Questions About Budgeting Apps, Umbrella Insurance, Hamilton, 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. Budgeting app for cash economy
2. Salary and union difficulties
3. Renting or selling old house
4. Skilled nursing care
5. Handling huge increase in income
6. Investment companies besides Vanguard
7. Umbrella insurance question
8. Am I saving enough?
9. Starting medical claims billing business
10. Offering financial advice
11. Foreign savings accounts
12. Cheap Hamilton tickets

Over the weekend, I attended a wonderful wedding that, again, reinforced to me what exactly makes weddings work and what doesn’t.

The thing that makes weddings work is the people. It’s the collection of people together for a common positive reason to enjoy the mutual company and share in a particular moment in time.

Everything else is really secondary to that. The “perfect” dress and the “perfect” moment don’t really matter in comparison. It’s about the people. It’s not about the flowers or the photographers or the music or anything else.

It’s about the bride and the groom and the love they have for each other and the people they love and the people who love them.

Everything else is secondary.

So, if you’re going to get married, don’t break your financial future with expense because, in the end, the thing that’s memorable about the wedding are the people, not the stuff. It’s the person you’re getting married to and the people who want to share that moment with you. Nothing more, nothing less.

Q1: Budgeting app for cash economy

What budget app would work for people like me, living in country with mostly cash economy? We get our income via banking, but less than 20% of the population has bank access. Not specially for low income but with different spending, like a live-in maid, a norm in most of Latin America, cost of security, the cheap labour, but very expensive home goods. I hope you can think of something and go world wide. I think you also have reader from India and just like Latin America, it faces the same type of financial challenges.
– Fred

I’d immediately point you toward You Need a Budget 4, which is still the budget software that I use for myself. It keeps your data offline and doesn’t rely on bank access like other tools like Mint.

Of course, as with any tool like this, you’re going to be relying on putting the data in yourself. The advantage of other tools is that they can pull your data in automatically (I don’t particularly like that myself because of security concerns, but for some people it’s a major feature). I personally prefer to enter transactions myself and have much more control over privacy, which YNAB offers.

The newest version of You Need a Budget isn’t recommended by me as it’s a subscription-based package. Stick with the older version linked above, which I adore.

Q2: Salary and union difficulties

I have worked at the same school district for 15 years. I have held three different positions, the last two have been positions that I am the only one who holds them so there is no one to compare my job to. My current job (for the last 5 years) is a first time position, necessary because of state and federal data collection requirements.

The problem I am having is that my Union is currently negotiating a new contract. The Union has decided that I make too much money (I make more than the Teaching Assistants, the Custodians, and the Aides). The negotiating committee came back with a proposed contract that would, due to an increase in work days, gives me a 12% pay cut, then the smallest pay raise of all for the next five years. Instead of getting the 5 weeks vacation everyone else working the number of days they are proposing I work I will only be getting 2 weeks vacation. The Union negotiators said that they fought to get me that and that I really should’t get any this coming year (our year starts in July) because it would be considered a new position. They feel I should be happy with the 2 weeks and the small, in comparison to all other employees, pay raise. If this contract passes I will be making less per hour every year for the next 6 years. Can they do this? They won’t admit to not representing me, but also made no attempt to stop a couple very angry coworkers from berating me and telling me I make too much and I am not worth it.

I emailed them what I thought would be fair and when not one of them responded or even checked the read receipt box I made copies of the emails along with a note asking that they please respond and put them in sealed envelopes in their school mail boxes. One person responded for the group that they had each received them. One negotiating member came to me to let me know they would be meeting on Monday. I foolishly thought they would be meeting with the board negotiating committee and the superintendent. Instead it is another union meeting. I hate to assume, but do, that the meeting will to bring up my proposal and see what the full Union thinks. This will lead to the unhappy members getting another chance to rip me apart. Can they do this? What is being negotiated must be confidential until an agreement is made, is it the same case when someone wants to make a change – or at this point is it an open negotiation process. How do I go about getting an arbitrator and do you feel I should get one or is everything they are doing legal. I do not feel I am being fairly represented.
– Dana

Your employer certainly can offer you any contract that they choose. That’s their decision, just as it is your decision whether or not to sign it. They’re giving an indication, though, that they don’t really wish to retain you, for whatever reason.

From the perspective you share here, it looks like the union isn’t supportive of you or of the professional position that you hold. Likely, your job became a bargaining chip in a broader negotiation.

Can they do this? Sure. Is this a workplace I would want to continue working in? Not at all. I’d start job hunting immediately, because even if there were something here that you could take legal action on (which it doesn’t look like there is), this is not an environment where you’re going to be valued and I’d suspect that you’re going to be a target for future cuts if there’s any way to do it.

Q3: Renting or selling old house

We live in Denver and are buying a new house (642K). We currently own a home in a very desirable neighborhood, valued at 525K (We bought it 3.5 years ago for 395K). In order to get the new house, we’ll have to raid our savings, mostly emptying it out. Because the housing market is so difficult here, we’ve had to borrow money from my in-laws in order to make a non-contingent offer on a home and to also avoid a second lien on our house that would come with hazard insurance and higher interest rates. We now have two options: rent out our first house or sell it. If we choose to rent, we will obviously be very leveraged. The house was flipped three years ago so it is in very nice/almost pristine condition. Houses went up 12% in my neighborhood last year. So, should we take the risks and try to rent in order to make a great investment? Or should we sell as soon as we can, pay back my savings account and my in-laws, and just be glad we made such a profit when we did? My Vanguard account only went up 3ish% last year, which makes the housing investment sound so much better. We have 1 child and hope to have a second.
– Kelly

Selling the house is obviously the safer choice here; renting comes with a lot more risk, but more potential upside, too (if you have good renters who stay for a long time and keep the property nice and the housing market stays strong). Unfortunately, no one can predict the future.

For me, the decision would come down to the rest of my financial state. What would happen to you guys if the house didn’t rent for a while or if the renter just didn’t pay you or did a lot of damage to the house while there? What would happen if the housing market bubble popped like it did in 2007-2008 and the values dropped by 15% or 20% or 30% over the coming year? Would you be able to survive?

If the worst case scenario results in complete disaster for your life, it’s not worth it. Renting properties in a situation where a bad renter can really negatively impact your financial world is not a secure situation. If you could survive that scenario and are willing to take on the effort of being a landlord (or are willing to take smaller returns and pay a management company), then it’s well worth considering.

Q4: Skilled nursing care

I saw your mailbag answer to Angela re the cost of skilled nursing in old age, and felt compelled to respond. We planned as carefully as we knew how for my in-laws’ eventual elder care, but it never occurred to any of us that my mother-in-law might suffer severe dementia and thus require intensive (and expensive) ongoing nursing-home care. If I had it to do over, we would most certainly have opted for the insurance. We thought we were being so careful – but we did not anticipate this. You just never know what may happen.
– Mary

That’s the challenge with deciding about long term care insurance. In most situations, it’s not necessary and it’s just a big expense with no benefit. In the situations where it is necessary, it’s very useful and perhaps even invaluable. It’s a situation where hindsight is 20/20, but no one can predict the future.

My feeling is that if you’re in a financial situation where buying good long term care insurance has a significant negative impact on the rest of your life, then it’s something you should forego. If you can afford the insurance without significant problems, then a policy is worth it to cover situations like those described by Mary.

It’s never, ever an easy decision, and it’s one where your choice can look very wrong in hindsight.

Q5: Handling huge increase in income

8 years ago I began a PhD in Art History at a top university, and just graduated. I live with my husband, and we have made between 40 and 70k each year, living in a major city. Over those 8 years, we moved across country, got married, and had a few unexpected expenses like a slew of weddings to attend and some prolonged periods of unemployment, but I will admit I wasn’t as frugal as I could have been, and slowly, credit card debt crept up. We have a car payment of $380 a month and a joint credit card with $10k and then I have another $15k in credit cards in my own name. My husband has about $15k in federal student loans. I always pay everything on time, but due to the poor credit utilization ratio and my lack of non-revolving credit, my credit score is 640, and my husband’s is 700.

Unexpectedly, I was recruited by a top company that normally hires MBAs, and next month my income will go from 20-30k a year to 200k a year, and if I do well, I could be making $500k in 5 years. So, our joint income is going from 70k last year to 250k once I start work. I never expected to make much money, so the shift has been kind of crazy.

Basically, I just don’t know where to start. I know I haven’t been as responsible with my money as I could have been, but based on my calculations, we should have at least $5000 to either save or pay down the credit cards each month (assuming 1/3 tax, 1/3 expenses, 1/3 fun money). By the end of the year, I expect to be credit card free, but I don’t know if there’s a best way to do it, or just throw money at the cards each month, since it will be paid off quite quickly. So, my question in twofold: 1) does the general advice on paying down credit card debt change when under a short time frame and 2) What should be my priority from there? I know building up a 401k (I have no retirement at 28), saving to buy a house, paying off the low interest student loans and car, and investing are all important, but is there a clear cut priority or rule to get my started or should I hire a financial advisor? Thank you!
– Mara

First of all, I would adopt a very, very strict “pay yourself first” routine. I’d put a large portion of each and every paycheck directly in the bank – in fact, if I were doing this, what I would do is have all of my pay directly deposited into a bank that I didn’t use regularly, then have enough of that to continue my current lifestyle (with maybe just a little more) transferred automatically to my current checking account. If your new job offers a 401(k), especially one with any matching, get all of the matching money you can.

Then, I’d use that “extra money” for things for the long term future. First, I’d use it to pay off all of my debts, starting with the credit card debt – get all of the high interest stuff out of the way. It is almost always the highest priority. I define “high interest” as anything over about 8%.

After that, the goals become more about what’s important to you. Is having your own house sooner rather than later more important to you? If so, then start saving for a house down payment. Is financial independence (meaning the ability to walk away from work and live off of your investment income) something that’s more exciting to you? If so, then eliminate all of your debts and start investing for that goal.

Q6: Investment companies besides Vanguard

I have been a long time reader of the simple dollar and have noticed that you tend to recommend Vanguard for Roth IRA investments. I am 26 and have restructured my finances to be able to invest the $5,500 maximum for myself and my wife into an IRA each year. My question is would you ever use anyone else besides Vanguard? I was thinking of investing $5,500 in several different companies over a few years and then eventually choosing 1 to continue investing with until retirement. What are your thoughts?
– Eric

I recommend Vanguard because it’s what I use. I looked at a lot of investment houses along the way and I felt that what Vanguard focuses on – low cost index funds that simply match the market automatically instead of high cost funds that try to beat the market but fall short most of the time – was a better match for me.

Many investment houses offer a lot of different options. They offer index funds, too, just like Vanguard does, along with lots of managed funds and different things.

Vanguard just focuses on one thing above all else and they have it down to a fine art, which results in pretty low management fees, which means a little more money in my pocket. However, if you’re not on board with the whole index fund idea, there are other firms that are likely better. I usually point people toward Fidelity as a second choice.

Q7: Umbrella insurance question

I bought umbrella insurance from Geico last year at $300 (annually). I’m 56 and single, my children are 29 and 31, and I live in an apartment. Do I need umbrella insurance?
– Kevin

I don’t know the full state of your finances. However, I will say that it’s almost never a bad idea for anyone to have a $1 million umbrella insurance policy. It’s relatively inexpensive (I’m guessing that at $300 a month you’re actually getting more than $1 million in coverage) and it covers you in the rare situation that you’re sued for liability beyond what your renters insurance or car insurance covers.

I can’t imagine in your situation that you would need a larger policy than that, as situations where you would be able to be sued for more than that are extremely rare.

If you’re actually sitting on a high net worth (say, more than $1 million), then you should have a policy that covers your full net worth. Similarly, if you expect to earn an income that adds up to more than $1 million before you retire, then you should consider a bigger policy. Aside from that, you’re probably fine with what you have.

Q8: Am I saving enough?

I have question regarding rule number 3 from the “Can a Single Index Card Sum Up Your Personal Finances” posting (https://www.thesimpledollar.com/can-a-single-index-card-sum-up-your-personal-finances/). I am 24 years old and didn’t start making any form of retirement savings until right before I turned 23 (May 2015), since that time I have been contributing 15% of my pre-tax income to my 401k. Am I saving enough or should I re-balance the budget to increase overall percentage ​of ​savings for retirement? What other options should I consider or start directing money into?
– Donald

Given your age, I think you’re absolutely fine saving 15% into your 401(k). In fact, if you keep that up, you should be prepared to retire somewhere around age 60 or so.

The advantage of saving more than that is that it moves your retirement age earlier and earlier and earlier. You’ll also eventually bump up against annual contribution caps, but you don’t really need to worry about that.

I don’t know what your annual income is, but if it’s low enough and you want to save more, I’d consider opening a Roth IRA in addition to your 401(k) savings. This allows you to save some after-tax money for the future as well, which will help with your taxes down the road when you’re ready to retire.

Q9: Starting medical claims billing business

I am wanting to start a part time medical claims billing service. How do I go about doing so?
– Nina

Here is a great introductory article on how to start a medical claims billing service from home.

The catch is that it does have some real startup costs – you need a decent computer, a good printer, some fairly expensive software, some reference books, and membership in a clearinghouse. That can add up, and if you don’t have the money to easily jump into this, you probably should be very careful about doing it because it’s not a guaranteed money stream.

I am usually very wary of at-home businesses with a lot of startup costs, and while there are ones that are more expensive than this, the costs here can add up to a lot especially before you have customers. Make absolutely sure you can afford to get started.

Q10: Offering financial advice

I’m a frequent consumer of personal finance blogs, podcasts, and books, and I have a finance degree. I’ve been pondering helping individuals one-on-one with their finances as a side hustle, but I’m concerned about two things.

First, I know the finance field is highly regulated. I’m not intending to sell securities or repackage debt – I’m more interested in being a tutor of sorts such as helping make decisions and apply budgets, but I don’t know what I’d call it that wouldn’t trigger a regulatory requirement or allude to a very specific trade. Is this a feasible service to offer? Any idea what title would be appropriate?

Second, (if it’s feasible at all) how much should I charge for this service? I tend to undercut and second-guess my value. Off the top of my head I’d do this for $20 an hour. I enjoy the field and like to help people so I’m not looking to make bank on this work, but is $20 just flat-out too high or too low?
– Craig

It sounds to me like you’re interested in financial coaching. It’s different than financial planning in that you’re not directly advising people on how to invest their money, but helping them to make better money decisions and the like. It’s a world I dipped my toes into and decided wasn’t for me.

I think your rate is reasonable, but I would suggest including that dollar amount as part of a package of hours – for instance, you may offer a package that includes a bunch of materials (that you prepped in advance) along with five hours of one-on-one coaching for $100. You may end up altering that rate in the future, but it’s a reasonable starting point.

Just be very, very clear on what you’re offering and make it clear that you’re not trying to sell investments or securities, which puts you in a completely different field that’s very regulated. Stick to “coaching” people on their overall life and financial state.

Q11: Foreign savings accounts

I am a pretty cautious person when it comes to my savings. I have what I thought were some pretty high APYs on my savings accounts (.75% and 1%) but then I found this… http://www.marketwatch.com/story/6-bank-accounts-that-earn-over-10-interest-2013-08-07 …and 18% is WAY better. Should I be getting a Ukrainian savings account??? It looks like inflation is one thing to consider, but what are your thoughts? What would this look like at tax time? One thing I love about my current savings accounts are that they are so easy to track, see, and when I need to, move money around. With a foreign account, I’d be concerned I wouldn’t have so much control. I currently have a personal savings account with Ally Bank (1%), one with Capital One 360 (.75%) and two other Capital One 360 at .7%. If I found something better I’d be excited to make more in interest.
– Nola

While your money will earn more while it’s sitting in an account at a stable bank, there are a lot of risks and problems here.

First of all, when you put money in and take it out, you’ll be paying for currency exchange. Not only will you have to pay to change dollars into hryvnia and back, you’ll also have to deal with changes in the exchange rate between dollars and hryvnia. Since 2012, the value of the hryvnia has dropped from $0.12 to $0.04, which means that even if you’re earning 18% a year, you’ve still lost a lot of money.

Another factor is that banks in other countries often aren’t as insured as they are in the United States. In the US, savings accounts have FDIC insurance, which means that even if the bank goes out of business, the first $250,000 of your deposits are protected. In the Ukraine, some banks are in a program that offers insurance up to 200,000 UAH (hryvnia), which adds up to about $8,000 US. Anything above that would vanish should a Ukranian bank go out of business.

I wouldn’t do this. The risks are far too great.

Q12: Cheap Hamilton tickets

Any thoughts on how to get inexpensive tickets to Hamilton? You have to pay hundreds/thousands just to watch a show!
– Timothy

The cheapest way to get tickets for Hamilton is to get in the $10 daily ticket lottery, which enables “winners” to buy tickets. You can check on the lottery for specific nights here.

Of course, if you need reserved seats for a specific night, you’ll need to beat the rush to Ticketmaster and buy tickets far, far in advance. They’re going to be more expensive and tend to sell out really fast.

Other than that… well, the secondary market on tickets for the show is pretty high.

Personally, if I were to see it, I’d wait until the hype dies down a little bit and you don’t have to pay exorbitant amounts for a ticket. If I lived nearby, I’d get into the $10 ticket lottery, though.

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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