Questions About Produce, Small Businesses, Market Timing, 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. Saving for infant daughter
2. Produce is expensive!
3. Starting a small business
4. Market timing
5. Homemade dishwashing detergent
6. Brands becoming awful
7. Actual process of buying gold
8. Political perspectives
9. Move? Or not?
10. Excessive toys as gifts
11. Huge debt problems
12. Free time

Although I often point to “spend less than you earn” as the fundamental rule of personal finance, over the years I’ve found that another rule is almost as important in terms of financial stability and happiness.

Never mix friendships and money.

In other words, assume that if you enter into a financial arrangement with another person, it has a significant chance of ending poorly and leaving you without any kind of positive shared relationship with that person.

One of the most frequent themes I hear from readers is that they loaned money to a friend or that they launched a business with a friend, and when that business goes south or that loan goes unpaid for a while, they want their money back from their “friend.”

Guess what? You’re probably not getting that money back without legal action. Guess what else? You no longer trust that “friend” at all and your friendship is already really tainted, even in the best situation.

Don’t loan money to your friends. If you really want to help a friend, make that money that you give into a gift that never needs to be repaid. Don’t enter into a business arrangement with a friend, either, unless you have some very, very clear business plans and legal structures to keep you both safe from mistakes.

Q1: Saving for infant daughter

Our new daughter is 4 months old and I am interested in starting a small fund for her when she is older. I guess this would be a trust fund, but I associate that with really wealthy people. We aren’t that but we are financially stable. I was thinking of something like $500-1000 per year into an index fund or something, but didn’t know what the best vehicle for something like this may be. Any suggestions and insight would be appreciated!
– Dennis

Assuming that there is any intent of your daughter having any sort of educational expenses in her future – like college, for example – your best bet is to open up a 529 college savings account for her.

In most states, a 529 plan is run by the state and enables people who open such an account to use that account to invest in a variety of options, including stocks, bonds, real estate, and simply in cash, and when it comes time to use that money to pay for educational expenses, the money can be withdrawn tax free – even the gains.

Unless there’s something exceptional going on, it’s usually the best option for people looking to invest on behalf of an infant child. Each of my children have a 529 account.

Q2: Produce is expensive!

I love your articles but I gotta disagree with you on one thing. Fresh produce is really expensive. It is so much cheaper to just buy canned stuff or frozen stuff.
– Derek

The issue with fresh produce being expensive is that people have reached a point that they assume that whatever specific piece of produce they might want should be waiting at their grocer’s shelves whenever they want it. Yes, if you want a Roma tomato in the middle of February in Iowa, produce is going to be expensive.

That’s not how you save money on produce, though. You save money on produce by buying items that are in season. You hit farmers markets during the summer months. You watch your grocery flyer and see what’s on sale. Then, you use those items and figure out how to use them for something delicious.

Right now, for example, tomatoes are in season, and in my area, there’s an absolute bumper crop of tomatoes arriving right now. Vines everywhere are loaded with luscious red fruits and thus you can pick up tons of them at the local grocery store or the local farmers market for very cheap.

They won’t be cheap in February, but in February, I’ll be eating canned or frozen tomatoes.

Q3: Starting a small business

If I wanted to start an LLC out of my house (owner/operator landscaping business for now), would it be acceptable to use a PO Box instead of my home address?
– Larry

Generally, you’re not allowed to use a post office box as your business address on your LLC application. At the same time, you’re also going to want to keep your business and personal activities as separate as possible, so you probably don’t want to use your home address.

There are several options here. One is to use the mailing services of a UPS Store. If you buy their mailing services, you can list their address followed by a “Suite” number. So, if they give you number 222, you can have your address be “123 Buena Vista Boulevard, Suite 222” (assuming the UPS Store is at 123 Buena Vista Boulevard).

Another is to simply designate a registered agent to receive your mail for you, allowing you to use their address. LegalZoom, for example, offers a registered agent service, and some lawyers in your area will do so as well.

Q4: Market timing

I recently read Benjamin Graham’s investing classic The Intelligent Investor along with your chapter-by-chapter analysis (which was great by the way). Generally Graham’s advise about buying in a low market and selling or holding in high market seems to make a lot of sense even though it goes against what most investors are doing on Wall Street. I’m 40 years old and a somewhat aggressive investor in that over 40% of my retirement accounts are invested in large US equity and index funds, 40% in mid and small caps, and 20% in international equity funds. In the 2008 bear market I held all of my funds as is and they eventually recovered a few years later, but I’d like to be more proactive this time around. Given that all of my funds are high risk/high return and we have been in a bull market for several years now (the market is at an all time high), it seems like now is the time to reallocate about 25% of my investments into a low risk bond fund. This way when the market drops again I’ll have some money set aside to buy equity funds “on sale”. I know that it’s impossible to time the market, but my gut tells me that this is what I should do. I am a big advocate of dollar cost averaging, but I’m also considering allocating about 50% of my future investment contributions to bonds as well, at least until the market drops. Does this sound reasonable? How did your investment behavior change after reading this book?
– Emily

My investment behavior actually didn’t change much after reading the book. I still don’t think that any sort of market timing is realistic. I just tend to buy efficient investments and hold them until I actually need the money, and if I need to “rebalance” in some way, I do that by changing my contributions until things are “balanced.”

I will say that one of the challenges of reading Graham’s book is that he doesn’t really consider tax-advantaged accounts, as they didn’t exist when the book was written. For him, moving funds from one investment to another immediately incurred taxes, while moving money in a retirement fund doesn’t have that problem.

If I were in your shoes, I’d just change my contributions. Switching your contributions to mostly bonds means that over time, your portfolio will become more conservative. If you feel that you’re too exposed to stocks right now, the solution isn’t to pull everything out of stocks. It’s to contribute more to bonds and other more conservative things to balance it out.

Q5: Homemade dishwashing detergent

What recipe are you now using for homemade automatic dishwasher soap? I was price-shopping the ingredients and not sure that homemade is worth the cost. My Borax costs between $3.79 or $4.79 depending on the store and the washing soda costs $3.79.
– Michelle

The prices for those ingredients aren’t that high around here, but if those are the prices you’re working with, I’d be wary about using it, too.

On Amazon, for comparison’s sake, you can get borax for $0.14 per ounce and washing soda for $0.16 per ounce. This HouseLogic article suggests a mix of washing soda, borax, and (believe it or not) lemonade Kool-Aid mix and salt. This is the recipe we’ve used most frequently.

According to my math – with borax weighing about 9 ounces per cup and washing soda weighing about 6 ounces per cup – those ingredients add up to $1.42 for a cup of each. The lemonade would cost $1.87 and the salt costs about $0.09, bringing the total cost of ingredients for that recipe up to $3.32 for 42 loads, or $0.08 per load if you order everything off of Amazon.

My preferred dishwashing detergent is Finish, which costs $0.15 per tab off of Amazon, so making a homemade mix saves you $0.07 per load. Since you really only need to make a batch every 42 loads and it takes only a minute or so, you’re saving $2.94 over the course of that homemade batch using Amazon prices.

Around here, the local grocery stores have pretty good prices on washing soda and borax – definitely comparable to Amazon in the worst case, but it’s usually cheaper.

Q6: Brands becoming awful

How do you know if a brand you have used and trusted has suddenly become awful? Two examples: Cascade dishwashing detergent used to be great but became awful in about 2006 and I stopped using it, and the last batch of Craftsman tools I bought were cheap junk. How do you check for this stuff?
– Daniel

If the item is inexpensive – like the Cascade – I don’t get too bothered by one purchase being problematic. I just take note of it and start avoiding that brand in the future. I think, in the case of Cascade, that was the point that they removed phosphates from their detergent for environmental reasons.

If the item is more expensive – like the tools – I do research each time. I’ve reached a point where, whenever I make a major purchase, I research the purchase before pulling the trigger and tend to buy a “buy it for life” item if I’m replacing something that I’ve used before, like my fairly recent purchase of a Best American Duffel to replace my duffel bag. So, if I were replacing tools, I’d do some homework and figure out which kinds were of the “buy it for life” nature.

Yes, sometimes good brands go downhill. That’s just part of the equation when you’re buying products from giant profit-driven companies.

Q7: Actual process of buying gold

I have been talking with my husband about buying some gold and/or silver. A couple of the other finance blogs I read have done highlights on gold. My motivation is not so much the ‘investment’ aspect of it, as it is the ‘prepared for the worst’ element. I know where I would buy, and I understand that you buy it by the troy ounce. What I am uncertain about is how much would be a reasonable amount. I have been thinking $1-2 thousand. Maybe splitting that between gold and silver. But if that IS a reasonable amount (I do appreciate that this is a very subjective question … we are a solidly middle-class family of 4 on a single income with about a 3 month stocked emergency fund and no debt or mortgage … it that helps) and I went in to the coin store (we found the one nearest us through the approved list provided by the US Mint http://catalog.usmint.gov/bullion-dealer-locator), do I ask to buy gold based on the weight we can afford with our budgeted amount (based on the daily prices we find on the internet), or do we go in and just say “we would like to by 1-2 thousand dollars worth of gold bullion please?”
– Margaret

My honest recommendation is to buy gold coins. Gold coins are minted in one ounce weight and clearly marked as such. Most coin dealers deal in such gold coins and can provide you with good advice. Such coins are fairly liquid – you can usually find a buyer for them easily, through a coin dealer if nothing else.

What will happen here is that you’ll likely pay a little bit more than the current price of an ounce of gold when you buy a one ounce gold coin, and you’ll get just a little under the current price of an ounce of gold when you sell a one ounce gold coin. That’s effectively the broker’s fee for doing so.

I don’t see any problem with owning a gold coin or two. Keep them in your safe deposit box at your bank and just sit on them until you have some real-world reason to sell the coins.

Q8: Political perspectives

Does your personal finance impact how you vote and what candidates you support? As you have been able to turn your finances around and put yourself on the path to financial independence, has that changed your political perspectives?
– Shawn

My changing personal finance state hasn’t really changed my political views much at all. My political perspectives over the last decade have been shaped much more by other things.

For starters, becoming a parent has altered my political views. What kind of world do I want for my children? What will be the best world for them in, say, twenty or twenty five years?

I’ve had many opportunities to be exposed to the realities of poverty in my community and my state, and that’s had a huge impact on my political viewpoints.

I guess that simply having more life experiences has had an impact on me, of which my finances are a part, but a relatively small one.

Q9: Move? Or not?

I’m 31 years old and recently remarried. together we make right at 70k a year. He moved in to my house that i’ve lived in since 2008. Purchase price $76,000 current loan $62,000.
There are several issues with the house, kitchen needs to be redone due to a pipe that burst in the wall during a lightning storm. foundation had issues when I moved in, repaired it, but have yet to redo the drywall which has cracked and looks awful in quite a few places. The school district isn’t great… on and on…

So the question is. Should we fix up our house to sell, or should we fix up to stay? To buy a slightly larger home in our current area (one that will have more space for our now teenage kiddos) the cost would be around $150k. I hate the idea of taking out such a large mortgage, I just wonder if our current home won’t continue to be a money pit.
– Lisa

I am generally in favor of “sticking with it and fixing it up,” unless there is an additional reason to move such as a career change or a major change in family dynamics (additional children or children leaving the nest or divorce) or a long-planned home upgrade that you’ve been saving for. (The exception to that is downsizing to save money, which isn’t really on the table here.)

Outside of those situations, a home upgrade usually ends up not being “worth it,” because you’re not gaining anything life-changing through the move. This move would not gain significant employment opportunities. It would not foster a major change in your family dynamics. It’s not something you’ve planned for for a long time or else you wouldn’t be worried about the mortgage.

Stick with it. Fix it up. Add some value to the home. That way, when you do finally sell it, you’ll make money on the deal.

Q10: Excessive toys as gifts

I am the only one of my six sisters to have any children. My husband and I have a four year old boy and a nine month old girl. My sisters do not plan to have any children, but they absolutely dote on my children. I think they all want to be the “cool aunt” to my children and they kind of compete in a way over it.

One of the results of that is a flood of toys. Every time any one of them visits, they bring a toy for my son and now a stuffed animal for my daughter. Birthdays and Christmas have been over the top. Last Christmas, it seemed to turn into an actual competition between them as my son was into Thomas the Tank Engine. We got him a wooden railway set and between my sisters he now has a huge tub full of trains and tracks.

I’m not sure how to tell them to “tone it down” a little. Suggestions?
– Natalie

If I were you, I wouldn’t tell them to tone it down. I’d let them do things as they want to do them. Instead, what I would do is spend your time and effort doing two things.

First, I would focus on grounding your children well in reality. They should not expect toys. They should not ask for them. They shouldn’t think they will always be handed lots of stuff. These things are truly special treats because their aunts love them, but they won’t always be able to do this.

Second, I would carefully curate their toy collection. You should frequently remove toys that aren’t actively played with to the garage in tubs, and if they’re not remembered, donate them to Goodwill or put them on Craigslist. No one says you have to keep all of these toys.

This isn’t worth causing a conflict with your sisters. Let them enjoy being aunts and let your children enjoy having aunts that care about them.

Q11: Huge debt problems

My husband had a terrible financial situation before I met him. He attended an expensive school after doing 2 years in the Army. He used every dollar of the student loans that he was offered during school. After school he got a severely underpaid job for a few years and didn’t pay his student loans back. As a result, a $50,000 loan bill has had capitalized interest that ballooned the amount owed to $101K. And this has an 8.25% interest rate on that!! Every time he makes an extra payment to it, it goes to interest, not principle. I believe that he did consolidate this a few years ago, and it now is held by Mohela. He has a subsidized and unsubsidized loan with them. When it’s all said and done, he’ll end up paying almost $200K for this stupid loan and won’t be done paying for it until 2034 when he is 63 years old!! Right now we don’t have a ton of expendable income to throw at it because we have 15-month-old twins in fulltime daycare, two full time jobs that pay well, a home and two cars. He does work for a nonprofit and could potentially do the Income Based Repayment and the Public Loan Forgiveness, but from what I can tell, that isn’t going to save us any money at all. Any thoughts in the Reader Mailbag would be appreciated–do you think we can do anything at all to help lower this debt?
– Tina

To me, it does look like the Public Service Loan Forgiveness program would save you some money. If he can make payments on his public loan for ten years, they’ll forgive the rest if he works for a qualifying nonprofit. That’s a big help.

The advantage of income-based repayment is that it ensures that monthly payments won’t become unbearable. You’re correct that it doesn’t help with the overall balance too much, but it does ensure that you won’t drown on a month-by-month basis.

Those programs are worthwhile, and they’re about the best help you’ve got, unfortunately. Student loans hang around your neck like an albatross. There is no secret magic trick to getting rid of them outside of simply paying them off.

Q12: Free time

Last September, I got my first “real job” and moved out of my parents home. I live in a one bedroom apartment and put in my hours at work (contractually mandated to be limited to 45 a week). Other than that… what do I do with my time?

It seems to me that most stuff for people my age involves spending money like going to bars, going out to clubs, going on trips, buying alcohol, etc.

I’m trying to find ways to spend my time and have fun without spending money but I am stuck. I have tried some of your ideas for trying “free” things but they all seem boring.
– Tanner

The problem is that you’ve already decided what’s “fun” and what isn’t “fun” and the “fun” things involve spending money. In your question, you list things you consider fun – going to bars, going out to clubs, going on trips, buying alcohol – all of which cost money. Then, in the next sentence, you say that things that don’t involve spending money aren’t fun.

The challenge is continually trying new things until you find things that are enjoyable for you and don’t involve spending a lot of money. That takes time. For every activity that I enjoy, I’ve tried many that didn’t excite me very much, and doing that took a lot of time.

Two things you should always keep in mind: one, time spent trying a new activity is never wasted time because in the worst case you’re learning more about what you like and don’t like, and two, there are always more things to try. The idea of being “bored” is simply a lack of imagination.

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.