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. Funding child’s health insurance
2. International travel currency concerns
3. Smartphones at a discount?
4. Credit card diversity?
5. Figuring out multiple bank accounts
6. Returning to school in retirement
7. A marriage in decline
8. Religious giving
9. Transfer of assets after death
10. Personal growth spending
In my spare time, I’ve been working on a handful of ebooks that cover a specific topic of some kind: digging out of debt, managing your time, and so on. These ebooks can essentially be thought of as large-scale versions of articles on The Simple Dollar, where I can take the information that might be in thirty or forty posts that would be interrelated and instead organize them in a fashion that makes them useful and entertaining for long-form reading and reference.
I hope to launch the first one before the end of the year. I will be selling them all on the Kindle store for $2.99, (hopefully) on the Nook store for $2.99, and also as PDFs for $3.
I’ll let you know as soon as the first one is ready to launch.
Q1: Funding child’s health insurance
Our youngest son is too old to be included in our family health insurance plan, and has been without health insurance for several years now. We would like to find a plan to cover him, for our peace of mind. He will graduate with a teaching degree in two years, when he will hopefully get a full time job with insurance. He is a healthy young man, and has siblings that include a nurse practitioner and two doctors, so he can get free advice and care for most problems. (He has never even used the campus health services.) It is the potential accident or trip to the ER that concerns us. What type of policy do you think would best serve him? In my research I find that the lower deductible policies include more services than he needs, but the higher ones may include only inpatient care. What in your opinion would be the smartest choices? We would like to help him with part of the cost, but of course we want to use our funds wisely and not waste them on unnecessary coverage. Any thoughts?
Given that he’s young and healthy, a high deductible plan is likely the best one for him at this stage in his life in terms of balancing cost and reward.
The reason you want this insurance is to cover the devastating situations and that’s what a high deductible plan will do. It will make sure he’s covered if a genuinely serious medical issue comes his way.
His needs will change, of course, as he grows a bit older, but by then he should be able to provide for his own insurance.
Q2: International travel currency concerns
Late this year, I will be going on my first international trip, to Germany. I already have my passport and have purchased tickets. My concern is with currency. I intend to use my credit card while over there for many purchases and I have been told this will work just fine, but I also want to have some physical Euros in hand for incidentals and for emergencies. What’s the best way to do this? Should I get the cash now? Should I try to time the exchange rates?
The first thing I would do is contact my bank and ask whether your card will work in ATMs in Germany and, if so, what their currency conversion is like. Many banks will simply charge their regular ATM fee and will allow you to withdraw cash at the current exchange rate, which is probably your best overall option. If your card has the Visa or MasterCard logo, they’ll usually work in a foreign ATM, but check with your bank to make sure.
If that’s not available to you, I really wouldn’t stress out about hitting the perfect exchange rate. It’s much like trying to perfectly time the stock market – you might get lucky and make an exchange at the perfect moment, but you’ll most likely end up frustrated.
If you do a currency exchange with a broker, try to avoid the ones at the airport and try to do only one exchange of dollars to euros (and another exchange back, if you must). Each exchange will have flat fees associated with it, so a single exchange will minimize those fees.
Q3: Smartphones at a discount?
I’ll be 70 next week, so I need to say no more about my lack of “comfort zones” when it comes to today’s technology. I have the Net10 phone and the cost is $15 a month – - and I’m really happy with it as I use it for what phones were made for: call someone. I am rearing a grandson who will begin 8th grade this year. He is in the category of high-functioning autism, is capable to managing phone conversations and calls, but simply prefers not to. Cell phones are permitted for the first time at school, and the point behind it is for the teachers to teach, or allow, the students to use their smartphone devices as an educational tool. So, where does this put me? I do not have the sort of account that most families have because “they simply cannot do without it.” If I bought a phone like I use, this would not benefit my grandson as it wouldn’t have what the teachers would expect. I realize that my grandson would greatly benefit from learning how to use the device as he grows, so can you tell me what phone and what sort of plan I could switch to that would give him the “smartphone-type” phone but not cost me and arm and a leg? We will need this soon as school starts Monday and it won’t be long into the year that they will need it.
You probably want a “pay-as-you-go” phone. There are a lot of different phones of this type available, but it’s hard to make a specific recommendation without knowing a lot about your area and about the exact usage your son will have.
If it’s being used as a classroom tool, I would ask his teachers at school for some suggestions as to phone models and types, then take that information and look at the various pay-as-you-go phones at your store of choice. Shop around a little bit and find the lowest-cost phone you can get that matches what the teachers want.
You may find after talking to the teachers that a simple phone is the best option for this situation.
Q4: Credit card diversity?
I already have a Mastercard. Let’s say I was going to sign up for another card. Should I specifically make sure that it’s another kind of card like a Visa or an American Express or does that really matter?
In terms of your credit, it doesn’t make any difference.
The one way I can think of where it could make a difference is when you’re dealing with retailers that take one type of card and don’t take another. For example, one retailer I know of only takes Mastercard. They do not accept Visa cards.
For situations like that, it’s not a bad idea to have a card from a second processor.
Acct #1. A major bank, used exclusively for our home mortgage–this bank carries the note and payment is made by direct deposit and debit payment. The bank doesn’t have a branch in our town, but does have branches throughout most of the U.S. There is no savings account attached to this account.
Acct #2. Another major bank, with a branch here in town, this account has overdraft protection through a savings account attached to it. It’s used for household expenses and savings.
Acct #3. Is a small local bank and is used for e-Bay sales. The bank has less than 15 branches located within Southern California and none outside the state. It’s considered an online checking account and it pays a small amount of interest on funds kept in the bank with no minimum balance required. I have a debit card, but no checks for this account because it’s strictly for e-bay. PayPal is connected to the account. If I need to withdraw funds from this bank and I’m not in town, I incur fees at both ends of the transaction. Debit purchases can be made anywhere without a fee. It can only be used as a debit card at gas stations.
SITUATION: My debit card (attached to account #2) was hacked while we were away from home earlier this year. I closed the account and reopened a new checking and savings account. It took over 3 months to untangle the mess this theft made because the majority of our household bills are either paid online or automatically debited from this account.
We returned from a month-long vacation this week and I discovered that the savings account attached to Bank #2′s account had been robbed of $280 by someone who walked into the local bank branch, filled out a withdrawal slip and presented it to the teller. The teller gave the person the money. The person is unknown to my husband and I, and is not a signor on the account. I have no idea how he obtained the account number for our savings account. I’ll be filing a theft report with the Sheriff’s office in the morning, followed by a visit to the bank to once again close that checking and savings account.
1. Under these circumstances, would you keep an account with Bank #2?
2. How could someone obtain a savings account number for an account that they are not a signor on?
3. Should I go back to writing checks to pay my bills? I have friends who don’t own a debit card and swear they never will have one. Other friends only write checks or pay with cash. What’s the safest, cheapest way to pay your household bills or to make purchases?
I would be very wary of continuing business with that bank. The bank should absolutely have detailed records on this transaction and may in fact have a video of the transaction from their security tapes. They should be working closely with you to figure this out as soon as possible.
It’s really hard to tell what might have happened in this case, but no matter what, the bank should not have allowed this to happen. There is some sort of protocol breach that happened here or else someone who was not an account signor would not have walked out with your money.
I don’t think checks are perfectly safe, either. Checks have your account number, bank routing number, and your signature on them. An unethical person could use those things, too. I actually feel safer with pure electronic transactions, overall.
Q6: Returning to school in retirement
I am fifty eight years old. In several years, I plan to retire and we shall have a very good income thanks to our retirement savings. At that point, I would like to go back to school at the local university and study American history. What financial preparations would make the most sense for this plan?
The best thing you could do is to open up a 529 college savings plan in your name.
A 529 plan is much like any other tax-deferred investment account. It’s really only concerned with the money that goes in and comes out. If the money that comes out is used for educational purposes, you don’t have to pay taxes on the gains.
However, if you don’t use this money for educational purposes, you’re going to be paying taxes on the earnings as well as an additional 10% tax penalty. This penalty is waived if you’re disabled or if you pass away, however.
Q7: A marriage in decline
After many years of using my credit cards for the kids which are now in college, we have accumulated a lot of debt, my own personal credit cards, which were used for school items (books, supplies, clothes, registration, soccer instruction, baseball instruction, uniforms, traveling with elite teams, tutoring, summer camps, etc, which by the way, was my first mistake because these costs should of been shared between my husband and I credit cards, but he would not take on these items because he thought of them unnecessary. Looking back, I probably would not have done all these things, but I wanted more that what I had during my childhood for my kids to experience. Live and learn….
Now, I am trying to apply for my own credit card, and I have been denied twice because of too high a balance. My husband has only been paying the minimum amount and says we can’t afford to pay any more than that, but I found out that he has been paying his credit cards off. Our marriage is pretty much over. I am trying to be independent, because sooner or later I will be on my own and want to have my own credit card and be able to put a down payment on a place of my own. I am running into quite a bit of obstacles because of the debt. I do not want to lead on that the reasons for my own card, is that I am preparing to go out on my own. Any advice on how to bring down these cards without setting up a red flags? Communication is pretty much down to nothing since when we talk it always ends up about money and then turns into arguments. Please advise.
Assuming that you are heading for divorce, the sensible thing for both of you to do is to split the debt evenly and transfer it to cards that are in your own name without the other’s name on it. If you cannot obtain a card in your own name, then your husband should put half of the balance on his own card, then you should both sign to have him removed from the card with the remaining balance.
This, of course, requires you to communicate and it requires you to both be on the same page when it comes to dissolving your marriage – or at least the financial elements of it. I’m not sure of the exact state of your relationship, but it doesn’t sound good.
If your marriage is dissolving, things become much easier if you both accept it and move on to making sure your assets and debts are properly divided among you.
Q8: Religious giving
I am a lapsed Catholic. My wife is a devout Methodist who attends services each Sunday. I go with her about once a month. I don’t mind that she gives a little to her church, but she’s always donating to different causes that the church sponsors and it adds up. I feel kind of bad criticizing her for giving money to the church-sponsored food pantry or to youth groups, but it feels like she’s giving away our money without consulting me. How can I approach this?
If I’m reading this right, it sounds like you’re fine with the concept of charitable giving, but you don’t like having little or no input on the giving. If that’s the case, sit down with your wife and talk about your charitable giving as a whole.
Before you do that, do your own soul-searching about what causes you think your money should be used for. Where would you like to see your money go?
If you’re opposed to the overall level of charitable giving regardless of who the money is being given to, then you’re headed for a more challenging discussion with your spouse. I think this article on handling religious differences with your spouse would be a valuable starting point for both of you.
Q9: Transfer of assets after death
The house and mortgage are all in my elderly parents name.My brother pays the mortgage payment. What is the most frugal way to go about making sure that when either my parents pass, the house will be put in my brothers name.My parents really have no assets, and I want nothing from them. I thought maybe they should quick claim the house to my brother, But he is not in the best health either, as he has malaria and other health issues.They could possibly outlive him.
I would recommend setting up a trust. You would want to talk to a lawyer about the specifics of setting it up. The idea would be that the house would essentially belong to the trust, with your parents having the right to live there and with the assets in the trust being distributed upon their passing.
I don’t know exactly how you’d want all that to work. You’d likely want to establish exactly what happens in the event of each person passing away first so that it’s clear to everyone involved, and that’s why a lawyer might be useful here.
A family practice lawyer in your area can help you get this set up.
If this is something that’s important to you, then it should be a part of your budget.
The key thing with spending like this is that all of the stakeholders involved – in this case, your spouse, if you have one – should approve of all elements of the budget. After all, if you spend money on one thing, you’re not spending it on something else.
If it’s something you consider important and it’s something that everyone else who has a stake in the budget is fine with, then a line item for this type of spending seems completely reasonable.
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.