Reader Mailbag #76

Each Monday, The Simple Dollar opens up the reader mailbags and answers ten to twenty simple questions offered up by the readers on personal finance topics and many other things. Got a question? Ask it in the comments. You might also enjoy the archive of earlier reader mailbags.

We currently have a propane-fueled water heater. I live in AZ which has fairly reasonable electricity rates. Since propane is pegged to the price of oil, if we ever have to replace the water heater, would it pay to convert to an electric water heater? If so, do you have any idea how much time it would take to recoup any differential costs for the switch?
– Jeff

It’s absolutely impossible to say without rates. Real numbers are needed for these kinds of calculations.

However, I will say this: replacing a functional piece of equipment in order to save on energy rates is rarely a good idea unless you’re certain that you’ll be able to quickly recoup the cost. Replacing a functional item is a reliability risk – if you know it works, why risk replacing it with a lemon?

It’s also environmentally costly to simply replace equipment with such abandon.

What is your favorite thing about blogging?
– Journey

Probably the respectful and thought-provoking discussions I have with readers.

There’s nothing more interesting than a refreshing new angle on an idea. It makes me think about whether I’m right, whether they’re right, and sometimes whether the question itself is worthwhile.

Part of the reason that purely negative comments frustrate me so much is that they’re usually presenting a good idea, but they bury it in attacks and vitriol that take that good idea and bury it in negativity. This helps no one.

I have recently lost my job and am collecting unemployment. My former employer sent me paperwork about my 401(k). What should I do with that money? I don’t need to take it out but don’t want to leave it with the company if I have other options. Thanks.
– Josh

The traditional advice is to tell people to roll over their 401(k) into an IRA the second they walk out the door. This advice is usually given under the assumption that IRAs are competitive – meaning they have lower fees – while 401(k)s are larded with high fees.

That’s not always the case. Quite often, IRAs nickel and dime you with fees and, at the same time, 401(k) plans are often managed quite well with low fees.

My suggestion is to figure out where you would want to put your IRA – probably in a low-fee place like Vanguard – and figure out all of the fees and costs associated with what you want to invest. Then, compare that with where you’re at now. Are they comparable?

How is it possible that you get paid to blog? Is it from like, page views, advertisements or something? Do you get paid per blog post?
Just curious, I’ve never heard of anyone being paid to do something that sounds as fun as that.

– Steve

I get paid in several ways. The most straightforward one is advertisements on the site. Most advertisers pay me a small amount (a few bucks) per thousand views of their ad. Since The Simple Dollar gets quite a bit of traffic and I show multiple ads, that can add up.

A secondary way I earn income is through links to Amazon. If I review a book or talk about some product and link to Amazon in my description of that item, if someone clicks on that link and then decides to buy the book, I get a small percentage of the cover price of the book, and I also get a small percentage out of anything else they choose to buy while there. Since I already link to Amazon because I think their pages have a lot of information about books and products, this is more or less icing on the cake.

Lately, my income from non-blogging sources has risen as well due to the impact and popularity of The Simple Dollar. I’ve been able to sell some freelance articles and sign two separate book deals, things that only happened because of The Simple Dollar.

The problem with making money blogging is that it’s a long slog. It takes a very long time to build up an audience to the point that you would earn more than a pittance from it.

I am 36 years old and have been spinning my wheels career-wise for the past 7-8 years. Five years ago, I got two useless licenses and last year, I got another one.

I’m at a point in my life that I would be able to try to go back to school, but I wonder what the pay-off would be.

If I go to a “trade school”, I can go full-time for as little as 4 months for $4500 or I can get my masters for $40K and up (and everything in between). Obviously, I would be without an income during this time.
What would be a better investment for me at this stage in my life? Keep in mind that I have less than 30-years to “get my money back”. I’m open to just about anything: my personal choice would be to continue working and go to school part time, but I’m curious if anyone knows what the “pay back” for higher education really is. When does it start becoming profitable?
Oh and I currently make about $18K as an “entry level” clerical position.

– Ashley

Again, without specifics, it’s hard to draw very clear answers here.

The best possible thing you can do in your situation is to follow your natural passions and talents. What are you naturally good at? What are you passionate about? Those are the areas where you should be pushing for your future career.

Sometimes that path leads to trade school. Sometimes it leads to college. Sometimes it leads to starting a small business.

Don’t worry about the money. If you follow something you’re passionate about and utilize the talents you have, money will always come.

The best thing you can do right now is simply live as lean as you can, take stock of your already-existing talents and passions, and start following up on them to see where they might lead.

Are you a conservative or a liberal? I can’t tell from your comments!
– James

I’m definitely a libertarian. I believe highly in the value of privacy and I believe that any activity that a person can do without harming someone else shouldn’t be punished by law. As long as you’re not hurting someone else, I don’t care what you do with your time and energy and money, as far as the law is concerned.

On most political issues, I see both sides of the coin. I think that most political issues end up coming back to an individual’s own moral code and I think it’s very hard to make a law that everyone should abide by that’s beholden to one person or one group’s set of moral values.

I’m an ardent believer that the best investment the government can make is in education, because education sets the stage for solving society’s problems over the long run. I would happily forego Social Security and Medicare and Medicaid to give the children in my town a better education. But, again, there you go – that’s my own values speaking, and I have a hard time believing that my own values should trump your values in terms of the law.

I think this is why I’m continually more interested in local politics and care less about national party politics. Individual liberty, quality education, and personal safety are best protected on the local level, where elected officials are directly connected to their constituency every day instead of sheltered in an office in Washington surrounded by aides with their own agendas.

Does that make me a liberal or a conservative? I have no idea. It just makes me me.

I want very much to budget our money well so that we can pay off debt, create an emergency reserve, and prosper. What is making it difficult for me (besides my right-brained tendencies 🙂 is that our income is in part from seasonal work. We have one job paid by a salary year round, and another job paid by hourly wages only during the school year. So during the summer, our income drops to about 1/3 of what it is the rest of the year.

I had worked out a system of saving during the more prosperous months to make it through the dry summer, but was doing all the record-keeping on paper. Do you have any suggestions for how to make this situation work using a program such as Quicken?
– Michelle

You’ve already got the right idea – when both of you are working, you need to save as hard as you can so you can survive the lean months.

I don’t really think the best solution for this is Quicken. I think the best solution is to set up an automatic savings plan at your local bank and make adequate savings automatic. Set up the plan so that you’re putting enough money into your savings account each month that you could actually survive on it, then make it your goal to make ends meet with the excess.

So, let’s say your living costs each month are about $2,000 and you find that you bring in anywhere from $1,000 to $5,000 each month. Set up your automatic savings plan to knock $2,000 each month into savings, then attempt to live out of your checking account. Only tap your savings when you absolutely must.

Should I feel obligated to attend a dinner party held by someone that I don’t like? I invited this couple to a dinner party we held several months ago and they were really loud and borderline rude. They loudly asserted some borderline racist opinions and left everyone feeling uncomfortable. Now they’ve invited me to a dinner party of their own. Should I go?
– Shanda

Absolutely not. You should never feel obligated to attend a purely social event if you’re going to feel uncomfortable.

Having said that, not accepting their invitation without an iron-clad reason will likely damage that social connection. Is that something you’re quite comfortable with doing? It sounds as if it is, but many people often try to have their cake and eat it, too – they’ll avoid spending any time with a loosely-connected friend, but expect that person to be there when needed.

Life doesn’t work that way.

In 2010, Lexington, KY (where I live) will be hosting the World Equestrian Games. The whole city is getting revamped in anticipation of the many people coming here from all over the world. Our newspaper recently ran an article about people renting out their houses during that time. Based on the article, my fiance and I (we will be married by the time the games come around) determined that we could probably get about $1000/day to rent out the house. The article had a smaller home with no yard that was going for that much. The games last for 15 days. During that time, we could go on vacation or stay with my fiance’s parents without any trouble. We’d have to clear out our clothes and some valuables, but for $15,000, it seems well worth it. There might be some issues with damage, but a damage waiver would at least help, and we might need to update our insurance policy for the home. The article even listed 3 companies that offer different levels of help with the process (i.e. hands off and no commission or hands on with commission). Do you think this is a good idea to pursue? Do you have any thoughts on this that might be helpful?
– Katie

If I were in your situation, this is something I would do.

Before I did it, I’d contact a lawyer and see what sort of legal protection I needed. Insurance coverage? Damage waivers? What other issues are worth considering here?

$15,000 is mighty lucrative, but you definitely need to protect yourself. I would strip that house down to the point of being like a hotel before I left, removing everything that could possibly be used for identity purposes and blocking all mail delivery.

At meals, do you feed your children different foods than you eat yourself?
– Leonard

Since the children were old enough to actually eat at the table with us, we haven’t done this. We serve them a plate that’s as identical to ours as possible and let them decide for themselves.

We only make one simple request at dinnertime: they have to eat one bite of everything on their plate. Beyond that is entirely at their discretion, but they are required to sit at the table until everyone is finished. Mostly, this is a good way to maintain conversation and to get them to try multiple bites of an unfamiliar food, since it’s right there and they see us eating it.

If they refuse, then we literally put their plate in the fridge and they are served that plate whenever they’re hungry in the future until they’ve tried everything on it.

This really seems to work well in practice. They’re constantly exposed to new foods and have found that they like unusual things. My son, for example, has utterly fallen in love with black olives, while my daughter is the biggest one year old connoisseur of broccoli in the world.

Got any questions? Ask them in the comments and I’ll use them in future mailbags.

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.