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Questions About Retirement Investing, Paper Towel Alternatives, Emergency Funds 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. Careful retirement investing question
2. Sanding down cast iron skillet
3. Don’t feel like buying stuff
4. Are unemployment numbers real?
5. Switching away from paper towels
6. Buying or continuing to rent?
7. Emergency fund goal?
8. Struggling with time management
9. Bad info on credit report
10. Banking extra unemployment money
11. Best sub-$10 strategy computer games
12. Coronavirus journal
As spring rolls on into summer, we are aiming to give our children the most normal summer we can given the fact that many of our summer plans were canceled due to coronavirus and while also being mindful of social distancing for ourselves and others. What does that mean for us? That’s been the big conversation between Sarah and myself over the last few weeks, and it’s something we haven’t really resolved yet.
We’re definitely going to go camping at a secluded spot for a few days. We are considering a couple other similarly secluded places for camping. We want to spend some time with my parents, but as I’ve mentioned before, they’re older and have some health concerns, so we will go into a pretty tight quarantine for a while before we visit them, as per their wishes and our desire for their safety.
It’s a challenge to try to navigate these things, with our own desire to be courteous to others, to keep our family healthy, and also to navigate ways to do interesting things while keeping those factors in mind. It’s a challenge a lot of people are facing, with different solutions depending on the factors they’re considering and thinking about.
On with the questions.
My husband recently retired and took a lump sum for his pension and 401k. He is rolling it over to a traditional IRA with Vanguard. We had planned to invest conservatively with Target Retirement 2015 VTXVX. With the virus and all uncertainty, we are no longer sure if this is conservative enough. Is the bond market even safe at this point?
My husband is wanting to use something such as CDs at this point. Something FDIC-insured. I’m not positive that Vanguard CDs are FDIC insured.
We are not planning to draw on his money for a year or two and are attempting to live off my income. We are just very afraid and not sure what to do.
According to its own documentation, all Vanguard CDs are FDIC-insured. It serves as a broker for CDs offered by other financial institutions, and one of the requirements for the CDs that Vanguard offers is that they are FDIC-insured.
The thing to remember is that FDIC insurance offers $250,000 in insurance per depositor per bank. So, if you want to hold $1 million in CDs and want it to be fully insured, you would need to split those CDs across four banks (actually five so that earned interest is fully covered).
CDs are about as conservative as you can get on the spectrum of investments. They are about as safe as the American dollar, as the biggest risk with a CD that’s within the FDIC insurance limit is hyperinflation or government failure of some kind. However, for that safety, you earn a pretty small return.
Obviously, a Target Retirement Fund, even like the one you mention that’s filled with a mix of cash and very secure bond funds, has a little more risk than that. In general, AAA bonds should only begin to fail if very large and very financially secure corporations begin to collapse. If the kinds of corporations offering AAA-rated bonds were to suddenly fail, we’d be perilously close to the kinds of situations that would cause hyperinflation of the dollar — apocalyptic scenarios. I view them as being almost as safe as the CD, but not quite.
It really comes down to your own personal level of risk. The more risk you avoid, the lower the return you’re going to get. CDs are pretty close to the bottom of that chase — absolute minimal risk, very low return. Extremely highly rated bonds are a step up from that — a small bit of additional risk, a small bit of additional return over the long run.
Again, it really comes down to the level of risk that you feel comfortable tolerating. However, personally, I would feel just fine buying either of those things right now.
Have you ever tried sanding a cheap cast iron skillet in an attempt to achieve the superior non-stick properties of “vintage” cast iron cookware? It seems like a few bucks and 30 minutes with my orbital sander may be worth it to achieve that super-slick surface that allows even scrambled eggs to slip off a freshly seasoned vintage cast iron.
This would work, but only in the very shortest of terms, and only with mediocre results. It would not take long for a true patina on a non-sanded cast iron skillet to end up with a better surface.
A cast iron skillet has a bunch of pores on it. When you cook fatty material on a cast iron skillet, some of that fat bonds with the pores in the cast iron, creating a natural non-stick surface called a patina that’s thoroughly bonded to the cast iron.
At first, those pores make cooking anything on cast iron pretty awful. That’s why people season cast iron so much. They’ll coat it in oil or butter and bake it in the oven, then clean it and do it again, and then again. Some people do it many times before starting to actually use it. The purpose is to build up that patina.
If you sand down the cast iron before using it (or after just a use or two, when there’s not much patina there), the surface will be somewhat better for cooking in the very short term. Those pores won’t be there to grab onto the fats/oils in the food. However, it still won’t be a great surface to cook on, and it won’t get any better from there.
Cast iron, once you get past that initial period, becomes better and better to cook on as that patina builds up and ages. Well-seasoned cast iron is a delight to cook on because of the heat distribution and the natural stick-resistant qualities of the patina. It just takes time to get there.
I read this article the other day and it really captured how I’m feeling right now regarding buying much of anything. I basically just want essentials. Love to hear your thoughts on it. I Don’t Feel Like Buying Stuff Anymore
I think that taps into a feeling I’ve had for a while, since about the second week or so of the coronavirus shutdown. I simply lost a lot of the desire I had to buy things, outside of basic needs.
For me, I began to realize that what I longed for was time with people and simple experiences with them like sharing a meal or just talking or maybe playing a game together. So many of the things I spent money on were just embellishments around that core idea, and I’ve come to feel like those embellishments really weren’t very necessary at all.
I just lost all desire to buy things, much like that article describes. I don’t know if or when that feeling will change again, but it’s still the way I feel as of this writing.
My wife and I have been talking about this for weeks and wanted to know what you thought. The unemployment numbers are really high each week and it looks like Depression-era unemployment, but I do not think it is that bad for two reasons. One, most of those people are receiving unemployment benefits, so they’re not starving. Two, a lot of those jobs are due to temporary closures, so the jobs come back when businesses reopen. I think those numbers aren’t “real” and what we should look at is what unemployment actually looks like when everything is fully reopened and people who get their jobs back go off of unemployment. What do you think?
First of all, before anyone misconstrues the question, I want to be absolutely clear that Andrew isn’t claiming that there is anything false or incorrect about unemployment claims. Neither he nor I believe that there is anything inaccurate about that data, and I personally see no reason to think it is incorrect. When lots of businesses close, lots of people are going to file for unemployment. The question is about what that data means.
I think you’re right on the big picture, but there are a couple of reasons why those numbers are still important.
One, those numbers indicate how much of a crunch there is on state unemployment funds. Most states have a certain amount of money set aside to pay unemployment benefits, but those plans don’t really account for millions of people simultaneously applying for benefits. It’s like having $50,000 in cash in your savings account, which seems like more than you’ll ever need, but then you’re hit with seven emergencies at once and that cash suddenly doesn’t seem like quite so much. One reason some states were eager to reopen quickly is because their unemployment fund was on a trajectory to completely run out of cash, and that’s a real problem.
Two, there’s the issue of how many of those businesses will be able to fully return when all restrictions are over. Will every restaurant chain come back? Every bar? Every salon? Every shop? There are a lot of businesses that were running without a whole lot of margin and without much reserve cash, and they may not have survived this. This doesn’t mean other businesses won’t pick up that slack, but it won’t be immediate.
I don’t think the unemployment numbers are apocalyptic because, as you noted, these aren’t due to businesses folding, but mostly going on “pause.” I don’t think we’re headed for Great Depression 2.0. However, I don’t think they’re good, either, and I think a pretty deep recession is inevitable.
We have been trying to switch away from paper towels in the kitchen by using cloth towels. Struggling to find good ones and a good system.
For us, the best replacement for paper towels have been thick cotton washcloths or small hand towels. We use them once for wiping something down, then toss them either down the stairs to the laundry room or into a basket under the sink for a batch wash later on.
So, start with decent cloths. The best option is probably to buy a bunch of them in bulk from a dollar store. I recommend buying cotton washcloths, like these, or cotton shop cloths, like these. We use a mixed bag of different cloths that we’ve picked up here and there.
If you have room, get a small wastebasket and put it under the kitchen sink, and then find a drawer in your kitchen that you can empty (or mostly empty) and fill it with those cloths.
Then, whenever you have a mess, just grab a cloth from the drawer, wipe it up, and put the dirty cloth in the basket under the sink (wring it out first if it’s sopping wet). When that basket is getting full or you’re running short on cloths, wash them. You can use bleach to get them really clean, but you shouldn’t need to.
This system really depends on having good absorbent cloths to use. I just find that cotton washcloths and shop cloths tend to work the best for most tasks that I would use paper towels for.
My wife and I have been struggling with the decision to buy a house or keep renting. We both have good jobs in the area and don’t plan on moving soon. We plan to have a child in the next one to two years. My wife wants to return to work quickly after having a child so we will remain a two-income family.
We are currently looking at homes in the $300K range. Our combined household income is $120K. We have only one outstanding debt, a student loan that should be gone by year’s end. We have been saving for a down payment and have $15K saved, and any additional stimulus will go straight into this. I think we can save $8K per year if we wait (plus stimulus checks). We both have really good credit.
Should we be shopping around and buying now, or should we wait another year or two? I have used a bunch of rent vs. buy calculators and none of them give me a definitive answer. Hoping for your input.
I hate to say it, but the reason calculators aren’t giving you a definitive answer is because you’re in that gray area where both renting and buying have some advantages for you. Without a lot of additional numbers, I can’t really tell you which side comes out ahead, and even then, it’s likely going to be close enough that events still to come will be the real determining factor (like what the local real estate market does in the next several years, what your own marriage and family look like, what happens with your careers, etc.).
I think the number one question to think about is whether or not you want to take on some of the duties of homeownership. When you own a home, you have to take on a healthy number of maintenance tasks. You’ll be responsible for the yard’s upkeep. You’ll be responsible for anything going wrong in the house, meaning either you fix it or you pay someone to come in and fix it. You lose the ability to just call the landlord to fix most things.
If that sounds engaging, then I would buy now. If that doesn’t sound pleasant, then I wouldn’t leap into homeownership quite yet, because you’ll likely be paying for services to take care of those tasks you don’t want to do, which adds to the expenses of homeownership.
I like your idea of focusing on automatic emergency fund transfers each week but how do you decide that you have enough in there? What’s the goal?
Honestly, for me, there is no goal. There is no amount at which I’ll stop contributing to the emergency fund. I don’t buy into the idea of a maximum cap on an emergency fund. I think that most people should strive to have one month of living expenses as a minimum, but I don’t believe in a maximum.
Let me put it this way: if you’re contributing $50 a week to your emergency fund automatically, that’s going to add up to $2,600 a year. Let’s say your lean living expenses are $3,000 a month, hypothetically. That means, even after a year of contributions, you still won’t build up a full month of living expenses.
If you tap your emergency fund very often at all — even only once every few years — it is going to take a very long time for it to build up to several months of living expenses, and that’s OK. The big thing to think about is that if you hit a run of really good luck, then that’s a perfect chance to get a nice buffer in your emergency fund. Let several months of living expenses build up, because something will eventually happen and you will eventually need it.
If you feel like you need more in your emergency fund, just raise that automatic weekly contribution a little bit and sit back and forget it.
My workplace laid off several people in April, so more job responsibilities have fallen on my plate. I’m working from home for the foreseeable future. Been doing it with my kids here and finishing off the school year with homeschooling and keeping them occupied, too. It feels like too much. As my brother said, it’s like trying to put five quarts of water in a gallon bucket. What do you do for time management if there is just straight up too much to do?
I like your bucket analogy a lot, but I want to expand it a little bit.
Imagine that the process of getting things done is like a little hole in the bottom of the bucket. The completed tasks are flowing out, just like water would flow out of a little hole in the bucket, right?
Now, there are three ways to approach time management.
One is to make the bucket bigger. That basically means you’re taking away free time, sleeping time and other important things from your life. You’re missing your kid’s recital, you’re skipping all of your leisure time, you’re sleeping less and so on. That’s not a good solution, but it’s one that people often turn to because it’s the easy one.
Two, figure out how to reduce the amount of water coming into the bucket so it’s not overflowing all the time. That means things like stepping back from life commitments, reassessing what tasks really need to get done, getting better at delegating things, and so on. For me, this is where reviewing my day and my to-do list falls while applying a critical eye toward delegating and just crossing off unimportant things.
Three, figure out how to widen that little hole at the bottom so the tasks flow out faster. That really means focus. It means the ability to really bear down on a task and get it done quickly and well. It means not being distracted. For me, this is where things like being intentional with my time and having a good to-do list fall.
I think that two and three should be the main focus of time management. One is basically useless and actually backfires after a while because the bucket keeps filling up. Just throwing more time at the problem never works.
I pulled my credit report and there is a debt listed on there from a company that I have never heard of and doesn’t seem to exist. I tried to find this company but they don’t seem to exist and I can’t find them on Google either. I followed the instructions and filed a dispute. What else can I do?
If I were you, I’d just hold tight. There are a lot of reasons why this may have happened, and it’s likely that the credit bureau will figure it out in fairly short order.
There’s a good chance that the company you see listed on your credit report is the legal business name of a company more well known under another brand. You may have a lot of difficulty finding the company’s true name in a Google search, particularly if it is small.
There are a number of explanations for what’s going on. Of course, identity fraud may be a reason, but the company may have simply had the wrong number in the data that they submitted to your credit bureau, or it might be a debt that you would recognize if you knew the true name of the business.
Just sit tight for now and see what the result of your dispute is.
When the extra unemployment money started kicking in, I just banked all of it and have saved up about $4,000 while living on my original unemployment. How long should I hold onto this? I think I will be going back to work soon, probably next month. Plan on using it to pay off my car.
This is an extremely responsible use of the extra unemployment money. Seriously, kudos to you for doing the smart thing here.
I would hold onto it for a while. At a minimum, make sure that you’re going back to work with steady hours and that it appears that the business you’re returning to is stable. Until then, I would leave the $4,000 untouched in a savings account somewhere. It’s safe there, and will earn a little interest while you make sure things are good.
The plan to use that extra money to pay off your car is a good choice, but it wouldn’t be a bad idea to hang onto a little of it as an emergency fund. Just leave it in your savings account for now and forget about it until something goes bad in your life, then you have that cash to help you deal with it.
I like big epic computer strategy games like Civilization. I have played various versions of Civ for many years. Do you have any good recommendations under $10 besides Civ that are in that vein? I know a lot exist but I don’t know what to really look for.
I’m going to link to games on Steam, which is the platform I use for downloading computer games. Here are two really good epic strategy games currently for $10 or less as their regular price, not sale prices. These are somewhat older games, but they’re each great and they’re sure to run on any computer.
Hearts of Iron III is a great grand strategy game focusing on the events leading up to and through World War II. This one is pretty complex to learn, so you will want to rely on some Youtube videos during your first plays to understand what’s happening.
Heroes of Might and Magic V is a really good turn-based strategy game, set in a high fantasy world where you aim to gradually conquer other kingdoms.
On Steam, a really good idea is to fill up your wish list with interesting strategy games that are a bit more expensive than you might want to spend and then wait for a regular Steam sale, where many of them will be on sale. I’d highly suggest filling up your wish list with anything and everything that looks good, then waiting around for a sale and picking one or two games that come in below the $10 price point. Games that are normally $20-$40 often end up at $4.99 to $9.99 during Steam sales.
I wanted to thank you for the nudge to start journaling back in March. I started a journal to just collect my thoughts about coronavirus and I plan on keeping it until there’s a vaccine or it disappears and I may just keep doing it to deal with life. It really really helped me during the lockdown, more than I would have ever expected. One question: do you save old journals? What about private stuff?
Journaling — the act of just sitting down with a blank page in front of me and writing out whatever’s on my mind for a while each day — has been a part of my life for many years and helped me deal with and understand more things than I can count. It’s one of a few things I’d describe as genuinely transformative for me, a non-essential behavior I would be very loathe to give up.
Like you, I’ve used my journal over the last few months to really process what I thought about coronavirus and society’s reactions to it. I think it helped keep me sane in April.
I have had a mixed approach to saving old journals over the years, but as I have grown older, I am much more in favor of saving them. A full journal really doesn’t take up much space and you can always destroy it later if you feel that’s the right call.
As for private thoughts, what I have been doing is rereading old entries a few years later and deciding whether or not this is something that I don’t want others to read. In general, I’m mostly concerned about things that might “out” secrets that others have told me. Things about me, particularly thoughts I had years ago… you know, I’m not bothered by them anymore, and if a child or a grandchild of mine wants to read them someday, it will be a way for them to get to know me better. My approach would be to hang onto it for a while, reread it after some time has passed, and redact anything that you think you would never want anyone else to read. What you’ll find, if you’re like me, is that the things you thought were once too intimate to ever let someone else see now feels a lot more innocuous.
I think, in particular, it will be valuable to save coronavirus-related entries. Those things are basically historical documents, and in years to come, I expect it will be a period of life that younger generations will want to know about.
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.