Reader Mailbag: The Music of Our Youth

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. Roth 401(k) conversion worth it?
2. Convincing myself of better tomorrow
3. Loan considerations
4. Suspected theft
5. Long versus short term investing
6. Partner possibly evading taxes
7. Experiences over stuff
8. Idea journal?
9. Paper product comparison
10. Figuring out used bookstore

I always thought it strange that my parents – especially my mother – preferred to listen to the music that was popular when they were about fifteen years old up until they were about twenty five years old. In their case, that meant that I heard a lot of music from the 1960s and 1970s. I can still sing along to an awful lot of songs from that time period – everything from Wings to The Supremes to The Carpenters.

Flash forward to today. I listen to some new releases, but I feel most comfortable when I’m listening to music that I was first exposed to between the ages of fifteen and twenty five. In other words, if it came out between the early 90s and the early 00s, it fits me like an old glove.

The more things change, the more things stay the same.

Q1: Roth 401(k) conversion worth it?
My employer has stated that they will be providing a Roth 401k where previously we had a regular 401k. I currently have about $30,000 in the current 401k and I wanted to find out if it would be be better to convert the old 401k to a Roth one or to leave it as is. I’m 27 years old.

– Emily

The decision to do this conversion is very similar to the decision to convert a traditional IRA to a Roth IRA. I recommend using this calculator. It was designed for traditional and Roth IRAs, but I’d trust the result for traditional and Roth 401(k)s as well.

I’d happily run the numbers for you, but I don’t have nearly enough information. If I used the defaults in the calculator plus the info you gave me,

Unfortunately, the biggest factor in determining which you should go with depends on your income tax rate, both now and then. Of course, you have to make a nearly blind guess as to what the rates are going to be in forty years. My suggestion? Assume that it will be high, because you won’t have many regrets if rates turn out to be lower.

Q2: Convincing myself of better tomorrow
I can see why it makes sense to save ahead if you foresee a bright future, but what if you don’t? My family has a long history of people not living past fifty, so I can’t see why I should save for retirement. I don’t have kids either. Why should I save?

– Andrew

This seems incredibly fatalistic.

If I were in your shoes, I’d hold back on the personal finance advice for now and spend some time talking to a mental health professional. An incredibly bleak future perspective has a tremendous negative impact on your life right now.

If there are recurring health problems, you should talk to medical professionals to see what you can do to minimize their impact.

Again, I don’t know the reasons that are causing you to feel this way, but I can say that feeling that way leads down a very dangerous road.

Q3: Loan considerations
When banks or credit unions are considering whether or not to give out a personal loan, do they look at your overall net worth (including assets you have with different institutions) along with your credit report or do they just focus on your report and your holdings with them exclusively?

– Mark

It depends on their process. Usually, a big part of that process is the application you fill out because, along with your credit report, that’s most of the information they use to determine your loan.

Some banks and credit unions use automatic underwriting, which means that computers analyze whatever data they have on hand. Others do manual underwriting, which means that a real person looks at your information.

Generally, I’ve found that manual underwriters are better if you have an unusual case – not much credit, an identity theft issue, or something like that.

Q4: Suspected theft
I’m pretty sure that someone in our house is taking items at a slow rate and selling them off. I initially figured it was my teenage son but I’m pretty sure it’s not him after watching carefully. This leaves my ten year old daughter or my wife. How do I figure out who is doing it? How do I handle it?

– Andrew

I don’t know how you figure this out other than using security cameras or other similar investigative tools. You could set up security cameras in the areas where you expect things to be stolen, then review the video after you notice more things missing.

Regardless, there are trust issues going on here. It may be that items have simply moved to another location or been placed in storage. You seem to immediately be jumping to the conclusion that someone is stealing from you.

Before you believe that about your family, make absolutely sure that you’re not blaming innocent people.

Q5: Long versus short term investing
How do you feel about the strategy of investing for the long term (401K and IRA using fundamental analysis) and trading for shorter term gains (discount brokerage account using technical analysis) as a way to have a funded retirement and side source of income now?

– Jerry

It is very hard to make significant money on short term trading unless you are very well funded and are able to take on the financial risk of trading on leverage (meaning the brokerage is essentially extending you credit to make short term trades).

If you don’t have those things, you’re taking on a ton of risk. Actually, you’re taking on a lot of risk even if you have that.

If you really want to trade for short term gains, use only money you can completely afford to lose because it is extremely likely that brokerage fees will eat up most of your gains and you’ll end up taking a lot of losses on the chin.

Q6: Partner possibly evading taxes
I just learned that my boyfriend has never paid income taxes. He’s earned a freelance income for the last several years. What should I do?

– Alex

I would contact a tax attorney to figure out the appropriate steps.

Assuming he provided an accurate taxpayer ID to his employers, the IRS is likely aware of much of his income. They may not have taken action on him because of their backlog of issues, but it’s very unlikely that he’ll get away with it over the long haul.

His best approach is to deal with it now, as it will keep the interest he owes as low as possible. He also may be able to negotiate it down.

Q7: Experiences over stuff
Over the years (been reading since 2010, I believe), you and others on your blog have talked a lot about prioritizing “experiences” over “stuff”. However, I don’t understand the difference. The only reason people buy “stuff” is to have experiences. If I purchase a movie, game, or book, the “stuff” doesn’t matter– what I’m really purchasing is the ability to have an experience (watching a movie, playing a game, or reading a book). Further, raw “experiences” are typically one-offs; a trip to Washington DC is a great experience, but can only happen once. “Stuff” usually allows for recurring experiences– for example, if I purchase a television show, I can experience it multiple times with all sorts of different people.

So, it seems to me like the difference is buying an actual experience (what you call “experience”) versus buying potential experiences (“stuff”). It seems to me that “stuff” is a better long-term investment, since it usually allows for recurrence and a greater mix of possibilities. Am I right, or am I missing the point?
– Ronald

If you’re buying a book just to have the experience of reading it, why not just check it out from the library for free? The difference between those two situations is “stuff,” not “experience.” The same thing happens when you’re comparing renting a movie for $1 from a Redbox versus buying one or playing a board game at a local community game night versus buying one.

You would have to read a book you purchased many, many, many times to make up for the “cost” of a library trip. You’d have to watch a program a lot of times to make it worth buying it.

Also, a lot of experiences are free. I look at my local community calendar all the time in order to find free things to experience. It doesn’t cost anything to play disc golf at the park or to go to a community concert or… well, thousands of other experiences. “Stuff” is very rarely free.

Also, stuff requires storage space, which eventually means larger living quarters. Experiences don’t take up any space at all.

Q8: Idea journal?
I’ve been reading The Simple Dollar’s archives from the start and I had a question about the “idea journal” you’ve mentioned many times. What kind of journal do you use for that?

– Geoff

Right now I use an Evernote Moleskine that I was given as a gift. Whenever I fill a page with random ideas, I take a picture of the page and save it in Evernote. Since I usually write my notes in big block letters, it just translates the words into searchable text which I can refer to easily.

Most of the journals I use are gifts at this point. Family members have figured out that I always like nice journals and they often give them to me as gifts.

As for what an “idea journal” is: it’s just a journal I try to keep with me all the time to jot down notes as they come to me. If I don’t have it nearby, I’ll use an app on my phone, but I prefer to just use a journal.

Q9: Paper product comparison
Recently I have begun trying to compare the prices of Bath Tissue and Paper Towels between various retailers and on-line. I have found the brand I like, the problem is it’s not a straight-forward comparison. Bath Tissue contains standard rolls, double rolls, mega rolls, big rolls, etc. I have counted 7 different sizes of 1 brand! Paper Towels is the same, with single rolls, Big rolls, etc. I believe the manufacturer purposely does this to confuse shoppers and make comparing prices difficult. What is the best way that you have found for shopping around for these 2 items?

– Ellen

Count the sheets, not the rolls.

Let’s say you’re comparing a 9 pack with rolls that have 120 sheets each with a 36 pack that has rolls with 90 sheets each. Just multiply the number of rolls in the pack by the number of sheets per roll.

In this case, the first pack has 1,080 sheets and the second pack has 3,240 sheets. Then, you divide the price by the sheet count and go for the pack that has the lowest price per sheet.

I agree – it’s often hard to interpret at a glance what the best deal is. My solution is to just keep a calculator on hand. If you can save even a fraction of a cent per sheet, it adds up to dollars when comparing large packs.

Q10: Figuring out used bookstore
Theres a used bookstore across town that I have started using but when I go there I don’t recognize any of the books. I have asked for help finding ones I might like but the people working there just seem lost. How can I find good books there?

– Jill

I’d do some homework in advance.

I’d start off by making a list of authors whose books I’d be interested in reading. List authors that you know you like, then look for the well-known authors in genres you like and write down some of those names. Try to make a list of at least twenty authors.

When you go to the store again, just look for books by those authors. I can’t imagine a used bookstore that would have zero copies of any books by such a list of authors.

If you need help when there, just tell the person you’d like to find books by these authors. It might be that they have no idea how to answer you when you’re asking for generic book suggestions, but they might be really helpful when they’re given a more specific request.

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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