Questions about Winter Clothes, Cheap Gas, Old Freezer Items, 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. Life insurance question
2. Buying gas when it’s cheap
3. Old deep freezer items
4. Keeping old financial documents
5. Debt repayment struggles
6. Buy it for life: winter
7. Old odd collector’s items?
8. Dave Ramsey and 12%
9. Budget categories
10. Loopholes and advice
11. Winter trunk items
12. Is entrepreneurship necessary?
13. Mattress recommendations
14. High school personal finance
15. Christmas gifts for financial security

Lately, we have been trying out and featuring a number of new writers on The Simple Dollar. As would be expected, some of them may be of interest to you and some of them may not be, because we’re all in different places. Some people want lists of recommendations, while others want more personal material, for example.

So, here’s a powerful tip. If you want to just see my articles – the ones by Trent Hamm – you can visit https://www.thesimpledollar.com/author/admin/ at any time. That link will just include my articles.

Having said that, many of the new writers are producing interesting stuff. I’ve particularly enjoyed the pieces from Holly Johnson, for example. I hope you’ll give some of the new authors a try!

Q1: Life insurance question

I am a 28 year old woman in good health and I recently married my 32 year old, smoker, husband. We have no debts except my student loans (about 80k, that I pay monthly). Our monthly bills are around $1300. I make about $57k a year and he makes about $45k a year. I have a 401k and am looking to start a Roth IRA for both of us. We went to look for life insurance yesterday but I am curious if it is something we need now, or really, how much? The rates were great for me, but much steeper for him due to the smoking for 100k and 250k. ($50 and $77 monthly total) We are not planning on having children, but most of the information I see about life insurance is about covering things for children’s futures. I would love your take on our situation. We live in NJ where the cost of living is extremely high, and are hoping to buy a house around here within the next two years,We have around 20K saved with a decent cash emergency fund.
– Molly

Here’s your litmus test for whether you need life insurance: what exactly would happen financially to either one of you if the other died? Would the survivor be able to get along financially with no insurance money, paying for the funeral and handling all debts and other financial responsibilities that you both share?

If not – or even if it makes you nervous – you guys should have term life insurance policies.

Most of the time, people use term policies to wipe the slate clean if the unthinkable happens so that the survivor can move forward in a state of much greater financial independence. Some couples really need that, particularly those who are facing significant debt. You’re not facing a real mountain of debt at this point, but if you were to get a home mortgage and you’d want to continue living there if your spouse died, you may want that insurance.

Q2: Buying gas when it’s cheap

Right now the gas prices are the lowest that they have been in ten years or so. I would like to buy extra gas but I don’t know how to store it. Do you have any ideas?
– Kevin

Most homes do not have a good, safe way to facilitate large scale home gas storage. Obviously, many households use one or three gallon gas cans to store fuel for their lawnmowers and snowblowers. Many municipalities restrict people from storing more than that at home, so you’d want to check your city and state laws before doing so.

Assuming you live in an area where it’s legal to do so, you do have a number of options. You can buy a 55 gallon fuel drum, for instance, or even an above-ground fuel storage tank that can store thousands of gallons. These items will have a significant cost up front, but they will allow you to store fuel for a very long time.

The challenge is filling them. Even with a 55 gallon barrel, if you did manage to load it into a vehicle, take it to a fueling station, and they didn’t object to filling it, you’d have to deal with a drum weighing more than half a ton when you got home. This is logistically difficult for most people. Thus, for large storage, you’d have to come up with a delivery mechanism.

Another problem is making sure the fuel lasts. If you expect that it will sit more than a few months, you’ll have to add fuel stabilizer to keep it from gumming up and going bad. Also, you won’t want to buy gas that has ethanol mixed in as the ethanol will just evaporate, devouring any savings you might get.

Basically, unless you have a survivalist-oriented motivation, it’s probably not worth it. It’s certainly not going to save you money.

If you do want to buy a little extra gas when it’s cheap, just fill up a small one to three gallon plastic gas can and keep it in your garage. Try to use it within two months or so, preferably when gas prices have gone up a little bit again.

Q3: Old deep freezer contents

I have been cleaning out our deep freezer and we’ve found some packages of chops and ground beef in the back that have been in there for 4-5 years. Are these safe to eat?
– Donald

The only way I would eat it is if I was absolutely sure that the freezer had never lost power in the last four to five years. If your freezer lost power for any significant length of time in that period, it means that your meat thawed and then froze again. I would not want to eat that meat.

If you’re pretty confident that such thawing has never happened, the meat will be freezer burnt but edible. It should make a passable hamburger, especially if you add seasoning to the meat. As for the chops… I would either drown them in barbecue sauce or else find another way to use that meat.

Meat never really becomes inedible. You could still eat sabertooth tiger or woolly mammoth meat if it had been frozen for 10,000 years. It just gets an odd texture and the taste changes a little if it’s in the freezer for a long time.

Q4: Keeping old financial documents

I am trying to go digital with the majority of my life as I don’t always have time to sit and organize all the things in my life. I’ve been scanning documents and debating on which cloud storage systems I want to use like a mad woman but it just occurred to me that I may not need any of this stuff!! My mother taught me to always keep financial statements and for a long time I filed them but I recently found a file full of four years’ worth of cell phone statements and have no idea why I kept them. Why kind of financial docs should I keep and for how long?
– Kenneth

You’ll get a lot of different answers to this question if you poke around. Here’s what we do.

First, keep all tax-related documents for at least seven years, if not forever. This includes your tax return and all paperwork related to financial transactions from that year. If a document has any impact on your taxes, hang onto it until you are outside of the audit window.

Most ordinary statements and bills – your electric bill, your cell phone bill, and so on – should be kept until you can verify payment received on the next statement, then you can discard the old one. I keep them for longer, but there’s really no need to. If you’re storing them electronically, storage space isn’t a problem.

If you’re unsure about any other documents, I’d suggest using this table from USA.gov.

Q5: Debt repayment struggles

I am 29, my husband is 28. We have a ton of student loan debt (already consolidated just before rates really dropped of course) and several credit cards. Both of us finally have decent jobs at the same time so we want to start tackling this debt.

We set up a debt payment plan as you suggested with the highest interest debt first. You said all payments should go to that first debt. Does that mean we shouldn’t make payments on the other ones? Won’t that damage our credit?

Another problem is that even if we pay it all off really fast, it’s still going to be a decade before we are free of this debt. We want to have a family but we don’t want to be stuck in this apartment with an eight year old. I wouldn’t want kids in this neighborhood.
– Maria

You need to make minimum payments on all debts in a debt repayment plan. A debt repayment plan simply tells you which debt you should make extra payments on. If you stop paying the other debts, your credit report will crater and they will start hounding you nonstop for payment.

Your issue about needing a decade to pay everything off is pretty typical. The only ways to accelerate it is to live as cheaply as possible (and throw every dime at the debt) and work more (by getting a second job or starting a side business) and throwing all of those proceeds at the debt. You’ve already consolidated, so that won’t help.

If you want to have children before then, seek out a rental property in another location. You might pay more per month, but it’s almost always better than the monthly costs of home ownership. Owning your own home can be really expensive – it’s not just the mortgage, but the homeowners insurance, the property taxes, any homeowners association fees, maintenance, and so on. Jumping into it when you’ve already got a lot of debt is a pretty sketchy idea.

Q6: Buy it for life: winter

I just graduated with a masters degree in petroleum engineering. I’m going to be working in rural North Dakota for the foreseeable future. I have never lived farther north than Oklahoma before this and I just got my first taste of cold weather. What kind of winter stuff should I buy that will last for years?
– Sam

My honest suggestion is to visit your local Carhartt store. The stuff that Carhartt makes, in terms of lasting for a very long time, giving you good bang for the buck, and keeping you warm in the coldest winter months, is going to be your best bargain.

I would very strongly suggest getting an Arctic quilt lined coat and, depending on how long you’re going to be outside, some similarly-lined snow pants. You’ll also want a stocking cap – they sell those, too. Since I don’t know exactly what kind of work you’ll be doing with your hands while outside, it’s hard to recommend gloves, but you will definitely want a warm pair. I have a green Carhartt Arctic coat that I’ve worn since 2004 and it still looks practically new. I won’t be replacing it for a long time yet.

Another strategy: dress in layers. Long underwear – both tops and bottoms – are vital on the cold days. On the coldest days, I’m usually wearing a t-shirt, a thermal shirt, and my main shirt on top, and thermal pants, sweatpants, and jeans on the bottom under everything else if I’m going outside for a long time. Sure, maybe it’s overkill, but I’d rather have my clothes wick away a bit of sweat if I’m really active than be frozen when I’m standing still.

Q7: Old odd collector’s items?

My mother recently passes away and we have some things that we want to sell. I don’t think anything is worth a fortune, but would like guidance so that we don’t get taken across. Some of the things are – silver coins and old paper money (circulated with little wear), Avon bottles from 1960’s and 1970’s, Jim Beam bottle, Michter bottles, ceramic bells and collector spoons from 1960’s and 1970’s and Franklin Mint Silver Ingots. Thanks for your help.
– Sam

The silver ingots probably have some value as they’re basically chunks of silver. These will have some significant value on eBay provided they’re still sealed. Check the price per ounce of silver (currently $13.34) and that’s the melt value of each ingot, so you should be able to get a bit more than that – maybe $15 per ingot – at a bare minimum.

The money should be taken for appraisal to a licensed coin dealer. Your best bet is to go to a coin show (if there’s one in your area) and have several dealers take a look at what you have. One dealer might lowball you, but if you ask several, most will be honest.

The old bottles and other items are trickier. My best suggestion, since you know what they are, is to try to find examples of the items on eBay and see what they sell for. It is very likely that they have little value. If you’re still unsure, take them to an antique show and ask several dealers for their opinion.

Q8: Dave Ramsey and 12%

I’ve read several of Dave Ramsey’s books recently and listened to his radio show and he constantly talks about getting a 12% return on your money if you invest it. I don’t understand how that’s even possible. You use a 7% return which seems a lot more realistic. Is Dave doing something else with his money? How is he getting 12%?
– Marcus

First of all, watch this video from Dave. He makes it pretty clear that he uses 12% as a motivating tool and that you basically can’t get this kind of return consistently.

He uses a very unusual method of calculating that 12% number – arithmetic mean annual return – that doesn’t match how money actually works. If you get a 100% positive return one year and then a 50% loss the next year, it means that you’re going to wind up with the same amount you started with – $5,000 turns into $10,000 when it goes up 100%, then drops back down to $5,000 when it goes down 50%. With arithmetic mean annual return, he just adds up the annual returns and divides by the number of years, so he’d take 100% – 50% to get 50%, then divide that by two to get a 25% annual return. Does that example look like a 25% annual return to you?

If you’re looking at long term returns, you need to stick with realistic long term projections. I really trust Warren Buffett’s estimation of 7%.

Q9: Budget categories

How many budget categories is it good to have? It seems to me that having just a few (like utilities, food, rent, fun) isn’t deeply useful but having a ton of them takes way too much time to manage. How many do you have?
– Gerry

We use You Need a Budget for our budgeting. Within YNAB, we have a pretty small number of actual categories – food, clothing, utilities, household, insurance, transportation, gifts, savings, and personal. I log all of our transactions in these categories.

The real useful part for us is that each transaction has a “memo” section where you can add whatever text you want. In there, I add hashtags like #boardgames or #eatout or #schoolsupplies. That way, whenever I want a more specific report on spending, I can just search for transactions that match those tags.

It works out really well. It makes it easy to dig down into very specific details if we want, but it keeps most things in a “big picture” mode.

Q10: Loopholes and advice

I read your column regularly and really enjoy it. I thought that you might want to read this article about HSAs as your advice on the HSA accounts wasn’t quite accurate.

http://www.today.com/money/sneaky-way-save-more-retirement-2D80174659
– Nancy

Here’s the thing: I am very, very wary of financial strategies that seem to revolve around “loopholes” and I am really hesitant to recommend them. This felt like a “loophole” to me.

In general, “loopholes” are a terrible idea for people at home to try to exploit. They generally require you to pay a lot of attention to changes in the laws and, if you’re not really on top of it, that loophole can close and you’re stuck with a real mess on your hands. Generally, loopholes don’t even save you that much money anyway compared to longer lasting options.

This is really the realm of financial advisors, who stay on top of these things and generally know with much finer detail when to leave loopholes behind.

Q11: Winter trunk items

What items do you keep in the trunk of your car during the winter? My father always kept jumper cables and a blanket back there. Any other suggestions?
– Darren

In addition to jumper cables:

Multiple blankets, because it might not be just you that needs to stay warm.

Road flares, because you may need to attract visual attention.

A first aid kit, because someone may be injured.

A change of clothes for each regular vehicle occupant, because wet clothes are not something you want to deal with if stranded in the winter.

A flashlight, because you’ll probably want to see and because they’ll act as a secondary attractor if you need help.

A spare tire and equipment to change a tire, because tires go flat in the winter pretty often if you don’t properly inflate them.

High energy snacks like granola bars, because you’ll need energy.

Water bottles, because you’ll need some water if you’re stranded. Most water bottles freeze without any problems.

A sandbag, because extra weight helps with traction on slick roads.

If you have all of that stuff, you’ll be in good shape for winter travel.

Q12: Is entrepreneurship necessary?

Almost every financial resource that I read (and this includes The Simple Dollar) gets around to eventually pushing entrepreneurship down my throat. Here’s the thing: I have no interest in running a business and employing people. None at all. I enjoy solving problems and learning things. I don’t enjoy management at all. Yet over and over again financial gurus push toward entrepreneurship. Is it that necessary?
– Kevin

No, it’s not.

The reason so many people talk about entrepreneurship is usually because they’re talking about pretty small scale entrepreneurship – a side business where they make enough money to support themselves. They might have one or two other people involved, but it’s usually more of a “splitting the pie” relationship than an employer-employee relationship.

More than anything, it’s about defining your own job. If you like to do certain things, you tinker with those things until you figure out some way that you can do it for a living, even if you’re not earning too much. That’s entrepreneurship. You’re essentially doing things you love and earning a living at it.

Some people might choose to grow that business into something more. When I started building a business, I myself quickly realized that I didn’t want anything to do with direct management so I got out of the “business” end of things. I really didn’t want anything to do with it either.

For a lot of people, entrepreneurship means freedom. It means the ability to walk away from an unfulfilling job before having true financial independence. That’s awfully tempting for a lot of people.

Q13: Mattress recommendations

What is your suggestion on mattresses? My husband and I have had a standard mattress for a long time – it must be 15 years old – and we both have back issues, etc that I think are probably related to the mattress. Since the price varies so much – anywhere from a couple hundred to several thousand, how do you decide what to get? Is there a way to buy for life without spending what amounts to a decent used car? Also we can’t decide if we want a standard spring, memory foam or a sleep number. For now I purchased a foam topper to help us get through until we can save enough to pay for a mattress with cash.
– Diane

It is really, really difficult to give a definitive answer here because different mattresses work well for different people. There simply isn’t a mattress that works well for all people. The only general indicator I’ve seen is that medium-firm mattresses seem to generally be better for people with back pain.

Sarah and I use a pretty low end mattress. I have some minor lower back pain from time to time which I attribute more to my office chair than to my mattress. Sarah hasn’t had much back pain at all since her pregnancy.

I consider it risky to dump thousands into a mattress if you don’t really know if it will help with your back pain. If I were you, I’d simply look at medium-firm mattresses. I’d get a relatively low cost one, see how it works, and then experiment with different toppers if it’s not great for you guys.

Q14: High school personal finance

What exactly would you present to high school students about money? Let’s say you had to give a series of presentations to a class of high school seniors. What would you talk about?
– Andrew

The challenge with reaching kids of that age, in my experience, is that most of them have no real concept that they will grow old. The idea of themselves in twenty or thirty or forty years is alien to them and they basically can’t visualize it in a realistic enough manner to take any action for their long-term future.

For those kids, I look at personal finance mostly in terms of the next year or two of their lives. I focus hard on how painful debt repayment is. I pull out a credit card application and point out to them what the APR is on that form, then I show them the reality of that APR. “If you spend $400 on some clothes or $400 on a PS4 using this credit card, you’re going to be facing a bill each month for $40. The problem is that you’ll basically keep getting this bill over and over and over again for years, costing you a total of $840. On the other hand, if you just put whatever spare cash you have into a shoebox under your bed instead of getting into debt, you can have those items in just a few months without having that $40 bill every single month.”

I try really hard to make it clear that debt is poison and should be avoided at all costs. If I can sell them on that one core idea, then they’ll be in much better shape no matter what they choose to do.

Q15: Christmas gifts for financial security

My husband and I are thinking ahead about Christmas gifts for our adult (or nearly adult) nieces and nephews that can encourage them toward financial independence and security. Any ideas?
– Jennifer

I actually have a couple adult nieces and nephews. If I were to give them gifts purely to encourage financial independence, the first thing I’d think of would be a copy of the book Your Money or Your Life by Joe Dominguez and Vicki Robin. It’s the book that turned my life around when I read it at approximately age twenty six. I’m actually considering it as a gift for one of them this year. There are many other good personal finance books out there.

Another good idea is a low-cost “buy it for life” item – something that they will use that will last and last and last and never break down so that they will never have to deal with the cost of replacing it. An enameled cast iron pot is a good example – Lodge makes good ones that are low cost. Clothes from Land’s End are also good ideas. Get them something well-made that they’ll actually use.

Another option would be a budgeting book or perhaps a copy of You Need a Budget. Both of those can be incredibly helpful to people first really grasping the need to organize their money.

Any of these would be thoughtful gifts. They might not be flashy, but they have the potential to stick around and play a real role in their financial future.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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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