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 value of CNBC
2. Should I refinance?
3. Student loans or savings depletion?
4. Wireless service question
5. Questions about slow cookers
6. Roth IRA or 401(k)?
7. Using 401(k) to pay debt
8. Controlling odor with laundry soap
9. Uber basics
10. IRA basics
11. Disney Rewards Visa question
12. Summer book recommendations
I am mildly claustrophobic. Although I don’t break down into a panic, I don’t like to be in enclosed places and my brain is shouting “LEAVE! LEAVE! LEAVE!” whenever I find myself in such a place.
A few days ago, my family and I camped for two nights at Maquoketa Caves State Park, in eastern Iowa. As you might guess from the name, the park contains a lot of caves, many of them quite small.
I walked through several caves with my family, some large enough (like Dance Hall Cave) to not really bother me, while others made me want to run.
The last cave we visited on our longest hike was one called Ice Cave. It was one that led downwards off of the trail and because of the descent it was very cool inside.
The ceiling was low and I simply didn’t want to go down inside, so I told my wife and kids that I’d wait out on the trail.
After a minute or so, though, one of my children (my oldest son) came back to the cave entrance and told me that the ceiling was much higher inside the cave and that the temperature was surprisingly low in there. Then, he asked me to come down inside the cave with them.
I hesitated for a bit, but then he said he’d rather wait out on the trail with me. A few seconds later, my daughter came over and said the same thing.
I asked if they had explored the cave all the way through and they both said they hadn’t, but that they’d rather come back to the trail with me than explore the cave without me.
That really got to me, so I went down into the cave with the two of them and explored it with them. Believe it or not, the sense of claustrophobia didn’t really hit me at all.
Some things are bigger than fear.
I’d like to offer a different take on the recent CNBC value question. The reader asked what is the point of “showing these guys all day long talking about how this specific stock is hot”. While I’m not a fan of most of the talking heads stuff while the market is open, there is some value in CNBC if you know where to look. I was not initially not a fan of the show ‘Mad Money’ as I thought Jim Cramer was just a talking head, but I found there is some value in his show. He often talks about the reasons why a market is performing like it is, has segments on technical analysis, and other market related advice. If you are someone with no interest in stocks you won’t find what he has to say valuable, but if you do, there is a lot of good information if you are looking for it. Just my two cents.
There is useful info on CNBC. It’s not a barren wasteland devoid of worthwhile personal finance information. It’s just that the bits of useful information are surrounded by self-promotion, commercial breaks, and discussion of financial topics that are completely useless to the individual investor.
The problem is that it makes for a pretty bad signal-to-noise ratio, meaning that in order to ferret out the good parts, you have to wade through a lot of questionable stuff to find it.
For me, I find it much more worthwhile to just read a personal finance book by a reputable author. The information contained in that book is almost entirely useful, there are no commercial breaks, and the book is geared toward personal finance.
I am about 18 months into a 30-year mortgage with ~$390k outstanding principal on a house worth about $560k at 3.875%. My bank offered me a refinance with ~$3,000 closing costs with a new rate of 3.25%. By my math I would ROI in about 1.5 years. Refinancing seems like a no-brainer (I’ll be staying in my house at least that long), but I am not sure if I’m missing anything that would make this a bad idea. Thoughts?
You’re not missing anything. You’re just seeing the large impact of a reduction in interest rates. It’s huge.
If you ever have an opportunity to reduce your interest rate on a loan by more than 10%, it’s probably worth it (depending on the closing costs). Here, you’re reducing your interest rate by more than 16%. Such a reduction has a giant impact, one that’s going to save you quite a bit of money.
Why would a bank do this, then? The biggest one is to keep you as a customer. They may be concerned that you will refinance elsewhere, so this is a situation where you benefit from market competition.
- Related: Should You Refinance Your Mortgage?
Is it better to deplete a savings account to pay for college or leave some in savings and take out a private loan? I already have scholarship and federal loans.
It really depends on other factors in your life. This is one of those questions that really taps into the “personal” aspect of personal finance.
Do you have a history of following through with goals and plans? Do you have friends and family in the area who are supportive of you and are willing to help you out in a pinch? Do you have anyone who is dependent on you? Those are key questions here.
The stronger your support network is, the more you can draw from your savings account. If you have no support locally, you need to leave money behind as an emergency fund.
In any case, I’d leave at least some behind in savings to serve as an emergency fund. If you have nothing at all in there, you’re begging for an emergency to happen – a car failure or a personal emergency or something else.
I am a property manager and we signed a bulk contract for a fiber network internet service for our whole property. They are required to provide a minimum number of mbps to each residence. That’s all the contract specified. Now I am getting complaints from residents about speed and when we submitted several tests, the provider said only hard-wired tests are valid. We were shocked since most people access the internet wirelessly. Are they right? We feel since the contract didn’t specify that the 30mbps had to be “wired” speed, that they should be providing 30 mbps speeds even if accessed wirelessly. Can you give me any input on what ISPs are talking about exactly when they advertise “30mbps?”
Service providers will almost never guarantee a Wi-Fi speed because there are just too many variables when it comes to Wi-Fi data. For one, other people can jump onto Wi-Fi networks and use up the bandwidth, which cuts the speed for everyone. For another, distance from the Wi-Fi point and atmospheric conditions and interference can drastically cut speed over Wi-Fi, things that really don’t affect wired internet speeds.
If you’re not getting 30 Mbps over your Wi-Fi network, there are a lot of potential culprits to blame. Is your network password protected? Are there a lot of devices accessing the network? Is there anything interfering with the signal, like phones in the same frequency range or other Wi-Fi networks on the same frequency?
All of those factors can cause drops in Wi-Fi speed compared to the speed coming out of the wire and there’s no reasonable way a service provider can guarantee anything in those conditions.
You need to attach a computer of some kind directly to their router and see what kind of speed you’re getting through there. If that’s well below 30 Mbps, then you have an issue. If it’s at 30 Mbps but you’re getting far less than that over Wi-Fi, then it’s a Wi-Fi issue that you need to fix separately.
I read your article about five ingredient crock pot meals. Just wondering how you’d cook the chili, pot roast, and shredded beef? Also, does ground beef cook okay in a slow cooker?
Meats tend to cook just fine in the slow cooker. Back in the day, we cooked meaty chilis, pot roasts, shredded beef, shredded chicken, whole chickens, ground beef, and all sorts of other things right in the slow cooker without any problems.
All you need to do is to check the temperature of the food when you get home. Is the meat at or above the appropriate temperature to be considered safe to eat? If it is, then you’re good to go. Most slow cookers, even on low, get meat to at least that temperature over several hours.
If you have a good slow cooker, the instructions in a slow cooker cookbook will virtually never lead you wrong. Just use a thermometer to check the temperature if you’re in doubt and don’t eat anything that’s obviously undercooked (but that’s true no matter how you cook meat).
I just changed jobs and with that change came a huge raise — to me anyway. I’m wondering what to do with some if the money.
I am currently 55 and my husband is 60. Last year we bought a house with a 15-year mortgage and have $131,292.37 left at 3.375% interest. My husband would like to pay that off in 9 years so we can retire. Our current payment is $623 principal, $369 for interest and $278 for escrow. We plan on adding another principal payment every month and then some to pay down the debt.
My 401K is at $208,000.00 and I contribute 15% while my company contributes 3%. I would like to up my contribution by 2% (still way below the max allowable) but I’m uncertain if I should input that 2% into the 401k pre-tax or into a Roth post-tax. Other than the current and future tax implications, is a Roth better than a 401k? And if so, why?
And would it be better to pay off the mortgage rather than up the contributions to the maximum allowable for the 401k?
Ignoring the tax implications entirely, Roth IRAs have one major advantage over 401(k)s: you control which investment house you use and which investments you choose, while your 401(k) is run by whatever company your employer chose and your investment options are usually pretty limited.
Even if the company managing your 401(k) is a good one and they offer quite a few choices, the options simply don’t compare to what you can find if you can choose the investment firm yourself and have access to all of the investment options from each company, which is what you get with a Roth.
If you include the tax implications, I think that it makes a lot of sense to hedge your bets when it comes to taxes and have some of your money in pre-tax retirement accounts (e.g., a 401(k)) and post-tax retirement accounts (e.g., a Roth IRA).
I need help quickly – I am 69 – planning to retire in February 2017 at 70. I have over $40,000 worth of debt (timeshare, credit cards, car note). My rent is $2500/month; I am married; earnings are $106,000/year; my husband is 72, social security is $1,600/month; I have $325,000 in my 401K. I wish to consult with my administrator regarding taking out enough money to pay all of the aforementioned debt before I retire in February, 2017. Thoughts please.
I would absolutely not take that money out before 2017 because of taxes.
If you take the money out in 2016, you’re going to be paying a high income tax rate on that withdrawal because it will count as income in addition to your normal salary. Your normal earnings are $106,000 per year, so if you withdraw another $40,000 from your 401(k) it will be as if your income this year is $146,000 and that last $40,000 will be in a pretty high tax bracket.
If you wait until next year, you’ll only bring in $15,000 or so in salary (depending on when exactly you retire) so that extra $40,000 withdrawal will only bump you up to $55,000 (you’ll also need to withdraw more throughout the year to live on). This means you’ll pay substantially less taxes if you wait until 2017 to withdraw the money.
You’ll want to talk to your administrator before doing anything, but if I were you, I’d withdraw money early in 2017 to pay off the debt rather than now.
Do you have suggestions that would help me get fresher smelling laundry? I don’t use fels naptha soap, maybe I should, but do all else as you say~ use slivers and ends of soap bars. I love the consistency of the soap, but is there something I can add (baking soda? vinegar) into the mix to make it combat mildew or mold smell? Our water is hard/we use a filter system.
Both vinegar and baking soda will work here, but do not add both as they react together.
If you choose to use baking soda, mix that right into your laundry soap mix. Add an equal amount of baking soda as you do borax to your mix and you’ll be fine.
If you choose to add vinegar, add vinegar to your laundry softener compartment before each load – half a cup will do just fine.
Both of those things will help a lot with laundry odor. Don’t do both, though, unless you want a ton of foam everywhere.
I am all signed with Uber to be a driver. How do I know if there are driving opportunities?
I’d suggest watching this Uber driver training video to help you get started on what you need to do. Once you’re all signed up, the app will tell you if there are driving opportunities nearby and you just snag them as they pop up.
Having talked to a few people who do occasional Uber driving, they tend to be able to constantly find driving opportunities in busy areas, but they get rarer when you’re away from downtown areas or airports.
For those unfamiliar with this, Uber is essentially a taxi service except that people in normal cars do the driving and you contact these drivers using a smartphone app. It’s kind of an alternative to the taxi system.
- Related: How to Make Money Driving for Uber
Your blog, and most other personal finance blogs out there, recommend using Vanguard for your investments. However, I see very little about how to structure these accounts within Vanguard, particularly for a couple. Can you help?
Do my wife and I each have to create separate accounts? Can some accounts be linked together anyway because they are shared investments? Is it possible to create multiple IRA accounts, so I don’t have to keep all of my rollovers together in one account? I love how at Ally and most banking sites, you can have multiple accounts, and I would like to do the same with Vanguard, so that I can separate my investment funds.
I just read JL Collins new book, The Simple Path to Wealth, and he talks about just needing a handful of funds, but without any detail about how to set them up correctly. Can you buy two different mutual funds (Stock index fund and bond index fund) within 1 IRA account, or do you need an IRA account for each separately?
You each need to create separate accounts (as far as I can tell), but you can give each other permission to view the holdings and settings for each other’s accounts within Vanguard. Just visit the “Account Settings” link, then click on “Account Permissions” within there and it’s very straightforward.
You can buy as many funds as you want within a single IRA. You do not need separate IRAs for each fund that you want to buy, unless you want to set up another IRA with another investment firm because you want, say, a Fidelity fund and a Vanguard fund without paying brokerage fees. If all of your funds that you want are at Vanguard, then you can hold them all within a single Vanguard IRA.
You absolutely can have multiple IRAs, but they are effectively treated as one for tax purposes and contribution limits by the IRA. It also makes management more time consuming. Unless you have a strong investment-related reason to do so, you’re far better off investing the time to get everything together in one place so you don’t have to constantly deal with it in the future.
One of my friends say she is earning excellent ‘rewards’ with a Disney rewards Visa. What do you think of these cards? Good or no? I currently use a hotel rewards Visa with the IHG rewards and earn lots of free nights by running household expenses through this card. I would like to earn ‘rewards’ for our upcoming Disney vacation but I hesitate to apply for a new card and switch from my current IHG card. Just thought I’d ask your thoughts on this.
The actual rate you earn is reasonable – 2% on most purchases and 1% on everything else – but the reward you earn is pretty restrictive. The card appears to pay out rewards in the form of “Disney Dream Reward Dollars,” which is basically credit for things on your Disney vacation.
While that’s good if you’re planning such a vacation in the near future, it’s not a good reward at all if you don’t plan on visiting a Disney park or buying a lot of Disney-themed goods in the near future or if something interferes with your trip.
A much better approach would be to get a card that offers more general use rewards, like a card that gives you a discount at your favorite retailer (like, say, a Target Visa if you shop there frequently, or Costco’s credit card, or an Amazon Visa) or one that offers actual cash-back rewards. Then, take what you save from those rewards and put that money aside for a Disney vacation. That way, if the Disney vacation doesn’t pan out, you have cash rather than relatively unusable Disney Dream Reward Dollars.
Any plans for a summer book recommendations post? I’ve found some books I’ve really enjoyed through past posts.
Here are some recent releases I’ve read that I highly recommend. All of these came out in the first part of 2016 and should be easily available at your local library. Two of them are novels and two of them are nonfiction books.
Grit: The Power of Passion and Perseverence by Angela Duckworth is a wonderful book about the usefulness of “grit,” which Duckworth essentially defines as a person’s willingness to stick with something through the challenges. Her argument is that “grit” is one of the key things that brings about success in almost every area in life. Most of the book focuses on strategies for building “grit” within yourself. It’s a great read, especially if you find yourself aimless or afraid to tackle challenges.
The Passage Trilogy by Justin Cronin had the third and final book, The City of Shadows, released earlier this year. The series is a very character driven story about what happens after a handful of people who were given a drug intended to drastically increase human longevity instead turn into something akin to vampires (though somehow more relatable, which somehow makes them more horrorific) and then escape into the wild. What makes this trilogy really work for me is the characters – the characters draw you in to this setting and really leave you feeling invested in the events.
Lab Girl by Hope Jahren is a memoir by a female scientist who writes wonderfully both about the challenges of being a scientist and about being a woman in a scientific field, but also about how the passions and mindset that led her into her field wrap throughout every dimension of her life. If you’ve ever wanted to understand what drives a scientist, this is something that is incredibly worth reading.
Barkskins by Annie Proulx is a novel about several generations of two logging families, starting with the earliest generations that fought against things like Native Americans and diseases and injuries, and as the story moves on to later generations, about how they handle what happens when the woodlands that previously seemed infinite eventually run out of trees to cut down. This is one of the best novels of historical fiction I’ve ever read.
Hopefully you can find something within these four books that really hits home for you.
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.