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. “Rent to own” proposal
2. Trying to change routines
3. Spouse disagreement about retirement savings
4. Local Edward Jones for investments
5. Cast iron pot
6. Hate others thinking I’m cheap
7. School fees or 401(k) savings?
8. Cheap dating
9. Feeling lost with great education
10. Old friends
Whenever Memorial Day comes around, I think of the millions of lives that have been snuffed out by wars. Most of the wars in human history have not been fought over anything that’s been worth the lives that have been lost to those conflicts.
Memorialize those who lost their lives in war today, but remember them when you think of future conflicts. Think of the youth and promise they held and then multiply that by a million. Is that conflict really worth it?
We owe it to them to always respect what they fought for and try as best we can to avoid the mistakes that led to their unfortunate passing.
Q1: “Rent to own” proposal
We are located in a very expensive and competitive area and for the past 8 years have been renting the house we live in. We are now thinking of buying it and are wondering what is the best way to approach the owner so as to convince him to sell it and do so at a fair price? Should be propose a “rent to own” or make an offer? Should agent(s) be involved?
For starters, it is very likely that, unless you propose something incredible, the owner will simply say no. If you’re in an area with a hot real estate market, he may not want to sell in the least. Hearing “no” will probably have nothing to do with your proposal.
If you’re going to bring it up, the best thing for you to do is figure out exactly what you might propose that he might realistically accept. For one, you’ll probably have to start from ground zero with a “rent to own” arrangement, and the total rent will likely have to at least match the value of the home. Figure out what all of these numbers actually look like.
When you’ve got that figured out, talk to your landlord directly about the idea, starting with the general concept. If your landlord is willing to discuss, run through the numbers you figured out. I’d suggest proposing something a bit lower than what you calculated earlier, but not overly lower – you want the landlord to think about it, not laugh you out of the room. If your landlord is interested, you’ll proceed to negotiation and eventually drawing up a contract, at which point you may want a lawyer to read it over.
Q2: Trying to change routines
Our biggest problem with the financial changes we’re trying to make is to not just fall on old routines. When we think about the changes, they’re easy, but we find ourselves just doing the same old routines without really thinking about them and they’re expensive. For example, I stop to get an egg sandwich and coffee each morning and I don’t even really think about it until later on. How can we break bad routines like this? I don’t usually mind the alternative – I just don’t think about it until it’s already done.
My technique for breaking bad routines was to either make that bad routine much more difficult to continue or else put a Post-It note in a place where I couldn’t help but see it so I would rethink that routine.
For example, if my routine was to grab a bottle of soda from the refrigerator, I would just fill the refrigerator with bottles of water.
Another example: if my routine involved stopping for coffee each morning, I’d stick a Post-It on my steering wheel suggesting that I skip the coffee and get something at work.
Nudges really do work. You’ve just got to set up those nudges in advance so they push you a little at just the right moment.
Q3: Spouse disagreement about retirement savings
My spouse and I have a great relationship and we can talk openly and calmly about anything and everything. The only thing that we really disagree on is whether we’ll have enough funds when we retire. How can I convince my spouse that we need to crank it up?
To give you some idea of where we are financially: I’m 39 and work full time in a stable IT position and bring home about 2500 EUR/mo after taxes. Because we have two small kids aged 3 and 0, my wife stays at home for the next few years bit gets several hundred Euros in government support (Austria is great when you’ve got small kids!). We’re moderately frugal and have one used car that’s low maintenance. No cable TV, magazines and such stuff.
We live in an apartment right now, but in the summer we are moving into a new house. Same size (living/dining/kitchen, 2 kids rooms, 1 master bedroom, 1 bath, no basement) but the house comes with a garden, and it’s brand new with modern heating so it has lower energy costs etc. It will actually not be more expensive than the apartment is now, but especially because even though we’ll have more debt then than now, it will be at a MUCH lower interest rate do the monthly payments are the same, around 1000 EUR/mo.
When all the bills are paid, there’s nearly nothing left to save, but one of the bills is a pension fund that we put around 250 into per month since about 6 years. According to my calculations that’s not nearly enough to get us by, 30 years from now. When we discuss this, my wife’s argument is that we need to ensure a stable home, and and it’s not like we aren’t saving anything.
I’m worried that I won’t have enough funds, and need to work until old age. On the other hand, I don’t really see where we could cut costs. Of course our monthly excess income will be higher once she goes back to work as a physiotherapist, I guesstimate that will bring an extra 700 EUR (no government support anymore) but obviously kids will cost more over time so we can’t simply plan to put all that into savings.
Talking to financial advisors is futile because we have the consistent experience that they will sell us anything they get a commission on so they invariably explain that one can never save enough.
You’re probably not saving enough for retirement to maintain the lifestyle you have right now. You might be saving enough to ensure a reduced lifestyle. The question is what level of lifestyle you’re each happy with in retirement.
It sounds to me like this is the crux of the disagreement. Your wife is happy to sell your home and live somewhere small in retirement, while you’d rather live a life more akin to what you have right now in retirement.
You’ve got to figure out together what your vision of retirement looks like, because if you’re picturing two very different things, then you’re each believing in a different path to retirement and are thinking the other isn’t preparing appropriately for it.
Q4: Local Edward Jones for investments
I’ve read your recommendations of using Vanguard.com and doing it yourself for investments. I have used my local Edward Jones office for investing for a long time and I like and rather trust the guy there. What’s the case for switching?
The quality of Edward Jones, in my experience, depends on the individual broker. I have known some Edward Jones advisors that are very good people and work really hard for their clients to get them into the best investments. I’ve heard long tales of other brokers that seem to do nothing more than steer clients into specific funds regardless of their needs.
This isn’t just true of Edward Jones. It’s true of virtually every financial advisor out there. Most are great people. Some are sharks. You’ve got to watch that individual person and do your best to figure out what they are.
If you’ve had a great experience with that advisor, there’s no reason not to stay there. However, if your advisor retires, then I would be very, very watchful over that person’s replacement.
Q5: Cast iron pot
You’ve mentioned that cast iron pots are the best. I’ve only ever owned the cheap nonstick pots from Walmart. They’re about ready to be replaced, and I want to get pots that will last us a long time.
Do you have any specific pots that you recommend? What should we look for, and what should we avoid? Ideally the pot(s) would be dishwasher safe, but I’m not opposed to handwashing if the pot will last forever.
We have a 5.5 quart Le Creuset enameled cast iron pot that we cook almost everything in, from soups to eggs. It goes through the dishwasher without any problems, cooks pretty much everything we throw at it, and looks like new. It was very expensive, but it also has a 101 year warranty.
I can’t speak more highly of enameled cast iron. It’s just wonderful for all kinds of cooking. It’s easy to care for, incredibly sturdy, and you can cook almost anything with it.
The only drawback is the cost. Even “cheap” enameled cast iron isn’t really cheap, and if you get higher end enameled cast iron with long guarantees, it’s really not going to be cheap. Still, you’re essentially never going to be replacing them. We’ve owned ours for several years now and it would basically pass for new even though it gets daily use.
Q6: Hate others thinking I’m cheap
I’m extremely good at saving money when it comes to my own expenses. When I’m alone, I’m perfectly fine spending a day walking on trails or reading a library book – in fact, that’s what I do. Where I run into trouble is when I’m in social situations. When I invite people over or when I go out with others, I really don’t like the thought of them thinking I’m cheap, so I tend to spend more than I should around them. Do you have any suggestions for finding that right balance?
The best advice I can give you is to stop caring what other people think.
No one is going to care if you order a low-cost item on the menu. They’ll probably just think you’re watching what you eat. No one is going to care if you don’t order five drinks after the meal, either.
No one is going to care that the meal you prepare when guests are over is made of low-cost ingredients, as long as it’s flavorful. As long as your living quarters aren’t really messy, they’re not going to care about decorations that much, either.
The best thing I ever did for myself is to realize that 99% of what I worried about when it came to the impressions others had of me really didn’t matter a bit.
Q7: School fees or 401(k) savings?
I have a job that makes about $150/week working part time. I only intend to be at the job for 1-2 years, while I finish the classes I need for grad school. When I’m in grad school, I will not have time to work, but will likely get a stipend. After my first contributions to my 401k (5%), I only have $20 for a month or two or work. I’ve been told that because of processing fees I shouldn’t have a 401k, beause I will end up losing money if I have less than around $3000 in it. Would it be better to wait on contributing to a 401k and instead using the money for my school fees? I’m 24 and have no debt except student loans, and will have to use all of my savings to pay for school this semester. I could use the 401k money for school or an emergency fund, but I know I’m supposed to save for retirement as early as possible.
If the 401(k) is incredibly bad in terms of fees, you should start a Roth IRA for yourself and contribute to that instead of the 401(k). The only exception to that would be an employer match – if your employer contributes to the 401(k), too, you should do what you need to in order to claim that free money.
Setting up your own Roth IRA is easy. I have one through Vanguard and it was about as easy as opening a bank account.
Having said that, if your schooling is leaving you without any emergency fund, you should focus on restoring at least a $1,000 emergency fund before saving for retirement. You need at least that hedge against disaster before worrying about retirement or other choices.
Q8: Cheap dating
I’m twenty five and I live a very cheap life. The only expensive part of my life is dating. Whenever I go out on a date with someone, it ends up being expensive – dinner and a movie can cost between $50 and $100, for example.
If you live a cheap life, you’re going to want to eventually find someone who wants that kind of life, too.
My belief is that dates should reflect what you consider to be the best of you, but not a “false” you. If you’re going to movies and restaurants you wouldn’t go to without the desire to impress someone, you’re going to end up with incompatibility issues.
Imagine you’re married and there is no pretense between you and your wife. What kind of date would you set up for the two of you then? What would a pleasant evening together be like? That’s the kind of date you should strive for when dating. The right partner will really click with that.
Q9: Feeling lost with great education
I am a long time reader of the simple dollar. Right now, I feel a bit lost. I have a Bachelor’s from one of the big three (Princeton, Harvard, Yale.) I worked in advertising for about seven years. Then I took time off to raise my kids. It has been five years. Thanks to a supportive and understanding husband, I do not need to work. We live well below our means and saving is not an issue. But I am lost. I feel like if I go back to work, I want something that works with my family. Maybe something in schools. So I have been thinking of subbing or teaching preschool, but I feel like people will look at me and wonder why an ivy league educated woman couldn’t do “better.” And sometimes I look at myself and think the same thing. If I have this great education, should I have come up with some great business idea that is flexible enough to allow me to put my family first and make money? I have racked my brain, but the ideas just don’t come. . .does this make me a failure to my education???
No, it does not make you a failure to your education. It makes you a person with your own independent thoughts and your own independent goals.
If you feel drawn to become a teacher, then think of yourself as a very well-prepared teacher who is intellectually ready to really educate those children.
Teaching is no different than any other profession. The well prepared tend to do well at that profession. Whether or not a specific person should be in that profession is up to them.
Q10: Old friends
Not too long ago, one of my best friends from high school moved to my town. She is not a Facebook user so I didn’t even know she had moved to my town until I actually saw her at the grocery store. Anyway, we met for coffee and then we invited her over for dinner. After dinner, she told us that she had left her husband who was abusive and was trying to make a new start but was having a tough time finding a job of any kind. She wasn’t telling us this to ask for any help as I practically had to force this out of her. Anyway, after she left, my husband suggested that he might be able to help her find at least some sort of job at his company. Is that something we should do? I’m really afraid of unintended consequences here.
It’s up to your husband. If helping her get such a job isn’t a big deal in his workplace and she’s not asked you for a thing, I see nothing at all wrong with it.
I would be much more wary if she had asked you for anything, but it sounds more like she’s an independent woman who’s struggling due to some life challenges. A friend offers a helping hand here and it sounds like you’re in position to do so.
Sure, there are some possible downsides to this, but the upsides are enormous. If she takes that job and succeeds with it, not only have you put a huge foundation stone in place for your friendship, but your husband’s employment gains a good worker. Even if she’s not the best worker of all time, it’s still got friendship upside.
If this is a trivial matter for your husband in the workplace and her job performance won’t reflect on his in any way, I would absolutely do this.
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.