Questions About Books, Cell Phones, 401(k)s, Private Schools, 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. Drawbacks of the library
2. Private school worth it?
3. Credit card for fixing credit
4. Abundance of green beans
5. Struggling with student loans
6. Decent dish towels
7. Tax bracket comparison
8. Thoughts on permanent portfolio?
9. Late model cell phone strategy
10. Talking about finances with family
11. Older personal finance books
12. Other reading

As the routines of the school year re-emerge in our home, I find my responsibilities and time commitments changing.

During the summer, I wake up early and try to use the earliest parts of the day to write. I generally rely on topic ideas and outlines that I assembled in the spring so that I can spend as much time as possible with my kids during the summer months. This means that I’m mostly at my writing desk when working.

During the rest of the year, I have full days in which to write and to prepare article ideas and outlines for the future (such as next summer). This means I spend a lot of time reading and researching during the fall, winter, and spring, taking notes and making outlines in addition to writing.

This week is my first full week in “fall mode” after “summer mode,” which means lots of time at the library and lots of time reading and thinking about ideas. It’s a nice change of pace.

Q1: Drawbacks of the library

I just wanted to offer a counterpoint against your advice of using the library. I have stopped using my local library and just buy books on the Kindle or at bookstores these days. Our local library only allows you to check out new releases for one week and has heavy fines for each late day. They also fine you if you reserve a book and then fail to pick it up within their hold window. I accrued almost $100 in fines in a single year there. I can buy the 5-6 new books I read in a given year rather than dealing with that nonsense.
– Alice

The fines you describe seem pretty excessive and outside of the norm of my experience with libraries. Not all libraries have such big fines – my local library has a three week lending period for virtually all books and the fine for being late is small (a quarter per day) and even has a grace period of a week. There’s no fine for missing out on picking up a hold, either. Not only that, I have asked for fines to be waived before and they’ve almost always just done it, no questions asked. (I usually pay the fines, though.)

If you’re in a situation where the local library is extremely heavy handed with fines, it’s very reasonable to sit down and assess the cost you’re incurring with those fines versus simply buying books from used bookstores or other sources (buying from elsewhere, trading, etc.) to meet your reading needs.

You might want to look into Little Free Libraries near you. There are a few near me and I often go there and drop off books I own and have read and probably won’t reread, and I also pick one up if I see something interesting (I do more “dropping off” than “picking up” overall).

Q2: Private school worth it?

Several years ago, my husband and I moved to a state with a pretty poor public education system in order for both of us to secure high paying jobs. We had twins five years ago and they’re now in a private preschool which is pretty expensive, more than the daycare we were using. This private preschool feeds into a private elementary school and secondary school and their tuition rates are even higher. For our twins, the cost will eat up most of what we have gained by moving here.

So we have three choices, as I see it. One, we enroll our kids in the private school. It’s expensive, but probably the best educational choice. I have some personal misgivings about private school in general but this one seems fine. Two, we enroll our kids in public school starting next year. Worst educational option, but best in terms of finances. Three, move to another area with good public schools and accept what will likely be some salary hit. Probably the middle of the road option for both education and finances.

What should we do? Looking for some advice.
– Clarinda

First of all, I would put a priority on my children’s education, so I would probably eliminate the option of just sending them to the bad public schools in your area. That leaves the other two options. Where I live, the public schools are pretty strong and I have no qualms about sending my children there at all, so public schools in a state with strong public schools or private schooling at a good private school are both reasonable.

I think I would choose between those two options based on other factors. Are you happy where you’re currently living? Do you have lots of social ties there? Would you be happier in another area? Do you have family or friends you wish you were closer to? Are there good job opportunities in those places you would consider moving to?

Let those factors nudge you. You might find that when you start looking at those things, one of the options emerges as the most sensible one.

Q3: Credit card for fixing credit

I am looking for a credit card to help fix my credit.
– Kevin

If you have bad credit, one of the best ways to start fixing it is with the help of your local credit union. This is something that credit unions excel at – they can help people rebuild their credit with several different tools.

One common tool they will often provide is a secured credit card. A secured credit card is basically a credit card with a deposit. You put down a small deposit and they issue you a credit card. You use that card like normal, but if you don’t make payments, they use the deposit to cover it. This allows the credit union to issue credit cards to people with poor credit, because the deposit helps the credit union cover the risk of giving a card to someone with bad credit.

As your credit recovers, they may be able to help in other ways, such as an unsecured credit card or a collateralized loan. It will take time, though – there is no magic solution to bad credit.

Just find a credit union in your local area and stop in to talk to one of their representatives. They’ll likely be able to help.

Q4: Abundance of green beans

What do you even do with more green beans than you can ever eat? We’ve been freezing them but they just keep coming and coming. We planted too many obviously.
– Alan

There are lots of culinary uses for green beans, but there comes a point where too many is just too many! We made this mistake once and almost made ourselves permanently sick of green beans.

My best advice to you is to talk to any and all people in your life who also have gardens and start bartering green beans for any other vegetables they’ll offer for them. Swap green beans for tomatoes or okra or whatever you can get. This is how we get rid of extras – we often swap them with neighbors or even give them some of our beans (under the implicit assumption that they’ll give us some of their excess of something when their crops are producing).

You should also consider donating them to a local food pantry. Most local food pantries will happily accept donations of fresh vegetables and they almost always are in high demand.

Q5: Struggling with student loans

I need help. I have been struggling to keep up with my student loan payments and have not had enough money to pay. I am 24 days late now and need help.
– Kelly

If you’re struggling to have enough money to pay for your student loan, the first thing you should do is contact your lender and ask about hardship forbearance options. Many student loan providers have programs where they will reduce your payments for a while or even eliminate them for a while when you’re struggling financially.

There’s a catch: usually, the interest will continue to accrue while you’re not making payments. Still, this can give you enough breathing room to get things under control and rebuild a little before you begin tackling the loan again.

Regardless, it’s best for you to contact them sooner rather than later. The longer you sit around with no contact and no payments, the worse the impact will be on your credit report. Call them up and see what you can work out together. It’s not in their interest or your interest for you to default on your loan.

Q6: Decent dish towels

They don’t make dish towels like they used to. I have bought several new dish towels in the last ten years and none of them actually dry anything. They just move water around on cups and pans. Where can one get decent dish towels without spending $20 a pop?
– Claire

Most dish towels do a fine job if you don’t use any fabric softener on them, so no liquid fabric softener in the washer or dryer sheets in the dryer. If you use those things, the towels come out feeling softer but they’re rather aquaphobic, meaning that they actually push water away rather than absorbing it.

Give all of your dish towels a washing or two with very plain laundry soap and no dryer sheet and see if that helps.

If it doesn’t, you might want to just get some new dish towels. I can personally verify that these are really, really good for the price. They do a great job of drying all kinds of things.

Q7: Tax bracket comparison

Please be aware that if you invest in a traditional 401k or IRA, you’re reducing your income and thus have to pay less tax in your current HIGHEST tax bracket, while in retirement it’s quite possible that this income will be taxed in lower tax brackets. Example: you earn $110k now as a married couple filing jointly. Your highest tax bracket is 22% . Any contributions to the 401k that you now make are deducted from your income, saving you 22% of that contribution in taxes. When you retire, say you’ve got $30k of social security income (taxable), $10k of Roth income (untaxed) and you choose to also take $20k of income from the traditional 401ks/IRAs (taxable). Now your taxable income is $50k; and after the standard deduction of $24k you pay income tax on $26k, you pay 10% on the first $19k and 12% on the remaining amount; for an “average” tax burden on your $50k of income of only 5.4% . (And remember that you also took $10k form the Roth accounts, so your total posttax income would be $57k). This is why I believe that traditional accounts can be an excellent idea, especially if you’re a relatively high earner now, but will be able to live on a bit less in retirement. (Say, you’re solidly in the 22% tax bracket now and will probably be mostly in the 10 and 12% bracket in retirement … but even if in retirement you “hit” the 22% bracket, most of your income then will be taxed at a lower rate). Even if the tax rates go up a bit in the next decades, they have to go up an awful lot to make the lower brackets in 2049 higher than the higher brackets now. So don’t just compare your “highest” tax brackets now and in retirement. Compare your highest tax bracket now to your average tax % when retired.
– Kevin

There are two big advantages of a Roth.

First, let’s say you’re early in your career on a path where you expect to be earning a much better salary as you move along. You earn, say, $75,000 or so per year for the first decade of your career, but later on, you’re probably earning $200,000 or more. During those early years, putting money in a Roth IRA is a huge advantage because your tax rate early in your career is likely to be much lower than your tax rate in retirement off of an $200,000 salary. It’s untaxed income no matter what your retirement situation is.

Second, a Roth IRA gives you a ton of flexibility compared to your 401(k) at work. You get to choose your own investment house and you get to choose from a wider variety of investments.

If I knew that the 401(k) at my job was as good as any IRA out there and I also knew that I would never earn a higher salary in my career, then the 401(k) is probably a good idea (with some tax assumptions). In general, however, I’m not going to make those assumptions, especially if the person asking for advice is young – I’m assuming their salary is going to go up in the future and thus socking away money that will earn tax-free returns in the future is good.

Q8: Thoughts on permanent portfolio?

I was listening to a podcast recently and the host was talking about the “permanent portfolio” but I didn’t follow all of the details. What is it and do you think it’s good?
– Gene

Was it episode 345 of The Voluntary Life? I listened to that recently and the host did mention the “permanent portfolio” a bit.

The “permanent portfolio” is an investment strategy first popularized in the 1980s. Basically, it’s a strategy for investing that should weather almost all changes in the economy quite well with minimal effort, meaning it shouldn’t fall apart when the stock market falls.

The idea is that you invest in equal amounts of four asset types: growth stocks, precious metals, bonds, and treasury notes, and then just let it sit and invest automatically. You take no additional action unless you need money or you notice that one of the four asset types is worth 35% or more of the total value or 15% or less of the total value, at which point you rebalance and equalize everything. (You can also “rebalance” by shifting around your contributions a little by contributing more to the things that are falling behind.)

You might practically do this by buying into equal amounts of Vanguard index funds – VIGRX, VBTLX, VUSTX, and VGPMX.

I think this is a good strategy if you’ve reached the point where you need to live off of your investments. This portfolio won’t have great long term returns, but it will have pretty consistent returns over time.

My only hesitation is the precious metals part. While I understand the historical reasons for it, I’ve seen precious metals be incredibly volatile in recent years in ways that seem to be untethered from other economic activity. I also have a minor hesitation about the exclusion of real estate.

If I were doing it, I’d probably consider using VGSIX in addition to the four above, or possibly cut out the precious metals option. However, I don’t think I’d jump to this unless I were living off of my investments, as that would become the goal of my investment strategy.

If your goal is self-sustainment of your lifestyle, it’s a good strategy; if you have other goals, you should use other approaches.

Q9: Late model cell phone strategy

Just wanted to share with you that I basically use the same strategy for cell phones that you use for cars. I buy a “late model used” (a phone that’s not of the current generation and often a refurbished one) and then use it until problems pop up (software stops working well or something breaks on it). It’s served me well since about 2009 and I see no reason to change!
– Stan

I do the same thing, actually. I’ve been using my current cell phone (an iPhone 6) for a couple of years now and I see no reason to switch yet. There are a couple of annoying scratches on it, but not bad enough to really bother me.

When I do replace it, I’ll get one that’s at least a generation old and, as you noted, a refurbished one if I can find it.

I’ve never had any problem with this strategy either. I used to “need” the latest and greatest phone, but it really didn’t ever do anything essential that an older phone couldn’t do. Older phones can make calls, send texts, check websites, do some GPSing, and other basic things.

Q10: Talking about finances with family

How do you talk about finances with your family? If money comes up, how do you deal with it?
– Mandy

Frankly, it doesn’t come up very often. When it does, it’s usually a serious discussion about something that’s of importance to all of us, like figuring out issues related to my parents’ estate.

On the rare occasions when it does come up, I never, ever talk about specific numbers or any details of our specific financial state. To me, such specific details are only of importance to Sarah and myself. I do talk about goals (“Sarah and I are aiming to retire in our early to mid 50s, hopefully”) and general strategies for getting there (“We just automate all of that and the money goes right out of our checking account and we don’t even have to think about it”).

Talking about specific dollars and cents tends to create emotions that we simply don’t want in our family relationships, and it also introduces direct comparisons, which we also don’t want. What good is it for me to compare our net worth to that of my brother? None at all. It doesn’t do either of us any good. Let’s say I’m better off than he is – does that make him feel bad? Probably. Does that make me feel good? Not in any real way – I’d mostly just feel awkward. Let’s say he’s better off than me. Does that make me feel bad? Probably a little. Does that make him feel good? Maybe, but, again, it’s probably awkward. Why do this?

If anything specific does come up, I check out of that conversation as soon as possible.

Q11: Older personal finance books

Do old money books have value? My grandpa has several and says that I’m free to have them. They are from the 70s and 80s. Still worthwhile to read?
– Jordan

Yes and no.

The core principles and philosophy of personal finance hasn’t changed since the days of Charles Dickens. Spend less than you earn. Avoid debt. Put your money to use somewhere. Have a good head on your shoulders about how you spend money. Those kinds of things are timeless and always good.

What does change are the specifics. The actual mechanical methods of investing change. The methods by which we shop change. Specific investing strategies change.

If you’re looking for bedrock principles and food for thought, older personal finance books are just fine. If you’re looking for specific strategies, then older books won’t help.

Q12: Other reading

What books do you read for fun?
– Jamie

I often recommend personal finance and related books here on The Simple Dollar, but that’s nowhere near all that I read. I am a voracious reader, often knocking out two or even three books in a week. I usually have one fictional and one nonfictional book going at the same time.

Regarding fiction, I mostly read literary fiction, science fiction, and fantasy. I’m currently reading Dragon Haven by Robin Hobb.

With nonfiction… I read everything. Science, philosophy, self improvement, history… it’s all over the place. I generally get obsessed with a topic and read about it constantly until I feel like I “get it” on some level, then move onto something else. Right now, I’m reading Origin Story by David Christian.

I generally put aside at least an hour a day for uninterrupted reading. With nonfiction books, I often take notes as I’m reading as that helps me absorb and remember key ideas and information.

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.

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