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. State retirement plan question
2. Working all my life
3. End whole life policy?
4. Thoughts on Kiplinger’s?
5. Getting value from used books
6. Salary negotiation
7. Way too much basil!
8. Recession worries
9. Saving digital notes securely
10. Dr. Bronner’s soap?
11. Knowing I’m making bad move
12. How I think about savings
One of the best noises in the world is that of a laughing child.
On with the questions.
I started a job with the state and they automatically enrolled me in their retirement plan. Basically a portion of my check is required to be put into the plan and the state matches it and a little more, and then it seems to be like a 401(k). Do I treat this like a 401(k)?
Max didn’t specify what state they are in, so I can’t give precise advice on this question. However, what Max describes sounds a lot like how the state employee retirement plan in Iowa (called IPERS) works, and is similar to plans in many other states as well in terms of contributions.
However, state plans vary a lot in terms of how they pay out. Some states operate much like a 401(k) plan, where your payout is related to how much you contribute over the years and how you choose to invest it. Other plans are much more like a pension, where you pay in a certain amount each year and then you get a clearly defined payout when you retire.
Regardless of how it actually works, in almost every case, this plan will provide you with additional income in retirement that will be on top of your Social Security income. Most plans have some kind of online portal where you can check your balance and the benefits that the plan will give you, as well as calculators where you can see what benefits will look like depending on how long you work there.
In most cases, you can consider the plan as a sufficient replacement for a 401(k) in terms of saving for retirement, but you may want to have a Roth IRA of your own to save even more. In some states, you may have to remain employed for a certain number of years to receive benefits, so you’ll want to make sure that you do so (this is usually referred to as “vesting” and usually requires five or seven years of service). Staying employed until you’re vested in the retirement plan is a huge financial boon.
My aunt sent me some of your newsletters and I hope you will have some good advice. I am 22 years old and due to graduate in the spring with a degree in construction engineering. While I like construction engineering just fine, I recently realized that the prospect of working for a living for the entirety of my adult life seems incredibly awful. I don’t want to work at engineering firms for 45 years and then retire completely burnt out and a decade from death, and I also don’t want to spend my entire adult life scrimping and saving so I can retire a decade earlier and have just two decades before death. It all seems miserable and fills me with dread about graduation and about what to do with my career. Hoping you’ll have some good “words of wisdom” beyond “suck it up” which is what everyone in my life tells me to do.
I really don’t buy into the idea of “sucking it up,” because it assumes that you have to suffer misery in silence. An adult life where you feel nothing but misery is not a good life to live.
As far as I can tell, the secret to all of this is inner contentment. You have to find a level of contentment with the life you have and the good things in it or else your life will always feel rather miserable, as there will always be something that’s dragging you down because it’s not up to the level that you want. There will always be things in life that aren’t what you want, but there will always be things in life that are pretty good at the same time.
Essentially, there are two ways of looking at the world. You can dwell on the parts of your life that aren’t what you want them to be and allow that negative feeling to pervade the rest of your life, or you can dwell on the parts of your life that are good and allow that positive feeling to pervade the rest of your life. Everyone has a glass that is half full… or is it half empty?
It is incredibly easy to fall into a situation of thinking that “if X were true, then I would be happy,” but the thing is, if you were to fulfill X, would you actually be happy? Or would you just find a different X that would lead you to discontentment with your life?
I could make a long list of things that could be a potential source of discontentment for me. I’m blind in one eye. I’m deaf in one ear. I have an underactive thyroid (since birth) that seems to arbitrarily work better at some times than at others. My knees hurt much of the time, sometimes quite badly. I currently have more writing contracts and commitments than I feel like I can fulfill. My parents are getting old and are starting to sink into ailing health. All of those things could lead to a whirlpool of despair.
At the same time, I have a lot of things to be content with in my life. I have a great marriage that I feel is incredibly strong. I have a really strong relationship with each of my children. I have a nice home to live in with lots of space for my hobbies and interests. I have work that I quite enjoy almost all of the time and I have a ton of schedule flexibility.
I very much try to keep a “glass half full” view of my life, understanding that I have a lot of good things in my life and that the things that are less… enjoyable are okay and are often a necessary counterbalance, meaning I have to have some less good things in my life in order to have other good things. I also understand that my own poor choices in the moment can easily add to the misery, and making better choices in the moment is vital, as is working on my own thought patterns so that they don’t turn into a cycle of negativity.
I’d highly recommend that you read Man’s Search for Meaning by Victor Frankl, as well as posts I wrote in the last year on stoicism, epicureanism, Aristotle, and secular Buddhism. A lot of the answers you’re looking for can be found there.
Just know this: you are far, far from alone in these kinds of feelings, and I think the answer to it is to start a journey down a path to internal contentment. The problem is that such a path is different for almost everyone. I wish you good luck.
My parents enrolled me in a whole life insurance policy when I was a kid that now has a cash value of around $7K. I am thinking about cashing it in and getting a term policy instead that has a much higher benefit and costs less per month and then use the $7K to pay off student loans. Good idea?
It’s a good idea provided you make sure that the term policy is in effect before canceling the whole life policy and that you’ve had the whole life policy long enough to avoid any surrender fees (you’ll have to check on that, but if your parents gave it to you as a young child, it’s probably true).
You’ll also want to make sure that the basis of the policy – the total amount of premiums paid in over the course of the policy – is more than the cash value, or else you’ll owe taxes on the excess amount. This info should be available from the insurer. If you and/or your parents paid in $6K over the years and you get $7K out of it, you’ll owe taxes on that extra $1K. This shouldn’t sway your decision – it’s just something you’ll want to account for. Set aside half of the amount that would be taxed so that you’re sure it’s covered when next year’s tax bill comes around.
I am generally opposed to whole life policies, as I think they try to do two things at once (be an investment and be a form of life insurance) and don’t do either one particularly well. If you need life insurance, get a term policy. If you need to invest or want to invest on someone else’s behalf, get an appropriate investment account (a Roth IRA or a 529 or an ordinary brokerage account).
What are your thoughts on Kiplinger’s personal finance magazine? Is it worth reading or subscribing to?
Kiplinger’s does a very good job for the audience it’s targeting, which is individual people who love to tinker with their investments. If you’re into chasing the best mutual funds or evaluating which annuity is right for you, then you’ll get a lot of value out of it. It serves that audience very well.
However, I think that there is a much broader audience for personal finance than people who are interested in being individual investors. I think that Money Magazine comes a little closer to serving that broader group, although I think it’s also somewhat heavily focused on investment options.
I think that if you’re in a strong financial state and are interested in investing your money in a variety of ways and tinkering with those investments, you’ll get a ton of value out of Kiplinger’s. If that doesn’t sound like you, you probably won’t get a ton of value out of it. It’s a magazine written very well for its audience – the question is whether you’re in that audience.
My wife and I have a ton of accumulated used books from many years of book buying. We have realized that we will never reread almost all of them and want to seriously pare down. We had a yard sale with some friends in the spring but very few of them sold for more than 2/$0.25 which is how we priced them on the last day. That just didn’t seem worth it. The only used book store in the area isn’t taking any books right now. Tried to sell some on eBay but they didn’t sell at all and I don’t think it’s worth it. What can we do to get value out of these books?
Used books, unless they’re rare or otherwise noteworthy, are notoriously hard to re-sell. Used book stores stay in business because they have a huge selection from which people will find perhaps one book they want. There have been some online book swapping services in the past but they have all seemed to have difficulty maintaining the service.
What I’ve done with my used books in the past is to mostly donate them. I’ve donated books to the local library. I often put books in nearby Little Free Libraries. If a friend has an interest in a book I’ve got, I usually just hand it to them without concerning myself over whether it gets back to me. The only exceptions to this are books that I believe I’ll re-read in the future.
Get in the practice of donating them or swapping them with friends. You’ll get way more value out of that than selling them two for a quarter. Plus, you’ll spend less time dealing with them and make a lot of people you know and people in your community happier.
What’s a good way to handle a salary offer? I just got a job offer paying about $10K per year more than I make right now. On the one hand I want to just take the money and run. On the other I think I should negotiate at least a little but I’m kind of scared as to how to do it. All articles I’ve found on salary negotiation seems like people playing hardball. How do I not risk my job or feel like a jerk?
Is their offer in the range of what’s reasonable for the position in your area? If you’re not sure, do a little homework and make sure the offer is in a reasonable range for the type of job in your area. Does it compare with other job listings?
Negotiating comes with a little risk. They usually can rescind the job offer, though they usually won’t do so unless they feel you’re being unreasonable in the negotiations. If you’re asking for salary that’s outside the range of what’s expected for this job in your area, that’s potentially a reason to rescind the offer.
What I would do in your position is evaluate comparable jobs in your area and what they are paid for similar jobs with similar experience requirements and then make a counteroffer that’s within that range, explaining your reasoning in the counteroffer in polite language. If the offer is already close to the top of that range, I’d respond with some questions about benefits, like 401(k) matching and vacation time and the health care plan, and if those seem reasonable, I’d take it.
If you end up at a salary impasse, ask for some non-salary benefits, like a small amount of extra vacation time accrued when you start.
I planted some basil along the side of our house because a friend of mine said it would basically grow with little effort and he wasn’t kidding. I have more basil than I know what to do with. I borrowed a food dehydrator and am trying to dry out some of it and I told some friends to come and get as much as they want but I still have tons of it.
I’d make some infused oil. Just get a big container of olive oil and, for every cup and a half of oil, blend it with a packed cup of basil leaves in the blender until it’s pureed. Then, put it in a skillet over medium heat for about a minute, then pour it through a fine mesh strainer, then pour that through a paper coffee filter, saving the oil. You might have to replace the filter a time or two. Put that oil in a jar and save it in the fridge and it’ll last for a month or so, and that olive oil will be amazing in anything that needs even a bit of basil flavor.
You can also just pick things clean, put it all in a large bag, and put it somewhere with a sign that says “FREE BASIL!” You could also just knock on the doors of your neighbors and offer it to them.
While you’re at it, I would dry as much as I possibly could and store it in the pantry.
What can I do to prepare myself for the upcoming recession? My job is pretty stable but what else should I do? Should I make any changes to my retirement account?
I wouldn’t do anything much. I definitely wouldn’t touch my retirement account, as you have no way of accurately predicting when the stock market or any other market will be at a high and when it will be at a low.
The one move I would make is to make sure you have a well stocked emergency fund. It should be cash stowed away in a savings account somewhere and it should cover at least a few months of living expenses, if at all possible.
My own strategy for an emergency fund is to just have a small amount automatically transferred every week from my checking account to an “emergency” savings account, and I never turn it off. When something big and unexpected does strike, I don’t hesitate to tap that money. There’s usually plenty in there. It’s a good practice, especially since credit cards are not a trustworthy emergency fund. They fail in times like natural disasters and identity theft and robbery, among other situations.
I have a bunch of old journals that I want to digitize and then destroy the originals, but then I want to keep the images safe. Don’t mind spending time on doing this because I’ll just read the entries along the way. What’s a good way of doing this?
There are a lot of ways of doing this. It really depends on how secure you want the saved pages to be and how frequently and easily you want to be able to access them yourself.
The easiest way of doing it would be to take pictures of each page with your phone, email them to yourself, then save those attachments in a folder on your computer and password protect that folder. You’d obviously want to delete the images from your phone and delete those emails as you go. If there’s nothing that’s overly sensitive in there beyond personal thoughts, this should suffice.
From there, you can get more and more and more secure, depending on what security needs you have. With my own journals, I largely don’t back them up, but the specific parts I have backed up, I simply have the images in a password protected folder, just like the description above. The worst thing that could happen is that someone might read them and know that I was struggling with some things, which might be embarrassing but wouldn’t be a huge deal, or that I was critical of someone. While I don’t want to broadcast that to the world, it’s also not apocalyptic if it was found. For me, a password protected folder is enough.
As for destroying the originals, the question I’d ask myself is whether I ever wanted someone – a child of mine, perhaps – to ever read them. If you ever might want this, I’d save the originals in a safe place. A safe deposit box at a bank is probably appropriate for this kind of thing. If that’s of no interest to you, destroy away.
Enjoyed your recent articles about homemade cleaning solutions. Have you ever tried Dr. Bronners? I use it at various dilutions for all kinds of things like shower soap and hand soap and dish washing and window cleaning. If you can get it at a good price it’s a good bargain.
Dr. Bronner’s is a type of liquid Castile soap, which is soap that’s made with vegetable oil (usually olive oil, though hemp oil and coconut oil are common) rather than animal fat. Since pure Castile soap basically consists of ash and vegetable oil, it’s pretty pet and environmentally friendly, and it’s a pretty good all around soap provided you dilute it appropriately for various uses (it’s mighty strong right out of the bottle).
Sarah got into a Dr. Bronner’s kick about a year ago, using it for a bunch of different things. The big issue we ran into is that it’s really potent (and pretty expensive) to use as hand soap, but if we cut it, it was really watery and our kids made a pretty big mess with it consistently. She had positive things overall to say about it, though.
I did some math on the variety of uses of Dr. Bronner’s and how much you should cut it with water or other ingredients for each use, and I came to the conclusion that if it works well, it would probably be a notable money saver over buying several different dedicated products for home cleaning purposes.
So, what I think I’m going to do in the near future is buy a bottle of it, use it for a bunch of common uses (hand soap, body wash, shampoo, various household cleaning uses) and see how it works and then turn it into a post. Look for it in a month or two.
Whenever I go do something it seems like I end up with a situation where I can spend money and I know it’s stupid but I want to do it anyway and I ignore the part of me that’s telling me it’s stupid. So I get nowhere. Very frustrating. Don’t now how to fix it.
That’s your inner voice talking, and it’s usually pretty wise. You’re just choosing to ignore it.
Most of us have two voices in our head, the metaphorical “angel” and “devil” that are used so often in pop culture, with one sitting on one shoulder and the other on the other shoulder. Your “angel” is quietly saying that this is a bad move; your “devil” is usually louder and is finding all sorts of reasons to do it anyway. Most of the time, the “angel” is speaking on behalf of the better long term move, the side that’s in line with your core values, while the “devil” is the one that speaks on behalf of immediate gratification and emotional desire in the moment.
What you’re dealing with is something almost everyone deals with as they try to change themselves. It is great that the “angel” voice is there, but the “devil” voice is louder and more compelling and gets your attention, so what can you do about it?
The best thing I can say is this: practice. In every situation you can, try to hear both voices, and make a conscious effort as often as you possibly can to listen to the “angel.” The thing is, the more you listen to the “angel,” the louder that voice gets and the quieter the other one gets. This is particularly true when you start seeing the benefits of listening to the “angel” in your life. Make that your goal every single day, think about it every single day, and give it your all.
This doesn’t mean you’ll be perfect at it – no one is. The point is to simply start listening to the “angel” more often, and the best way to do that, at least that I’ve found, is pure focus and practice. Keep the idea in mind as much as you can in the coming days and weeks: “I need to listen to the good voice and do what it says.” Don’t kick yourself if you mess up; just focus on doing it right the next time.
Eventually, if you do it enough, not only will you start seeing real positive results in your life, the voice of the “angel” will get louder and louder and the voice of the “devil” will get quieter and quieter. It takes time, of course, but what’s really happening is a change in your habits and routines.
Make it your goal every single day for, say, three months. “Today, I will try to hear the ‘good’ voice before I make a choice and I will do my best to do what the ‘good’ voice says.” Do that as best you can; don’t expect perfection, but expect improvement. That’s all you can do.
Another good strategy is to simply change up your environment: try to avoid even being in situations where you’re needing to listen to that “angel” and that “devil.” Rather than going out somewhere and then struggling with choices when you get there, make the choice to do something else entirely. Rather than hanging out with someone who constantly gets you in these situations, find other people to hang out with.
Good luck, my friend!
The way I think about savings or about money in retirement or in investments is that it’s just another way of making money. If I decide to spend less and then have $100 to put away at the end of the month and I put it in something that earns 7% per year, I’m now earning $7 more this year and every year for as long as I leave that initial $100 alone. If I do that 100 times, that’s $700 a year forever. I like to look at it in $100 increments like that because it becomes something tangible in my life. I decide not to buy a $300 Switch and instead bank that money and now I make $21 a year without working basically for ever. I like it when little stuff adds up like that too. Not spending money on stupid stuff means I make more money without having to work.
That’s a really good way of looking at things. You’re simply translating making good spending decisions into what that means when you invest that money. Money in the bank is working for you, earning more money for you without you lifting a finger. If you can get money in the bank, then you’re going to earn even more without lifting a finger.
The thing that got me going on savings was the compounding. Like you said, $100 means that if I invest it and get 7%, that $100 will earn me $7 a year automatically as long as I don’t touch it. But if I don’t touch that $7 either, then the next year that $100 earns me another $7, but that $7 I didn’t touch earns me $0.49. And if I don’t touch it again, that $100 earns me another $7, the $14 I didn’t touch earns me $0.98, and even that $0.49 I didn’t touch earns me about 3.5 cents. And on and on and on. It grows on its own.
You can maybe think of that as the money in the bank giving itself a raise because it’s been working for a long time!
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.