

Some people consider it a personal imperative to help others at every opportunity. Others do not. It’s simply all about what you value.

As long as your actions aren’t directly (or indirectly, in a strong way) bringing harm to someone else, I think it’s pretty hard to say that one set of values or priorities is “right” and the other is “wrong.” They’re all just different.

Q5: Cost of second child

My husband and I have 1 child who just turned 2. I really want another child, but my husband is adamant about no more kids. I admit that before we got married, we agreed to having only 1, but I believe that decision was made premature. His concern is that it will be too expensive to have another child (I am a stay at home mom, so we live on 1 income), and that he is getting too old. Do you have any idea if it is that much more to have a 2nd child?
- Jennifer

In our experience, each subsequent child has been less expensive than the one before it. The reason for that has been the number of “hand me down” items that we’ve had access to. There’s been no reason to re-purchase most of the supplies we needed for a baby or a toddler.

That being said, there are a lot of expenses with a second child. Everything that’s consumable or disposable needs to be purchased. As the child gets older, you’re signing up for a big additional batch of expenses for all of the education and extracurricular activities, let alone the food and clothing.

“Less expensive” does not mean “cheap” or “free.” Far from it.

Q6: Starting a financially equal marriage

A few months ago you wrote about being financially equal in a marriage. I will be getting married this year and am trying to brainstorm a to-do list for combining finances so that we can start our marriage together financially. We each have several long-term to-dos such as student loans, credit card, etc. What are some debts that we need to keep mind and what are some ways we can consolidate everything?
- Riley

Every debt that either of you brings to the marriage should be on the table. After all, once you’re married, you’re both going to be impacted by the repayment of that debt.

Any debt repayment plans you each individually have should be dropped in favor of a mutual debt repayment plan that covers all of your debts. Work through those debts as if they’re your own personal debts because, when you’re married, they functionally are your personal debts in many ways.

Similarly, it makes sense to combine your finances into a single account as quickly as possible, and both of you should have open access to review everything going into and out of that account. Openness and honesty are the best things you can have in a marriage.

Q7: “Freemium”

I don’t understand how “freemium” things work. How can a company make money if they’re giving away most of their product? It seems like most of the time they’re only charging for unnecessary add-ons.
- Joe

The entire “freemium” model is based on the idea that people will pay for those “unnecessary” add-ons, for two reasons. One, the customer actually views those “unnecessary” items as worthwhile, and two, the user simply wants to support the company that’s just giving them a really useful free product.

Take Remember the Milk and Evernote. These are both services that use the “freemium” model. They’re both services I use basically every day. They both offer “premium” versions that offer additional elements that I don’t necessarily “need,” but that I find useful. Because of the fact I use them both so much and the extra elements are actually somewhat useful (better mobile versions, etc.), I’m willing to pony up for the “premium” version of both.

I’d rather give a little money for a service that I know I actually use all the time than pay up front for a service that I may or may not use over the long haul.

Q8: Emergency fund paradox

My husband and I are both in our early 50’s. We finally have a very nice emergency fund built up and all debts paid off except our mortgage. Right now the emergency fund is in a savings account at a major bank. While it’s not making much interest, the fact that it’s there makes it immediately available in case of emergency, and as a side perk, allows us to maintain “preferred” status at the bank (meaning we get free checks, no-fee banking, and in general, hassle-free banking).

Our problem is that our two teenagers will soon be applying for college financial aid, and the emergency fund has me worried. All of the college planning websites I’ve read advise that any cash sitting around is considered “available” for tuition by the FAFSA, and will be assumed to be going toward college tuition. We know we could dump this cash toward the principal on our mortgage prior to filling out the forms (and then it wouldn’t be considered in the FAFSA calculation), but then the funds are no longer available in an emergency. Any suggestions?
- Susan

If I were you, I’d start by using FAFSA4Caster to get some real models of what kind of impact your savings will actually have on your children’s FAFSAs. Run this application using a few different scenarios and see what the different results are.

In general, my experience has been that, unless you are truly poor or on the low end of “middle class,” the FAFSA simply points you primarily towards student loans anyway and that most grants and scholarships are primarily merit-based, not need-based. There are exceptions to this, of course.

In other words, I wouldn’t expect that the presence or lack of the type of emergency fund you describe will have a make-or-break effect. Just run the numbers through the FAFSA4Caster and see for yourself.

Q9: Home maintenance troubles

I follow a home maintenance schedule from an issue of Readers Digest several years ago. I use it as a checklist. The problem is that I don’t like doing most of the things on the list, so I hire a handyman, but then I feel dumb when I see him moving through the whole list in an hour or two with no problems. How can I get over my fear of home maintenance?
- Jessica

Pick one of the tasks on the list and do it yourself. That’s the best way to break down this wall.

Look for one single task that doesn’t seem too intimidating, then watch some YouTube videos on how to do it. Most home maintenance tasks have several videos explaining how to do it in very visual terms.

Once you feel confident after watching the videos, give it a try. Go through that one task slowly, one step at a time. What you’ll almost always find is that it’s quite easy once you do it.

The thing to remember is that even if you mess up the maintenance badly, you rarely create a truly problematic situation. You just create a situation where someone has to re-do the maintenance.

Even better, once you succeed at one maintenance task, you’ll have the courage to try another, then another, then another.

Q10: Geocaching?

Have you mentioned geocaching?! If you haven’t heard of it it’s the best free fun you can have! And on top of that, the kids love it and your dog can come along most of the time and help you search.. and he gets some good excerise too!
- Shelley

We love geocaching! It gives us an excuse to wander around all over the place looking for “treasure” (though the search is the real reward).

It’s a lot of fun for children who get really into the search. My oldest son goes absolutely wild when we go geocaching or do something similar.

I’ve been known, in my area, to leave signed copies of my books in the caches, so if you geocache in central Iowa, you just might find 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.

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