Questions About HELOCs, Gift Planning, Pocket Notebooks, Basic Income, 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. Money conversations before engagement
2. HELOCs and taxes
3. IRAs that accept rollovers
4. Gift advice (for next year)
5. Forever stamps
6. Long lasting headphones for exercise
7. Scared to spend
8. Buying glasses online
9. Praying for financial success
10. Thoughts on basic income
11. Best sturdy pocket notebook?
12. Running for office?

Like many Americans, the turn of the calendar year brings with it resolutions and plans. There’s simply something about a fresh, empty calendar that fills people with possibility for a better future.

For me, the biggest commitment I have for 2018 centers around fitness and exercise. My flexibility is poor and I’m unhappy with my cardio – I get out of breath easier than I’d like. I want to be able to play soccer with my kids as they grow older and not just in relatively short bursts.

Another big commitment I have for 2018 is a commitment to more meaningful reading with a focus on nonfiction and personal development. I hope that some of these books have a direct positive impact on my writing here at The Simple Dollar.

A final initiative that I have planned for 2018 is to improve my daily routines, particularly in the morning. I find that when I stick with a daily routine, almost everything moves more efficiently and I allowed my daily routines to fall apart in 2017 for a number of reasons. That will change this year.

How am I doing these things? I’m basically relying on my handy to-do list. I have items related to each of these areas that I’ve added as recurring tasks to my to-do list so that I think about and do them each day. In fact, I’m actually trying a new method for many of the changes… which I’ll talk about in a post later this week.

Q1: Money conversations before engagement

I am a 37 year old scientist. My boyfriend is a 36 year old nurse. We’ve dated for year and just learned our finances are quite different. He has about 12,000 in a retirement account and 4,000 in a savings account. He was a professional athlete and engineer and went back to school to be a nurse. He has 85,000 in debt and is considering grad school to earn a masters degree in nursing. I’m worried about his financial situation. I’ve saved more for retirement, I have savings in investments. What are your thoughts? Marriage material? Important discussions to have?
– Dana

I wouldn’t be as concerned about his debt load as I would be about his actual daily practices. Does he live a lean, frugal life? Does he live in a simple apartment? Does he spend a lot less than he earns? If that’s how he lives his day to day life, I wouldn’t be worried about the debt. The truth is that a significant pile of debt is part of the startup cost of many career paths today.

What would concern me is if he’s not just racking up student loan debt but consumer debt, too. Does he have an expensive apartment? Expensive tastes in things? Does he simply spend too much money?

For me, daily spending habits are far more of an indicator of someone’s long term financial health than any amount of debt they’ve accumulated over the years. They can be fixed, but it requires a lot of internal commitment from the spender. Ideally, they already have good spending practices in place.

Q2: HELOCs and taxes

I have a question about HELOCs. Will they still be tax deductible?
– Maxwell

You’re fine for 2017 taxes, but 2018 taxes, under the new tax bill, won’t allow HELOC interest to be tax deductible. That’s a pretty painful change.

Prior to that change, HELOCs used to be a pretty effective way to borrow money at a low interest rate and have that money be tax deductible. The only risk, of course, is the use of your home as collateral.

Now, with this change, the tax deductibility is gone, which means that the tax benefits of a HELOC vanish as well. It just becomes a lower-interest credit card with your home as collateral, which isn’t nearly as good of a deal.

Of course, things change in Washington. This may be patched up in future revisions to tax law.

Q3: IRAs that accept rollovers

I have had an IRA with chase but they no longer accept rollover from a 401k. I am looking for a plan that I can pick the riskiness I’m looking for and my account will stay within stocks that match or I am given options to match the riskiness I am looking for. I don’t plan on trading much.
– Lindsay

I looked around at my two preferred investment houses, Vanguard and Fidelity. Both seem to offer this service.

Here’s a link to Vanguard’s 401(k) rollover policy and here’s a link to Fidelity’s rollover policy.

I recommend both of those investment firms. Both have done right by me in the past and I agree strongly with their individual investment philosophies. If you have a decent amount to invest ($3,000 or more) and are committed to an index fund based investment philosophy, I’d point to Vanguard; otherwise, Fidelity is a great choice.

Q4: Gift advice (for next year)

Those considering giving gifts at holiday time should proceed if they know the tastes of their receiver well, and if they are prepared to think hard about what to get. Otherwise, it’s best to go with cash (or perhaps gift cards, which are less efficient than cash but which may be more acceptably gift-like).

http://www.economist.com/flaws-economists-grinchy-approach
– Jim

Cash and gift cards are solid gifts if you don’t know the recipient well but are actually interested in the recipient having the best outcome from the gift.

However, if you do know someone well, cash can feel pretty impersonal. It can give the impression that you just tossed some cash in an envelope at the last minute because you didn’t bother to put any thought into the gift. I think a gift card that’s carefully considered and centered around that person’s personal tastes is actually a better gift idea, as it opens the window to them buying something they’ll actually like while still indicating thought and care.

My solution is that I often pair gift cards with a thoughtful gift. One thing I love to do for someone who is a avid reader, for example, is that I’ll pair a book with a small gift card to a local independent bookstore. I’ll pick out a book I think they’ll like, buy a small gift card to fill out my budget for them, and slip that card inside the cover. That way, the gift is thoughtful – I thought about their interests and considered a book that I thought they’d like – and also flexible – the gift card lets them get what they want.

Q5: Forever stamps

The price of Forever Stamps are going to increase a penny to $0.50 on January 21, 2018. While this isn’t a huge increase, it still makes sense to buy stamps now vs. having to buy in, say, February. Also, something that a lot of people don’t know is that the USPS has been legally limited to only raising stamp prices to match inflation: they had to get special permission to increase rates higher than inflation. HOWEVER, the USPS has recently gotten permission to raise stamp prices inflation + 2%. While the upcoming rate increase is already set, I anticipate future increases will often be inflation + 2% (as it is, the USPS would like to have no restrictions on raising stamp prices).
– Jeff

Historically, even without such federal restrictions, the postal service hasn’t really beaten inflation for stamp price adjustments. In fact, over the history of the service, the price of a stamp has tracked carefully with inflation.

My feeling is that if they ever go away from that by too much, another service will jump in and replace them. If there is profitability in mail delivery, then UPS or FedEx will start offering the service. They’re primed to do so.

In other words, I think the threat of competition will keep stamp prices from going too much above inflation.

Having said that, buying a “forever stamp” just before the price goes up is an “investment” that beats inflation, at least by a little. If you use stamps regularly, stocking up this week is probably a smart idea.

Q6: Long lasting headphones for exercise

I want to buy some long lasting headphones for exercising. I do NOT want earbuds! I want headphones outside of the ear. The last set I bought was a Sony MDR 7506 which still works great but the ear pads seem to melt in sweat and they were gone after about a month.
– Richard

My honest recommendation is to get a pair of
Amazon Basics headphones
. They’re really inexpensive and have surprisingly good sound quality for what you pay – far above what I expected for just a few bucks.

The thing is, if you use these for exercise and they disintegrate over the course of several months or a year, then it’s not that big of a deal. You got nice value out of those headphones.

I would absolutely avoid ear pads that aren’t protected in some fashion when exercising unless they’re attached to very inexpensive headphones. You want either hard plastic or something that’s protected against sweat. Sweat is salty and moderately acidic, which is just destructive over time to the kind of foam that you find in headphones.

Q7: Scared to spend

At the start of 2017 I made a big commitment to curb my spending and turn my financial life around and I did it! I paid off about $13,000 in student loans and wiped out my credit card debt and built up a $2,000 emergency fund. Way better shape a year later!

The problem is that now I’m almost scared to spend. When it came time to buy holiday gifts, I felt really anxious about buying things for my nieces and nephews (I am single and childless but I adore them). I don’t want to be an old spinster aunt who gives weird cheap gifts. I want to give them meaningful stuff they will like. But the thought of spending all that money put a knot in my gut.

Do you have advice for this? How do you get over feeling really guilty about spending money on nonessentials that are still really important to you?
– Angelica

If I were you, I’d step back and look at your annual budget for gift giving. What do you spend on birthdays and on Christmas/Hanukkah/winter holiday, ideally? Who all do you buy gifts for, and how much do you intend to spend on those gifts?

When you figure out that total, start putting aside a few dollars a week so that you match that annual total after a year.

Let’s say, for example, that the only people you buy gifts for are your eight nieces and nephews.

If you want to buy a birthday gift and then a holiday gift for one of them and want to spend $25 on each gift, then that adds up to $50 over the course of a year. If you put aside $1 a week, then you’re covering that gift.

If you have eight such kids, then put aside $8 a week and the gift is covered.

Think of it entirely in terms of the $8 you’re putting aside each week, not the $200 you would actually spend during the holiday season buying $25 gifts for each of them. Once you put aside that $8, it’s gone. It’s invested toward those gifts. Actually “spending” that money during November or December is just the culminating act of that gradual process.

Q8: Buying glasses online

My mother in law gave me a “new pair of glasses” for Christmas. Literally, it was an envelope that had it on the inside. She is going to pay for an optometrist visit to get a good prescription and then pay for a pair online.

I have never done this before and am very apprehensive about buying them online. I’m a bit price conscious but my MIL is well off and is pretty serious about me not worrying about it. Mostly worried about them actually working.
– Stephen

The first thing I would do in your situation is sit down and talk to my mother-in-law about those concerns. Tell her that you’re concerned that you’ll end up with glasses that won’t work.

I’m almost 100% sure that she’ll say that she’ll help out until you get glasses that really work for you, even if that involves returning a pair and incurring a few extra fees along the way.

This is especially true if you involve her in each step of the process along the way. Be very open and clear about the steps you’re taking to get those new glasses. Let her know when you’re going to the optometrist. You might even want to actually order the glasses when she’s around – just take your laptop there along with your prescription.

If you want some help, Consumer Reports offers a great guide to buying glasses online.

Q9: Praying for financial success

Do you think praying for money success works?
– Anna

In my experience, prayer helps with the internal world, not with the external world. Prayer helps you find internal resolve and strength, but doesn’t cause significant change in the outer world. That outer world change occurs as a result of your stronger internal resolve and strength.

Rather than praying for money to rain from the sky, pray to improve yourself in the ways needed to improve your financial state. Pray for strength and wisdom. Pray for focus.

I often think of the words of the well-known Serenity Prayer, a beautiful short prayer written by theologian Reinhold Niebuhr:

God, grant me the serenity to accept the things I cannot change,
Courage to change the things I can,
And wisdom to know the difference.

In my eyes, that’s a powerful prayer, one that’s likely to bring about the kinds of change that the person desires.

You can’t change the world if you can’t change yourself.

Q10: Thoughts on basic income

In December, my book club read Basic Income: A Radical Proposal for a Free Society and a Sane Economy. We try to read books on controversial ideas and discuss them and this one was a doozy.

Have you read the book? Do you have any thoughts on basic income?
– Ash

I haven’t read the book, but it is actually on my 2018 “to be read” list. However, I am familiar with the idea of a basic income and have read several articles on it.

Wikipedia summarizes basic income as follows: “A basic income is typically a form of social security or welfare regime, in which all citizens (or permanent residents) of a country receive a regular, liveable and unconditional sum of money, from the government. The payments are thus without strings attached, i.e. no work requirements or requirements to look for work, and also independent of any other income.”

The idea of basic income is to solve widespread unemployment problems and enable people to not starve if they’re facing a career downturn or taking a career risk. It also cuts down on the administrative costs of welfare programs because there’s no need to “check up” on people as everyone receives the payment.

The main concern, obviously, is that people simply will choose not to work if they have basic income. I don’t think that’s true, for a few reasons.

One, a sensible basic income would be low enough to cover just the most basic needs for a person – staple foods and a tiny shared living space. It shouldn’t provide enough for any kind of affluence, just enough to avoid starving.

The big factor, however, is that it eliminates the welfare disincentive to work. The biggest problem with the current welfare system is that benefits disappear at a certain income level, so if your income is close to that level, you are actually disincentivized to work. If you work harder to earn more money, you lose benefits and end up gaining nothing – or actually losing ground financially – by working more.

A basic income eliminates that trap. It doesn’t matter what you make – you won’t lose that basic income. So, if you want more money, you go to work. You don’t have to worry about whether or not you’ll break through some “limit” and lose your benefits. You work, you have more money.

I actually doubt that very few people will just be “lazy” with basic income. Rather, I think it’ll greatly help low income people, far more than the current system does, and it gives a small safety net to everyone.

Furthermore, during periods of high unemployment, a basic income will help keep people from being disruptive to society. There will be no bread strikes or anything like that. There will be no bonus army. People won’t starve. Instead, they’ll figure out what’s next for them.

AI and robotics are on the verge of seriously disrupting a lot of industries and drastically changing employment options. It’s going to happen quickly in the coming years, when industries like the trucking industry and the taxi industry and the train industry melt away rapidly due to self-driving vehicles, for example. Letting those people starve while they struggle to figure out what’s next is a horrible idea for society.

On the whole, I am in favor of basic income. It will undoubtedly be costly, but the benefits for everyone up and down the economic ladder are tremendous. I look forward to reading more about it.

Q11: Best sturdy pocket notebook?

I have read that you carry a pocket notebook around with you all the time. What do you use? I tried using a Mead notebook but they fall apart within a few days.
– Jerry

I used the Mead ones a long time ago, too. They’re just not worth it. They fall apart and get ruined so easily that you end up using just a few pages of each one – at least, that’s my experience. Plus, the spiral would bend, making it hard to flip through pages, and the ends of the wire would often snag on my clothing.

A better option: Field Notes are great, and they’re my preferred pocket notebook. They seem expensive but if you actually fill one up you’ve gotten your money’s worth out of it.

If you find that you’re often in situations where the notebook would get wet, I would check out Rite in the Rain pocket notebooks. They’re very water resistant – the pages are made out of some form of plastic that can be written on.

Q12: Running for office?

Have you ever considered running for office?
– Andrew

No, at least not beyond the local level. I have zero interest in running for a statewide or nationwide office, ever. I don’t want to deal with what it would do to my family, more than anything. My kids and my wife don’t deserve the attacks that seem to hit family members of candidates. Even in our congressional races, I have seen some ridiculously nasty attacks leveled at the spouses and children of people running for those offices.

If I were single, I’d consider it, but there’s another big issue: I think of myself as a moderate, and moderates don’t seem to last long in today’s political climate. I don’t fully agree with the platform of either major party – in fact, I’m not really close to either one of them.

I think I’ll just stick to local things. I’ve been on a few local boards and may wind up on a city council at some point. That’s enough for me. I like seeing positive change on the local level.

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.