Questions About Taxes, Pepper Mills, Career Choices, Buying Cars with Cash, 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. Career, marriage, and life crossroads
2. Taxes for disabled veterans
3. Paying off a lease early?
4. Queen of Versailles
5. Buying a car with cash
6. Huge salary a requirement?
7. Career versus cost of living
8. Buying a pepper mill
9. Strategies for minimizing food expense
10. Tax refund question
11. Ebooks and book trading
12. Graduation gift for civil engineer

My oldest son loves soccer. He has a dream of doing something involving soccer with his life. However, even at his young age, he realizes that he doesn’t have the split-second hand-eye coordination needed to play the game at the highest level. He’s found a niche for himself at the level at which he plays that he’ll probably be able to fulfill at a high level in high school, but he’s insightful enough to assess that he’ll likely never play in the English Premier League unless he suddenly gains some significant agility.

The question for him is what exactly that means. I don’t want to crush his futbol-related dreams. He enjoys it and he’s very good at the level at which he plays, though he’s not on the level of playing on traveling teams or anything like that. He’s getting fitness and a lot of fun out of it.

However, I know that at some point he’s likely to set his horizons elsewhere. He won’t dream of a soccer life forever – even people who turn pro don’t do that. That doesn’t mean soccer won’t be a part of his life – he may make films about it or become a broadcaster or become a writer.

This creates this interesting balancing act when we talk about his future. He has a vision that soccer will be some part of his life in adulthood, and it might very well be, but what else will be a part of his life?

It’s actually very enjoyable to watch my children start to dream and think about their future, and then assess those dreams and recalibrate, and then do it again. It’s a process I started when I was his age, when I dreamed of being a writer. Funny how things turn out sometimes.

Q1: Career, marriage, and life crossroads

So I’m lobbing up one of those “not sure what to do” big questions.

My wife is in a job she hates and has the opportunity to take on a job she absolutely loves as a caretaker resident at an animal rescue organization. The organization is fairly large and well funded and she would be living rent free in their beautiful ranch house with a monthly flat stipend.

The farm is about 45 minutes north of my office where I work, and I live a further 45 minutes south… in a house that we own.

I make a significant good income, so we can support ourselves and our goals if she takes this position. This is truly her found passion project. It’s beyond beneficial for her mental well being, and she loves the work.

We figured out that we can do some split time away from each other. I can live Monday-Thursday at “my” house, and then stay with her Thursday night through Sunday. We’re okay with that separation as our current work hours provide us with very little face-to-face overlap during the week as it is.

The financial stuff:
Her stipend would be basically cash, so she wouldn’t draw a W-2. As she’d have no income, I’m realizing some of the things that I would need to take over as the wage earner like:
-buying her new car (this would be a small loan plus cash)
-insurances (I’m sure that I’d have to be primary on all our policies, currently the auto is in her name)
-health care (I have our coverage under my employer who has generous benefits)

Right now we’re looking at all the x factors. From the little things like her needing to find a new dentist to the big things like eventually selling our house and moving up there if things are working out in a couple of years.

What am I missing? What’s the angle in my blindspot?

Oh and for the usual other questions, we don’t have (or plan on) children, we only have about 60% left on our mortgage which we look to finish off in 5-10 years, and I have one car loan under my name as her current aging car is paid off. And we do have a nice chunk in our retirement fund which in on course to support retirement in about 20 years (I’m 42, and we’re hoping for a 60-65 retirement window, putting off withdrawals/Social security until the mandatory final age).
– Jim

My gut reaction to this is to ask why you wouldn’t just move to the ranch in the first place? If my understanding is correct, the commute to your work from the ranch is about the same as your commute to work from your current house. So why not just move to the ranch with her completely? What’s the purpose of keeping your current house, especially if you’re quite willing to sell it in the fairly near future?

Unless there were other extenuating circumstances that aren’t clear from this email, I would definitely consider selling your current house and moving to that ranch or near that ranch. If you can actually both live at that ranch, which you seem to imply by the fact that you’d both live there on the weekends, I’d jump on board with that. I’d convert your current house into a rental or sell it. In either case, you’d make a mint by doing this.

I feel like there must be some sort of additional reason not mentioned here for keeping that house, which would definitely change the equation, but if there’s nothing else going on, strongly consider moving out of that house and either selling it or renting it out.

Q2: Taxes for disabled veterans

My question is whether a disabled veteran with 100% Individual Unemployability or Total/Permanent has any recourse on paying federal taxes to the IRS. I am assuming that my student loans ($54K) which have been in an IBR for 2 years may be written off by the servicer, but them considered to be income whereas taxes are paid on it. I just got out of debt settlement 2 years ago and got my credit score back to good. My intention was to start working a better job and then the VA issue happened. My income will be only VA disability and my small unity from civil service and there is not much to then give the IRS for monthly payment for the rest of my life. I am 57 and my retirement date is 66. Not sure whether I can qualify at some point for SSDI. Will not be working until sometime in the future maybe.

Is there any slack given to disabled veterans who just got the rug pulled out from under them again? Can’t default on them, but can’t afford to pay them either. The payment would be $700/mth.
– Kelly

Given that your situation is tied to the current regulations of a giant network of government programs – your student loan repayment, your tax liability to the IRS, your disability arrangement with the VA, possible qualification for Social Security disability, and some other form of civil service income – any specific advice I might give you is likely to be completely wrong in six months, as many government programs are undergoing changes as I type this. Plus, there are some areas of your situation that aren’t entirely clear.

Your best approach, honestly, is to contact the people to whom you owe money directly and talk about forbearance or an easier payment schedule. I would contact both the IRS and your student loan holders now rather than when things get bad and look at your options to reduce your monthly payment burden.

That’s the first action I’d take. I would contact your lenders and the IRS and look for alternative payment systems that will reduce your monthly payment burden, because it sounds like you’re facing payments that are overwhelming given your current financial and employment and benefit situation.

Q3: Paying off a lease early?

My question, in short: what happens to my credit history if I pay off my lease and turn in the vehicle several months ahead of schedule? Will I still get the positive history I would have received by keeping it until the end of the contract, or will this somehow impact me negatively?

Context/background: I’m 25 and married, my wife and I have been steadily improving our lifestyle and finances, and we are just about ready to get rid of our second car entirely. (Naturally we want to get rid of the lease and keep the older, cheaper car.) However, we are also looking forward to buying our first home sometime in the next 2 years, and the main reason we leased a car instead of buying was to build installment-loan history (we have spotless revolving-credit history, but only about three years’ worth) in the hopes of bringing down our mortgage rate in the future.

I have enough cash to pay down the remaining balance on the lease, which ends in November, and I estimate I can save well over $100/mo by dropping the extra insurance (young drivers in a very expense part of the country). However, I don’t want to be ‘penny wise and pound foolish,’ saving $800+ on auto insurance by costing myself thousands of dollars in increased mortgage interest. How seriously would this move affect my credit score?
– Michael

There are two things really worth considering here. First, if you pay off your lease early, you’re likely to get smacked with an early termination fee (or some variation thereof) from the lender and the dealer serving as the middleman will try to hit you with as many fees as possible, as is often the case when a person returns a car off of a lease and doesn’t buy it and doesn’t jump to a new lease. The fees are going to cost you. One approach you may want to consider is seeing if you can turn in the car early, then continue making lease payments until the end of the lease to avoid fees.

As for credit impact, if you pay everything in full, then what should happen – provided the lender is following the standard operating procedure – is that they just stop reporting the lease to the credit agencies. This means that this particular account will start to age, which will have a small impact on your credit report. How small depends on how many other lines of credit you currently have open; if you have a lot of credit available to you, then the impact may even be very slightly positive.

I would be more concerned about the early termination fees and other fees that the dealer and lender may hit you with than I would be about the impact on your credit from this decision. The impact will be minimal provided you actually pay everything off and the lender is reputable with reputable business practices.

Q4: Queen of Versailles

Have you seen Queen of Versailles? It’s a documentary about a real estate developer and his wife who want to build this giant home in Florida, it’s like this super-mansion, and then the real estate market hits some trouble. I think you’d love it.
– Tammy

Tammy suggested this documentary to me a few weeks ago and I finally got a chance to watch it. I did enjoy it, actually, but it was saddening.

The message that I couldn’t help but take away from this documentary is that money can’t buy happiness. This was a billionaire’s couple, building an almost materially perfect estate and home to live on, and none of them seemed happy – not the couple, not their children, not the staff that worked for them. They seemed almost addicted to buying things for that momentary burst of happiness and then felt sad when that moment passed so they did it again and again and again.

It felt like a Real Housewives show, but less scripted, focused on one family, and somehow quite sad. I really truly hope that the people involved all find some level of true happiness in their lives, but this documentary is a loud example to anyone watching it that money doesn’t buy happiness. It comes from somewhere else.

Q5: Buying a car with cash

I want to buy a car with cash. I have $12,000 saved and want to buy a fairly late model used car. The problem is that every dealership I go to basically won’t sell me a car. They absolutely insist that I use their financing. I have now basically been refused by three different dealers who said that they won’t sell me a car unless I finance it through their program. How does someone buy a late model used car? I don’t want to buy one directly from somebody because I want some dealer warranty on it.
– Terry

Here’s the truth, as I see it: if a dealer is giving you strong pushback about buying a car in cash, then it’s a shady dealer that you don’t want to do business with anyway. A good car dealer recognizes that someone paying in cash is probably not going to cause much of a hassle, won’t default on payments, will probably not take too long in making the purchase (because they’ve already done their homework), and will likely give very good feedback if the deal is done quickly. The only dealers who pass on that are ones who are trying to get every dime they can out of every sale to maximize per-sale profitability even if it means sacrificing a few sales along the way.

My honest recommendation is to go to a very large dealership and make it clear right off the bat that you intend to pay in cash. Do your homework first on their lot and on their website and identify some specific cars you want to look at so that you can come in, say that you’re interested in car X and car Y and are looking to pay cash for them. If you get any pushback at all, walk. There are thousands of cars in the sea.

I did buy my current car directly from another person who needed to sell quickly due to life changes. It worked out well, but it was a bit nerve-wracking and I was glad I had a trusted mechanic to look at things.

Q6: Huge salary a requirement?

I am a single 28 year old female living in fairly rural Wisconsin. I make $42K at a job with a ton of stability but not a lot of room for financial advancement. I am able to save about 25% of my income each year and I want to retire when I’m 50-55.

The problem is that without more income there’s not much else I can do. I can’t really take action to cut my spending any more without moving into misery camp. My current job is wonderful and stable but I’m not going to multiply my salary here. Entrepreneurship seems like a lot of time investment for very uncertain reward and I’m not sure I’m cut out for it any way.

It seems to me that the deck is stacked against most Americans in terms of achieving any sort of quick financial success because it requires a huge income. Thoughts?
– Jana

It’s absolutely true that the fastest route to financial independence comes from being able to save the largest percentage of your salary. The larger the percentage that you can save, the faster you’re going to move toward your goal and the smaller that goal will be.

Take a person bringing home $100,000 a year. If he’s able to save 20% of that, that means he’s socking away $20,000, but it means that he needs $80,000 a year to live. A year’s savings is only a quarter of what he needs to live for a year. But if he ups his savings rate to just 25%, he’s now saving $25,000 a year and living off of $75,000 a year. Suddenly, he’s saving a third of what he needs to live for a year.

The point is that when you’re shooting for financial independence, regardless of your salary, the most powerful thing you can do is figure out what the real minimum amount you need to live the life you want to live and then live that way. The lower that number is, the easier it is to achieve your goal regardless of your salary.

Yes, when you do figure out that number, it becomes all about the salary, because the higher your salary is, the faster you get to your destination. The thing is, very few people figure out the real number that they need to live on to be happy. They allow their lifestyle to inflate with their salary. They insist on certain luxuries that really don’t bring them much lasting happiness at all. Digging trough all of that is an essential part of financial independence that few people really do. Why? It’s hard.

If you’re in a position where you feel constrained by salary, carefully consider every aspect of your life and ask yourself whether it’s really meaningful to you or whether it’s something you’re doing because you think you’re supposed to be doing it or because it brings you minor flashes of joy every once in a while that isn’t nearly proportional to what it’s costing you. That, to me, is the most powerful frontier of personal finance, because it’s something everyone can do, but it’s something that’s very, very hard.

It’s often hard to even talk about those kinds of choices, because many people won’t even consider them or even listen to the reasoning. They just consider a certain thing to be a requirement for modern life and won’t even ask if it’s really a requirement for your life or their life. They don’t want to hear talk about a 200-300 square foot apartment or living out of a single bag or couch surfing for six months because, for various reasons, they’ve adopted a fundamental assumption about their life and won’t question it. That holds a lot of people back from achieving their dreams.

I do not view a huge salary as a requirement of financial independence, but I think you either need a huge salary or you need a strong mindset for self-evaluation and a willingness to do things differently and challenge your assumptions. Having both makes it practically easy.

Q7: Career versus cost of living

I am about to graduate with a MS in Data Mining in May and I have a lot of job opportunities lined up in various areas. Here’s the general problem: the areas where I have the best career and salary advancement opportunities also have the highest cost of living. There’s almost a linear relationship there. Thus it comes down to a lifestyle decision in terms of where I want to live on that line. In my mind it seems like I should go for the area that’s furthest above the curve here but what other factors should I be considering?
– Clancy

I absolutely loved this note from Clancy. To me, it read like someone who has found their life calling in data mining and statistical analysis. He’s approaching this question very analytically and thoughtfully, something I appreciate.

My approach in your situation, Clancy, would be to dump all of the options that are below the curve, meaning that the salary adjusted by cost of living is below average for the ones you’re considering, and I’d also avoid any areas with a small number of employers for your field. I’d focus on everything above the curve. I would start applying and interviewing for positions in a variety of places that are above the curve and use those interviews and visits to figure out which area you really click with.

Remember, you’re going to want to be at least somewhat happy living there, so if you go to an area and discover that there are aspects you don’t like, whether it’s the weather or the people or the cultural factors, then it should be low on your list.

If you want to dive into this analytically, I would try using some sort of weighted scoring. I’d study and then visit each area and give it an approximate score in terms of factors that matter to you, then use those scores to evaluate those places. How much you should weight such scores is up to you and your life goals. If you’re looking primarily to retire early and bank a lot of money, then the ratio of salary to cost of living should be heavily weighted. If you’re mostly interested in work that intellectually stimulates you and an environment that’s conducive to that, then you should put extra weight on the culture of the companies in the area. If you’re mostly interested in other factors like the culture of the area, weight those more.

During my post-graduation job search, I actually used an approach like this when comparing a few job offers and I ended up concluding I was happiest near a metro or a college town in the upper Midwest or New England or the Pacific Northwest based on the factors I was evaluating. Guess what? I currently live within half an hour of a college town and of a major metro area in the upper Midwest and I’m very happy with it.

Q8: Buying a pepper mill

I’ve been diving into cooking at home over the last year and I’ve learned that I like black pepper on almost everything. I used to just buy pre-ground black pepper in those little plastic containers that you just tossed when they were empty but I followed a cookbook suggestion and bought a small plastic container of peppercorns with a plastic grinder on the bottom and I was hooked.

The cheapest route if I’m going to grind my own pepper for food seems to be to buy peppercorns in bulk and use your own grinder. I’ve priced the cost of bulk peppercorns and it gets rather cheap if you buy amounts bigger than a sample size.

This brings me to actually buying a pepper mill. I can’t find any reviews or discussions of pepper mills anywhere that aren’t either Amazon reviews that I don’t fully trust or comparative reviews from some shady dot-com that sounds like the “reviews” were bought and paid for by manufacturers. Can you help me find a great “buy it for life” NOT OVERPRICED pepper mill that does a great job reliably and will last forever?
– Stephen

I’m with you on freshly ground pepper. It is amazing on pretty much every savory dish that exists out there.

As with most things, pepper grinders continue to rise in quality with the amount that you spend, but once you reach a certain point, the quality increase doesn’t match up with the price increase.

I really like this pepper grinder, for example. It costs about $20 and really does a great job, using a carbon steel core to actually grind the pepper. It seems like it will last for a very long time, as the parts inside are simple and made of steel.

The catch, of course, is that you can keep ramping up your spending for a slightly “better” pepper grinder as much as you’d like. This $45 Unicorn grinder is one that a friend of mine owns and it works really well, perhaps even a little better than my own. The biggest difference between the two is the shape, the filling mechanism (I think this one is a bit easier to fill), and the amount of peppercorn it holds (this one holds a lot). But is the difference worth twice the price? I don’t think so, but maybe others do.

I’ve seen some impressive solid brass pepper mills that are quite expensive, but the truth is that once you reach a certain level of quality in terms of the mechanism, you’re paying more for visual appearance and in some cases a longer-lasting metal. However, unless you’re grinding pounds of pepper daily, most decent pepper mills should have internal parts that last for a pretty long time.

I’d stick with one of the two above options, I think. I think the first one is the best “bang for the buck” and the other one is a little better for double the price – I don’t think it’s worth double price, but I do think it’s a slightly better mill. They both blow away cheap plastic mills.

Q9: Strategies for minimizing food expense

My sister and I are both trying to cut back on our spending and we’re doing it together to make it fun. We are both single. This month we are trying to see who can spend the least amount on food without like starving ourselves and still eating a healthy diet. I know the usual advice of eating the cheap staples like rice and beans but what would you do if this were your challenge?
– Lisa

It depends on your definition of “healthy.” If your goal is to meet your caloric and protein intake standards at the lowest possible price, then you should just stick to this list as much as you can, which sorts foods you can find at the grocery store by how many calories of it you buy per dollar. Just choose a few of the cheapest items on that list from a variety of food groups and make those most of your diet. You’ll get through the month with reasonably balanced nutrition and almost assuredly beat your sister at this challenge.

The only problem is that some of the items on the cheap end of that list aren’t really healthy. Flour? White bread? Sugar? Those are the first three items. Rice isn’t bad and plain oats are great, but next is ramen which is pretty nutritionally dodgy. Basically, what ends up happening is that if you apply any sort of reasonable nutrition standards, that list ends up looking like the list of “cheap but healthy foods” that I often share: rice, beans, peanut butter, eggs, oatmeal.

That’s really the solution, though. It’s those really cheap and healthy staples that make the backbone of a frugal diet. Buy the nonperishable ones when they’re on sale and even cheaper – wild horses couldn’t tear me away from bulk sales of rice, beans, oatmeal, and peanut butter – and focus your diet on the perishable ones when they’re on sale. Pick up fresh produce that’s on sale to supplement it, especially produce items that are high up on this list.

There isn’t any magic to it. The trick is sticking to those principles. A lot of foods that people like to add on to this backbone are pretty expensive and it’s those add-ons that lead to expensive diets. Just learn to cook and season the staples well and you’ll do really well in your contest with your sister.

Q10: Tax refund question

Each year wife and I take our taxes to local tax guy who files them for us. My brother started using HR Block and got a $1100 refund. I have never gotten a $1100 refund in my life and i make more than he does. Am I getting scammed?
– Alan

Probably not, actually.

People get a tax refund for a number of reasons. One is that they’re simply paying in more throughout the year than they owe in taxes. Another reason is that they receive some sort of tax credit or deduction that they’re eligible for, and those can come for a variety of reasons as well.

Adding those reasons together, I don’t think there’s much of a case here that your tax guy is ripping you off. Most likely, either your brother’s employer is taking too much out of his paycheck or your brother is eligible for some tax credits or deductions for some reason which is causing him to get a refund.

Beyond that, unless you’ve got a strange financial arrangement with your tax preparer, he or she has no reason to “scam you.” They can’t gain financially from it and it would hurt their business. Most likely, your preparer is using a standard tax preparation software package that’s similar to what the guy at H&R Block is using for your brother, so you’d likely get similar results with either preparer.

I wouldn’t worry about it.

Q11: Ebooks and book trading

The biggest reason I have never gotten into ebooks is that I can’t trade them. I swap books with my friends all the time and you just can’t do that with ebooks without a big rigamarole or pirating or something. If they made it easy to lend books I would be much more interested in ebooks.
– Maxine

I agree with you, actually. I really, really like having a lot of books available on my Kindle wherever I go, but there are other aspects of ebooks that make no sense. I can’t conceive of why a Kindle book costs more than the same printed book, for one. I understand a basic cost for editing and writing a book and books shouldn’t be free, but a printed book includes all of the costs of the paper and the printing and the shipping that isn’t included in an ebook.

Another thing that baffles me is the book swapping aspect of ebooks. It wouldn’t be that hard to come up with a mechanism for trading ebooks with friends and you can do that in a very limited way with the Kindle, but why not just allow you to share a particular ebook, say, ten times when you buy it? If I buy a book from the Kindle store, I’m able to share it ten times. While it’s loaned, I can’t read it myself. When I want it back, I just push a button and it disappears from the borrower’s Kindle.

If those two things changed, I would buy almost all my books on the Kindle. Without that, I still buy a lot of printed books, especially ones I think I’ll be lending to friends.

Q12: Graduation gift for civil engineer

My nephew is about to graduate from college with a degree in civil engineering. We intend to spend about $200 on his graduation gift. Trying to think of a thoughtful gift that’s something more than cash. Ideas?
– Connie

I have several friends and family members who are in the civil and construction engineering fields. I asked a few of them for suggestions and got lots of feedback.

Several suggested buying a good mechanical pencil. One friend specifically suggested a Uniball Kuru Toga and some lead to go with it.

Many of them suggested getting him a gift card to buy something he’ll use in his work, like a really nice bag. If you’re buying something that’s well made and suitable for an engineer, you might want to look at a gift certificate to Tom Bihn, which makes a ton of well-made bags that I like, and you can get the gift card here. Or you could ask him what kind of everyday carry bag he might want in the future and buy one yourself. This will eat most of your money, though. An appropriate Tom Bihn bag with that mechanical pencil in it and some lead would be an amazing gift (I personally would be jealous).

Look at his Facebook or other social media and see if you can figure out his hobbies and buy him something appropriate to that hobby, or else give him a gift card that’s specifically for that hobby.

Generally, I tend to shy away from “luxury goods” for a graduation gift unless I know that person’s tastes very well. This would especially be true for the engineers I know. Get him something functional and useful (or a few functional and useful things) or something explicitly tied to a hobby of his and you’ll do well.

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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