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. Student loan repayment strategy
2. Unemployment question
3. Home as investment
4. Buying long-term Christmas lights
5. Great goal advice
6. Amazon Rewards card tip
7. Stain remover
8. Saving money on children’s activities
9. Store chains vary by location
10. Am I paid too little?
11. Cheap cell phone service
12. Misery for financial independence? No!
13. Transporting hot meals
14. Long term care insurance
15. Learning computer programming
It always feels as though the two weeks surrounding Christmas are incredibly busy, almost to the point of no longer being enjoyable. Almost.
The huge to-do lists almost seem overwhelming, and when you couple that with the cold and the short days, there are moments when I’ve just about had enough.
Why do it? There are those moments that the holiday season brings that just make all of it worthwhile. For me, it’s usually some moment where I see all three of my children playing together, perhaps playing with a relative that they don’t see very often, or it might just be a late night conversation with someone I see once or twice a year when we both know we should be in bed.
All of the effort and planning makes those moments possible, and it ends up being worth it in the end.
I currently owe 97k in student loans. My lender had some significant deals that I took advantage of. I set up automatic withdrawals from my bank account and that reduced my interest rate by .25%. I made 24 on time payments in a row and they reduced my rate by 1%. i made an additional 24 on time payments and they again reduced my rate by 1%. The total interest rate reduction is 2.25%. My current interest rate is .08% (I am not kidding). Though it is a variable rate. I was in a state loan repayment program where I got lump sums of money to go towards my loans so I am now paid through 2/2017. i currently make $450 monthly payments.
Someone suggested a repayment strategy where I would stop paying back my lender for now, since i am paid for the next 2 years, and invest what i would have paid in the market for 2 years. Thinking my return in the market should be better than the interest rate and after 2 years pay that sum to my lender. and then repeat. If i do this i would lose the .25% rate reduction and interest accumulates and compounds in the account. would you adopt this strategy in my case?
In a situation where your interest rate is that low, you do have some options. The possibility of investing that money and then making a lump sum payment every two years is certainly one of them.
There are only two things that might work against this. One, what do your personal goals look like? Are you in a career path you’re happy with? Do you have stable employment and options for when that employment goes away? Two, what would be your plan if you put all of that money in the stock market and then we suddenly have another 2008, where the stock market loses 40% of its value pretty quickly? Could you deal with that?
Doing what you’re suggesting adds a little risk to an extremely low risk situation. If your life is stable, it can probably absorb that risk with little problem, but there’s also the question of how you feel about that additional risk. If it seems tolerable to you, go for it.
There’s also the option, of course, of simply using a high interest savings account here, one that would return more than the 0.33% rate that your loans would accrue. If you put your money into a 1% savings account, you’d still get at least a little return with virtually no risk involved.
Recently, my company basically went out of business. They had to “restructure” during a bankruptcy settlement, which seems to mean letting almost all employees go.
Anyway, I started collecting unemployment and the checks are quite a bit more than I would make working at a minimum wage job. They’re about what I would make earning $14 an hour full time.
I’ve been applying for some jobs, but I haven’t applied for anything below that $14 per hour rate. It seems to me that I shouldn’t try for those jobs as long as my unemployment lasts. Some of my family say that I am being lazy. What do you think? It makes sense to me.
I don’t think you’re being lazy. Unemployment insurance is a benefit paid for by your previous employer and you’re enjoying that benefit right now. There is no reason at all for you to return to work to earn less than what you’re making on the unemployment insurance.
Having said that, unemployment insurance will run out at some point, so I wouldn’t overlook jobs that pay a little less but really match what you want to do or have good opportunities for the future. I don’t really know what your career path looks like, but there may be lower-paying jobs that are real career helpers and I wouldn’t just skip over them.
When your insurance starts to wind down, you should absolutely start looking at lower paying jobs and apply to some of them.
Basically, I think you’re on the right path and you shouldn’t pay any attention to the people criticizing you for it. You’re receiving a benefit that was part of your compensation package at your previous job, that’s all.
I read your recent article arguing in favor of renting instead of owning a home. The point you’re missing is that your home is an investment. It earns you money. Renting doesn’t earn you a thing.
I agree that your home can be an investment, but it’s an investment that can often lose money compared to the additional costs you have to sink into it compared to renting.
For example, let’s say your total cost of renting – insurance plus the rent – is $1,000 a month, but your total cost of owning a similar home – mortgage plus insurance plus taxes plus maintenance plus homeowners association – is $1,800 a month. The only way your investment is building positive value in this situation is if it is going up in value by more than $800 a month (about $10,000 a year). That means you’re in a very hot real estate market – if you’re anywhere else, that kind of increase isn’t happening.
There’s a different case to be made if you can simply write a check for the house. In that situation, it’s probably cheaper to live there than to rent something of similar size, plus it will appreciate a bit over time (hopefully at a rate better than inflation).
The idea that one’s home is this megawatt investment is an idea that gained currency during the real estate boom of the 2000s. That boom went bust big time in 2008 and the housing market fell back down to reasonable levels. You’re not going to get a 10% annual return on your house any more.
I was getting out Christmas lights yesterday and just like every year, untangle and plug in strands only to recall that half of them are no longer working or have bulbs out that I’ll never be able to figure out (or replace, since they’re all different sizes). Do you know of a brand of Christmas lights you’d consider “buy it for life”? Or is it something so cheap that it’s worth it to buy them as more of a throwaway once dead? I mostly use them for an apartment balcony but wouldn’t mind also knowing what’s good for a house.
For the small number of Christmas lights that people hang on their home, there isn’t really a cost-effective “buy it for life” option.
If you buy residential-grade LED lights, you’re paying a little more up front for lights that will use less energy. You’ll make up the difference over a few years, but that’s roughly the life of the strand. The more you use it each year (meaning the greater the number of days and the hours per day), the better the value of LED becomes.
Having said that, residential Christmas lights are not well constructed. They’re mostly made of a fairly flimsy plastic that can last for a number of Christmases if you’re careful with them, but will never last for lots of years. They’re just not made for that.
The problem is that buying lights that are designed to last for many years – commercial-grade strand lighting – is basically cost prohibitive for most home buyers. They’re substantially more expensive than the LED strands, but they will last for a long time. I’ve seen strands of commercial-quality lights that have been around for decades. The catch? You’ll be spending hundreds of dollars in lights and probably invest a lot of time in them, too. It’s just not worth it for a home situation for most people.
So, if I were you, I’d decide whether I wanted to spend a little more up front to have a little less impact on the energy bills for the next few years. In either case, it’s probably not realistic to expect the lights to last for a long time (though you may get lucky).
I love all of the advice you give about setting and achieving goals! I think it’s fantastic!
One strategy that I wanted to mention that has been vital to me with my goals is to just not think about the outcome. The outcome is usually so far away from where you’re at that thinking about it doesn’t really help you or get you anywhere. You should think about what you can build this week, this month, this year not what you can build in several years or a decade. Don’t think about a restaurant chain – think about the business plan for one restaurant.
I agree. It is really easy to get caught up in some sort of big dream, start chasing that big dream, and then find out that the steps to get there are greater than you realized. Nothing makes a dream melt faster than a stifling dose of reality.
While those big dreams can be inspiring and they can get you started, your goals – the things you’re working towards – should be pretty short term. You’re spot on when you mention things like writing a business plan instead of dreaming about a restaurant chain.
You can’t make those giant things happen in one step. They’re the culmination of a lot of steps. You need to focus on one step at a time or you will never get there. Figure out the problem first, then figure out how to solve that problem. The big dream comes later.
I recently learned something about the Amazon Rewards card that might be useful to you (and maybe your readers). Rather than applying your reward balance to a purchase at Amazon, instead log on and apply that reward to your balance. So, if you have a $50 reward coming at Amazon, you can instead apply that to your balance. Then, if you still want to buy a $50 item at Amazon, go for it. It will give you $1.50 in additional Amazon Reward credit. Basically, it’s free reward credit if you use it smartly and it’s also more flexible.
That’s a really smart idea! It doesn’t earn you a lot, as you mention, but it’s better than nothing at all.
The bigger idea here is that you can turn Amazon Rewards into a reduction in your credit card balance, thus saving you money directly. If you buy a lot of stuff at Amazon.com, this can be much more of a money saver than just using the credit.
We buy a number of gifts, household items, and non-perishable food items from Amazon, so this is actually very noteworthy for us.
What stain remover (eg Shout) do you use on your kids’ laundry? Do you have a diy one that is made at home? Otherwise, I find that regular detergent does not remove all food, grass, chocolate, etc. stains and have to buy an expensive mix at the store.
I always just use this recipe from Modern Day Moms. It’s just one part dishwashing soap mixed with two parts peroxide. It forms a really runny liquid, then I just dump it right on the stain and scrub it in with a brush. This seems to get out everything.
I can’t make any claims about it doing any long-term damage to the clothes, but I certainly haven’t noticed any major damage from using this mix. It just seems to get the stains out.
Edward had a second question.
How do you save money with kids’ activities? For example, rec soccer, music lessons, etc. Or do your kids not participate in any activities outside the home?
We’re pretty selective about what our kids get involved with. In general, we try to look for opportunities for them to try out activities before we invest money in them. For example, the local taekwondo group allowed our kids to try it extensively before we started to pay for lessons.
We are pretty adamant about not oversubscribing our kids, though. We want them to have free time at home. We even want them to feel something akin to boredom sometimes, so that they can figure out how to entertain themselves (we encourage reading here).
We also let our children’s interests lead. I will be the last parent in the world to keep my child in some activity or another because I feel like they’re “supposed” to be doing it.
After reading your Aldi horror story, I just wanted to say that you can’t judge store chains by individual location. A lot of the time, the state of an individual location is due to the manager’s effort (or lack thereof). That Aldi likely had a very lazy manager. Not all Aldi are like that. The one near me is awesome to shop at.
I agree with your assessment that most horror stories in chain stores come from negligence at one single branch. I’ve been to other Aldi stores since then and I’ve had good experiences – plus, my bad experience occurred almost thirty years ago.
Having said that, I will admit that my eye is more critical at Aldi than it is at other stores. Because of that, I’m more likely to identify problems there and find reasons not to shop there. I don’t avoid the store, but I am watchful.
That’s a good thing, of course. I want to be sure that the place I’m shopping at is clean and sells quality stuff. I’m just more willing to look critically at Aldi because of earlier experiences.
I am 24 years old. Two years ago I graduated with a BS in Computer Science and was hired along with another person. We started on the same day doing more or less the same work.
The other guy drives a 2014 car. He has an iPhone 6 that he got on the day of release. He dresses in what looks like brand new clothes every day and bought himself a watch that costs about $4,000.
I couldn’t afford any of that stuff even if I wanted to. I have student loans to pay off and I know he does too based on things he has said.
I looked up what my salary should be given my job description and I am being paid around the 30th percentile. I think that the other guy is being paid more than me. What can I do about it?
For starters, I think you’re jumping to a big conclusion that the other guy is getting paid more than you are. There are a lot of explanations for this. He might have student loans that are much smaller than yours or at a lower interest rate. He might be racking up credit card debt. He might also be getting money from his parents – you’d be shocked how many people in their twenties still get cash from their parents.
Your bigger concern should be the 30th percentile issue. Do you live in an area with a low cost of living? If you do, then that’s at least somewhat understandable. However, if you live in a high cost of living area, then you may want to talk to your boss about it.
I wouldn’t bring up the other worker at all. There are too many other factors involved to assume that his spending is directly connected to his pay at work.
We signed up for Verizon, because it was the only provider that could provide service to our area. But now there are companies that offer pay as you use cell phone service that are significantly cheaper and they contract with Verizon for service in our area.
We would need new phones – but our old ones aren’t smart phones, we want new phones anyway. We would purchase cards at the grocery store for time that doesn’t expire.
What could go wrong with this option?
If I were you, I’d jump to it as soon as you can walk away from Verizon.
The biggest drawbacks for what you’re describing are ones that relate to the continuing business model of the pay as you go provider that you choose. There’s no guarantee that they’ll continue to contract with Verizon or that they’ll stay in business for the long term. Verizon is big enough that they’ll stick around.
Still, assuming you’re saving a lot, they don’t have to stay in business for very long for you to be saving money by switching. Plus, with a pay as you go model, you can jump back to Verizon whenever you feel it’s the right move.
I’d go for it!
The idea of living a cheap miserable life so I can retire a few years earlier is stupid. You go and eat your lentils and starve your children. I’ll go to Paris and eat good meals and still retire plenty young.
If you need trips to Paris and expensive meals to bring happiness in your life, then go for it. Personally, I’m actually quite happy with humble meals at home.
I derive a lot of personal joy from knowing that we’re on a very fast track to financial independence. It’s a goal that I’ve harbored for a while now and knowing that we’re heading there feels good.
I don’t deny myself things that I like, but I don’t actively seek out expensive pleasures if inexpensive ones bring me joy. The inexpensive ones also help with my bigger goals, so that’s an extra bonus.
I work in the middle of a field most of the time digging trenches and laying pipes. I am trying to figure out how to bring hot meals to work. What’s the best route for doing this? I am also worried about food poisoning for keeping food warm for so long.
Your worry about food poisoning is spot on. I would not trust hot food out of a Thermos or anything like that, regardless of how many “I did it and it was fine” stories I might hear. You’re begging for illness if you leave food at a warm temperature for a long time.
If I were absolutely forced to do this, I would use a very well insulated meal container, like this LunchBots Thermal Food Container, and I would fill it with soup that’s literally boiling just before I left for the day. Yes, boiling. I’d keep that container in my vehicle and then eat it at the earliest possible opportunity for lunch. That’s the route I would take to minimize the time that the food is in the temperature “danger zone,” as it would mostly be too hot for bacterial growth with this procedure. I would still opt not to do this.
Honestly, I’d just eat filling foods in your situation and keep warm with the work.
I recently retired after 12 years of planning, at age 51. Right now I’m torn between whether I should purchase long-term care insurance or not. I’ve looked through your site, specifically under the “insurance” tag but didn’t find anything pertaining to long-term care (only disability) insurance.
Time is drawing near where I have to make a decision one way or the other and I would really like to hear your thoughts on this.
I basically concur with this article from The Wall Street Journal that seems to conclude that the cost is simply too high for what you get. The problem is that the length of long term care is so variable that insurers have a very hard time putting a price on it, so they price it pretty high.
This means that the majority of people would get more value out of the insurance by simply saving in advance for long term care. The only people that get more value out of the insurance are those that are in long term care for many years.
I would consider long term care insurance if and only if your other needs are well in hand and you can afford the premiums without putting a serious dent into your lifestyle. The one advantage you have is that you’d be starting the policy relatively young, which means the premiums won’t be as bad, but you will likely be paying them for many years before you’d ever need the service.
What’s the best free method for learning computer programming? I want to learn computer programming but I don’t want to dump thousands into classes or a degree program.
For an adult, I’d point to Code Academy. It does a great job of teaching application-oriented programming in a number of languages. I found their “program Etsy” tutorial particularly cool.
For a child, I’d point to Scratch, which is basically a modernized version of LOGO (the language I learned as a kid). It can be great fun for adults, too, and it does teach the basics of programming logic.
Some advice from an experienced programmer: you will get stuck on things. You will get frustrated. When that happens, don’t give up. Ask for help. There are many places online to ask for that help; here’s one.
Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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.