Questions About Treasury Bills, Camping, Old Stoves, Prepaid Tuition, 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. Too many credit cards?
2. Recovering from family emergency
3. Homeowner’s emergency fund?
4. Packing for domestic trip
5. Vegetable stock question
6. Old stove unsafe?
7. Trunk camping essentials
8. 529 prepaid plans worthwhile?
9. T-bills as investment?
10. Rewarding good grades
11. Buying time brings happiness?
12. Critical thinking recommendations

We’re now in that strange period where my children are done with the school year, but my wife, who teaches in a different school district, is still finishing up her school year. Thus, our three kids are home with Dad, thus Dad is having to get work done either before the kids are up or in a house with three kids that need at least some supervision.

My solution for this part of the school year (which can vary from a couple of days to a week – it’s on the shorter end this year) is to simply wake up extra early and then let the kids sleep in as late as they want. My two older kids will usually sleep in until mid-morning and my youngest one is pretty good at quietly occupying himself when the other two are asleep and he knows that his dad has to work.

By about 10 AM, though, I’m usually better off having my work done for the day. Good thing I’ve been up for six hours at that point.

So let’s get to the questions quickly!

Q1: Too many credit cards?

I have about a dozen credit cards that I use at different retailers. My parents always had a card for each retailer so they could get bonuses. My fiancé had a stroke when he heard this and said that I needed to get rid of some of them because I am at strong risk of identity theft and bad credit. Thoughts?
– Mary

Your fiancĂ© is correct in that the more credit cards you have, the more likely it is that you’re going to get hit with identity theft. The chances are still low, but the more entries you have in credit card databases, the more likely it is that you’re going to eventually have your credit card number or your identity stolen.

I can’t assess whether having so many cards is dinging your credit or not without seeing a fuller financial picture, but my guess is that it is having at least a little negative impact assuming you’re anywhere near the average American income level and the cards don’t all have tiny credit limits. Your credit score tends to take a hit if you have a large amount of available consumer credit, which indicates that you could very quickly get yourself into a difficult debt situation.

If I were in your shoes, I’d start closing out some of the cards. I’d keep the one you use the most (the one that nets you the most rewards, which is probably the one you use in default situations) and your oldest card (to establish the length of your credit history), and start closing out the other ones. I’d do this during a period where you won’t need your credit (so don’t do this when you’re about to request a loan or get a new apartment lease or something like that), but once it’s done and a few months have passed, you’ll have reduced your identity theft risk and likely improved your credit score. If you have a good general-use card,

Q2: Recovering from family emergency

I’ve always been relatively frugal, but then I met and married my now-husband, who has debt left over from his first marriage to a big spender. We paid down a good portion of his debt, and only had student loans left, but we were working on getting our emergency funds replenished. I started a new job with a pay increase.

The kids lived with his ex-wife during the week and we had them on weekends. And then, one week after I started my new job, a family emergency struck that required us to take custody of the kids. The next few months saw a large number of expenses that got racked up on our credit card: lawyers bills, moving expenses (to a three bedroom so both kids could have their own bedroom), and a lot of convenience purchases while we were overwhelmed with new schools, new jobs, and new routines. Everyone is doing well now — the emergency has passed and the kids are happy and well adjusted. We’ve got a pretty good routine down. But we now have about $10K on credit cards, which are at 0% interest through October, and are finally at a place where we can start thinking about cutting expenses and paying it down.

The main question I have is that we have about $100K in our retirement accounts. $10K of that is in a Roth IRA, and $5000 of that is contributions. Does it make sense to pull the $5000 in contributions from the Roth IRA to jumpstart paying off the credit cards, or make another balance transfer to a 0% interest card while we pay them off? I’ve never had credit card debt and am so ready to get this paid off as fast as possible.

We’re meeting with a financial planner I have through work next month, but I trust your advice, so also wanted to see what you think.
– Juliet

Honestly, I can’t give you a really straight answer without seeing your current income and how close you’re coming to spending all of it each month as things sit now. The real question is whether you have enough breathing room to easily pay off those credit cards over the course of, say, six months to a year, or whether you’re going to be making minimum payments for many years.

If you can make, say, double the minimum payment or more and keep making payments of that total amount for the foreseeable future, I would do that and continue to contribute to retirement accounts as normal.

It is very likely that, if you have good credit (meaning you’ve never missed payments on anything in the last few years), you’ll be able to come up with another 0% balance transfer in the next few months, probably with a different credit card issuer. I would definitely take advantage of that.

The only situation in which I’d cut the retirement contribution is if (a) you struggle to make any payments much beyond the minimum on your credit cards and (b) you can’t get any further 0% balance transfers and you revert to something like 20% or 30% interest rates in October. Both would have to be true for me to suggest even considering cutting retirement contributions.

Prioritizing credit card payoffs over retirement contributions is only important for people who are pushed right up to the fence with being able to afford their minimum bills. They likely have pretty poor credit to boot. From a whole life picture of an otherwise financially stable person, retirement contributions are more important long term than credit card payoffs if you’re able to regularly get 0% balance transfers and can pay things off at a reasonably fast pace.

Q3: Homeowner’s emergency fund?

Bought a home in late April. First time. How much should I have in my savings for home repairs?
– Adam

The usual suggestion is that the average cost of maintenance and repair of a home is about 1% of the purchase price. Most of the time, that’s made up of small expenses that are simply gobbled up by a typical household budget, but it’s also true that in a year without any major repair issues, you’re probably coming in under 1%. What you’re really saving for are big things, like the deductible portion of major damage and major issues like replacing a furnace or replacing windows. The small things, like filters and such, come out of your budget.

So, my suggestion would be to aim for 1% of your home’s value saved per year. If you own a $240,000 home, for example, that means you’re trying to save $2,400 per year, so set up a $200 automatic transfer from your checking to your savings per month and you’re good to go. Then, try to absorb the little expenses – furnace filters and the like – into your normal household budget and only tap the emergency fund when there’s a big expense that would really stress your normal expenses.

Sarah and I have a large multipurpose emergency fund of which our home repair emergency fund is a part. We transfer more than 1% of our home value into that fund each year, but we use it for all types of emergencies.

Q4: Packing for domestic trip

Is it cheaper to ship a box to your destination with your clothes and stuff in it than to check a bag at the airline? Trying to figure out best practices for domestic trips. I have to fly monthly for a while.
– Max

There are good arguments for both strategies.

First of all, you need to know exactly what the cost for checking a bag is for your flight. What is the cost of checking that bag? Different airlines have very different pricing strategies, from free to $75. If it’s on the very high end, it’s almost always cheaper to just ship a box to your destination via UPS or Fedex. A box with a bunch of folded clothes in it and a few other items can be shipped for $30 or so (based on my recent experience), so use that as a baseline.

If the prices are close, consider what’s more convenient. Is it more convenient to fill up a box with clothes several days before flying and stopping by a UPS Store to ship it? Or is it more convenient to get that bag to the airport and then wait at baggage claim after your flight? They’re both going to eat up time – where would you rather have that time?

I don’t think there’s a strict winner either way. It depends on convenience and the pricing of your airline.

In either case, I would still pack a carry-on that has at least one change of clothes in it along with some of the bare essentials you need for your trip. In my opinion, a carry-on should have at least some clean underwear and a strongly wrinkle resistant shirt in it.

Q5: Vegetable stock question

You mentioned in a recent cooking post that you make vegetable stock out of scraps and then save the stock for soups in the future. Can you outline specifically how you do this? It’s just not clicking for me.
– Veronica

I have a big resealable freezer bag (gallon sized) that stays in our freezer (think Ziploc, but store brand). Whenever I cut up vegetables, I usually have a few oddly shaped pieces that don’t work in the dish I’m preparing. Those pieces go into that bag. Whenever we have steamed vegetables with minimal seasoning and there’s leftovers, they go into that bag, too.

When the bag is full and nothing more will really fit in there, I pull out the slow cooker (it’s got a six quart crock) and I dump all of the contents of the bag in there. I break it up a little if needed (it’s usually frozen into chunks) and then add enough water to cover all of the vegetables with a couple of inches to spare. To that, I add some salt to taste, some peppercorns, and a few herbs and spices (usually garlic, sometimes a bay leaf, whatever seems good). I then turn the slow cooker on low and leave it for many hours – 12 to 18, even sometimes as long as 24 hours.

When I decide it’s good enough, I get out a strainer and strain the liquid. I usually have a big pot of some kind and I set a metal strainer with really small holes on top of it. Then, I pour all of the contents of the slow cooker through that strainer. I usually have to stop a few times and clear the strainer of big pieces of overcooked vegetables. The liquid in the pot is stock – I just put it into quart-sized resealable freezer bags or containers, label them with masking tape and a marker, and pop them in the freezer for future use.

Q6: Old stove unsafe?

We bought a house that an elderly couple lived in for many years. While it is clean and roomy, we want to update much of it. One issue is that some of the appliances are very old. There is an old GE electric stovetop and oven in the kitchen that we are guessing is from the 1960s or early 1970s. Is it safe? Relatives have told us over the phone that it’s fine, but it looks like an antique. Can’t find reliable info on it.
– Danika

Stoves are actually really simple devices. By the 1930s, home stoves were already properly insulated and quite safe for home use. In fact, older stoves and ovens are often better built and better insulated than newer ones.

I wouldn’t replace it, in other words. Instead, I would ask around the community and identify a trustworthy appliance repair service and ask them to come out and inspect some older appliances. If they’re trustworthy, they’ll probably give most of your stuff a big thumbs up. If they want to replace things or do anything beyond minor repairs, get a second opinion first.

You probably actually have an extremely functional and useful stovetop and oven on your hands!

Q7: Trunk camping essentials

Considering doing some camping with my family this summer. What are the essentials one needs to go camping? Minimal stuff so that it’s not miserable basically.
– Mark

Unless you want to sleep in your vehicle, you’ll probably need a tent of some kind to provide shelter in case of rain and to keep critters out. If you have a lot of blankets, sleeping bags are optional – just fill up your car with blankets and pillows and make some “nests” for people in the tent.

Assuming you want a campfire, you’ll want something with which to start the fire – a lighter and/or some matches, along with some paper and cardboard to get it going (assuming you’re not highly adept at making campfires). Firestarters are useful but not 100% essential – they basically make it easier to transition a fire from burning paper to burning wood. You’ll be able to buy wood at the campground, so don’t sweat that part.

You’ll probably want food items. There are a lot of ways to go here – we usually eat a lot of fruit and sandwiches when camping, which basically just requires fruit, bread, peanut butter, jelly, and butter knives. We have some reusable camping dishes, which are helpful – just get cheap plastic plates and cups and some silverware from Goodwill or another secondhand store. For dinner, just eat something simple like hot dogs roasted over the fire – you’ll need a small cooler to keep a few items like that cold. You can cut simple roasting sticks from the branches of nearby trees – just cut off a branch and whittle one end down to a point, then skewer the hot dog on it. You’ll probably want some flashlights, too, and maybe some chairs to sit around the campsite.

That’s really about it. Everything else I might suggest is extra, and much of that stuff should already be around your house (blankets, a small cooler, flashlights, folding chairs, etc.) or can be bought at Goodwill (dishes, silverware). Your only big expense at first is a tent.

Q8: 529 prepaid plans worthwhile?

I live in Michigan and am looking at college savings options for our newborn. What do you think of MET?
– Lonnie

MET is short for Michigan Education Trust, an alternate 529 program available in Michigan that allows people in the plan to pre-pay for tuition at any of Michigan’s public universities. The way it works is that you sign a contract that enables you to make monthly payments (or a single lump sum payment) that add up to an amount equal to the average tuition cost at Michigan public universities today. Then, when your child is old enough, that contract covers their tuition at any Michigan public university that they choose to attend.

This program really only exceeds the value of a normal 529 if your child attends one of the best Michigan public universities (Ann Arbor or Michigan Tech or Michigan State) and the growth in tuition costs at that university drastically exceeds the stock market or other investments. If either one of those aren’t true, then you’re probably better off in an ordinary 529 plan.

However, if you’re pretty sure you want your child to go to Ann Arbor in 2038, then the prepaid plan is probably the most cost-effective route to get there.

The same is true for most prepaid plans. If you think that your child is likely to go to the top one or two public universities in that state, then the prepaid plan is probably a good idea. If not, then use a normal 529.

Q9: T-bills as investment?

I recently recovered some unclaimed property that I had lost to the state 12 years ago that they sold 8 years ago. I lost dividends for 12 years and lost the value the stock rose after it was liquidated. I wish to make up for my mistakes, so I was thinking of investing the money in T bills as I could use more stable investments. Do you have any opinions on T bills?
– Sandra

For those unaware, T bills refer to treasury bills, which are investments that are auctioned off by the US Treasury Department. They’re short term investments, with terms ranging from 4 weeks to 52 weeks. They are issued with a face value on them – say, $1,000 – and are then auctioned off, usually selling somewhere below face value – say, $980. Then, in 4 weeks (or whatever the term is), the government pays the investor the face value of the treasury bill. In this case, that investor will have turned $980 into $1,000. You can invest in treasury bills directly with the federal government via the TreasuryDirect website.

Right now, interest rates are very low, which means that investing in T bills won’t net you a great return on your money. The advantage that T bills have is that they’re about as rock-solid stable as you can get in terms of an investment – there’s almost no risk at all there, but because you’re taking on almost no risk, you get very little return. Everything that would get a better return includes a little more short term risk. For example, take stocks – throughout history, they’ve always given a solid positive return over a 20 year timescale (and sometimes a great return), but over shorter terms (like a year), there have always been negative periods where people lost money.

So, my view of a T bill right now is that it’s about as stable as you can get, but the returns really aren’t very good right now. However, they’re pretty short term investments, so you won’t be hung with them forever. They’re very similar to buying a short term CD from a bank in terms of risk and reward.

Q10: Rewarding good grades

When I was growing up my parents rewarded me with $5 for every A, $2 for every B, -$2 for every C, and -$5 for every D or below on our semester grades. We started doing a similar system with our own kids but they get all As and Bs with little effort and it just seems like a cash handout. Is this a bad idea? Do you have better suggestions?
– Carrie

It’s simple: directly reward studying time instead of grades. It takes more consistent effort from the parents, but it implants the idea of how valuable studying effort is.

My preferred way of doing this is to have a “study grid,” which is just a piece of graph paper with a big rectangular block in the middle. Each little square within that block represents 15 minutes of homework or study.

The first step is to have a “cell phone” basket where kids deposit their electronic devices when they’re not supposed to be used. Have your kids plop their phones in there when they’re ready to study.

Then, just set a timer for studying and homework. Maybe they study for 15 minutes, or maybe 30 minutes. You can work together to figure out a good timer policy. I would not suggest a single very long period – a period of an hour or more is likely to be unproductive. You’re better off using a 30 minute period, a 15 minute break, and another 30 minute period than an hour.

While the timer’s going, have them study in a spot where you can see them but it’s relatively quiet, like the dinner table. They don’t have a cell phone so there’s no easy distraction.

When the time is over, just initial a square on the study grid. Each time they fill up a full grid, they get a reward.

For example, you might make some 5×10 “study blocks” made up of 50 squares, which is 12 1/2 hours of homework and studying. Each time they fill up a block, they get some tangible appropriate reward, probably dependent on their personality and your family situation.

However, over time, they’ll begin to see how that homework effort translates into good grades, at which point you can talk about how those good grades translate into a good college and good scholarships and how good grades there translate into a good job.

Your goal here is to reward the effort, because when the effort is there, the results come naturally.

Q11: Buying time brings happiness?

What do you think about this PNAS article that says that buying time-saving services promotes happiness? https://www.pnas.org/content/114/32/8523
– Annie

I have mixed feelings on their conclusions. I agree that in the right situation that time-saving services can make you happy, but I think the paper is influenced by people wanting to reflect happily on their recent choices and not actually assessing what they’re getting for their money.

First of all, if you’re paying for a time-saving service, it should be one that is genuinely worth the expense in terms of the time it gives you. My experience has been that the cost of many time-saving services is much higher than the value of the time that they save me. If I’m paying $5 or so for an hour of time, that’s great; if I’m paying $100 or more, that’s not great.

Second, there are quite a few time saving services that are simply substitutes for low skill for ordinary simple life activities, like basic food preparation. For me, spending $10 on a fast food meal versus making a sandwich at home for $1 could potentially be a bit of time savings, but the time savings gets to be less and less the more often I prepare my own food. Thus, at a very low skill level, the $10 option might save enough time to make it worth it, but if you simply fall into that trap, you never have the opportunity to build up enough skill so that it’s not worth it.

Also, I’m not sure about the time frame of the “happiness” brought on by buying time-saving services. Is this based on a short-term reflection (in the last week or so) or in long-term reflection (“How do you feel about the $100 you spent on this time-saving service a year ago?”)? From what I was able to determine, most of the positive response was a short-term reflection. I would love to see some long-term reflection on this.

For me, a time saving service is best when it’s handling an infrequent task that would take me much, much longer to do myself than simply hiring someone. This includes things like auto repairs, more complicated auto maintenance tasks, and things like that. I generally find that many time-saving tasks either don’t save me much time at all over doing it myself (like a laundry service) or are prohibitively expensive. I also avoid ones that keep me from developing a useful skill, which is why I avoid buying from a restaurant out of convenience.

I’ve also found that when I carefully track my time and use a time-saving service, that time I saved ends up not being used all that well – I don’t engage in some great leisure time or take care of serious business. Rather, it just adds low-importance and low-quality time to my life – video game time or something like that. At best, I’m buying time to read, which is great, but how much is an extra hour of reading worth to me in terms of dollars and cents? Honestly, I’d rather have the cash I spent on a housecleaning or laundry or meal prep service.

However, whenever I use a service like this, I really want to mentally attribute the most fun thing I’ve done lately to the time I saved from that service, but in truth, I would do that fun thing anyway. What it actually buys is the least effective use of my time lately, and that’s not really a bargain.

Q12: Critical thinking recommendations

Can you please recommend some online resources/books about critical thinking?
– Chris

Three books immediately come to mind as good places to start to learn more about critical thinking.

Thinking, Fast and Slow by Daniel Kahneman lays out the two different systems our minds use for thinking, how each has its faults, and how knowing how to balance both leads us to making more rational choices and digging deeper into complex issues.

Factfulness by Hans Rosling focuses on how our perspective is easily distorted both by our own experiences and by the world around us and the sources we choose to look at, causing us to have a funhouse mirror view of the world, and also how to break through those distortions.

Predictably Irrational by Dan Ariely focuses on how the irrational choices of individuals – which we all make – results in major societal shifts when multiplied across many individuals, for better or worse. I think it’s a good capstone to the other two books, which focus more on how we internally make decisions and think critically and rationally, whereas Ariely looks at the value and impact of rational and critical thinking in aggregate.

After reading those three, you’ll have enough background that you’ll know where to dig next regarding whatever your specific interest is.

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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