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. Preparing to retire
2. Most important lesson of all
3. More on wool dryer balls
5. Cash gifts for college
6. Plant-based meat alternatives
7. Authorized user problems
8. Struggling to stick with plan
9. Lodge for cast iron?
10. Is a savings account worthwhile?
11. Stock market going up forever?
12. Current reading
Over the last week, I had a few readers write to me about "Blue Monday," which refers to the idea that in the northern hemisphere, the third Monday in January is the most "depressing day of the year" for a number of reasons — a confluence of post-holiday letdown, seasonal affective disorder and the start of the workweek.
I basically don't buy into it. Yeah, seasonal affective disorder is a real thing, but for me and a lot of others, it kicked in two months ago. Most of the other reasons are very situationally dependent.
Don't buy into the idea of Blue Monday or anything else like that. Rather, take on today like you would any other day.
On with the questions.
We are going to be retiring soon and currently live in a condo that we have owned for about 13 years. We were initially happy but since a new management firm took over the complex, we are not as happy. We are considering moving into a senior apartment complex in a better area. We have no debt and have built up a nice nest egg for our later years in life. We live very reasonably in our condo. Of course, we do have to pay for any repairs and appliances on the inside of the condo. We do have minimal condo fees and taxes to pay, plus very reasonable utilities. We have no mortgage. Several friends and family members live in senior complexes where they pay upwards of $2,000 per month. Yikes! The place we like requires a large sum of money to be put down and then the monthly apartment rent is less. Upon leaving the complex, the renter gets 90% of the money that was put down. The senior complex has a lot to offer; however, the majority of the people are around 10 to 15 years old than we are. The thought of paying around $900 to $1,000 per month in rent that basically "disappears" bothers us. And we are sure that there will be issues with living in a complex just as there are where we live now. What advice can you give us to think about?
It sounds like you have two choices — staying put or moving to the senior condo — with pros and cons for each. You like the price and the social environment of where you're at now, but it comes with other issues you don't like. The senior condo is more expensive and may be less appealing socially (for now), but has many other aspects you do like.
It really comes down to what aspects of living you and your partner value the most. It sounds like you have a list of a bunch of features and recognize that one option is good at some and another is good at some, but you haven't really decided which of those features are most important to you. What really matters to you? The extra spending money you'd have at the cheaper condo? Having those people close by? The amenities and environment that you're living in?
I really can't answer those questions for you. You have to decide which one or two things really are most important to you, and there's no right answer. There's only the right answer for you.
If I were to try to read between the lines of your message, I think that the features you care most about are present in your current condo, not the other one. I think you're concerned about price (and how that translates into more spending money) and about the people around you more than the amenities offered and the location. If that's actually the case, you should stay put.
What would you say is the single most important thing you did to turn around your finances?
I recognized that buying things didn't make me happy. Buying essential things beyond what I actually need amounts to a non-essential purchase, and buying most non-essential things creates this very short-lived illusion of happiness that fades rather quickly. Yes, there are some non-essential expenses that bring me happiness, but they're a small fraction of what I used to spend my money on.
It crops up again and again and again. I'll buy things because they seem cool at the moment or because I think they'll make my life better and I'll get this brief bit of joy that fades and then I'm on to wanting something else.
It's as if there's a sense of want inside of me that is never quenched by feeding it. If I want more stuff, actually acquiring more stuff makes that desire burn even stronger. Buying new stuff doesn't sate that desire more than just temporarily.
To be quite honest, the most powerful strategies I've learned for dealing with this come from the secular aspects of Buddhism and stoicism. I was already gravitating toward the ideas and principles in both of those practices on my own before I really discovered how much of a tradition they had. Stoicism taught me to stop and reflect before reacting, and Buddhism taught me about the problem of unquenchable desire.
Found your comments on wool dryer balls interesting. I find them to be worthwhile but not a huge saver. One nice benefit you didn't mention is that they seem to just eliminate static cling, so stuff doesn't stick together.
To summarize, I picked up some wool dryer balls a while back to test out how they work. I concluded that they reduced drying time a small amount and also softened the clothes a small amount (I don't use fabric softener, so it was noticeable; I don't think they'd have any effect if you were already using fabric softener), but that they didn't provide enough of a benefit to be worth it. Amy points out here that they also seem to reduce static cling, which is something I noticed too but didn't think much of it.
After some experiments, what I've found is that dryer balls seem to do better when you've got a pretty full load in the dryer. I usually don't fill my dryer to the brim when drying clothes, so it's not something I typically notice. I usually run a small load and the dryer balls only make a small difference in run time, but if you run a big load, they make a bigger difference. My dryer loads usually run about 40 minutes without dryer balls, with the balls shaving off about 5 minutes on average. With a huge load, it'll run for about 80 minutes, but the dryer balls seem to cut off about 15 minutes.
I still don't think they're a great bargain, but they're certainly not going to hurt.
Hi Trent, longtime reader; saw this article on kakeibo and thought you would appreciate the approach, particularly given it's connection to the Kaizen method:
When I got down to this section of the article...
"According to the kakeibo method, you must ask yourself the following questions before purchasing any non-essential items — or the things you buy on impulse, but might not necessarily need:
Can I live without this item?
Based on my financial situation, can I afford it?
Will I actually use it?
Do I have the space for it?
How did I come across it in the first place? (Did I see it in a magazine? Did I come across it after wandering into a gift shop out of boredom?)
What is my emotional state in general today? (Calm? Stressed? Celebratory? Feeling bad about myself?)
How do I feel about buying it? (Happy? Excited? Indifferent? And how long will this feeling last?)"
... I immediately realized that I've basically been doing this for years, and in fact since the earliest days of my financial turnaround. Initially, I referred to it as the "10-second rule," meaning that I would stop before any non-essential purchase and really think about it, but over time a set of questions very similar to those began to emerge and I began to ask myself those things about every purchase.
It's extremely powerful. It's really shown me that a lot of the things I used to spend money on are really not in line with what I want to be doing with my life.
The kakeibo method centers around using this for any significant purchase and actually writing down your answers. I think it's great to write it down while considering big purchases, but it's a good mental checklist to have for even small ones.
If a relative gives my child a cash gift for their education what is the best thing I can do with it?
If your child has a 529 college savings account, put it in there. If your child doesn't have an account, sign up for one and put it in there. That's the best thing you can do with money that is intended to help with their education.
A 529 account is kind of like a savings account except when you sign up, you get some choices as to how the money in there is invested. You can have it be invested in something aggressive like stocks or something low risk like a money market. Usually, I recommend that people choose a target fund, which basically means that the money you put in there is invested aggressively when they're young and dials back as they get closer to college age.
The big advantage of a 529 plan is that you don't have to pay taxes on money earned in that account as long as it is used for educational expenses — tuition, textbooks, and so on. That's a pretty big advantage. (If it turns out that there's still money in the 529 after college, the money can be withdrawn with a small additional tax penalty, or it can just be left in there and transferred to a child.)
Each state has its own 529 program, so start by looking at your own state's plan. If you live in a state with income tax and contributions to that account have tax benefits, then go with the one in your state. I would strongly encourage you to avoid prepaid tuition, if that's an option in your state, and go with college savings. In some states, there is an option to use 529 money to prepay tuition at some universities, but that seriously limits college choice for your child, so I advise against that approach.
What are your thoughts on the "plant-based" meats that a lot of companies are bringing out? They're expensive. Are they any good?
I think they're a solid stepping stone for someone who really likes meat but wants to move to a plant-based diet. I don't mind them and will certainly eat them, but I actually prefer things like grilling a portobello mushroom or making my own black bean patty.
So, to be clear what Barney is asking about, he's referring to things like Beyond Burger, Impossible Burger and other alternatives to meat that have been on the market for longer, like Field Roast hot dogs and Morningstar's various products. All of these are attempts to simulate the texture and flavor of various meat products — hamburgers, hot dogs, bratwursts, chicken patties, ground beef and so on — with varying degrees of success.
I think they click well with some and not well with others because different people appreciate different things about meat. Some people simply want chewy and savory and spices and these things hit the spot for those, while others expect it to be EXACTLY like their favorite hamburger or whatever in taste and texture and everything, and they're going to be disappointed.
For the most part, these meat alternatives are pretty expensive. I think they taste good but don't really match the texture of meat too well. My personal favorite out of all of them is Field Roast's various versions of hot dogs and sausages, but honestly, I'll usually just cook something else entirely that's not trying to imitate meat, like a portobello mushroom cap, grilled tempeh or a black bean patty I made myself. If you're going vegetarian, look at these as a once-in-a-while thing and get used to a diet that's centered around actual vegetables.
I added my youngest son to my credit card as an authorized user in order to help improve his credit. He basically doesn't have any credit. I kept the physical card and didn't even tell him the number.
Last month he went to get a car loan and was declined. He didn't know what to do so he went to a credit union and they looked at his report and said that the problem was that I have a balance on the card. The card has a credit limit of $3,000 and I pay it off every month so I am not sure what is going on.
Let's walk through this, step by step.
When your son was declined, some business pulled his credit report, calculated his credit risk based on that report, decided that he was too risky and declined him. If the credit union looked at his report and said that the issue is with this credit card and, as you note, that's pretty much the only thing on his credit report, then we need to focus on that a little bit.
A person's credit report is managed by three different credit bureaus, businesses that exist solely to collect credit information on people and then sell reports on individual people to other businesses so they can decide how trustworthy you are. To get that information, they have arrangements with a lot of different businesses — banks, credit card issuers, utility companies and so on. Those businesses report to the credit bureaus about you regularly.
Most credit card issuers report information about you once a month, and it usually has no relation to the day you get your bill or the bill's due date. That report includes your current balance, your credit limit and whether you're up-to-date on your payments.
At the moment when the issuer sends their report, if you happen to have a balance that's near your credit limit, that's what the credit bureaus are going to receive. For your son's credit report, it's likely that the only thing on the report was a single credit card that was nearly maxed out. If you regularly fill up that card to something near the credit limit and then pay it off, that's probably the issue.
Was there a point in the last few months where the balance on that card approached the credit limit? Did you consistently do that? If so, that might have been enough to trigger this.
Given that the credit union actually looked at the report and said that your credit card was the problem, that's my best guess based on what I know of this story. You might want to have your son as an authorized user on a card that you use fairly infrequently and usually have a low balance on.
For the new year, I took your advice and came up with a money goal that is basically just completing some daily steps. I decided that each day I would put aside an item to sell off and then sell that stuff on Facebook Market every few weeks. Already running into problems because I'll forget to do it one day, I'll not want to get rid of something or I'll grab it back from the "to be sold" pile. I need help.
My advice to you would be to keep up with trying to put something aside every day but don't sweat it. Instead, schedule a "sell day" once every other week or so, and then on that sell day aim to sell off 14 items (or 21 items if you do it every three weeks). Start by selling everything in the "sell pile," then find enough additional items to sell off to go along with that. At the end of the year, you will still have sold off an item a day.
Not every goal works perfectly as a "focus on today" kind of goal. I find that things that center around trying to alter a behavior I already have or doing something new that I want to do every single day are the kinds of goals that really work best with a "focus on today" kind of goal.
As an aside, I hope that part of your goal is to do something wise with the proceeds, like put it into a Roth IRA or use it to directly pay off a student loan or something. Without that, money "earned" from selling stuff off often ends up just buying new stuff.
Are Lodge skillets and pots good cast iron or should I buy another brand?
Lodge makes excellent cast iron products and, in the big picture of cast iron options, its prices are pretty solid, too. I wouldn't object to any Lodge cast iron purchase.
A few things to note if you've never used cast iron before:
First, it's heavier than most other types of pots and pans and skillets. Expect it to weigh more. It's not back-breaking or anything, but it is heavy.
Second, you will almost definitely need some sort of handle cover in order to be able to lift cast iron easily. Really good hot pads will work, but Lodge also sells a silicone handle cover that works really well.
Third, even if it's pre-seasoned, you're going to want to season it more. Just coat it with some kind of oil or fat — butter, vegetable oil, animal fat, whatever — and bake it in the oven, then clean it off and repeat a few times.
Finally, don't put it in the dishwasher to clean it. Instead, get a nylon bristle brush and simply wash it with water and a good scrub with the brush. If something really won't come out, use just enough soap to get it out of there. Here's a good discussion on how to clean cast iron.
Aged cast iron with a good patina cooks like nothing else. It's an almost perfect nonstick surface. It just takes some time and patience to get there.
Is a savings account ever worthwhile? If you're only getting a 1% return on your money why put money in there?
There are really three factors that you should look at for every place you put money: volatility (how much the returns can change on a daily/weekly/monthly basis; you want low volatility), returns (you want high returns over the long term), and liquidity (how easy it is to get your money out of the investment; you want high liquidity). No investment exists that has all three of these things.
Stocks, for example, have high volatility. Real estate has relatively low liquidity and at least a bit of volatility.
Savings accounts have extremely low volatility (basically zero) and very high liquidity (you can get your money pretty much whenever you want), but you pay for that with low returns.
So, what situations exist where it is most important to have very low volatility and very high liquidity? That's where you want to keep your emergency fund. That's where you want to keep money that you've saved for short term goals, like a major appliance or a car down payment or something like that.
Different investments have different purposes because different purposes want different levels of volatility, returns and liquidity. Sometimes, it's OK to lose 40% of your investment in a year (like 2008) because you'll get good returns most other years. Sometimes, it's OK to be invested in something that you might not be able to sell for a year with any semblance of a nice return.
Watching Fox Business while in a waiting room and a guy on there says the stock market will be going up forever. This seems wrong to me but it has basically gone up or stayed level for 11 years straight.
No one can predict the future of the stock market. However, if I were to bet, I would bet that the stock market will continue to go up for the foreseeable future as a long term trend, but we will have individual years or even multi-year periods of decline. That's what's happened over the 200+ year history of the American stock market and I see no real reason for that to change.
This is why I almost always point to the stock market and to real estate as good long-term investments. The stock market is a good long-term investment because workers will always slowly become more productive with technology improvements and there will always be new kinds of businesses and industries (the internet basically didn't exist in a commercial way 30 years ago, for example). Real estate is a good long term investment as long as more people are born and thus the need for land increases.
I wouldn't invest in either one for a short-term return — less than 10 years for stocks at least — because there will always be short term volatility and investment bubbles. But if I were to bet whether a broad stock market investment, like an index fund, is more valuable 100 years from now than today, I'd put all my money on "yes."
What books have you been reading lately? Any new "Books with Impact" coming up?
I'm never really sure which books will end up making for a good "Books with Impact" column. I check out a lot of personal finance and philosophy and self-development books from the library, read them, take a few pages of key notes on things that I think are practical and applicable to me, and try them out. If they click, I'll usually get my own copy, read it again, highlight it, and keep going with it, and if it feels really powerful, I'll end up writing about it.
Here are a few books that might eventually turn into a "Books with Impact" column in the future. I've read them and have some notes from each and I'm currently trying to use the ideas in my everyday life. If they continue to click well, they'll probably become "Books with Impact" in the future.
The Simple Path to Wealth by J.L. Collins is a nuts-and-bolts book about financial independence, offering a plan for those who want to retire earlier than the typical retirement age.
Getting Results the Agile Way by J.D. Meier is a really interesting productivity book that skews the ideas behind the Agile software development method into a context that works for individuals.
The Like Switch by Jack Schaefer is basically a primer on how to get people to like you when you don't know them well, something that doesn't come naturally to socially awkward people like myself.
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.