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Questions About Inheritance, Old Money Books, Fidgeting, Pickles, 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. Inheritance question
2. Converting attic into extra bedroom
3. Tempted by individual stock investment
4. Staying motivated at work
5. Fidget “spinners” or other toys
6. How someone becomes rich
7. Dealing with divorce loneliness spending
8. Getting started with painting
9. Roth IRA or Roth 401(k)?
10. Pickling vegetables in the fridge
11. Usefulness of old money books
12. Single piece of financial advice
This entire weekend was full of beautiful weather. It practically demanded that I spend time outside, especially on Saturday and Sunday afternoons.
And so I did.
I played catch at the park with my youngest son until he chose to quit. I went on a long walk with my daughter after supper until it was almost pitch black. I did a bunch of cleaning in our front yard, getting rid of some winter detritus. I went to my oldest son’s soccer game and my daughter’s soccer game.
And is often the case after those first days of spring where you spend a ton of time outside after spending a lot of indoor time for months during the winter, I slept deeply and soundly. I knew it was going to happen, so I set an alarm for myself, one that I apparently slept through for almost 30 minutes of noise.
I feel great. I feel alive.
Let’s get to some questions.
I’m 47 and just inherited a substantial amount of money, $400,000, and about $300,000 more will be settled over the next year. I currently have secured debts of: $255k mortgages on two properties (one is a rental and to be sold when I retire), $135k second mortgage and $55k student loan. I have $50k in a Roth IRA as well as an annuity and pension. I just paid off all unsecured debt.
I’ve already spoken to another financial advisor but would like your opinion as I value it greatly.
What do you think is the best way to utilize and/or invest my inheritance?
To answer your question, you have to fill in a lot more blanks. What are your big ambitions in life? Are you hoping to retire early? Retire at a typical time with comfort? Do a lot of traveling? Switch careers? Are you married? What is your risk tolerance like? What are the interest rates on those mortgages?
Those are questions that I don’t have an answer to, so it’s very hard to suggest what you should do with that money. I could fill in the blanks with my own answers to those questions, but then I wouldn’t be giving you advice on what you should do. If I were in your boat, I would be looking ahead at retiring in 10 to 15 years and thus I would probably lean away from investments with significant risk and strongly consider paying off all of those mortgages and then either buying another rental property (assuming that property management is something I valued) or putting the money into a target retirement fund in a taxable account, moving as much into a Roth IRA each year as I could. (Or, honestly, both.)
The problem is that, again, I’m filling in a lot of blanks with guesses from my own life, not from your life. Your best move would be to talk to a few different fee-only financial advisors who aren’t financially motivated to sell you on a particular investment and see what they think. The best ones will ask you all of those questions above and more.
What are your thoughts on converting attic space into an extra bedroom? I’ve seen estimates to do this ranging anywhere from $10K-$50K. Do you see this as a good alternative to moving houses, if the main reason for moving would be just to add another bedroom for kids/guests?
If you’re otherwise happy with where you’re living and have an attic with reasonable headspace and a good place to put stairs leading to that attic, then it’s a great idea. However, if you’re somewhat unhappy with your current house or if adding that attic bedroom would be awkward, moving would be a better option.
Speaking from my own experience, Sarah and I looked seriously at the prospect of adding a bedroom above the garage in our house. This would require ripping the roof off of the garage and adding a second story above it, which would be accessed from the second story in our current home. The costs escalated rapidly however when we discovered that doing it safely would essentially require rebuilding our entire garage.
If you have a convenient way to add an additional bedroom to a house that you otherwise like, go for it.
My brother is an employee of a company about to have its initial public offering. I am very tempted to invest in this company. My brother is a true believer in what they’re doing and how the company is organized and I am convinced the company will rapidly increase in value in the coming years.
I’m trying to decide how much of my Roth IRA balance to invest in his company. Advice?
If you have a well-funded overall retirement plan and the money you invest wouldn’t sink your retirement if that individual company failed, then this isn’t a bad idea. However, if you’re already behind the pace for saving up for retirement, putting your money in something this risky is a bad idea. It’s like a batter with two strikes swinging wildly at the next pitch because he or she feels that a hit is absolutely the only way to get out of their situation when a walk will do just fine.
So, what should you do? First, I’d spend some time assessing where you are in terms of your retirement planning. Are you on pace to retire when you want to be? Are you ahead of that pace? Behind that pace? CNN Money has a great little retirement income calculator that can help you quickly figure this out.
My feeling is that if you’re currently on pace for retirement and bump up your savings, you can certainly invest in your brother’s company in a moderate way. The same is true if you’re above pace. However, you should never go anywhere near putting all of your eggs in one basket – the advantage of an index fund or a target retirement fund is that if one company fails, it’s not going to really hurt you. However, if you have all of your money in your brother’s company and it fails, you’ll be in a world of hurt. Don’t put all of your eggs in one basket, no matter how strong that basket looks.
I don’t hate my job like many people. I like it just fine and I don’t dread going to work. But when I am there most of the time I just sit around unmotivated. I have stuff to work on and I can press forward on it if a deadline is on me but most days I just stare out the window or walk around or read The Simple Dollar or something. I get the work done that I need to get done so I don’t think I’m in any danger of getting fired and my last review was good (not great but def. good). I just have zero motivation to work toward a promotion or anything. I feel like I am coasting and I can’t decide how bad that is.
The most powerful tool I’ve ever found for motivating myself to work when I didn’t feel like it is that I looked at the other life benefits of doing the work that I was resisting.
For example, right now, I could easily dawdle in terms of formatting this mailbag and answering all of the questions. It’s kind of tempting to just lurk on Twitter and read some things or to read a book or just to stare out the window or go on a walk around the neighborhood.
However, I know if I get this article finished and make a lot of progress on another article before my wife and kids get home, I can spend time with them completely unworried about work, plus I’ll have space later in the week for other things, plus I’m very likely to be able to bank some articles for the future (that’s how I take “vacation” time – I write articles in advance and then set them to automatically post when I’m gone).
In other words, look at your empty time not through a window of immediate feelings and desires, but as an opportunity to take on your bigger goals in life. What do you want to be doing in five years? You can be using those empty times at work to address that question.
What are your thoughts on fidget “spinners” or other such small devices for manipulating with your hands while you’re thinking? I find myself constantly fidgeting when thinking or waiting and I almost always grab something to twiddle in my hands like a large coin or a pen cap or something because it seems to help me focus. Do you think a fidget “spinner” is worthwhile for focusing?
So, for those unfamiliar, a fidget spinner or fidget cube is a small item intended to be held in the hand to manipulate or twist around or spin as a way to relax and improve focus. Many people who need to concentrate on solving problems professionally find value in fidgeting, as do people with mild anxiety.
To me, a good “fidget spinner” is a great gift for someone, but probably not the best investment of money.
Here’s why: You already likely have a bunch of stuff around that you can fidget with. As you mentioned, a large coin works great, as does a pen cap from a sturdy pen. I often fidget by twiddling an entire pen in my hand, just kind of spinning it back and forth while I think.
My suggestion is to just find something you already have that seems to really be soothing when you fidget with it, then keep it in your pocket and have it always ready to twiddle.
Buying something to replicate an activity you can do with other things in your environment already seems redundant, but I can see the value in a device that perfectly focuses on fidgeting that’s always available in your pocket, so suggest it as a gift idea if someone ever asks you.
Can you explain in very simple terms how someone gets to be rich? I understand that some people make a lot of money but how does someone who makes like $500,000 a year turn that into having many millions in the bank?
Generally, people become rich by spending their money not on lifestyle things, but on things that produce more money.
Let’s say I make $500,000 a year and spend all of my money on vacations and such. If that happens, at the end of the year I have nothing in the bank.
Let’s say, on the other hand, I make $500,000 a year but I only spend $200,000 of it and leave the other $300,000 in the bank. At the end of the year, I have $300,000 in the bank, and that will be true every year thereafter. I’m at least heading in the right direction.
Now, let’s say that I make $500,000 a year, I spend $200,000 on my life, but I use that other $300,000 to buy two houses to rent out to people. I can always sell those houses again later and make my money back, but now I have two $150,000 houses that I’m renting to people. Let’s say there’s people paying rent in those houses most of the time, so I make $2,000 a month in rent. That’s another $24,000 a year.
Okay, at the end of that first year, I’ve made $500,000, spent $200,000, and bought $300,000 worth of houses. Those houses make me another $24,000. So, my overall worth is $300,000 in houses and $24,000 in rental income. Pretty good?
Well, here’s where people get wealthy. The next year, I make another $500,000 and buy two more houses with that extra $300,000 that I don’t spend. Now, I own four houses worth $150,000 each and I make $1,000 per house per month in rent, so $48,000 a year.
The next year, I do it again. I buy two more houses. I now own six houses worth $150,000 each and I make $1,000 per house per month in rent, so $72,000 a year. Over those three years, I have $144,000 that I’ve earned just off of rent, so I use that to buy another house. At the end of that year, I now have seven $150,000 houses that I own that will each make $12,000 a year in rent.
It just keeps going, year after year. Eventually, the houses are earning enough in rent that I can buy another house each year. Then another two houses each year. Then maybe an apartment building. Then maybe I open up a couple of chain restaurants. All of those things I’m buying make more and more money for me in addition to my $500,000 a year that I make.
That’s the secret to building wealth. You use your income to buy things that either go up in value or make money on their own. You then use those proceeds to buy more things that either go up in value or make money on their own. It snowballs, bigger and bigger and bigger.
The key is to always spend less than you earn. If you do that, then you’re already heading down that path! It’s just easier for someone earning a large income to spend less than they earn, but it’s not impossible for most Americans to do it. It’s just that modern life tempts us to not do it.
About a year ago, my wife abruptly announced that she wanted a divorce. She got custody of the kids and moved about an hour away to be closer to her job. I felt happy with our marriage but she obviously did not.
I am fine with the divorce proceedings and the amount of child support that I pay each month. What I am struggling with is basically just loneliness and spending.
I feel lost. Each day before things changed I felt like I had a purpose. I filled almost every hour with something related to either my career or the family.
Now, on a typical working day, I have about five or six hours that are just unfilled. I mostly just sit at home and overplan the next weekend when I’ll have the kids because that’s what I look forward to the most.
I have tried to get back into the hobbies I used to have when I was single and I have spent a lot of money on buying stuff for them but I just have no desire to do it. I sit at home and binge watch TV series and go on runs and then watch some more TV and read the internet and spend some more money at online stores.
I have read a lot of advice books on getting out of a post-divorce funk which I’m obviously in but what is really worrying me is that I used to feel like my spending was completely under control and now it’s totally haywire. It’s like I convince myself almost every day that buying something will make me feel better like I used to but it doesn’t.
Honestly, Craig, you sound like you may have a mild form of depression, one that may have been there during your marriage but you kept so busy and organized that you didn’t notice it because you didn’t really have time to unwind at all.
If I were you, I’d have a chat with your doctor who will likely encourage you to seek some kind of therapy to work through this.
Along with that, all I can do is encourage you to take the steps that a friend of mine took after his own divorce. He has told me many times that he made himself go out and get involved in community groups, that he really didn’t want to but that if he just sat around the house he was going to dig himself into a deeper and deeper funk. Go look at Meetup.com and go to anything and everything that’s interesting. Dabble. See what clicks with you.
Good luck. Life will go on. And unless you’re bankrupting yourself and not saving for retirement, don’t get too stressed about the money concerns right now. If you right the ship in other areas of your life, I’m willing to bet that the money will come along, too.
I want to get started with painting as a hobby. I used to love painting back in high school art and felt like I was at least decent at it. I looked into becoming a member of a studio and it was scary expensive. I have some space in the guest bedroom that I could use. Do you have any suggestions for inexpensive easels, sources for canvas and paints, and so on?
I actually have considered this very hobby a few times. I could definitely see myself doing this in the corner of the basement family room by placing things to paint in front of me or watching instructional videos. I did some homework on it and asked some people, and I came to the conclusion that the best place to start was with paints and equipment paired to instructional videos.
So, I came to the conclusion that a kit that was well supplemented with a bunch of online material would be perfect, and that led me to Bob Ross.
If I were getting started, I would get a starter kit of the items Bob Ross used on his show Joy of Painting, along with a simple easel and a bucket for cleaning brushes and a pack of stretched canvases.
Then I’d set up in front of my television and turn on some videos of old episodes of Joy of Painting. Start with a great starter episode, like Grandeur of Summer, and just follow along. After that, start going through the videos of old Joy of Painting episodes on Youtube and working through the ones that look interesting, pausing whenever you need to.
The point isn’t to just copy his paintings, but to eventually branch off and do your own thing. Consider the episodes to be inspirational training wheels, from which you can branch off and do whatever you want.
Once you have the basic gear (easel, brushes, and initial batch of paints), you’re probably investing somewhere around $10 per painting, but it will provide you several hours of calm entertainment (at least). That, to me, is a reasonable bargain compared to many hobbies.
My workplace now has a Roth 401(k). How does it compare to a Roth IRA? Which is the better deal?
If your employer is offering matching contributions, then the Roth 401(k) is a better deal. The amount of money you’ll get from matching contributions blows away any edge you might get from using a Roth IRA over a Roth 401(k).
If your employer isn’t offering matching contributions, then the Roth IRA is almost assuredly a better deal because you have a much broader selection of investment houses and investments so you’re sure to save money on costs over the Roth 401(k) at work.
However, if you’re saving enough to go over the annual limit of a Roth IRA, then putting additional money into a Roth 401(k) is a good idea.
Can you actually save money by pickling things yourself in the fridge for later consumption? For example, if you’re comparing a jar of pickles at the store to pickles you pickle yourself at home, which is cheaper? Enough cheaper to be worth it?
I tend to think that refrigerator pickles – the kind you make in a jar that you store in the fridge until you eat them a few weeks later – blow away almost any store-bought pickles. However, the cost of refrigerator pickles does exceed the cost of cheap pickles at the store, though they’re not as expensive as the higher-end pickles at the store.
What you’ll need is a quart jar with a lid, some tap water, a little bit of vinegar (though how much depends on your preferences – I use about half a cup per jar), 2 tablespoons of salt per jar, some peppercorns (2 teaspoons or so) and garlic (a few garlic cloves) and a bit of dill seed (a teaspoon works for me, but it depends on the flavor you want) or fresh dill for flavor, and some cucumbers. Cucumbers are easy to grow, so if you can get them from the garden, this makes the pickles much less expensive.
Put everything but the cucumbers and water in the jar and shake it thoroughly with the lid on there, then slice the cucumbers into spears or discs and add to the jar until the cucumbers fill up about 3/4 of the jar. Then add water to fill the jar up to just a bit above the cucumbers but below the top of the jar. Add the lid, shake thoroughly again, and put it in the fridge for a week. The pickles will be amazing.
If you let them stay in there longer, the flavor gets stronger, but the pickle may slowly start to degrade and become soft. There’s usually this happy point where it’s got this perfect balance of flavor and texture, and I find it’s usually between 7 and 9 days.
You can always adjust the seasoning as you wish by adding more or less garlic or dill or peppercorns or add things like red pepper flakes.
My calculation of the cost of a jar like this is about $1.50 for the jar and lid (which you should be able to reuse a bunch of times), $0.50 to $0.75 for the non-cucumber ingredients, and whatever the cost of the cucumber is. You can, of course, reuse old pickle jars from the store for this.
I think it’s a money-saver, but only because I’m comparing the refrigerator pickles to the better store-bought pickles instead of the cheapest ones you can buy.
Is there any value to reading old money books or do they become useless after a few years? I picked up some money books from the 70s and 80s and some of the tips are just bizarre. Tips referring to using Ma Bell aren’t useful!
I think that the more timeless/conceptual/philosophical ideas consistently hold true. That’s why the wisdom of people like Epictetus and Ben Franklin and Marcus Aurelius and Ralph Waldo Emerson still provide great guidance for personal finance and career choices, even today. They often spoke to principles and assumed that the reader would be smart enough to figure out how to directly apply those principles to everyday life.
It’s the specific application that becomes dated very quickly. Specific money-saving tips have a fairly short shelf life on average, though some – like food strategies – can stick around for a while. You’re spot on in pointing out that strategies for “Ma Bell” really aren’t useful these days!
I tend to value the more “timeless” books more, anyway. I think it’s quite enjoyable translating core principles into specific tactics in my own head and although I like reading lists of frugal tactics, I’m often using those tactics just as much to sharpen my own sense of how to be frugal than using those specific tips themselves.
What is your best single piece of financial advice?
I was literally asked this question three times this week by three different people, so it felt right to include it in the mailbag!
My single best piece of advice is to spend less than you earn. If you live within your means, you will achieve financial success.
However, that doesn’t mean that financial success will instantly arrive the first month you spend less than you earn. Spending less than you earn needs to be the pattern of your life. You should do it every month, and when you do it every month that means you’ve done it for the year, and if you do it every year, that means you’ve done it over the span of your career.
It’s a person’s inability to do this one simple thing that leads to virtually all financial troubles, and it’s a person’s ability to do it that leads to virtually all financial successes.
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.