Reader Mailbag: Keeping a Project Secret

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Trouble deciding how to save
2. Investing in friends?
3. Lending money to family
4. Investing in kitchen remodel
5. Endorsing a Presidential candidate
6. Tools for travel
7. Financial blunders and morals
8. Should I leave?
9. Tactic for magazine subscriptions
10. IRA just sitting there

How do you keep a project secret?

I’ve been working on the plans for a pretty cool project that’s intended to surprise someone, but it’s reached a point where physical items are going to have to be acquired – and some of them are somewhat large.

At some point, the person to be surprised is going to know I’m up to something. The trick is keeping it secret without going to bizarre lengths or without a pack of lies.

I’m going to have to be careful.

Q1: Trouble deciding how to save
Our current household income is $5869. We fully fund 2 Roth IRAs every month. After all bills are paid each month we have about $1500 left each month. I am confused about whether to pay extra on my mortgage or not. Our rate is 3.875% and our rental property is at 4%. My husband does not think we need to be to worried about funding our kids education. I’m not sure about this either. I’ve looked at 529 plans and didn’t see anything spectacular about them. Most seemed very poor performers and if my kids decide to not go to college then what, I have to pay a penalty to get my money out. Could I just save in a Vanguard account and withdraw from that when the time comes. We have about $8000 in savings, I guess you could call it emergency fund, but we use it for non emergencies when we want. Our only debt besides the mortgage is my husbands jeep which runs us $250 a month, with $12,500 left to go. I am currently studing to be a nurse, but all school expenses and childcare are covered by my VA benefits. So would it be okay to wait until I’m done with my degree and find a career position to fund kids education. We could then live off of one paycheck and save like crazy. Just so many questions that I’m kind of just stuck with which way to go.

– Ashley

I don’t think there is a wrong way to go here. It sounds like all of your remaining debts are pretty low interest, which means it’s not a mistake necessarily to start saving for other goals, nor is it a mistake to strive for debt freedom.

I think that as long as you’re spending less than you bring in and your net worth (your savings and assets minus your debts) is consistently going up, you’re heading in the right direction.

Now, what specifically should you do? It really depends on what you want to be doing in five years. Do you want career flexibility? Then debt freedom is probably the best goal, as it minimizes your monthly bills. Do you want a very stable education for your children? Then a 529 is probably the best route (don’t judge all 529s based on the short term performance of a few).

Sit down with your husband and figure out together what you want to have in a few years. Make sure it’s something you both want so you’re both driven to work for it.

Q2: Investing in friends?
A friend of mine who has been a stellar chef at several restaurants is really aching to start his own restaurant. He is currently hunting for loans at various banks.

I am considering loaning him money to get the business off the ground. I have read his business plan and it seems strong. He has never asked me for anything other than advice on how to make the business plan better.

My only worry is that it will mess with our friendship. We have been friends and golfing partners for the last fifteen years and I don’t want to change that.
– Roger

I would not lend him money with the expectation of him paying you back in the future. For one, the restaurant business is notoriously risky. For another, a lender-borrower relationship puts a real weight on any personal friendship.

If you do want to help him, then consider becoming a silent partner in this operation. Invest some money in it in exchange for a portion of the ownership. For example, I know one local business where a silent partner put up all of the capital but does none of the work and owns 33.3% of the business. His partner does everything for the business and owns 66.7%. (That’s the split as I understand it, anyway.) They split the profits accordingly. The silent partner knows that the active partner is going to do everything possible to make it work, which sounds like the situation you’re in.

Keep in mind that if you do this, you’re taking on some real risk with that money. If the business folds, you’re going to be out whatever you put up. If the business is a success, though, you’re going to have a nice revenue stream for a while and you may eventually be bought out, which would make you a very nice profit. That’s the risk of this type of “angel” investing.

Q3: Lending money to family
A member of my family (who is a widow) has been asking her children for money constantly every since her plant closed down. I don’t mind helping her with bills, but she wants money for gambling. This is at least three or four times a week. We all have families and trying to get ourselves out of debt so we can live comfortably. She tries to make us feel guilty. It is terrible. Then when a bill comes up she ask for money for that too. I try to help with the bills, but the other I cannot handle it. It is driving a wedge between us. Please don’t use name or state. Sometimes she borrows it and then when she pays it back on her pay day (Social Security), she’s short paying her own pills. Grrrrrrrrrrrr!

– Amy

You simply have to tell her no. Lending money to family is troublesome enough when it’s going for a good cause. When it’s going to further a gambling addiction, you need to not support it in any way.

This is a difficult situation for everyone involved. No one wants to unconditionally say “no” to a loved one. However, if you don’t do this, it just fuels her gambling addiction. Every time you lend her money for this, you’re playing a role in perpetuating the gambling.

You may want to visit your library and check out some books on intervention. It sounds like she may be sinking into a very deep personal and financial pit, and if that’s the case, it may be time for her family – the ones around her that love her – to step in and help.

Q4: Investing in kitchen remodel
When I bought our townhome the one thing I didn’t like was the kitchen so I have wanted to redo it for years, we have received quotes and it is about $40,000. The house is worth about $420K and we plan to be in the home until retirement which is another 20-30 years. Do you think this kind of investment is worthwhile? I’m having a hard time parting with $40k but I know it is something that we would enjoy and add value to our home.

– Linda

If you’re going to live there that long, I would not really worry too much about the value it will add to your estate. It is going to be very difficult to predict how much value your changes will add to the house when you’re looking at that kind of timeframe.

Instead, you really need to ask yourself whether the kitchen changes add $40,000 worth of value for you. If you have the money on hand and you’re going to be living there that long, that’s the key question behind all of this.

I can’t tell you the answer to that question. It’s something you need to decide carefully with your spouse.

Q5: Endorsing a Presidential candidate
Are you going to endorse a candidate for President? I’d be interested to know what you think about the Obama vs. Romney matchup.

– Jim

I’m not really interested in “endorsing” either candidate. I generally feel that the president is largely a figurehead and that the federal government keeps on rolling no matter who is living in the White House. I think that both guys will do, at minimum, an adequate job as president.

I will say that I think Obama’s performance is underrated at this point, but I usually feel that way with every president near the end of their first term. I thought GWB had done better than people had given him credit for in 2004. I thought Clinton had done better than people had given him credit for in 1996. The same is true for GHWB in 1992, for that matter.

The reason I say that is that we, as ordinary citizens, are rarely privy to the amount of information that the president has. We judge his decisions without knowing the information he’s using to make that decision, which is a very unfair judgment.

Mostly, I think this election will come down to who does a better job of presenting to the American public over the next six months.

Q6: Tools for travel
If you’re having trouble finding lodging on your trips, you might want to try these tools. is a service that lets ordinary folks rent out a spare room, couch, or their entire home to travelers. They provide insurance and safety features and the service is free. It’s also great for those looking for good accommodations at low cost. Great source of secondary income for those with extra space. is a service that helps you find those willing to put you up in a spare room, couch, etc for free. It’s for those looking to travel on a budget, but predominantly for both hosts and guests to meet new people when traveling. The site has things like references, identity verification and ratings to keep the process as safe as possible. Incredible value and networking potential.
– Louis

These are both pretty good, and I have strongly considered them for trips where I travel alone. I would probably not want to embark on such a situation with a large family.

In fact, I did look into both options for two solo trips I have coming up this year. I managed to find a room for one of the trips using CouchSurfing, but then travel plans changed and the arrangement fell through.

Still, if you’re traveling alone or just with your spouse and you’re not tied to a tight itinerary, these are really good tools.

Q7: Financial blunders and morals
I love the mailbag cause it shares what people are going through. Here are a few of our blunders over the years.

1) While being frugal and stretching Dad’s schoolteacher salary very well, he decided to buy a refurbished Jeep Cherokee as he’d seen a friend do to sell at a profit. This was not a vehicle bought for our use. The maintenance and insurance and possible future note had me wondering if I would have to go back to work to pay these. Finally it sold and now whenever I see one, I have a bad feeling :). Moral of the story, “don’t try to make a fast buck.”

2) Our older son found out he had a family coming right out of high school and Dad bought them a foreclosed house against my better judgement. It was a great sized house but needed quite a bit of maintenance. The son’s 2nd job (pizza delivery) played out and they couldn’t afford the situation and the house had to be sold in 2010–not the best time to sell. It would have sold faster if Dad had followed my advice to “not be greedy” and market it at a good price. Oh well. Moral of the story, “Don’t make a quick financial decision in the middle of a big life change.”

3) and final, during our divorce (various reasons–not financial), Dad was presented with the idea of buying vending machines that have the snack in back and the drinks in front via a door you open to the back. I don’t want to tell you how many thousands of dollars were lost in that venture. Moral of the story, “don’t make a big financial decision while under stress. And surely don’t take out a home equity loan to finance something on a whim.”
– Becky

I think pretty much every adult who interacts with the world and has to make financial choices eventually messes up.

For example, a few years ago when I had to make some dietary changes, I followed the doctor’s advice and tried out some soy products. I thought they were pretty good, so I ended up buying a bunch of items containing soy in bulk.

Well, I should have tried them some more because I found that when my soy intake is too high, I begin to have some really bad digestive problems. I can eat a little bit – one dish every two or three days with significant soy content is okay. More than that? It’s not good.

The moral of that story is to be patient when making purchases related to lifestyle changes. They can really bite you in the foot.

Q8: Should I leave?
My wife and I have been married for eleven years. We have three children: 8, 6, and 3 years old.

A few days ago, I found out my wife was cheating on me with a co-worker. It’s not a suspicion, I have a lot of proof in the form of emails and text messages.

Yesterday, I also found out that she has racked up about $20,000 in credit card debt without letting me know. I started digging through papers to figure out how to get our affairs in order when I found this.

I want to divorce her. I can’t stand to be around her right now. I am scared about the children, though. I do not want them being raised by someone who acts like that. I don’t know whether I should leave or I should stay for their sake.
– Shawn

(I edited this letter quite a bit to eliminate some personal information and to take some of the edge off of Shawn’s emotions.)

First of all, you need to know whether or not she wants to try to make this work. If she has no interest in making it work, then divorce is inevitable. That means that you’re going to have to talk to her about this, as uncomfortable as it may seem.

If you want some specific help with this, you may want to meet with a marriage counselor by yourself first. A good marriage counselor can offer advice on how to make this conversation work.

You may also want to contact a divorce lawyer in advance so that you know what you need to get straight before you have this discussion. If it goes poorly, things can happen quickly.

This isn’t easy, but you’re not alone in this. Others have gone through it, too. If you know anyone who has gone through anything like this, you may want to talk to them, simply for the support and advice they can provide. You may also want to seek out internet forums on separation and divorce in which to post anonymously.

Q9: Tactic for magazine subscriptions
Most of my magazine subscriptions are on a yearly base with cancel terms like one, two or three months. I have an alert in “Remember the Milk” in september to check my subscriptions and see if I want to keep them or cancel them.

– Jenny

For those unaware, Remember the Milk is a wonderful tool for handling to-do lists, grocery lists, and other lists that are essential for managing life.

Jenny offers a great tactic, though. If you spend a moment studying your subscription terms on your magazines, you can set yourself up a reminder in whatever online tools you use to review that subscription on a particular date and, if you aren’t using it, cancel that subscription.

I actually went and did this for myself in Google Calendar, which I use for most of my calendaring needs.

Q10: IRA just sitting there
I am 24 years old working a decent job paying $42k/year. I contribute to my employers 401k plan 4% (matched!) and am into an Employee Stock Purchase Plan. Every pay period, I auto-transfer a portion into my savings account and I feel that I am doing the best I can, financially, to live within my means. My question is this: I have a traditional IRA which I rolled over from an old 401k from a previous employer and it’s just sitting there. If anything, I’m getting hit with a yearly fee from my financial institution for maintenance.

I also have a Roth IRA that I contribute sporadically, though not enough to hit the yearly max. I want to concentrate on contributing towards my Roth, and I considered just transferring the Traditional over. Is that wise?

If not, any idea of what I can do with it? My overall goal is to be in good financial shape.
– Jeff

The obvious option is to let it sit there, but if you’re getting charged an annual fee for it, it’s probably not in a place that’s really working for you.

At the very least, I would look into transferring the IRA to a brokerage that will manage it for you with no annual fees. There are a lot of good brokerages out there like Vanguard and Fidelity that will manage your IRA for you without excess fees.

Transferring it into a Roth IRA will cause you to take a tax hit when you do it. Assume that you’ll be paying at least 30% of the balance of your IRA in additional income taxes the year after you make the transfer. SmartMoney has a great calculator for figuring out how much it will cost and whether it’s worthwhile. My take? If you can afford the taxes, a Roth is probably a good place for your money to be.

Got any questions? Email them to me or leave them in the comments and 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 hundreds of 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.