Questions About 529s, Dollar Shave Club, Solo 401(k), Nagging Coworkers, and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. 529 for child without custody
2. Advising friends without being pushy
3. Found the furniture-selling article!
4. Notable feature of money markets
5. Never want to retire?
6. Paper journal versus Day One?
7. Dollar Shave Club or alternatives?
8. Lower APR but higher payments?
9. Maxed out Roth without 401(k)
10. Investing in specific companies
11. Coworkers nagging about child sales
12. Cutting out time wasters

One of the questions in this week’s mailbag deals with using paper versus digital, and it actually made me reflect on that comparison quite a lot this week. I actually reached the end of a 500 page journal that I had literally filled with writing, causing me to switch to a new journal, so I spent some time thinking about the times when I use paper to write things down and when I use digital tools.

The truth is that, even though I’m a writer and I spend tons of time each day at a computer writing, I just prefer paper for a lot of things. Paper writing causes things to stick in my head better. I work out ideas better on paper. I dig into this a little more in the question below, but I just think paper generally works far better for me for most things.

The question I’m really dealing with now is the use of a stylus. I use an Apple Pencil on my iPad for a lot of things and I feel like it gets me about 90% of the benefits of using paper and it’s definitely easier to save and store stuff, yet for some reason I can’t quite figure out I still choose paper fairly often. I haven’t quite pieced this out yet. Is it habit? Is paper really better than a stylus for me? I’m not sure, but I know that I prefer both paper and stylus to typing when I’m trying to figure out something or work it out in my head.

Anyway, on with the questions.

Q1: 529 for child without custody

Am I allowed to start a 529 for my daughter if I don’t have custody of her? Or does one have to be started in my ex’s name? I don’t want her to have control over that money.
– Eric

You can start a 529 with anyone you wish as the beneficiary. From the IRS: “You can set one up and name anyone as a beneficiary — a relative, a friend, even yourself.”

You are the owner, so you maintain full control over the money in the account. You are always free to withdraw your contributions. However, if you withdraw earnings for purposes that aren’t related to the education of the beneficiary, you will owe taxes on the earnings plus an additional 10% penalty. If you withdraw earnings for educational purposes for the beneficiary, it’s tax free.

So, basically, if you want to do this, recognize that the money is going in there for your daughter’s education. If it’s your account, only you (and, to an extent, your daughter) can touch that money – your ex can’t do anything about it. However, if you change your mind later, any growth in the money you put in the account (interest, dividends, etc.) is not only fully taxable, but also has an additional 10% penalty, and you’re going to be on the hook for that.

Q2: Advising friends without being pushy

My husband and I are by far the most financially secure of almost everyone in our friend group (despite making less money than most of them). We invest, save, and keep our spending in line with our priorities. We have learned a ton about personal finances over the years through books, blogs, and personal experience.

Meanwhile, a lot of my friends are struggling with spending more than they earn, not tracking expenses, and not doing anything to pay off their debts. They tell me that I’m lucky to be able to travel and do other things that I want to do, but I’m only able to do that because of my financial knowledge.

When I learn something, I want to share it with other people, and I really want to help my friends see that they can drastically improve their lives if they’re willing to learn just a bit about finances. I feel like I’d be in a good place to teach anyone who was interested in turning things around. I know that people won’t change unless they want to, but I want my friends to know that I’m available to help them with finances if they ever want to try to work that change. The problem is, how do I offer this help to my friends without seeming pushy, nosy, or know-it-all?
– Laura

This was the exact conundrum I ran into when Sarah and I were turning our financial life around. We had paid off a bunch of debts and were clearly heading in a positive direction. Very quickly, we went from being unable to pay our bills to having a bunch of debts eliminated and seeing a direct path to home ownership, things that our friends were struggling with, and we wanted to tell them about it without feeling like we were bragging or being pushy.

The Simple Dollar effectively started as a newsletter to those folks. I wrote up a bunch of articles about different aspects of our turnaround and sent the URL out to a bunch of my friends. Quite a few of them read it and passed along links to their friends, and that’s honestly how The Simple Dollar got started.

Perhaps you could start by simply sharing links to articles with a ton of good advice you agree with on your social media accounts. Share a few great articles on Facebook or Twitter with a few sentences from you about how this article sums up what’s working for you. Don’t overload on it, but post several over a period of time.

You’ll probably find that a friend or two wants to engage in more conversation on the subject, and those are the ones to really direct your efforts toward. Your other friends are either not interested, not ready to make changes, or don’t feel comfortable having those conversations, and that’s fine.

Q3: Found the furniture-selling article!

I enjoyed the article today. I think this is the original article the reader was referring to:
– Hannah

Thank you! The other reader who wrote in didn’t include the publication. I did some Google searching and even poked around on that Money Magazine site, but didn’t find it.

The article I wrote in which this Money Magazine article was referenced without a link was this one: Selling off Your Furniture (and Other Unexpected Thoughts). The article had been referenced by a reader, but I couldn’t actually find the reader’s source. The actual article itself wasn’t particularly relevant to what I was writing, so I just went with it anyway.

Still, the Money article is worth a read. It’s interesting to see how something like selling off furniture can become seed money for an entrepreneurial venture.

Q4: Notable feature of money markets

Just read today’s post about a money market account. The one important feature you forgot to mention was money market accounts limit have a limit on the number of checks you can write per month. The Federal Reserve Regulation D limits you to six transfers and electronic payments out of each MMDA or savings account each month.
– Angela

This was from the first question in last week’s mailbag, and Angela brings up an important point.

This withdrawal limit is why money market accounts can’t be used as a replacement for checking accounts. You can only make six withdrawals a month, max, so if you’re using it to pay bills, you’re going to quickly run out of withdrawals.

A money market account is NOT a substitute for a checking account. Rather, it’s more of a substitute for a savings account. If you decide to use one, make sure that it’s FDIC insured. In general, money markets are pretty similar to savings accounts, except that they offer a higher interest rate that tends to be more variable over time.

Q5: Never want to retire?

I’m 46 and single and never intend to marry or be in a long term relationship. I like my quiet time too much. I love my job and intend to keep working there until they cart me out the door. Social work is the thing that gets me out of bed in the morning and has been for 25 years and I don’t see it changing. I am used to getting by on a small salary and I am sure I can make it on Social Security and a little bit of Roth IRA that I have saved up. What is the rationale for saving any more than that, especially when my income is low and I want to work forever?
– Renee

Here’s my sole counterargument for retirement savings. What exactly do you do if you reach age 60 and they tell you that you’re no longer needed? Are you able to get another social work job easily at that point? Are there fresh hires in your field in their 50s and 60s? That’s the picture you need to be considering.

In that situation, money in your Roth IRA will help you bridge the gap until Social Security kicks in.

Don’t think of your Roth IRA as setting you up to quit your job. Think of it as a security blanket for when your job doesn’t exist and you’re unable to secure a new one in the field you’d like. The money in that Roth might enable you to volunteer in your field or take a lower-paid position that you’re passionate about.

Q6: Paper journal versus Day One?

Is there any reason to use a paper journal these days when you have tools like Day One on your phone that can sync between devices and is password protected?
– Danny

I use Day One to record life events that I want to remember in the future. Usually, it’s silly things like going out for ice cream with the kids or odd highlights of our vacations or things like that, things I’ll be happy to see in five years. If that’s your purpose, as something of a “life log,” Day One is great.

I use a paper journal for a completely different purpose. I use it to work through my thinking. If I’m troubled by something, I write it out by hand, and I find that very consistently this process helps me figure out what to do about that trouble in my life. I use a practice called “morning pages” where, at some point in the early morning, I set a timer for 30 minutes, open up a paper journal, and just dump out whatever’s on my mind. I usually end up coming up with a handful of things to do in the coming days that really address some problem that’s bothering me, and it feels really… cathartic.

I find that typing out my thought processes really doesn’t help in the same way. There’s some connection between my brain and actually using a pen or stylus that unlocks lines of thinking that typing simply doesn’t. That’s part of the reason that I often take notes by hand when reading a challenging book, because it just unlocks things that typing for notes doesn’t. This is actually a real thing – NPR covered it well and showed that there are real cognitive and learning benefits for taking notes and writing things out by hand versus typing if you’re aiming to learn. Typing is better for simply recording things, whereas writing by hand is better for thinking through things. Perhaps that’s why so many people seem angry online – they type out their thoughts and thus don’t give their words the thought they deserve.

Q7: Dollar Shave Club or alternatives?

Does Dollar Shave Club or any of the other razor subscriptions actually save money?
– Jarrett

It depends on what you’re comparing them to.

I’ve used both Dollar Shave Club and Harry’s. Both provide basically the same service – they ship you razor cartridges and other shaving tools (as needed) by mail on a regular basis. In terms of cost, they’re both cheaper than buying Gilette cartridges at the store, even at a warehouse club, and they both provide a higher quality product.

However, they’re both more expensive than using an old-fashioned safety razor. Also, at least with Dollar Shave Club, most of the products you get are actually manufactured by Dorco, and you can get the same exact products from the Dorco website for less money (and different branding, of course). Harry’s appears to use rebranded versions of Schick products, but I can’t find an online source for them.

If you shave daily with a cartridge razor, use the cartridges for less than a week, and are buying them at the store, DSC and Harry’s are both going to save you some money while providing basically the same shaving experience. However, if you use another kind of razor or take more than a couple of weeks to get through a cartridge for your razor, you probably won’t save money with them.

Q8: Lower APR but higher payments?

So I was about to finance a car last week and they offered me several different loan options that didn’t make any sense. Lower APR is supposed to be better, right, but the loan with the lowest APR had the highest payments. Is high APR good? Thought you wanted interest rates to be low on loans.
– Chris

If you have two loans of the same length – 48 months, 60 months, whatever – the one with the lower APR will have lower payments. However, if one loan has a shorter length, it will still probably have higher payments even if it has a lower APR.

Let’s say you need to borrow $10,000. You are offered a 24 month loan at a 3% APR and a 48 month loan at a 5% APR.

With the 24 month loan, your monthly payment will be $429.81, which seems high, but you’ll actually only be paying $10,315.49 over the course of the loan. The total interest you’ll pay is only $315.49.

With the 48 month loan, your monthly payment will only be $230.49, which seems much lower, but you’ll actually be paying $11,054.06 over the course of the loan. The total interest you’ll pay with this plan is $1,054.06.

With the longer loan, though, you’re making twice as many payments. Every two payments on the 48 month loan is the equivalent of one payment on the 24 month loan in terms of getting rid of the debt. With the 24 month loan, a single payment is $429.81, but with the 48 month loan, if you add two payments together (so that it’s kind of equivalent to a 24 month loan), it’s $460.98. In other words, you save about $30 per payment by taking the 24 month loan.

In other words, by taking the shorter loan with the higher monthly payments, you pay off the loan a lot faster and end up paying less interest and less money overall, but the monthly payments are a lot bigger. If you can handle those higher payments, you will save money over the long run.

Q9: Maxed out Roth without 401(k)

I am a 1099 worker and have maxed out my Roth IRA in both 2018 and 2019. I want to save more for retirement but don’t know what to do next. No clear online guidance for this other than people who seem to be shilling for their investment products. Advice?
– Vincent

My recommendation, if this is your exact situation, is to use a Solo 401(k).

A Solo 401(k) is basically designed for you. It’s an individual 401(k) plan designed for a business owner with no employees, which is exactly what almost all 1099 workers are. It has really high contribution limits ($56,000 per year as of this year, with an additional $6,000 if 50 or over). You can close whether to make it traditional (meaning you contribute pre-tax dollars, lowering your taxes right now, but you have to pay taxes when you withdraw later in life) or Roth (meaning you contribute post-tax dollars, but don’t have to pay taxes when you withdraw).

Most online brokers offer these accounts. I recommend using Vanguard or Fidelity (links go straight to their solo 401(k) pages).

I have one for myself for money that goes beyond my Roth IRA, Sarah’s Roth IRA, Sarah’s workplace 403(b), our children’s 529 accounts, and a taxable account (so the solo 401(k) doesn’t catch a whole ton of money each year).

Q10: Investing in specific companies

What is your advice to someone if they have a specific company they really believe in and want to invest in? You have said before that individual stock investing isn’t a good idea for most people, but what if there is a company you really think has a strong future and the stock is undervalued?
– Davis

I don’t have any objection to this provided that you are saving adequately for your personal finance goals and don’t have any high interest debt before you invest in this way. This kind of investing should be done with money that you’re not relying on and from a position of personal finance stability.

Back in the early 2000s, shortly before I graduated college, I really wanted to invest in the Google IPO and also buy Amazon and Apple stock. I felt, right then, in about 2001 or 2002, that those companies were going to dominate the tech future, but I didn’t have any money. If I had some money then, I would have thrown money at those companies because I believed in them. (I wouldn’t do this now, as those companies are already quite large.) So, I do understand the desire to invest in such companies.

Having said that, such a move is inherently risky. It’s not the kind of risk you want to add to your “fortress of solitude” (the money you’re really relying on for the future). Don’t upset a stable future to chase something like this. However, if you do have the spare money, go for it.

Q11: Coworkers nagging about child sales

I have several coworkers in my office with kids. Several times a year they all come in with various sales packets for their kids activities and pretty much insist that everyone buys something. If I spend $10 on each sale, that’s literally $300-400 a year that I don’t want to be spending and it’s hard to even find stuff for just $10 that isn’t complete rubbish. My boss makes a big deal out of it and acts like this is a big way to build office camaraderie. I wouldn’t mind it so much if I had kids and everyone was buying from my kids too but I feel like I’m being sucked dry by the parents.
– Dawn

If this were not being so strongly advocated by your boss, I would suggest talking to HR about it. However, doing so in this situation might cause some workplace issues that you don’t want to deal with, so I’d use a different approach.

The first step I’d take is to assess the place where I work carefully. Are you the only single person in the office? Is literally everyone else a parent who is engaging in this behavior? If that’s the case, you might want to consider looking for other work in your field, as this may just be a case of a office culture mismatch.

On the other hand, if this is just a portion of the people in your workplace and there are a lot of other single people or married people without kids, talk to the other folks without kids privately and see how they feel about the barrage of sales.

If you find that there are a lot of people who feel the same way as you, then I would start declining the sales or at least suggesting less direct solicitation. Ask the people to put their sales materials in the break room so you can decide on your own if you want to buy Girl Scout cookies or wrapping paper for their child’s soccer team (we get hit up by the wrapping paper thing pretty often). If they’re still insistent, just decline politely and suggest that you feel overwhelmed by the sheer number of requests and that other non-parents likely feel the same way.

A good approach might be to say that you’ll buy one thing a year from each coworker’s child, but that you’re simply not interested in everything. I have no problem buying a box of Girl Scout cookies or some wrapping paper once a year or so from a neighbor’s child, but if it were a monthly solicitation, I’d probably keep my door shut.

Q12: Cutting out time wasters

I am pretty much addicted to incremental games that can be played in a web browser like Cookie Clicker and Sandcastle Builder. I intend to just let them run in the background but I end up playing them for hours. I tried using blocking software but I just end up finding a new one and “playing it for a while.” Advice? It’s eating seriously into my job.
– Barry

My first question would be whether you need a web browser at all for your work. If you don’t need one, then delete it entirely.

If you do need it but only for a handful of sites, talk to your IT person at work and tell them that you want to set that up on your computer. It’s a pretty simple task – just make sure that the list of sites you want left unblocked is thorough so you’re not constantly asking the IT people to add more sites to your “whitelist.” (Whitelist is the term for sites you’re allowed to visit when everything else is blocked.)

I actually do this for myself and have a handful of sites completely blocked during the workday, ones that I know are addictive but also not helpful for my work. I have a script on my computer that blocks those sites starting at 6 AM and unblocks them at 4 PM each day. If I try to visit them, I just get a “site not available” message. It really helps.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. 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.

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.