Questions About Refinancing, Photo Printing, Camping, Light Bulbs, 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. Paying off house early
2. Difficult refinance
3. Am I financially independent?
4. Preparing for a layoff
5. Applying for a joint loan
6. First lien position HELOC question
7. Saving on home photo printing
8. Light bulbs and rentals
9. Structure in retirement
10. Unrealistic stories
11. Camping on the cheap
12. Confusing Meetup experience

Over the summer, I am going to be doing a series of posts discussing the book The Wisdom of Frugality by Emrys Westacott. I intended originally to just review this book with a single review, but I found so many things I wished to talk about that I decided to make it into a series, one that will spread across several Saturday posts this summer.

This series won’t start for at least a few weeks, but I’m telling people about it now because I know some people like to read along with series like this that I’ve done in the past, or they like to finish the book first. You won’t need to have read the book to get value out of the articles, but having read the book will enable you to contrast what you got out of the book versus what I got out of the book.

Basically, the book covers the philosophy behind frugality and simple living from several different angles, looking at how it impacts lives and the world through the lens of various philosophical and religious traditions. It’s a wonderful book with a lot to talk about. (The Simple Dollar is briefly mentioned, which was a pleasant surprise.)

On with the questions for this week!

Q1: Paying off house early

I just read that you paid your mortgage in 4.5 years. Were you investing during that time or throwing everything at the house?
– Jim

During that period, we were contributing to our retirement accounts up to the point of receiving a full match from our employers, but aside from that, we were throwing everything else we could at our mortgage, making triple payments many months (and often more than that).

The reasoning was simple. We viewed every extra payment as an investment that paid a guaranteed 5% annual tax-free return (because 5% was our mortgage interest at the time). We weren’t going to beat that kind of return anywhere – we might beat it over a long period of time, or in years where we were lucky with the stock market, but not as a guaranteed year-in-and-year-out return with no taxes associated with it.

We paid the mortgage down and we did it hard and fast.

Q2: Difficult refinance

My wife has health problems that forced her to stop working. We have about $40,000 in credit card debt. I also have about $70,000 in student loans that is in an income based repayment plan to dramatically reduce the monthly payment. I have slashed every bill I can by calling all of our credit cards to get rates reduced and cut cable, cut out alcohol and even downsized to one car for our family of four. I also already borrowed $15,000 from my retirement plan and paid off credit card debt with most of that money. The rest was used to stay afloat and pay monthly bills. I am working a second job and trying to start a business to increase my income. My specific question is…we also have about $40,000 in equity in our home if we were to borrow up to 80-85% LTV. I have tried taking out a HELOC to consolidate credit card debt and reduce interest. One bank told me it looks like it might not work due to our debt to income ratios. Another bank told me they could offer a cash out refinance but not a HELOC. I’m concerned about the closing costs with a refinance and getting a higher rate as our current mortgage loan is at 3.75%. Also a little worried about shopping around and getting too many inquiries on my credit. Could you please help me with the pros and cons of a cash out refi vs. a HELOC, or offer any other advice or suggestions for our situation?
– Adam

You’ve basically laid out the big differences that are relevant to your situation. A cash-out refinance is just that – you refinance your home with a larger mortgage than what you currently owe and put the difference in your pocket, which you’d probably use to kill some of that credit card debt. A HELOC lets you take out cash as needed. I do understand, with your debt situation and your wife’s inability to work, why a bank would be hesitant to loan money to you. If you do go for the cash-out refi, put every dime of it toward those credit cards, starting with the highest interest ones.

If I were you, I would basically burn all of your credit cards and avoid getting into any more debt. If you think you “need” them to “get by,” then you’re living a lifestyle that’s above and beyond what you can afford with your current income. Something has to give here.

As an aside, if your wife’s health problems are permanent ones, you may want to consider downsizing your home to something more affordable. If you sell your home and move to something with more affordable payments, you may be able to make things work more efficiently.

Q3: Am I financially independent?

I have an inquiry as to your opinion on whether or not I would be considered financially independent, yet. I am a 40 year old disabled military officer retiree (Iraq/Afghanistan Wars veteran), and I receive a substantial military pension and a bit of Social Security for life as my injuries are permanent and total. All my current living expenses-minus my debt payments, are covered by my pension. My debt payments (which will be paid off in the next year) are all covered by my Social Security payment (Even if SS is cut by 20%). If social security is passive income like my pension, and I can comfortably live off both without active work for life- am I already considered FI. Or just when debt is gone and I don’t need Social Security’s supplementation?
– Annabelle

You’re as financially independent as anyone can be who isn’t wealthy enough to make themselves financially independent from the American government.

The thing to remember is that there are always degrees of financial independence. While you are free from the need to work, you aren’t free of the government; your independence relies on the continued healthy operation of the government and their continuation of the programs that support you. You have to be quite wealthy to become independent of that.

I think you’re in quite good shape, though.

Q4: Preparing for a layoff

A dear friend is facing a possible layoff and he is torn up what to do. He has more than two years salary saved as a emergency fund plus retirement funds of about $400,000, but he is in his late fifties and is worried he will never have a good job again ($80k is good to him) In fact, he has twice as much saved as his 30 year mortgage balance which has 29 years left on it. The mortgage balance is $250,000 at 3.5% and the payments are around $1600 a month with taxes and insurance . He keeps asking me should he pay off the mortgage debt he has with part of his retirement and emergency funds and take whatever junk job he can find? My advise has been to tell him to sit tight, look hard for the next job , make his payments and look where life takes him 1,2, or three years from now. How do you all see it?
– Edward

I think your advice is spot-on. He should sit tight, make his payments, firm up his resume, and start softly looking for his next job. I’d encourage him to really use his professional network in this job search – who does he know in his field that might help him find work elsewhere?

Also, if his workplace offers any sort of retirement savings, especially if there’s matching of contributions, he should start doing that immediately. He needs to be collecting every drop of employer matching if it’s available.

He should NOT quit this perfectly good job right now just to take “whatever junk job he can find.” Be patient. It’s far better to keep making $80K a year for now and then be as ready as possible to leap to a new job in a year or two when he’s very ready for it and when the layoff might actually happen.

Q5: Applying for a joint loan

Can we apply for a loan using joint income?
– Fred

Yes. You can apply for most secured loans (like a car loan or a mortgage, where the bank can repossess something if you fail to pay) jointly and many personal unsecured loans jointly. The bank will take into account your combined income, as well as both of your credit histories, when deciding whether to do a loan.

Be aware that, while most joint loans end up helping you secure a better loan, it can be problematic if one of the people has really bad credit. That can actually hurt your interest rate, though you’ll probably still be offered the loan you want.

Good luck!

Q6: First lien position HELOC question

Does it make sense to get a first lien position HELOC on your home, put your whole paycheck toward it, and then borrow back from that to live on?
– Erica

This question was asked by multiple readers, which makes me think that some major radio show or mainstream website must have been talking about this type of program within the last week.

In short, no, I would never do this. Unless that home equity line of credit comes with a fixed interest rate, I wouldn’t touch this plan with a ten foot pole. There is no way on earth I would ever put my entire home mortgage on an adjustable interest rate loan. If loan rates go up, you are in bad shape very quickly.

If you can find a home equity line of credit that offers a fixed rate – and by fixed, I mean permanently fixed, not just fixed for 2 or 3 years and adjustable annually after that which is what many are actually like – then this might make sense. However, you’re probably not going to be able to ever find such a loan.

Q7: Saving on home photo printing

What are some strategies to save on the cost of home photo printing? I like to print photos to use in picture frames and collages but paper and ink really add up.
– Denae

Printing photos at home eats up a lot of ink, and good photo paper is expensive, too.

One thing you can do is simply buy your photo paper in bulk quantities. This is a good thing to do at a warehouse club like Costco or Sam’s Club, where you can often find a good deal on a large bundle of photo paper in various sizes (4″ by 6″ and 8.5″ by 11″ are commonly found there).

Another strategy is to either refill your own ink cartridges using a kit that works with your cartridge type or take your empty cartridges to a service that will do it for you. Both options are far cheaper than constantly buying new cartridges, which you have to do if you print many photos at home.

Also, if you just have a large set of 4″ by 6″ prints to make, consider having them printed elsewhere. I’ve found that the cost of printing a large batch of 4″ by 6″ prints at home is higher than just sending a large batch to an inexpensive photo printing service.

Q8: Light bulbs and rentals

Saw this idea on another website and wanted to get your take on it. I live in an apartment and someone suggested buying a bunch of LED bulbs and replacing all of the bulbs in the apartment and then saving the old bulbs in a box in the closet. Then when I move out I take out all of the LED bulbs and put the old bulbs back in the sockets and then take the LED bulbs with me. This way I save on energy while living here and don’t leave behind the expensive LED bulbs. Does this make sense?
– Juliet

Yes, it absolutely does make sense. You will save money on your energy bill while the LEDs are installed and when you move out they’ll go with you to your next place.

The only real drawback I see is the risk of broken bulbs, which will eat into the savings, so I do have a few suggestions. First of all, make sure the bulbs you take out are stored well in a place where you’ll remember them. Put them in the box gently and then put the box somewhere where there’s little risk of them breaking. This isn’t going to be worth it if there’s a ton of shattered glass all over the place.

Second, when you take out the LEDs, pack them securely. If you install, say, 20 LEDs around your apartment, that’s a bit of an investment, and you’re going to want to make sure you carry that investment forward. Put them in a box, mark clearly what it is, and make sure it’s very secure with nothing on it. You may even want to pad the bulbs a bit inside the box. This is probably a box you’ll want to handle yourself.

Q9: Structure in retirement

Thoughts on this article? Many Americans Try Retirement, Then Change Their Minds

This is something I am puzzling over myself. I am 62 years old. I have been in the full time workforce for 42 years without cease. I am worried about what I am going to do with my days when I retire. I watched my father retire from a factory, go home, sit in his chair for ten years, and then die. I don’t want to do that.

But I am smart enough to know that the “big picture” isn’t enough to convince you to do something every day, especially when you are old.

Thoughts?
– Tammy

Figure out some things you want to do in retirement, then mandate a “work day” for yourself to work on them. That’s my plan for retirement. I plan on “working” an eight hour day most days on the things that I’ve always wanted to do or take care of.

Things I want to do when I retire: work for and revitalize a local charity, grow a giant garden, write a series of novels I’ve been thinking about for a good decade now, go back to college for a degree (I want to be one of those 70 year olds who graduate with a degree in history or something), go on camping trips with my wife and go on as many trails as possible and utterly stretch my physical capabilities, visit my children on occasion and just take their children off their hands for a while so they can have a break (assuming they have children, of course), and a lot of other things.

I fully intend to jam pack every day with those things, along with a routine that keeps me physically and mentally strong.

I think the key is “routine.” Suddenly, the routine of your job is gone. What are you going to replace that routine with? If you don’t have a routine pretty quickly, it becomes easy to spend your days without any structure, doing very little. Find a new routine. Make a daily schedule for yourself and stick with it to the best of your ability.

Q10: Unrealistic stories

I like reading your site and other sites as I get my financial house in order. The problem I have is that when I read stories about other people they just seem unrealistic to me usually because they have way more income. The money strategies of someone making 5x my salary seem useless.
– Amie

Honestly, I find the best strategies when reading about the lives of people in far different situations than my own, because most of the best strategies for people in similar situations are already known to me.

For example, I already know how to prepare a frugal American diet, so I often get good insights from reading about frugal foods from other cultures. I already know what to do for social and cultural experiences that are the norm around here; what can I learn for new ideas from people different than myself? What do rich people do? What do poor people do? What do people from other cultures do?

I’ve found useful financial and frugal strategies from people way richer than me, way poorer than me, from different cultures than me, from different places than me. Often, they’re strategies I would have never tried, like different ways to prepare and season rice or ways to use cabbage (which is always one of the cheapest items in the produce aisle) or the idea of growing a “three sisters” garden (planting corn, beans, and zucchini all together) because they sustain each other in the soil.

There is never anyone too rich or too poor or too different that you can’t learn something from them. Don’t worry about how much they make or where they’re from or anything like that. Just listen to what they’re doing and borrow what seems like it might be useful, even if it seems out of the ordinary to you.

Q11: Camping on the cheap

How can you call camping a cheap vacation? We were considering it for this summer but when we added up the costs it was well over $1000 just for 5 days! Not cheap!
– Andrew

It might help if you sent me your budget. However, my guess is that this camping trip involves buying all of the equipment and starting from scratch. If you’re buying a family tent and several sleeping bags as a startup cost, yes, it’s going to be expensive.

However, after that, those costs don’t recur. If you spent $500 on sleeping bags and a tent, then you can reuse those items at a cost of $0 for future trips.

We go camping four or five times each summer. We use the same sleeping bags every time. We use the same tents and other equipment every time. Thus, our only cost is getting to the campsite, paying for a campsite (if needed), and the food and other things we consume there. Camping puts us in a location where we have full days to explore what’s around us and the opportunity to engage in basic outdoor skills, such as starting a campfire. It’s an incredibly fun way to spend several days in the summer and it’s not much more expensive than staying at home (considering we turn off almost all energy use at home when we leave).

Q12: Confusing Meetup experience

I followed your suggestion and went to a meeting of [a political group] I found on Meetup. It was terrible. Most of the meeting was people talking about stuff that was way over my head and I was afraid of saying anything because I didn’t want to sound stupid. A few people came over to me and were really friendly but most of the meeting was a waste of my time. How do you find stuff that’s friendly to beginners?
– Marcia

This actually does sound pretty friendly to beginners. My suggestion to you is to go back to another meeting with a notebook and a pen and write down literally everything they’re talking about that you don’t understand, then take it home and look up every single one of those things from a fairly unbiased source. I usually tell people to start with Wikipedia to get a basic understanding and then branch out from there.

When you’re talking to someone later, simply say, “I’m new to all of this,” and don’t be afraid of asking if they have any “intro” recommendations, whether they’re books or websites or something else like that. Ask things like, “What do you guys all read for your political news?”

Take this as an opportunity to dig deeper into a topic with some social guidance. Trust me – the vast majority of those people are going to be thrilled that you care enough to show up and ask questions. Don’t feel dumb – everyone was once a beginner in the same exact shoes you’re in.

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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