Reader Mailbag: Old Albums

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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. Starting with digital video
  2. Running for office
  3. A “rent or sell” dilemma
  4. Buying individual shares
  5. Borrowing from 401(k)
  6. Cooperative board games
  7. Starting a book club
  8. Cash or low-interest loan?
  9. Community dinners
  10. Grocery costs versus healthy selections

I love listening to music from my late teen years. It was a period when a lot of music held very deep meaning for me, and now when I listen to it, I can still feel a sense of that urgency and meaning, but it doesn’t have the enormous impact it had then.

Instead, there’s a sense of nostalgia, a faint whiff of the life that I led at that time.

I would absolutely love to see myself going through a typical day in my life during the mid-1990s.

Q1: Starting with digital video

I noticed on one of your recent Simple Dollar posts that you make your own videos. I’m thinking of making a short one for my boyfriend on Valentine’s Day. Do you have any comprehensive and simple guides to making a homemade video with either a digital camera or camcorder and without expensive software?
– Kelly

It depends on what you’re trying to make.

In terms of making a nice personal video for someone, pretty much any low-end camera will do the trick. Any camera that can shoot at least 480p will make a good home video, and a 720p one will do even better. My cell phone can actually pull this off.

You’ll also want something that can hold it steady, but you can assemble that at home out of odds and ends around the house. I do it all of the time.

For video editing, Movie Maker is free and will do most anything you want.

Q2: Running for office

I have been thinking about running for the city council in my town of about 20,000 people. I know a lot of people in the community and I’m frustrated with some of the things that are happening in our city.

The thing is I don’t even know where to start with this. Do I have to invest my own money? How does this all work?
– Jim

The first thing you need to do is look up the campaign finance rules for your state. Often, you can find straightforward guides that will walk you through this step by step. These rules generally serve to keep the finances of your campaign separate from your own and separate from other entities and also provide guidelines for who can contribute and how much they can spend.

You can think of it as a separate account (and often it will exist in that way) where you can transfer money, as can others, but you need to keep careful track as to where the money is coming from and where it’s going.

If you have people willing to donate to your campaign, then you don’t have to spend your own money. Otherwise, unless you live in a very unusual place, you’ll be spending money out of pocket for your campaign.

How much do you want to spend? In almost every election, the person that spends the most money has an edge, simply because it increases their number of points of contact with prospective voters. On the local level, name recognition is often a very big factor, so simply getting your name out there as much as possible will really help.

Q3: A “rent or sell” dilemma

I recently finished grad school and got a well-paying job in a different state. My husband and I are planning to move there this month. He will be working remotely and keeping his current job and we are planning to live in an apartment in our new city.

We currently own our home and are trying to decide if we should sell it or rent it out. The housing market is not great now, but we bought the house at a good price, it’s in a popular neighborhood and we have done a lot to renovate it, so if we sold it we would not take a loss.

However, we refinanced last year to a 15-year mortgage and have an excellent interest rate, so we are building up equity fast. If we rented it, we would be able to charge enough to cover the mortgage and taxes, but we would likely have to put some of our own money in for maintenance. My husband and his family jointly own another rental property in the city, so he has experience as a landlord. Although we are out of town, his dad or brother would be willing to help out with small repairs. We will be returning to our home city often to visit family, so will have plenty of opportunities to check on the house.

We are young professionals (I’m in my late 20s and he’s in his early 30s) would like to move back to our home city when we have kids (3-4 years), because most of our family is here. However, our current house is only one bedroom, so we would not move back there.

My thought is to rent our house for a few years and build up the equity. We could sell it when we’re ready to move back and use the money for a downpayment on a bigger house. But we risk getting renters who will cause significant damage and having to use our own money to cover repairs.

We had some periods of low income over the last few years (I was in grad school and my husband worked at a coffee shop because he had difficulty finding a higher paying job), but my husband is doing well now and I will be doing well when I start my new job. We have $57,000 in student loans and only $20,000 in retirement savings. We have $5,000 in an emergency fund and no consumer debt. When I start my new job, we will be able to put $2,500 a month towards debt repayment, retirement and our emergency fund (We would like to pay back our loans in 3-4 years.) However, if we needed to make a repair on the house or it was vacant for a month we would be able to redirect most of that money to cover the cost.

What do you think? Should we rent the house and build up equity or sell it and be rid of the risk?
– Julie

If you’re not going to be nearby to maintain and keep an eye on the house, you’re going to need to hire someone to handle those things for you – a property manager. You do not want to rely on family for consistently watching your property and handling the repairs there. If a water pipe bursts in the middle of the night, you want someone who’s just going to handle it, not a family relationship.

That being said, this is actually a reasonable plan, considering you’re living in an apartment in your new location. If that job fails, you can always move back to the original house that you’ve built equity in.

If I were you, I’d just be very careful in screening the tenants of the house. You’re honestly better off letting it sit empty than having tenants that would significantly damage the property.

Q4: Buying individual shares

How does a person go about buying individual shares of stock?
– Adam

The easiest way for most people to do it is through an online brokerage like TD Ameritrade or E*TRADE.

You get an account there and transfer money to it from your checking account. You then use that money to execute a “buy” transaction, where you buy a certain number of shares of stock. Let’s say you transferred $500 there and you want to buy 12 shares of Coca Cola (which is at roughly 38 right now).

For that transaction, you’d pay the cost of the stock – 12 times $38 in this case, or $456 – plus whatever their fee is for a transaction. The fee varies, but it’s usually in the $10 range for a one-off purchase like that. So, you’d then own 12 shares of Coca Cola and you’d pay $466 for it.

After that, you can hold them as long as you’d like. When the company pays dividends, the money would land in your brokerage account, which you could then withdraw at your leisure.

When you decide to sell, it works very similarly. You can either sell immediately or you can mark a specific price you want to sell them at. When they sell, you pay a transaction fee there, too.

So, let’s say you buy those shares of Coca Cola as described above. A year later, you’ve earned $1 in dividends per share and you’ve decided to sell them when they reach $45 per share. They sell, earning you $530 – $540 for the sale minus the fee – plus the $12 in dividends. You turn $456 into $530, in other words.

Of course, that relies on your stock doing well (or earning a lot of dividends), which is risky. On small transactions like this, it’s harder to make a big profit (because of volatility and because the fees eat up a larger percentage of things), but if you just want to sit for a long while on the stock, you can still do okay.

Q5: Borrowing from 401(k)

I am in a very good financial position, where I have several years worth of emergency funds available, a steady job, plenty of savings in the bank. I have no debt except for 2 rental properties that are cash-flow positive. I am thinking about borrowing from my 401k (I am 40 years old and have over $300K in the 401K account) to put a down-payment on a third rental property. I am confident that I can pay the loan back over 5 years, and I like that the interest rate I pay is paying back to myself. What do you think of this idea? I know generally it is taboo in the Personal Finance world to not do this, but in my case, I am in a pretty good financial position, and I don’t see any downside to this. But I really wanted to get your opinion too.
– Erin

The downsides are that if you lose your job, you have to pay back that loan very quickly and that you’re losing value in the 401(k) while the money isn’t in there.

I’m trying to understand what you’re hoping to gain from this transaction. Do you feel that you will earn more over the long run with your money tied up in the rental versus the 401(k), even including the risks mentioned above?

To me, that’s not a sure thing at all. Either way you choose, it’s an investment risk. I would probably not do this because of the strong challenge I would face if I suddenly lost that job. I would not want to have to toss a large chunk of my emergency fund at solving this loan issue if I were suddenly out of a job.

Q6: Cooperative board games

I know you get questions about different board games all the time, but I couldn’t remember having seen a list just of cooperative games. My group of friends is pretty competitive, and not always able to stay good-natured about it, so uniting forces against a common foe in the game might make for much less divisive game nights! I’d love some recommendations from you if you have a chance.
– Andrew

There are a lot of good cooperative games out there, with varying levels of complexity.

The primary one I’d recommend is Pandemic, which is a great co-op for one to four players. In it, you’re teaming up to fight a handful of simultaneous worldwide disease outbreaks. The only problem with Pandemic is that it tends to have one person who kind of takes over as “leader” and winds up telling everyone else what to do. It’s just the nature of the game.

Another game to try, if you prefer a fantasy theme, is The Lord of the Rings: The Card Game, which works well for one to four players. In it, the players each have a deck of characters and events from Middle Earth and they use them cooperatively to take on a number of different scenarios. Each time you play, you can tackle a different scenario, but even the individual scenarios have a lot of replayability because there’s some variety within each. This one’s more complicated than Pandemic, but it’s probably my favorite cooperative game.

I’d start with those two options.

Q7: Starting a book club

How would you suggest starting a book club in my town? I used to be in a great one in the city where I used to live, but there doesn’t seem to be one here.
– Angel

I’d start by visiting the library and talking to the head librarian. The library in a smaller town is the best place to go to either start a new book club or find one that already exists.

If you want to start a new one, I’d talk to the librarian about what type of book club would click in the town. If you’d like one based on literary fiction, for example, but no one checks out literary fiction in the town, it will probably flop. You’re going to want to start one based on what others read, at least to some extent.

Work with the librarian to get such a club started. The library is likely where you’d want to start getting the word out, though you may want to host meetings elsewhere depending on what you’re looking for. Any librarian worth their salt will be happy to help an endeavor like this get started.

Q8: Cash or low-interest loan?

I have a question about our Car. Our 3 yr lease is about to run out (wish we hadn’t leased, but that’s water under the bridge). The car will be worth more than the buyout cost, and we like the car, so we are planning to buy it out. We have enough cash to buy it outright. Currently, we have no debt, and our current main financial goal is saving enough for a downpayment on a house. My wife is in a PhD program, and we plan to wait on any buy decision until she finishes in 2 1/2 years, since we could be changing cities at that time. Should we use cash for the car, or should we take out a $12,000 loan at a very low 2% APR for 48 or 60 months through our credit union? The loan would preserve more cash for us when we would be ready to buy a house, but would cost around $5-700 in interest over the life of the loan. The downpayment is likely to be the biggest impediment to buying a house at that time.
– David

Here’s the thing: with interest rates as low as they are, it starts to make debt look very attractive, and it’s easy to understand why. You’re not paying much interest over the lifetime of that loan, right?

The problem, though, is that debts still add another bill to your required monthly payments. Even if you’re comfortably getting by, this does add a bit of a squeeze, and if things are tight at all, a monthly bill can add a significant squeeze.

In your situation, knowing that you do need a car and knowing that, at this point, you’re probably paying significantly less than you would buying that same late-model used car at the dealership, this is probably overall a good move. However, the best move would have been to save for this buyout while also making the lease payments.

It’s always better to find ways to scrimp right now and save for the future than to just assume your future self will take care of things, because that future self is pretty unreliable.

Q9: Community dinners

A local church puts on a non-religious community dinner each week. There’s no cost to it, but they have a “free will offering” basket out to help pay for costs. I feel guilty not paying anything for this meal, but I also don’t know what I should put into the basket, either.
– Jill

Usually, a “free will offering” basket is done so that people who are genuinely facing hardships can get a warm meal without having to scrape together two dimes for it. However, it’s generally expected that those who can actually afford to chip in do so.

If you’re not sure what to give, I’d just look at the meal and ask what it would cost to prepare this at home for myself. Make the best estimate you can and give that much.

At the very least, it covers the cost of your meal and it likely covers a bit more than that as the items they use were likely purchased in bulk.

Q10: Grocery costs versus healthy selections

I was wondering what your stance is on grocery shopping for healthy foods vs. selecting cheaper unhealthy foods such as those containing high fructose corn syrup for example. I’ve noticed that a loaf of bread for example that doesn’t contain the unhealthy ingredients such as high fructose corn syrup almost always costs double what the other alternative (generic store brand) bread would cost. Same thing with buying organic milk (or almond milk, or soy)….it is healthier than the processed regular milk. Do you personally select those items that are healthier and just pay the higher cost? I don’t buy organic vegetables, but I was thinking perhaps its ok to pay higher for some items, and find a tradeoff somewhere else…..I have found btw shopping at the spanish market (Hmart,or asian markets) for produce only costs a fraction of the cost you would find at a normal grocery store such as Safeway or Harris teeter. My husband and I are trying to eliminate all the processed food and high sugar content in our weekly groceries….it is hard to do on a fixed budget and is more expensive. Do you think its worth it? I know on the news the discussion of the bad effects of high fructose corn syrup is serious, so I’d like to know how you are addressing it with your food purchases.
– Dan

I select items with health in mind first, then search for the best bargain among the healthier options.

I look at it as a long-term investment. Obtaining the same nutrients at a lower calorie count or avoiding trace amounts of hormones and pesticides and preservatives in foods has positive long-term health consequences, for me but particularly for my children.

Every time I buy something with a lower calorie count or something without pesticides or hormones, I’m very slightly improving their odds of not having various long term health problems – heart conditions, cancer, and so on. That adds up to, on average, lower health care costs over the long haul.

Of course, the best route of all is to have it both ways and have your own garden, but that requires a significant time investment.

Got any questions? The best way to ask is to email me – 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.

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.