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. The inevitable “avocado toast” question
2. Small balance for credit score?
3. Exact recipe for laundry soap
4. Destroying documents without paper shredder
5. Inactive credit cards
6. Selling a car
7. Frustrated with job search
8. Handling an old 401(k)
9. Credit card with positive balance
10. Saving old journals
11. Hiking bag contents?
12. Starting a campfire?
Last week, I tripped over a fallen tree branch and rolled down an incline. I didn’t break anything, but I pulled a muscle in my leg pretty badly. I can walk on it, but it hurts and I’m limping a little.
The funny thing with an injury like this is it reminds you how many little things we just take for granted in life. There are so many little movements that I do completely in stride most of the time, but now there’s this little sharp pain when I do them and it reminds me that, yes, I am moving my leg in this way.
So much of our life is taken for granted. I often feel like our life is akin to the planet Earth and at any given moment we’re only aware of what’s on the surface, when almost all of the mass of it is hidden underneath.
On with some mailbag questions.
Thought you might want to comment on this for a reader mailbag. The reaction to this article has been largely negative (it was a little tone deaf) but I’m annoyed how everyone focuses on the specifics, like, “Well if I stop buying avocado and bread I can afford a down payment in 500 years.” The point is more about lifestyle inflation and spending less than you earn. Maybe it’s trite for you to address it, but I figured you would have an opinion on this story making the rounds on the internet.
Tone deaf is a good description. Here’s a quote from the article:
“When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each,” [property mogul Tim] Gurner told the Australian news show 60 Minutes.
He’s making a solid point, but he phrased it in perhaps the worst way that he possibly could phrase it. Smashed avocados for $19 isn’t really a life choice that very many people are making, even people that are actually overspending a little.
Here’s a much better attempt at getting the same point across. “When I was trying to buy my first home, I had to make a choice between some of the more silly things that I wanted, like an expensive cup of coffee at the coffee shop, or contributing to my down payment fund.” It gets the exact same point across without the layers of judgment and negative stereotyping of millennials.
His core point is true: Every dollar you spend has an opportunity cost attached to it. If you spend $5 on coffee, that’s $5 that’s not going toward your house down payment. If you spend $19 on smashed avocado, that’s $19 that’s not going toward your house down payment.
That doesn’t mean that every fun dollar has to disappear and be sucked into your house down payment fund (or whatever your big goal happens to be). It just means that people need to recognize the choices they’re making, and sometimes changing the balance a little bit will get you the big results closer to what you want. Later in the article, this guy mentions traveling to Europe every year; that’s a good example of a reasonable cutback. If you have a “stay-cation” every other year, a modest vacation every fourth year, and then an expensive trip to Europe every fourth year, you’ll save yourself a lot of money and still get to enjoy Paris. You don’t have to give up everything.
Plus, there’s something called hedonic adaptation. If you keep filling up your life with expensive experiences, it’s not going to be long before those experiences no longer seem special at all. They seem normal, and you revert right back to the happiness level you were at before – except now you have a much more expensive baseline to maintain that happiness. Trust me – I’ve experienced this myself. You’re far better off having most of your days be as ordinary and low-cost as possible, because then when you do treat yourself, it feels really special.
Also, dude, if you’re spending $19 on smashed avocados, buy an avocado at the store for a buck or two and smash it yourself. It just requires a fork and a minute of effort and it’ll probably taste better because that avocado is ultra-fresh.
My credit score has been climbing these last few years as I pay down my student loans, and I’ve finally cracked the 800-mark. I’m aggressively paying off my loans and plan to pay off $18k in the next 18 months. I’ve already closed out a couple of the smaller loans and every time this happens, my score drops a few points. I expect this to continue as more accounts close.
My question is this: Should I pay down my student loans and retain a small balance (e.g. < $1) per loan to keep my accounts open to prevent my credit score from taking a big hit? My student loans are some of my oldest accounts open so they greatly impact my credit score both from a utilization/DTI standpoint, as well as average account age.
You’re absolutely right in pointing to the reasons that your credit score is dropping a bit each time you pay off one of these debts. You’re likely having a small negative impact on your credit utilization ratio and you may also be affecting the age of your credit history, too.
So, what can you do about it?
The important thing to remember with credit scores is that it indicates to banks that you’re going to be a low risk and profitable customer for them. What banks really want to know is that you’re going to take out loans, pay them off at the minimum payments over time, and do so very reliably. That’s how banks make the most money, and that’s the kind of behavior that earns the best credit score. While paying off your loans early helps your financial state, it’s not exactly the ideal behavior for banks – it’s better than non-payment, but it’s not as good as paying things off steadily and slowly. That’s why rapid payoff will always earn you a solid credit score, but not a great one. Just keep that in mind – if you are as personally financially healthy as possible, your credit score will be good, not great.
Right now, you have a credit score of over 800. That’s extremely good and definitely puts you in the “prime lending” category. It’s very likely that until you have revolving lines of credit that are at least seven years old – meaning credit cards that are seven years old or older – debt payoffs will cause your score to drop a little when they happen. What you’re suggesting, if I understand it right, is that you pay down your student loans to a few dollars and then just sit on that to avoid the loss of a few credit score points. That’s an idea that has good and bad elements.
The good elements, of course, is that it will keep your score as high as possible, but we’re really only talking about a handful of points here. This isn’t going to make a giant difference in the big scheme of things. Each debt you don’t pay off likely amounts to 5-10 points, so it’s only a strategy that will help if it’s keeping your credit score above 700 or so (which is usually the cutoff for the best interest rates, more or less). In your case, your score is well above that, so there isn’t much tangible benefit.
The drawback, of course, is that it’s another account to manage and remember and another narrow avenue to identity theft.
My honest feeling, given all you’ve said, is that this isn’t going to provide enough benefit to outweigh the drawbacks. If you were close to taking out a large loan or if you had a credit score much closer to 700 than 800, this strategy might have more benefit than drawback, but your credit score is very healthy as it is and you’re just not going to get enough benefit out of not simply paying off the debts.
In one place he has the recipe for laundry soap with two parts soap flakes and washing soda and one part borax. This week he seems to of having equal amounts of each. Which is the correct formula?
My current recipe that I’m using is equal parts borax, washing soda, and soap flakes. The container I have can hold two cups of each almost exactly, but what I usually do is if I notice it’s starting to get low, I just add one cup of each and shake it up.
The big reason I switched from the previous recipe of two cups soap flakes, two cups washing soda, and one cup borax is that I found myself regularly forgetting the exact mix. This resulted in me making a batch of the wrong proportions – 2 cups soap flakes, 2 cups borax, and 1 cup washing soda – and it did a perfectly good job, too. I didn’t notice the difference, in fact – I only realized it later when trying to figure out why the borax was gone so quickly.
The next time, I just used a cup of each and it seemed to work perfectly well and it’s much easier to remember, so I just stuck with it. I think that as long as you have all three ingredients in there and the proportions are somewhere between 1:1 and 2:1 between all of the ingredients, you’ll be fine.
I currently have about $5,000 in an HSA earning about $3/month with no fees. My 401(k) is with Vanguard so I am more familiar with their investments. Do you suggest I transfer these funds to another HSA administrator with better returns? Vanguard recommends healthsavings.com and healthequity.com. Suggestions on either of these or any other options?
Also, how might I go about doing this? I am 25 and if I do not use these funds, I’d like to see a better return.
It sounds like your current HSA is invested very conservatively. You seem to be acting under the assumption that this is effectively part of your retirement savings and that you primarily plan to tap this money in retirement, which means that you’d want to be as aggressive with this money as you are with your retirement savings. So, unless you have investment options with your current HSA that allow for that, your best option is to try to move the money.
It appears that the options you name are very similar, in that they are HSA-focused companies that allow investment in Vanguard funds. I do not have a particular preference between them and I do not see any major differences between the two after looking over the documentation.
Rolling over the money is quite easy. All you need to do is contact the place where you’re setting up an account and ask them for help with their rollover process. Different companies handle it a bit differently, but you want to make sure that there is no tax implication for you.
I have received two notices from two different cards stating I have to make a purchase by xx date or they will close the accounts for inactivity. It seems I should be ok, but to be specific, I carry no credit card debt and have a consistently “excellent” FICO score. Am I ok just to let them close for inactivity, or do you suggest a different tactic?
It depends heavily on your overall debt situation. I would expect a small downward bump in your credit score when the account closes, with the size of the bump depending on a number of factors. How long has your longest line of credit (credit card, usually) been open? The longer, the smaller the downward bump. If this is your oldest line of credit that’s closing, then the downward bump will be bigger.
A second factor: how much overall credit do you have? If a credit card closes, that changes your overall available credit, which can have a small impact on your score (usually a very small negative one).
In general, what you’ll find is that you just see a small negative bump in your score if you’ve already got a good credit rating and the card that’s closing is not your oldest card. You’ll rebound from that fairly quickly, provided you don’t keep closing cards.
We have an extra car that we want to sell. We don’t want to trade it in as we’re reducing our car count. What do we need to do to sell it? Feels like a dumb question but there are no dumb questions!
First of all, check out what needs to be done in your state to sell a car. Just Google “selling a car in ” followed by your state.
Most states follow some variant on the same procedure, which goes more or less like this.
You find a buyer through whatever method – Craigslist, etc. – and the two of you meet. You give the buyer the car keys and the title and the buyer gives you the amount of money owed. You then fill out a bill of sale together – probably two copies of it, one for each of you. Here’s a sample one. Basically, it contains the name and signature of the seller (the person on the vehicle title), the name and signature of the buyer, the date, the dollar amount, and all info about the vehicle, such as the make, the model, the VIN, and so on.
If the buyer can’t produce the money or only has a personal check, don’t hand over the keys and a bill of sale. Many banks will provide an escrow service where they neutrally hold onto the items until the money has been transferred, then release the items to the buyer, so you may want to talk to your bank about it if they’re not producing cash.
Each state has some variation on this process, but that’s the overall form of it. It’s not too complicated!
I have been unemployed for seven months. I have been sending out a dozen or more resumes a week and have received exactly two interviews and didn’t get either job. I feel like I am completely wasting my time with all of this and I am feeling really frustrated and disheartened. When do I stop bothering and start a new career?
My advice to you, as a job seeker, is this: Do not assume that a great resume and/or cover letter will get you a job, or even get your foot in the door. That’s just not going to do the trick on its own, not in an environment where HR offices receive hundreds of applications for one job. You’ve got to do extra to make yourself stand out.
Try this. This week, instead of sending in a dozen applications, pick three that really match what you have to offer. Make a great resume and cover letter and submit them, then wait a couple of days and actually call that company. Try to get the HR person responsible for the hiring for that job on the phone and make your case directly to that person. Even if you can’t do that, leave a message so that the person knows you’re interested. Then, wait a week and call and ask for updates.
This can be a lot of additional effort, but it’s a sure-fire way to get your name to stand out and appear as though you really want that job, and that’s often the difference when it comes to getting your foot in the door for an interview.
Note that this is just one strategy among many, but it hits home to the point that you need to go the extra mile to stand out.
Now, interviewing is a different ball of worms, but let’s focus on getting interviews first!
From 2002 to 2009, I worked for a company that had an okay 401(k) plan with employer matching. I contributed to it without thinking because a mentor suggested that I do it and convinced me it was important but I didn’t really pay any attention to it.
Now I am starting to see the value of it. That 401(k) is still around and has grown in value a lot but it has some high fees associated with it. Is it worth the effort to roll it over? Are there any other considerations?
Assuming that the 401(k) is relatively small (less than $100,000 or so) and that there aren’t any extraneous factors, like having a large portion of your current or previous 401(k) in company stock, rolling it over is probably a good option if your current 401(k) is better than your old one,
If your 401(k) is large or if there are a lot of company stock issues involved, then you should probably talk to a financial advisor before making any moves so that they can look at your full situation. A fee-based financial advisor is what you want here as they will have no reason to try to encourage you to do something way outside the box.
Your company may occasionally bring in a financial advisor for advice and that’s the perfect person to talk to.
I have a credit card that has a positive balance on it. What kind of impact does that have on my credit score?
It’s basically the same as having a $0 balance. The credit card company doesn’t report any balance to the credit bureaus and just marks your account as being in good standing, just as they would if your account had a $0 balance.
The thing to remember is that a positive balance on your credit card means you gave the credit card company more money than you owed them and they’re not going to hand it back to you. Your only option for getting it back is to use the card.
So, if I were you, I’d spend that balance on a typical purchase – like groceries. Just buy your groceries on that card, then pay the really low bill when it comes in to bring it to $0. That way, the credit card company isn’t just holding onto your money, because that’s effectively what’s happening now.
What do you do with old journals once you’ve filled them up? Do you save them? The idea of having such personal thoughts sitting around in a box somewhere kinda worries me.
I save my old journals digitally. I take pictures of all of the pages – it really doesn’t take all that long – and then save them on my computer. I usually then burn the journals.
I do actually look at them sometimes, which is why I save them. If I never looked at them, I wouldn’t bother. I like going back and reading about different periods in my life and how things have changed. My earlier entries were much more about listing the events of my life and over the years they’ve kind of shifted away from that and more into wrestling with what’s on my mind right now. I don’t know which is “better” or “worse,” just different. I get a lot more meaning out of the “wrestling with myself” entries when I reread them, but the others take me back to another place in my life really well and I wonder if the “wrestling with myself” entries will age as well.
I’ve decided to start saving at least a few of the paper journals, though, for my kids to have when I’m gone. I know that I would enjoy being able to look through my grandmother’s journals. She used to keep a journal/diary as well and was probably responsible for me taking it up.
I’m getting a lot of questions lately about hiking and camping, because I am a big fan of both of them as very frugal hobbies and talk about them on here sometimes. So, for a little while at least, I’ll be including two or three of them in each mailbag. Here are two recent ones.
What do you carry in your hiking bag? You mention always wearing one while hiking. Why?
I usually keep what’s known as the “essential ten” in there. These are ten items that are a good idea to carry along on any hike.
1. A GPS unit, plus a map and compass in case GPS fails
2. Sunglasses, to keep bright light out of your eyes
3. Sunscreen and bug spray, to prevent environmental discomfort and skin damage
4. Extra clothing, in case you soak your clothes – I usually just carry extra socks on a day hike
5. A flashlight, in case it gets late and dark
6. First aid supplies, in case someone gets hurt
7. A firestarter, in case I’m lost and need to stop for the night
8. Matches, to start that fire
9. A utility knife, for lots of rare cases
10. Extra food, again, in case of getting lost – this is usually just snack bars
I usually have a water bottle in a side pocket and an extra one if I doubt the availability of potable water (or a capsule for making water from a stream potable).
I’ve had to use everything on the list at various points except for the firestarter and the matches, as I’ve never wound up so lost that I couldn’t get back out with a flashlight, thankfully.
I feel dumb asking this but here goes.
I really struggle to start campfires. I’ve watched I don’t know how many YouTube videos about starting one and yet I continually fail. The only way I can get one consistently started is to buy one of those “starter logs” and use that, but they’re ridiculously expensive. You can buy three nights of firewood for the cost of one of those logs.
Do you have any tips for this, like maybe a video that shows exactly what you do?
There is no dumb question, and even if there were, this certainly isn’t anywhere near that.
My “trick” for starting fires is to make my own firestarter “cubes.” All I do is save egg cartons – the paper/cardboard kind – and the dryer lint that I clean out of the dryer filter. Whenever we burn a candle, I put a little lint into each slot in the egg carton and then dump melted wax into each slot. Then, the next time we burn a candle, I add a little more lint to each slot and dump on more wax. Usually, after about five layers or so, the egg slots are full with a mix of lint and wax. Boom – 12 ultra-cheap firestarters. (I also use the “document destruction” method described in question 4 above.)
Then, when it’s time to make a campfire, I just make a little teepee shape out of a bunch of small twigs and scraps of wood, and then make a big teepee shape out of small logs above that. Right in the middle, I put two or three of these firestarters – I just tear them off the carton. I just light the firestarters and the fire eventually takes off. The flame starts on the cardboard part of the firestarter, starts melting the wax, and eventually gets enough heat to catch the lint on fire. The combined heat off of that much wax and lint is enough to get the small sticks going.
This works every time unless the wood is really wet.
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.