Reader Mailbag: Unfinished Business

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. Strange credit card fee
2. Handling sudden income increase
3. Great job, next financial move?
4. Children’s movies
5. Keeping papers
6. Determining ownership percentages
7. Taking control
8. Stuck in a condo?
9. 529 plans and multiple children
10. Saving old magazines

On my desk, I keep a stack of papers that reflect “important but not urgent” tasks I need to get taken care of, like submitting an invoice for some work done or cancelling a subscription we’re no longer using.

About once a week, I take a few hours and clear out that “important but not urgent” stack. The day I do that usually ends up being one of the best days of the week because I feel as if I’ve accomplished a lot.

Q1: Strange credit card fee
I have Mastercard credit card linked to American Airlines miles rewards. I’ve had this card for about 15 years, and over the years the available credit limit has gone up to $54,000. We never used up even remotely that much, and currently the card has $2,000 on it which will be paid off by summer if not before. It’s a 0% transfer sum, so no interest is being paid on this amount presently. We have not charged anything to this card in over a year.

Anyway, this months’ statement is the second where I noticed a small fee added to it, 50 cents. It is not a late charge or anything related to a purchase (since there hasn’t been one made). I wonder if this is an “inactive” fee, meaning that they aren’t making money off of us since we are not buying anything and therefore aren’t paying any interest, and the card company needs to get some money out of us and thus is charging this kind of fee. I wouldn’t be surprised if this is one of the card companies work-around to get additional money out of people who pay their bills on time…

I am annoyed by this fee, of course, but am reluctant to cancel the card (we really don’t use it, and once the current amount is paid off, it’ll basically just be laying there in its file.) It is my oldest credit card and with the high available credit limit, it is good to have on my credit report, right? I do pay an annual fee of $50 because it’s an airline travel credit card….

I know I can call the card company and complain about this extra fee, but I was wondering if other readers/people have the same fee appearing on their statements. My only other credit cards are a corporate AMEX credit card that I use once or twice a year and pay off promptly and a Discover card that is paid off every month and only has very few dollars charged to it every month (gas). Both these cards are relatively new, less than 3 years and the available credit limits are less than $10,000.
– Bill

You should call your credit card issuer and ask them what the fee is for. It’s hard to tell what it’s for, though an “inactivity fee” is probably a good guess.

However, if the card is often inactive, I’m not sure I would want to pay a $50 annual fee for the card. I would only pay it if I were clearly getting more than $50 worth of value from this card beyond the cards I could get for free.

If it is an “inactivity fee,” I’d assess whether or not you’re going to need spectacular credit in the next couple of years. Do you have a car loan or a mortgage coming up? If not, cancel the card. If you do, hold off until the big purchase is finished, then cancel the card.

Q2: Handling sudden income increase
I have something of an unusual question, particularly during these times. After college, as well as several years of alternating unemployment and minimum-wage jobs, (we’re both 27) my fiancee and I are now both employed in extremely well paying (six figures each) positions for the foreseeable future. We are incredibly lucky to be in this position, especially in the current economic climate and given our lack of debts (we both attended college on full scholarships, and each bought our cars used for cash). We’re already setting aside enough for our 401ks to max them out by the end of the year, and have been fortunate enough to give sizable amounts to several charities we favor. The only problem is… what else should we do? Besides filling up an emergency fund, should extra money just go into a savings account? Should we look at CDs and IRAs?

Most of all, are there any books you would recommend that are more tailored to our situation? Personal finance seems split between getting out of debt and playing the stock market, neither of which really apply to us; since we don’t really have problems with overspending, I feel like we’re sort of left adrift. Adrift and extremely extremely lucky and fortunate, but adrift nonetheless. Thanks for any help you might be able to offer.
– Ron

You need to sit down together and assess your goals. Do you want to buy a house? Do you want to have any children? Where do you guys want to be in five years? In ten years?

Your plan for the extra money should follow the answers to those questions. If you’re saving for a short-term goal (less than, say, five years), I would just keep all of the money in cash or in CDs, as the volatility of other investments probably isn’t worth it.

For a book to read, I’d suggest The Bogleheads’ Guide to Investing, which is my favorite book on investing I’ve ever read.

Q3: Great job, next financial move?
At 25 I landed my dream job. Its fun flexible and has a great six figure salary. When I finished school in May of 2011, I racked up a few thousand dollars in credit card debt to bridge me over to my first paycheck, which came in September. As of January this year, I’ve paid off all credit card debt and have 54,000 left on my student loans (at 6.7% and 7.6% interest) and about 1,000 in emergency funds. I’m still living like a poor college student and am planning to pay all my student loans by January 2013. I haven’t been able to invest in a 401(k) because my employer only offers it after you’ve been with the company for 6 months. Because I only worked several months last year, I am in a smaller tax bracket than I will be in 2012. I’d like to invest some money in an IRA or Roth IRA before I file my taxes for 2011. Basically, I’d like to take full advantage of being in a lower tax bracket while I can (for instance, next year I won’t be able to claim up to 2,500 plaid toward student loan interest) and was wondering if I should divert money I’m intending to pay toward my student loans to open an IRA or Roth IRA and which type one would would be the wisest choice for my 2011 income.

– Lana

If you qualify for a Roth IRA based on your income, I’d choose a Roth IRA. I think it’s a good idea to diversify your retirement money in both pre- and post-tax retirement accounts since no one knows what the future will hold.

As to whether you shoud divert loan repayment money into a Roth, it’s really an apples-and-oranges decision. There are good arguments to be made both ways on it.

If I were in your shoes, I’d probably fund the Roth fully before making extra payments on the student loans. The big reason is that, if push came to shove, I could always withdraw the contributions from the Roth at a later date if I so chose.

Q4: Children’s movies
What movies do you let your children watch on your “movie nights”?

– Alex

If it says “Pixar” on the label, we’re generally okay with it. Many of our family movie nights involve Pixar films.

We also often watch Studio Ghibli films, but we’re a bit selective on those as some can have scenes that might frighten really young children (like the fate of the parents at the start of Spirited Away).

These two categories give us about 25 movies to choose from, so we just rotate them. We also have a few additional Disney movies in the mix.

The thing to remember is that movie night with my family isn’t about the move so much as it is about the whole family cuddling up under blankets together, laughing together, and enjoying time together.

Q5: Keeping papers
I’ve got a well controlled financial situation, but I’m overwhelmed by the paperwork. I get statements from multiple bank accounts, investment accounts, 401ks, etc. I get bills for the utilities and my credit card and such. I’ve got my tax returns. Some of these “papers” are actually digital, but most of them are paper still. I’m planning to get a house in the next year, and I imagine there will be a ton of paper involved with that as well.

How long do I need to be hanging on to the various paper and digital copies of all of this paper work? Do you have a preferred method for handling the onslaught of papers?
– Alan

If you’re just keeping paper copies, I’d keep most of them for seven years. I would keep tax returns and other truly key documents forever.

However, I think the best solution is to just make digital archives of everything. Scan all of the paperwork onto your computer using a document scanner. Then, just keep them forever on backed-up hard drives and other formats.

This can take up some serious hard drive space, but then you have an archive of all of your documents. It takes some time, but I think it’s really worth it.

Q6: Determining ownership percentages
My fiance and I are getting married next fall. We will most likely be purchasing a home before we get married. I currently make about 70k per year and she makes about 26k per year. We will be looking to purchase a home in Southern California in the price range of 365k-400k. I will have roughly 80k saved for a down payment/closing costs and my fiance will have roughly 8-10k saved for the down payment/closing costs. She is currently working on paying off 8k of student loans. My question is, what is a fair way to determine percentages of home ownership with the varying amounts of money that we have available for a home purchase and considering our difference in annual income?

– Mike

I would be extremely wary about taking on a mortgage that’s more than double your combined salaries, even with low interest rates. Such a situation is practically begging for Murphy’s Law to take effect.

I don’t think there is one fair way to determine ownership percentages in this situation. It has far more to do with your relationship than anyone else’s ideas of fairness.

My wife and I have had income inequality since the day we were married, but as far as we’re both concerned, everything is a 50/50 split. We’re in this together for the long haul and we’re constantly helping each other in terms of emotional support and other assistance, so it just makes sense to have a 50/50 split.

Q7: Taking control
I recently turned eighteen and my parents are slowly turning over control of my finances to me. However, I have no idea what to do or where to start! Do you have any suggestions for getting started on the right track to ensure financial stability in the future?

– Shawn

I would start with a basic personal finance book. I’m not sure exactly what experiences you’re going through right now, but I would guess that college is either a current experience or one that’s in the near future for you.

If that’s the case, I’d probably suggest Please Send Money by Dara Duguay. It’s a great “getting started” personal finance book.

On the other hand, the book that had the single greatest impact on my thinking with regards to my money was Your Money or Your Life by Joe Dominguez and Vicki Robin.

I feel both are well worth reading in your situation.

Q8: Stuck in a condo?
When housing values started to slide we started making larger principle payments on our condo to stay above water. Eventually the value was going down so quickly we couldn’t keep up. We borrowed $340,000 in 2004 and the current value of our condo is around $200,000 on a good day. We still owe $250,000. Two years ago we stopped putting money toward paying down the principle and started living even more frugally and managed to save up $100,000. The plan was to pay down the principle and refinance into a loan that allows us to rent out the condo then save a down payment to purchase a house. This is due to our family doubling in size since our condo purchase. Now that we have saved up the $100,000 and lived so lean to make it there the idea of throwing it away for a place we have grown out of anyway is pretty painful. Short Sale or Foreclosure don’t seem to be options since we can afford our payments. What other choice do we have?

– Randall

Sadly, your options are fairly limited.

You can just hand your keys to the bank, which will severely damage your credit and make it difficult to borrow anything for the house you want for quite a while.

You can keep living where you’re at and keep saving until you can simply pay off the condo. If you do this, I’d start making extra payments on the condo mortgage rather than sticking the money into savings. Then, you could save for a down payment for a house while trying to sell the condo.

You can also just pay down your condo right now so that you’re at a break-even point on it, then start focusing on your next house immediately.

I don’t know which is the right choice. The second one is probably the safest and most conservative option, which is what I’d go with because that’s how I usually react to such situations.

Q9: 529 plans and multiple children
We have two kids but only 1 529 account setup. Should we increase the contribution to that one account or open another one for the 2nd child? I am not sure if it matters or quite frankly if two kids can even share one account – but I know I didn’t find the answer easily on the web page for the Iowa 529 plan.

– Espen

You would simply open up a new 529 account with your second child as beneficiary.

With many college savings plans, you’d basically manage them together, as they’d appear under the same login name online and they’d send paperwork together. This is exactly how Iowa’s plan works.

I have three seperate 529 plans, one for each of my children. They’re easy to manage together.

Q10: Saving old magazines
I have this tendency to save old magazines, particularly cooking magazines and project magazines. The problem is that my closet is starting to get full of them. How do I get rid of this clutter without losing that information?

– Jill

I have this exact same problem with food and project magazines. They tend to really build up over time!

What I do is once a year or so, I go through the magazines and look for things I’m actually going to use. In a food magazine, for example, there might be five or ten recipes I actually want to save. I actually cut out the pages, scan them onto my computer, then throw all of it away.

It takes some time, but I have this wonderful archive of pages on my computer to browse through. I give the files sensible names so I can easily find them again.

Got any questions? Email them to me or leave them in the comments and 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 hundreds of questions per week, so I may not necessarily be able to answer yours.

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  1. Monica says:

    RE:Q10 – Magazines:

    If I find myself with a magazine stack that’s getting too large, sometimes I just toss the whole stack. My philosophy is that if I don’t know (or remember) the contents in a particular issue, than I’m not missing anything when I throw it out. Maybe that sounds strange, but I have found that I don’t generally take the time to go back and re-read issues.

    That being said, if I am reading a magazine and notice that it’s a particular good issue with lots of ideas I tend to store that issue in a special basket — that way I know it’s a keeper and I know exactly where to find it when I want to reference it.

  2. E.D. says:

    A few comments:

    Q6 – If you both agree that you should have a split other than 50/50, maybe a lawyer could draw something up to that effect. I’m not a lawyer, but would a jointly purchased house be considered community marital property in CA?

    Q10 – I have this problem as well. I rip out the pages I want to keep and put them in sheet protectors. I have one binder for recipes, which wouldn’t do me much good on my laptop since that never goes into the kitchen, and one binder for everything else.

  3. Johanna says:

    Q8: You are far enough underwater that strategic foreclosure (“walking away”) may be a good option for you, even though you can afford the payments on your mortgage. This is especially true if you’re in a non-recourse state (where the lender can’t come after you for your other assets after they take the house). The black mark on your credit will probably cost you less, in the long run, than the $50k you would save by going this route. If strategic foreclosure is an option you want to consider, talk to a lawyer to make sure you do it right.

    If you’ve ruled out strategic foreclosure for one reason or another, then there is no getting around paying the $250k, no matter how painful you find it.

  4. Matt says:

    Q6:
    I don’t think the “be wary of more than double your combined salary” advice works everywhere. In many areas, housing (bought or rented) just costs a lot! If there are options to go lower of course that’s a better idea, but there may not be. A mortgage of $320k max ($400k -$80k down payment) is manageable on combined $96k income – especially since the interest rate should be really low and they won’t have to pay mortgage insurance. As long as both are in reasonably secure jobs, I think it’s acceptable.

    In terms of how to divide… I view this as a really strange (and maybe a bit selfish?) question! Right now my wife doesn’t work at all (she stays home with our kids) so by that principle I should own everything and she shouldn’t own anything! In a marriage there will be times when each partner will contribute more or less – whether it be money, time, etc – than the other. It doesn’t make sense to me to divide everything up by percentages. We call pretty much everything “ours.”

  5. Mister E says:

    Q6: That sounds odd to me, I make more than my wife but for the most part we both consider everything that we own to be “ours” and certainly anything large like the house.

    The cats are “hers” though and I won’t back down on that one.

    If you’re really serious about that then I’d definitely get a lawyer involved.

  6. TLS says:

    Q10 – If you don’t want the stack of magazines anymore and they are still in decent condition, don’t just throw them away. You can donate them to a thrift store or give them away to someone who wants them. I have heard that daycares or preschools use old magazines for art projects, so you could check into this. You can also advertise them in the ‘Free’ section on craigslist – it is amazing what people are interested in if it’s free.

  7. Johanna says:

    Q6: I get the impression that Mike’s question arises because he and future Mrs. Mike are planning to buy their home before they get married – and that once they do get married, the question of “percentages of home ownership” will be pretty much moot.

    If that’s the case, then why not just put off buying a home until after you get married, especially since you plan to get married soon?

  8. valleycat1 says:

    Q6 – re comment #2 E.D. Community property applies to anything purchased together AFTER getting married. The assets owned before marriage remain with the original owner, not both.

    However, Q6, I’m with Trent that it’s a really bad idea to purchase a home together before the wedding takes place. There are too many stories out there of the relationship breaking up & having to deal with splitting up mutual assets. Your question about allocating ownership percentages is a warning flag to me. Buy the house after you’re married.

    In my past experience, any arrangements regarding ownership percentages or whatever are only as solid as the paper they’re written on and the good will of the two people making the agreement (a judge can overturn it and they’re almost impossible to get enforced legally). If both your names are on the loan, you’re each individually and equally liable for the payments regardless of what you negotiate between yourselves.

  9. Andrew says:

    If the magazines are specialized or obscure enough, you can sell them on Craigslist. I sold a year’s worth (52 issues) of Paris Match for more than I had paid for them to begin with.

  10. valleycat1 says:

    Q10 magazines – To keep them from piling up, when I read one I am ruthless and immediately tear out whatever items catch my interest. I throw away the remaining 95% (or more) which is ads or info you can find anywhere. After doing this a few times I got a lot more selective about how many magazines I purchase. I have a basket where I collect random items; recipes go in my recipe book labeled ‘to be tried.’ When I have a little time available, I’ll go back through the basket & weed out things that no longer interest me or take some positive action with the ones I continue to keep.

  11. Andrew says:

    Q1 Just be aware that if you call the credit card company about anything it will open you up to a review, and it wouldn’t surprise me if that $54000 limit got seriously reduced.

    Credit card companies these days are watching “available credit” much more carefully than they used to since they don’t want cardholders making huge purchases that will then not be repaid.

  12. SMB says:

    What scanner do you use? I’m looking for a good all-in-one scanner, printer & copier. Thanks.

  13. Jackowick says:

    Q10 I have similar issues (no pun intended) with magazines that have long term information value, such as my guitar magazines that include sheet music and other key articles such as maintenance tips and excercises.

    Check the website for each title to see if backissue articles are archived by the publisher. Any that are, you can ditch.

    Some publishers sell nice binders for back issues, so if you still want the entire issue, it’s an attractive way to organize; usually a binder is designed to hold 1 year of info.

    The next step is to junk any magazine you can completely live without. I found that some mags have cult followings and was able to flip the back issues on ebay (watch the weight with shipping charges). For example, I sold an art magazine off in 12 month lots and was shocked to get $40-50 per year on a mag where I paid only a $20 subscription.

    If you need specific articles handy, such as recipes or just good reference info, but you feel you don’t need the bulk, don’t be afraid to thin the magazine/rip out sheets etc. Get access to a good paper cutter if you can to make nice pages for a binder/folder/mylar sleeve.

    Finally, if your organizing system works off deep memory recall, cut off the covers and use those as the binder cover or as reference sheet tabs. I remember some of my guitar mags based solely on the cover feature.

  14. Kerry D. says:

    Q8, I don’t quite understand the concept of walking away from a property, if one is able to make the payments reasonably well… There is no guarantee that a property will hold it value, when we buy them. And, when a property value dips (as ours did through most of the 1990’s) there is a reasonable expectation that it will rise again (as ours has, even in this economic climate)… So, although a larger home would be very desirable, I don’t see why I would ruin my credit over a low property value. Unless, maybe I had a strong intuition that my purchase price was way overvalued and that the chance of recovering is slim and none. But, I do see a lot of signs of economic recovery, so its likely a matter of time.

  15. Jackowick says:

    Q6 I am throwing a big red flag at that potential purchase as someone who is in a very similar situation salarywise with a house and mortgage for about half that value; That house is too much.

  16. Jackowick says:

    Q3 If you are risk averse, paying down liabilities is the peace of mind move, so paying off student loans as fast as possible is my first vote, but do it while funding the IRAs. Then look at a money market account.

    The suggestion to use a CD is “ok” but the fed foresees very little, if any, interest rate movement through 2013. That’s a year away. Look at laddering CDs and a small chunk into a dividend friendly stock such as a GE or Coca-Cola (just examples, folks) so you can outpace bank returns, have a floor to the risk, but also an upside during economic recovery.

    Very boring stocks can be very safe. *I am not an economic advisor*. I tell my friends that if you can’t understand it, don’t invest in it. If you don’t understand stocks, stay away go the safe route with a money market.

  17. Kacie says:

    Q6 seems really odd to me. When you’re married, what’s yours is hers and what’s hers is yours.

    Are you talking about for tax purposes, maybe? Like your mortgage interest deduction?

  18. Charlotte says:

    I love that Q1 is willing to pay a $50 annual fee, but wants to close the credit card after a 50 cent fee appears. That doesn’t seem very logical to me.

    Plus there are typically fees for balance transfers, even if it’s a 0% interest rate.

  19. Michael says:

    I would totally put those items in a stack but they are only important-but-not-urgent if the dollar amounts are large but they’re not due soon.

    Real important-but-not-urgent would be setting up a more automated billing system.

  20. Steven says:

    Good idea on the scanning of articles/recipes/projects. My gf has the same tendency to not want to get rid of these types of magazines, and I’d never thought about scanning them. *Slaps forehead*

  21. jim says:

    Q1 : Why would any bank or credit card company try and nickel and dime someone with a invalid 50 cent monthly charge??? Its probably not even from the bank.

    Q3 : Lana, good job on the focus on savings. If you keep your spending under check and focus on saving you’ll do great. I’d recommend Personal Finance for Dummies as the 1st book to read.

    Q6 : I wouldn’t follow Trents rules on how much home you can afford since his rules aren’t really practical for S. California. I would recommend against even buying a home together before you are actually married. You never know what could happen before the marriage. The relationship could fall apart and you’re stuck owning a home 50/50 with your Ex. Theres no rush to own a home now.
    If you do buy a home before marriage then whats the point of deciding % ownership?? You’re going to get married. Is your marriage going to be setup with strict mine versus yours rules on who owns what? Whats the point? Are you trying to do a prenup? If so then why? Keep in mind that after marriage California is a community property state, whats yours is hers and whats hers is yours.

    Q7 : I’d recommend Personal Finance for Dummies as the 1st book to read.

    Q8: Randall, you don’t say how much you could rent it for. Do you want to be a landlord at all? Do you plan to stay in the same city. If your current interest rate and payments are higher then you could look into a HARP 2 refinance on the property and see if you can get the mortgage payments lowered. With HARP you can refinance when underwater. Then if renting will pay the mortgage I’d recommend doing that as long as you’re happy to be a landlord and staying in the same city. Throwing $50k into a property to sell is a huge loss. I’d rather rent it out and see how it works out over the next few years. One problem however is if you plan to rent the condo and buy then it may be difficult to get financing on the new home since you’re already carrying the mortgage on the condo. You may need to qualify to pay both mortgages at the same time without the rental income counting. TO get around that you could rent a place yourself for 6 months and rent out your condo to establish the rental income first.

  22. Suzanne says:

    Q6: My husband and I bought a house 6 months before we got married and everything turned out fine. Just wanted to let you know there are happy ending stories, not all relationships explode after such a stressful event.
    Much like when we rented an apartment together, the amount we pay is weighted based on each other’s salaries and debts. It used to be 75% him and 25% me, but now it’s more like 60% him and 40% me since I changed jobs and increased my salary, plus I pay the utilities, buy almost the groceries and cleaning products and stuff like that, so it probably evens out. We have separate bank accounts still, but we work together on our bills and expenditures.

    Q10 – I have been struggling recently with a large collection of recipe printouts and I can’t believe I didn’t think to scan them! I try to save as many of them as I can as a google bookmark since most of them can be found online.

  23. Tom says:

    My guess is Q6 is really an income-tax question, moreso than a how-should-me-and-the-future-wife-split-our-joint-purchases question. Unfortunately (maybe?) for you, the IRS doesn’t give much guidance for how 2 people not filing joint returns should split interest. You’ll likely get only one 1098 form from your mortgage holder. My guess is you’re allowed to determine what is fair; be it 50/50 or as a percentage of salary (The questioner makes about 72% of the income) or whatever.
    I’m willing to guess that you’ll get a better deduction than her (You’re certainly farther in the 25% tax bracket than her), but you should run it through a tax preparation program or advisor.
    …Assuming this is actually why you’re asking.

  24. AnnJo says:

    Q6, regardless of the decision you make on ownership percentages, the State you live in may have different ideas about how your property should be divided up if you split. And contrary to Valleycat’s statement at #8, even property acquired before marriage can be treated like community property in some states. And that treatment can vary from state to state. So whatever you decide, consult with a family law/matrimonial attorney and draw up a contract to memorialize what you’ve decided.

  25. mary w says:

    Q3. I agree with Trent, fund a Roth IRA for 2011 and cut back on your extra student loan extra payments. When you are eligible for a 401(k) I would also fund that up to whatever match you get rather than making extra payments on those loans.

  26. Des says:

    Q1 – Do you still get paper statements, or do you view your statements electronically? Since you carry a $2k balance and are charged an annual fee I doubt it is an inactivity fee. It sounds more like a paper statement fee. If you are still getting statements in the mail, try signing up for electronic statements and see if the fee stops showing up. Bonus, its more secure (since stealing mail to obtain account numbers is a very common fraud tactic), and saves trees.

  27. Dave says:

    Q1: if it is not a paper statement fee like Des said in response #26, it is probably a minimum finance charge. I had a 0% offer for one of my credit cards, but there was a $1.50 minimum finance charge if you carried a balance over more than 1 billing cycle. I bet you this is what the 50 cent charge is. Credit card companies are required to list all fees, so I;m sure it is in your agreement somewhere.

  28. jim says:

    It would make more sense if Q6 were really about how it impacts taxes.

  29. Jill says:

    Q1: Don’t quote me, but I seem to remember hearing something about compromised credit card numbers, and how it was common for people who had bought stolen credit card numbers to try putting through one or two small test charges to see if they were accepted by the system before making a major purchase with the number.

    So I’d definitely contact the credit card company for those kinds of small charges where the other name on the transaction couldn’t be identified.

  30. jim says:

    Jill #29, Yes that happens. Citibank once called me to verify a $1 charge I had made because it raised a red flag. They told me that thieves will apparently run a small purchase to test a stolen card #.

    However it sounds like Bill has more than one 50 cent charge in different monthly statements. (If I read him right) If it was a thief they’d do a small charge and then follow it not long afterwards with a giant shopping spree.

  31. Roberta says:

    To Matt at #4

    I respectfully disagree with your statement that “my wife does not work at all (she stays home with our kids)”

    Do you mean she does not work (inside or outside the home) for money? Because I can assure you that unless your children are grown and totally self-sufficient, or you have extensive household staff actually raising your kids, she in fact is working. She just isn’t doing something on which our society puts a dollar amount.

    I know, I know, I’m being all snarky and nit-picky about the language – and “my wife doesn’t work” is generally understood to mean that she’s home with the kids – but words and how you use them are important.

  32. Heather says:

    Q10 – the magazine question. Freecycle! Scan what you want and then post the magazines on Freecycle. I have given away stacks of magazines and received stacks of great magazines that I could enjoy without the burden of the subscription. Lots of people enjoy being able to read through a stock pile and then pass them along to someone else keeping them out of the landfills.

  33. Kate says:

    Like #22, my husband and I bought our house before getting married. That is, we picked it out and I bought it solo. We did not think the bank would look with favor upon his incredibly variable income (from self-employment), and he still owned the house we’d been living in previously. I took on some financial risk but it seemed ok given our relationship at the time. Since then: having a husband who is deliriously happy every day to be living “out in the country” is apparently good for our marriage!

  34. getagrip says:

    Q2 Great job! You’re where most of us are struggling to get with a great cash flow coming in and low expenses going out. I echo Trent’s advice to sit down and determine future goals and then save/invest towards them. I also will say that sometimes it can be hard to crystalize those goals, especially when you’ve each just accomplished a major one you’ve been working towards for years. You’ve reached what JD at Get Rich Slowly (as well as others) call the third stage of personal finance, where you’re meeting all your primary financial goals and now find yourself with abundance and sort of a “what do I do now” attitude. You could check out his blog and follow up some of those discussions for ideas. My point is enjoy it for a bit, you’ve worked hard to get there and there isn’t an immediate need to rush to the next goal.

    That said I would recommend you start broad brush thinking to avoid lifestyle creep while still enjoying what you have and fine tuning your next steps. One goal I would suggest in your position is to shoot for real financial independence where you aren’t reliant on a 9 to 5 job for your income. That way if in 15 years either of you decide to shift careers, start your own business, etc. you can take that risk with some assurance. You could likely save the equivalent of one of your salaries or more per year and still live comfortably and in ten years, even if you do nothing but bank it, be in a great position. My one other piece of advice is find a fee only planner to help you map out your financial options. Keep in mind they may try shuffling you towards certain investments, etc. but you have to educate yourself well enough not to be lead and be in on the decision. Best of luck.

  35. Geoff Hart says:

    Ron wondered about the “sudden increase in income”. Good advice thus far, but a few things to keep in mind:

    It’s certainly appropriate to want to reward yourselves for the hard work invested in getting through school, but be careful not to overdo it. You’re probably moving from a necessarily frugal student lifestyle to a life of sudden plenty. The problem is that it’s easy to get into the habit of rewarding yourself constantly (e.g., eating out every night) so that it becomes a habit rather than a reward. That not only diminishes the reward; it also leads to financial problems down the road when your situation changes (e.g., you start a family) and you have a bunch of bad habits to break.

    Don’t forget that even though your jobs are great now, that can change suddenly. The economy’s still fragile, and if Europe’s problems continue to worsen, the North American economy may follow Europe down the toilet. Building a lavish emergency fund is a great idea because (what many people forget) that fund is an investment in your future. If you’re lucky enough to never need it, you’ll end up with a nice retirement surprise.

    One of the most effective things you can do right now is to max out your first-year savings: For example, put aside 100% of one person’s salary this first year (or 50% of each of your salaries) and live on the remainder. Do that and you’ll be starting with a better savings account than most people build after a decade. If you can save 75% of your salary, so much the better. Since you’re both young, that initial investment will grow rapidly if you’re smart about your investments and don’t get greedy.

    As Trent noted, you should sit down and honestly discuss your goals. Now, when you have few/no debts and financial commitments, is the best time to define those goals and establish a pattern of saving towards those goals without living like monks. You can (and probably will) change those plans later, but the old phrase “start as you plan to continue” is a good one to keep in mind.

  36. Icarus says:

    Q8: Can you use some of the money you’ve saved to buy your bigger house, one that you will live in for 7 or more years? If so, you could do that and try to rent your condo for break even or maybe only supplement a small difference between what you can rent it for and what your monthly PITI is.

    Then if it doesn’t work out, you could try the short sale route. by the time your credit repairs, you will be able to sell the house if needed for another upgrade. Or you could try keeping the condo for when you are an empty nester.

  37. Amy K says:

    On Q#6 percentages: My husband and I bought our house many years before we got married. This percentage was a numebr that I really wanted, though my then-boyfriend didn’t care. In the end we decided to just keep track of input in case of sale/having to divvy proceeds. We each brought the same amount in to the down payment, but monthly mortgage payments came out of a joint account that we contibuted to based onthe ratio of our AGIs (yes, I was very concerned about “fairness”!)

    As for the tax implications someone else mentioned: All of the mortgage interest went on his return, and I just took the standard deduction. He has a higher income, and if we split it by AGI ratio as above I don’t think my portion exceeded the standard deduction. By putting it all on his it reduced our combined tax liability significantly. If that doesn’t seem equitable to you, maybe you can alternate years that each of you takes it.

  38. Bookaunt says:

    On Q#9s question about 529 plans for siblings: For the state plan that I am familiar with (I do not know if this is state specific), there can only be a single beneficiary of a 529 account, but the owner of the account can change the beneficiary once a year.

    Having separate accounts makes for the simplest bookkeeping and I would recommend that route. However if the 529 plan charges a separate maintenance fee for each account, you could consider only have a single one with the oldest child being the official beneficiary and do the bookkeeping at home to track each child’s share.

    Sharing an account is easiest if there is 4 or more years between the children, since after the older one graduates, the younger child can be named as beneficiary. If the children are closer in age, the years when both are in school may be tricky.

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