Questions About Gloves, Castille Soap, TurboTax, and More!

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. Paying ahead on student loans
2. Why does tax deferring matter?
3. Investing in collectible cards
4. Camera and money advice
5. Buy it for life: gloves
6. Selling unwanted stuff in winter
7. Next steps after student loans
8. Starting a local charity
9. Breaking junk food routine
10. Handling parents and debt
11. TurboTax security?
12. Splitting up a business
13. The basics of depreciation
14. Couponing questions
15. Dr. Bronner’s soap?

One of my little side gigs revolves around buying and re-selling vintage video games. I’ll keep my eye out in stores for vintage video games and I have a pretty long list of games and their approximate prices.

In November, I found several rather valuable vintage games in a thrift store for $5 a pop. I hadn’t taken the time to resell them until recently, but I turned $25 plus about $25 in shipping costs into just shy of $300.

The problem with things like this is that they’re pretty hard to build into a real business. It’s just a matter of stumbling upon really big market inefficiencies and knowing enough about them to exploit them. You can’t repeat that mechanically.

I do think it’s worthwhile for everyone to know the value of some things so that if they see something that’s woefully undervalued (on the order of 90% off), they can make themselves a little bit of money.

Q1: Paying ahead on student loans

I have been with my girlfriend for 5 years now. She is 26 makes, 60K per year and has no debt. I am 29 and make just over 60K per year (after my yearly bonus). My only debt is in the form of student loans, but they are just over 60K. We have about 17K in savings combined (this is separate from our own 401Ks).

Some of the loans are private and some are federal. The private loans vary in interest, but I paid off the highest one which was 9.25%. The next highest loan is 5.75%. The private loans are on a 15 year term while the federal loans are on a 25 year term. I am currently 3 years into both. Combined, the minimum payment is about $500 per month. I usually pay at least $300 per month on top of this (and sometimes up to $500 more). Obviously the more I pay to this the less I pay in the future due to interest and the shorter my repayment period becomes. This does, however, slow down my ability to save for a home. We want to buy property in a rural area in North Carolina where we can still have access to the city. At present my girlfriend and I both work remotely, but this of course may not be the case in the future. Each year that we continue to rent is money that is not being put into the home which also delays the duration of our mortgage. It seems that if I wait to pay off the loans first, it will be years before we get into a home.

What are your thoughts on this?
– Reggie

First of all, renting is not necessarily a bad thing. When you take out a mortgage, you’re going to be paying a significant amount of interest on that loan each month, and you’re going to be paying homeowners insurance and property taxes each year. None of that money offers any return to you. If you can rent for substantially less than the interest on a mortgage plus the homeowners insurance plus the property taxes, then you should strongly consider renting because it will leave you with more money to invest.

Having said that, this is really a matter of figuring out your goals. If you stop paying extra on your student loans and instead start saving for a down payment, you’re going to wind up in a home sooner, but you’re also going to be facing simultaneous mortgage payments, student loan payments, homeowners insurance, and property taxes. That’s a painful load. On the other hand, you can choose to delay the home for a few years and eliminate the student loans first, which will reduce your bills when you do own a house.

I can’t tell you what the right choice is here. Do you want a house sooner but a stronger pair of golden handcuffs? Or are you willing to be patient to have more breathing room and freedom? That’s really your choice.

Q2: Why does tax deferring matter?

Can you explain to me why tax deferring matters? Everyone makes a big deal about how deferring taxes by putting money into a 401(k) is such a great strategy, but I don’t get how it helps. I think that income taxes are just going to go up because they’re unsustainably low. Help me out here.
– Sam

When you put money into a 401(k), that money is directly reducing your taxable income this year. That means that the money you put aside would have been taxed at the highest tax rate. If you’re a single filer making $60,000 a year, that means you would have been taxed at a 25% rate on that money (using current tax rates).

When you retire, you’re theoretically going to be earning a lower rate of income. That single filer making $60,000 a year will see his income (between Social Security and his retirement savings) drop into the $40,000 or $30,000 range. At that point, when you take money out of your 401(k), most of it will only be taxed at 15% (at current rates) and the rest will be taxed at an even lower rate (5%).

The only way that ends up not being advantageous is if they jack up the tax rates on low-income citizens. That’s extremely unlikely to happen.

Q3: Investing in collectible cards

What are your thoughts about investing in collectible cards like Magic: the Gathering cards? I ask this because a few years ago I bought a collection from a friend of mine for $750 and over the last few months I have sold most of that collection in pieces for about $2,500 (mostly due to appreciation but also because I put in the footwork to split it up). Do you think this is a viable way to invest money?
– Louis

It depends on what you mean by “investing” in them. Do you mean finding big discounts by looking for inefficiencies (kind of like what I explained about video games at the start of this mailbag)? Or do you mean buying and holding individual cards because you anticipate them going up in value?

If it’s the former, I fully encourage you to do it. There’s nothing wrong with buying collections or finding other ways to acquire items far below market value then reselling them using eBay or other services.

If it’s the latter… I would be very careful about it. It all relies on the cards maintaining value over a long period of time, which may or may not happen. It assumes that people will keep playing the game and more players will continually join the game, which is what needs to happen to push up the value of cards. It also assumes that counterfeit cards won’t get good enough to start truly fooling people.

I don’t think collectibles are generally a good long-term buy-and-hold unless they’re vintage.

Q4: Camera and money advice

I’ve been doing a lot of freelance travel writing lately (and getting paid!) and realise that I need to get a decent camera to take better photos. My options:

1. Spend $150 on an SLR camera that will last a long time but that I won’t use more than half a dozen times a year.
2. Spend $1000 on a new smartphone (like the Sony Xperia Z3) that I’ll use more often because it will be a good replacement for my three-year-old smartphone that’s getting a bit slow lately.

Advice?
– Stephen

First of all, once you get beyond marketing claims, no phone camera matches up to a decent SLR. In fact, it’s not physically possible for them to do so. They can take good pictures, but not amazing ones. The Z3 you mention isn’t even close to the top of the pack, either.

However, I’m guessing that you are looking at a very low end SLR if you’ve got a $150 budget. I’m not entirely sure that the images from a truly low-end SLR would top the images coming out of a decent cameraphone.

I guess my suggestion to you would be to buy the smartphone with the best camera, and from what I can tell, it’s not the Xperia Z3. I’d shop around very carefully for the best camera above all else.

Q5: Buy it for life: gloves

Do you have any suggestions for gloves that will last a long time? It seems like I’m ripping the seams out of my gloves every winter (or else ripping a hole in them).
– Daniel

My first question would be to ask what you are doing with them. What activities are you taking on that is causing so much damage to your gloves?

I asked a few people I know who do a lot of outdoor work for the glove they’d recommend for lasting a long time and two of them suggested the Ringer Roughneck. They’re a bit pricy, but they come highly recommended for resisting punctures and not wearing out for a long while.

Another option is to just buy cheap gloves in bulk from a farm supply store. You can buy dozens of pairs of cheap gloves for the same price as one pair of really sturdy gloves and the bundle of cheap gloves will probably last longer.

I’d recommend either of those approaches over mid-range gloves that wear out annually on whatever tasks you’re doing.

Q6: Selling unwanted stuff in winter

My husband and I move regularly because of his job. We move into areas and live there for 2-3 years and have to move.

Before previous moves we would have a yard sale before moving to get rid of stuff so we’re not dealing with it when we move. However, we are going to be moving in March this time and we’re in a northern area where a yard sale really doesn’t work.

I could list all this stuff on Craigslist but dealing with lots of people stopping by for stuff that won’t sell for a lot anyway seems like a giant hassle. Is there another solution I’m not seeing?
– Shari

If you have lots and lots of stuff that you expect to have significant resale value and you just want to get rid of it all quickly, I don’t have a good solution. However, I will say that a careful re-evaluation of your shopping habits will probably save you more money than you’ll ever make from selling that stuff.

If you’re mostly trying to get rid of low-value stuff with a few better items sprinkled in, I’d donate the lower-value stuff and use Craigslist or eBay to sell off the higher-value items.

If you don’t have much stuff at all, I’d just cherry-pick anything that had specific value, sell it on eBay, and donate what little is left.

Q7: Next steps after student loans

My husband and I are looking at coming into an inheritance next year. The estate has informed us that the likely amount of the inheritance is much greater than we had been half-expecting – somewhere in the $250,000-350,000 range, depending on how things go settling the estate and selling off the house.

We’re generally frugal people – my husband is a great saver, and I’m a great budgeter. We spend within our means, are paying off our debts, don’t have cable, have only one very old paid-off vehicle, etc. We want to make sure this windfall is both appreciated and put to good use to honor the one passing it down to us.

This is way beyond what we were expecting, and frankly it’s a little mind-boggling to think about inheriting that much money. Obviously we don’t want to go crazy with it, or put it to stupid uses, but we can think of several things we might be able to do with the money. First of all, we’d like to pay off the last of our student loans (about $19,000) and the balance on a 0% home improvement loan (about $16,000), as well as hit the remaining credit card debt we have (about $8,000). We’ve been using YNAB and are making great progress on these debts on our own (should have them all knocked out by Jan 2016), but we’re looking forward to knocking them out of the running entirely in one fell swoop.

But the question is, where do we go from there?

We are expecting our first child, and anticipate having at least one more. We recently bought a house we love, deliberately chosen for location, neighborhood, and size – it’ll be big enough for us and two to three children, and we don’t anticipate moving ever again, frankly. We put down 20%, and are about a year into a 30 year mortgage (about $300,000; yes, we’re in a city with a pretty crazy housing market). It is perfectly livable, but will need some improvement work in the next 10 or so years, as most of what is in the house is original to its construction 40ish years ago (insulation, appliances, carpeting for the most part). Likewise, our single car will likely need replacing in the next year or so, as we have been saving for a newer, safer vehicle with the arrival of baby.

We both have retirement accounts with our employers, though my husband just started his this year and his is unmatched. Mine is 15% of my paycheck each month, plus employer matching, in an effort to make up for his late start. We have a solid emergency fund, and are almost living on next month’s paycheck according to YNAB’s goals. We spend within our means every month.

We’re wondering what your advice would be once we’ve paid off our student loans and consumer debt. Set up an education fund for our child(ren)? Pay off a significant portion of the mortgage? Invest in home improvements? Buffer our new-car fund a bit more? Dump it into retirement? Put the whole thing into investments and forget about it for ten years? Any advice would be welcome; we had simply not considered we’d gain this much money and are a little stunned by it.
– Jane

I would not start saving significant amounts for your child’s education until you have all of your debts paid off and you have your retirement savings on a very strong path. I would put both of those things as a higher priority than saving for future education.

If I were you, I’d pay off all of your non-mortgage debt. I would then fully fund a Roth IRA for both of you for the next few years (meaning you just sit on the money, then fund the Roth IRA each year). I’d make sure I had an incredibly healthy emergency fund. I’d top off the car replacement fund so that it takes care of your next couple replacements. Next, I’d take care of any glaring home improvements.

If you have all of that taken care of, then I’d contribute to my child’s college retirement savings.

Q8: Starting a local charity

My grandmother has a substantial amount of money in her will that she wants to set aside to start a local charity. She wants to be able to fund it for many years after she passes.

How do we go about doing this? I know the obvious answer is “talk to a lawyer,” but I want to have some idea of what needs to be done so that the lawyer doesn’t just make us jump through hoops in order to get a few more billable hours.
– Fran

This Forbes article on starting a charity is going to be a great place to start. Essentially, someone is going to have to actually start the charity and run it, as your grandmother’s funds are going to serve as the “fundraising” step in that recipe, at least at first.

So your first question should be “who’s going to run things?” Even if you end up hiring someone to run the day-to-day workings of the charity, you’re still going to need someone to oversee things.

My guess is that the lawyer will suggest forming a trust of some sort, which will require someone to manage the trust, which means that person will have some oversight regarding the charity.

Q9: Breaking junk food routine

We are trying to cut our spending and eat a little healthier in 2015 but we are finding it really hard to do so. The problem is that my husband is pretty committed to spending less unless it cuts into his foods. He gets pretty upset when I come home without many of the foods he likes and so after work he’ll go to the store and “supplement” my grocery buying with a bunch of junk food. He says it’s not worth it to cut back on the things that make life worthwhile. I don’t really think junk food makes life worthwhile. So naturally this turns into an argument.
– Mary

Whenever two people have big desires and goals that conflict with each other, you’re going to have conflict unless you sit down together and try to figure out ways to make it work.

My suggestion would be to meet in the middle. How much does your husband spend on what you consider “junk food” in a week? Find some amount that’s about half of that and make that your “junk food spending” allotment.

I will say that if he’s not wholly on board with a major dietary change and you suddenly went from cheeseburgers and fries to sprouts and quinoa, he’s probably not particularly thrilled about it. Some compromising on the meal plan is probably the best approach, where you mix some healthier meals and some “comfort food” meals together into your meal plan.

Q10: Handling parents and debt

My dad is 57 and I’m 28. He got divorced from my mom about 7 years ago and moved out on his own. My mom’s dad had a sizable estate so my dad walked away from a lot of money. He left with some sort of annuity but I’m not sure what else.

He’s employed but money is tight and he recently divulged that he has credit card debt across multiple cards. He doesn’t have any expensive habits – I imagine dining out would be his highest expense.

I’ve been proactive about my money situation since college reading blogs and books about it so I have a good amount of money saved up, pay off my credit cards, fund my retirement, etc. I have a lot currently sitting in my Ally account.

My dad’s the type to say “Ya, I should look in to that” but he never does. Over breakfast recently I offered to loan him money to pay off his debt so he can get out of the hole and stop paying unnecessary interest on the cards. I think he knew he should take it but pride led him to say no.

What would you do in my situation, Trent? Is there any way I can help him with this? I can’t imagine him fixing this situation until it gets worse and it’s more out of control.
– Kelly

For starters, I would never lend money to family. Lending money to family members is one of the surest ways to guarantee a big family rift that no one wants. You should avoid lending money to your father at all costs.

One big reason is that there is no guarantee that he won’t just fall right back into debt anyway. He has to want to change.

If I were in your situation, I’d find ways to subtly help your dad spend less money. Invite him to dinner and send him home with some leftovers prepared. Help him take care of tasks that might otherwise be expensive. Help him prepare a bunch of meals for his freezer so he doesn’t eat out as much.

You can’t change him, but you can make the damage from his financial problems have less impact on his life by doing things like this.

Q11: TurboTax security?

Any thoughts on the recent TurboTax security issue? Should we not be using this program?
– Jenna

Based on what I’ve read to this point, Intuit is not the cause of the security problems. The problem is that someone is either using their software or imitating their software to submit bogus tax returns.

To make sure it wasn’t their systems, TurboTax temporarily halted e-filing of state tax returns. Later, they returned to allowing e-filing for state returns.

So far, I haven’t seen an indication that TurboTax is insecure. I do suggest that people change their password and use a strong one, but that’s a good practice to follow anyway, no matter the account. Good password security is always a good idea, and that means changing your password regularly.

Q12: Splitting up a business

A few years ago, my ex-boyfriend and I started a lawn care business together. We invested equal amounts and put in equal time for two years building the business. After we broke up, he agreed to buy me out of the business, but we came to very different conclusions as to what the business was worth. He basically says that the business itself is worthless and that he only owes me for half of the equipment (I was paid for labor at the time of the work). I say that it has value because of the clients that have been built up. Who’s right? Do I need to get a lawyer involved?
– Amy

Customers absolutely have value. If you want to get a rough estimate as to how much value they have, you’d want to check out this article from Inc, which will help you come up with a pretty good estimate.

You will come up with a different value than your former business partner, but there’s no way that the clients you helped cultivate are valueless.

If he refuses to pay you some reasonable value for those clients, then you should contact a lawyer. This probably isn’t a giant claim, but it’s far more than nothing.

Q13: The basics of depreciation

Can you explain how depreciation affects the average Joe? I was reading about the expenses of operating a new car and depreciation was one of the costs. How is this a cost to me if it’s something that I never technically pay for?
– Charles

Think about the value difference between a new car and a used car. For example, my local Honda dealership will sell you a new Honda Civic for about $20,000. On the other hand, a ten year old Civic with good care will cost about $6,000.

So, let’s say you paid $20,000 for that new Civic, owned it for ten years and cared for it, and then you’re ready to sell it. You’re not going to get $20,000 out of it. You’re only going to get $6,000 out of it. That $14,000 is your depreciation.

In other words, you do pay for depreciation when it comes to things like cars. You buy a car for a certain amount and then when you sell it, you don’t get as much cash in return for it. It lost value while you owned it. That’s a real cost, and that’s why it’s usually included in calculations.

Q14: Couponing questions

Do you still coupon very much? Looking back, do you think it was worthwhile for you?
– Angela

I still use coupons, but with nowhere near the same fervor that I once did. However, it’s not so much because couponing isn’t effective – it can be – but because our shopping habits changed.

Today, most of our food is fresh stuff meant to match up well with a vegetable and fruit oriented diet. We buy very few prepackaged foods. Most of our toiletries and household supplies are bought at a warehouse club.

Those factors make coupons a lot less useful because they typically don’t save us enough to really make them worthwhile. I’ll still flip through coupon flyers if I see them and I’ll certainly search for coupons online (I often run through my grocery list in Google looking for manufacturer coupons), but I don’t plan anything around them.

On my last trip to the grocery store, I used four coupons and saved a total of $4 using them. I spent maybe five minutes finding those coupons.

Q15: Dr. Bronner’s soap?

Any thoughts on Dr. Bronner’s soap? I have a friend that swears by it but it seems pretty expensive.
– Geoff

For those unfamiliar with Dr. Bronner’s soap, it’s a fairly concentrated liquid castille soap made by a small company that prides itself on being as ethical as possible. Here’s a great article on Dr. Bronner’s to get you up to speed.

As for the soap, we’ve tried it and it works really well. It’s also not that overpriced, considering that it’s very concentrated – you can cut it 4 to 1 with water and it’ll still work incredibly well. It’s easy to get fooled by the soap because it’s not very viscous. It seems really watery and because of that, if you’re not careful with it, it’s easy to use far too much of it. A drop or two of the soap is plenty to wash a lot of dishes, and it also works well as a bath soap. Castille soap is really flexible.

You can make your own castille soap, too. It’s basically soap that uses olive oil as the “fat” ingredient in the soap making process. You can actually make a pretty good soap that’s fairly similar to Dr. Bronner’s in your kitchen using olive oil, sodium hydroxide, and water using these instructions. You’ll end up with a very good liquid soap that, by my math, is a little cheaper than Dr. Bronner’s but very similar.

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.

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