Updated on 07.07.08

Reader Mailbag #18

Trent Hamm

Each Monday, The Simple Dollar opens up the reader mailbags and answers ten to twenty simple questions offered up by the readers on personal finance topics and many other things. Got a question? Ask it in the comments. You might also enjoy the archive of earlier reader mailbags.

As usual, we’ll start things off with a few links to older articles that directly answer questions I’ve heard recently.
101 goals in 1001 days
When is it time to move from the city to the country?
Financial success for minimum wage earners

And now for some great reader questions!

My wife and I are ue to come into a large sum of money we hope to use as a down payment on our first home. I have a substansial amount of debt (making me a bad candidate for a good mortgage)that is being taken care of with our budget. My question is what is the best way to make this money “work” for us for say 24-36 months whle we clean up the rest of the mess?
– HippyKidz

Unless your debt is really low interest, use the money to get rid of the debt, then start saving for your down payment. This gives you a lot more flexibility in terms of future decisions. You can “snowball” your debt payments right into that savings for a down payment, plus if you decide that you want to do something different in a year, you can do that.

I’ve come to the belief that the best argument for debt freedom is the freedom part. It gives you the power to make major life changes much more easily – if you don’t have any debts and some cash in the bank, what’s stopping you from spending six months in the Amazon? It’s a lot different if you’ve got big financial burdens on your back and you’re chained to your job.

What are your personal nicknames?
– Carlos

I can really only think of one. When I was in high school, I was involved in extracurricular activities and a lot of people I met from other schools called me Elvis, because when I would give a presentation, I used to work in an Elvis Presley impression as an icebreaking and self-deprecating comedy bit. The fellows who I was involved in this project with thought the whole things was so hilarious they’d practically wet their pants when I’d curl my lip. In fact, I saw one of those guys recently and he still just called me Elvis.

Trust me, the people who know me personally that read this are either baffled or are shaking with laughter. I have absolutely no rhythm or singing skill.

Is it a waste of time to sit around and daydream about being rich?
– Norman

Not if it fuels you to take some sort of action. Being “rich” is a great goal – but that’s what it is, a goal. You’ll never reach that goal if you don’t get up and start doing something.

Instead of daydreaming about being rich, spend some time thinking about how you can get from here to there. Do you have a talent you could be cultivating? Could you be working harder at your current job and perhaps earn raises or promotions?

Or is it really being rich that you want? Maybe you just want a greater degree of freedom – or you want someone to love you. Spend some time figuring out what you’re really daydreaming about, then use that for fuel to start making real changes in your life.

A daydream can be a nice start – but that’s what it is, just a start.

I don’t know anything about buying wine, but I enjoy a glass with my evening meal. Any tips?
– Melissa

Stick to inexpensive bottles. Don’t spend $30 or $40 on a bottle of wine if you’re unfamiliar with what you’re buying. Look at the recommendations and scores at your local wine seller and stick to sub-$10 wines that seem to be recommended. Try a lot of different types of wines, and different varieties within that type. Look very carefully at food matching advice – for example, if you’re eating a pasta with a tomato sauce, try a nice red Zinfandel.

Another cheap way to figure out what you like is to regularly go to free wine tastings. Go to several and note which ones you seem to be drawn to regularly, then focus on those.

Most people shouldn’t bother paying more than $15 for a bottle of wine. There are tons of great wines for less than that – why blow your cash?

Why did you stop posting Consumer Reports Magazine overviews? Do you still subscribe?
– Louise

I still subscribe, but the posts weren’t very popular, so I stopped with the monthly Consumer Reports and Money articles. Instead, I just read each issue and try to find specific things to comment on either to support articles I’m working on or as the basis of a new article.

I’ve considered a monthly “magazine roundup” post, but that would require me to subscribe to a number of personal finance magazines, most of which I don’t like.

What do you consider to be appropriate preparations for a devastating global event?
– Will

Well, you have to look at this type of situation much as you would an insurance policy. The type of global disaster that would cause you to have to turn to emergency rations has an extremely tiny likelihood of happening, so from a cost standpoint, it’s not reasonable for the average person with a non-faith concern to spend a ton of money preparing for doomsday.

If I were to prepare for such devastation, I’d probably have a lot of potable water in the basement – a few giant jugs of it that would last for a while. I’d also have a bunch of dehydrated food that could last a very long time – several of these would do the trick. The advantage with things like this is that you could actually use them in a pinch – for camping and such.

At least one person I know has enough supplies in his basement to feed his family 2,000 calories a day per person for more than a year.

In truth, though, your best way to prepare is through knowledge and consistent behavior. Know how to do basic things for yourself. Start a garden, and know how to do it. I recommended books on off-the-grid living a while back, particularly the SAS Survival Handbook.

I don’t want just an investment guide. I want one that also teaches me how the stock market works. Got any recommendations?
– Anna

The best book I’ve found in terms of a general introduction to the stock market that also teaches a bit of investing is Burton Malkiel’s A Random Walk Down Wall Street. It is not the best investing book out there, nor is it an unstoppable economics tome, either.

Instead, it’s just a readable book that explains how the stock market works in pretty solid but engaging terms, and then uses that explanation to point out some basic investment advice.

How do you write articles in advance when you make timely references?
– Annie

Most of the time, when I write about things I’ve done recently, that article is really freshly written. Sometimes, I’ll write in advance of something I’ve got planned to do in the next day or two when it’s just an offhand reference, like a plan to do a small home improvement project or something, but those are pretty rare. When I do write something that’s very topical, I just slip it in there and move the scheduled article back to a later date.

Doing this helps me not only have stuff written in advance, but it also lets me write about topical stuff if I need to. You can think of it like a newspaper edition – an article might be scheduled to run, but then at the last minute the editor slips something else onto the front page and that article waits for another day or two to run.

Do you have any suggestions for online software that can track my spending habits?

I have tried wesabe.com, but I don’t especially like how it works.

Do you have any other recommendations?
– Melinda

The best option I’ve found for basic budgeting online is PearBudget. It does exactly what it says on the marquee – budgeting. I wrote about PearBudget in detail a month or so ago.

While it doesn’t have some of the bells and whistles of services like Mint or Wesabe, it does the core function of budgeting very elegantly and protects your privacy very well, too. It’s also entirely ad-free and doesn’t weigh you down with product come-ons a la some other online budgeting tools. My only complaint is that it is subscription based (for the time being, $2.95 a month), but you can try it for free for a month and see if it works for you. I still tinker around with their free spreadsheet on occasion.

I keep hoping to hear more about your cooking site. Any news on that front?
– Shan-Oh

The cooking site is on hiatus for the time being, as I try to decide what to do next. I have a ton of potential projects in front of me right now – a second book, an image bank, some software updates to The Simple Dollar, and about five other things that I want to be doing that are connected directly to The Simple Dollar.

A cooking blog, while fun, would probably be even more of a time sink than The Simple Dollar. Right now, I just don’t have the time to give it the love and care and nurturing I would need to give it to be a success.

Got any questions? Ask them in the comments and I’ll use them in future mailbags.

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  1. Frugal Dad says:

    Re: the question from HippyKidz. Another benefit of the approach Trent outlines is that by paying off the debt up front you will have longer for your credit scores to “heal” before shopping a mortgage. Pay off the debt when you receive the money, build back a downpayment fund and allow your credit score to heal over that time. Sound approach.

  2. beloml says:

    Could you please elaborate on the concept of a price book? I can’t figure out the benefit, from reading both your posts and the Tightwad Gazette.

    Is the premise that stores consistently price the same items differently, and that difference is significant enough to justify the time and expense of going to different stores for different items? Thanks. Love your blog.

  3. kathryn says:

    Actually, I miss the Consumers Report summary.

  4. Nick says:

    I miss the Consumer reports summary as well.

    Another great site for tracking expenses is

  5. Jennifer says:

    I am hoping to sell my home next year and buy a new one in a better school district (and it will be more expensive). My only debt is my current mortgage and a car loan that will be paid off in 2010. I should have enough equity for a downpayment of about 15% on the next house. Do you think it would be better to take my extra income (after my emergency fund, which is fully funded)and pay off my car loan (better for a new loan?) or to save it for a 20% down payment?

  6. Joe says:

    I liked the CR summaries as well.

  7. Adam says:

    Another fan of the Consumers Report summary.

  8. Noah'Dib says:

    Ditto missing the consumer report summaries.

  9. Steve says:

    I’ve probably missed some posts over the past several weeks, but didn’t you have a couple guest posts at one time? And I thought that was to be an occasional but ongoing thing (since it seems for most big bloggers it’s very common to give them time to focus on other worthwhile projects I suppose). Did you decide against having guest writers, and if so, howcome?

    I’m for originality, but sometimes a different perspective every now and then offers a welcome change of pace.

  10. Family Man says:

    I miss the consumer reports stuff as well.

  11. mgroves says:

    That bucket of food is awesome.

  12. K says:

    Jennifer –
    definitely don’t buy without at least 20% down. A car loan near the end of the term won’t negatively affect your credit, in fact it should improve it if you’ve been paying regularly. The only thing they might check is your total debt payments as a % of your income. But they usually approve people for more than they should actually be buying. So you should definitely only pay the minimums on the car loan and save up for a 20% down payment.

  13. J. Savings says:

    I have a question for you – and you have to pick one ;)

    “Would you rather… Default on all loans, credit cards, mortgages, etc for 5 months straight (no payments allowed at all, no matter what even if you have the money) – OR would you rather give Uncle Sam a one time $20,000 check to avoid it all together?”

  14. Lola says:

    About the question whether it’s good to think about getting rich, I agree with your answer. I’ve been thinking more about that recently. Then I remember that hilarious film, Office Space, where the protagonist says he would like to be rich so he could do nothing, and his friend replies that one doesn’t need to be rich to do nothing – his cousin is a bum, he’s broke, and doesn’t do a thing. I’m honestly thinking about doing nothing without having to be rich…
    I don’t remember reading your Consumer Reports summary, but I’d like to read it.

  15. Ryan says:

    Since the cooking blog is on hold for the time being, maybe you’d be willing to make some more posts recipes or techniques you enjoy, or just on food and cooking in general, just to give us some tidbits to whet our appetites (or satiate them, depending on how you look at it). Something to tide us over, perhaps.

  16. Lola says:

    One question related to Office Space: have you seen this film? Do you like it? What films do you like about the workplace, if any?
    I don’t know if you got this question I asked ages ago:
    What do you think of the concept that, to be able not to work and live off your funds, you should calculate how much money you spend a month, and then multiply it by 200? So, say, if you spend 2,000 a month, you should have 400,000 invested, and that would allow you to get the interest each month, and the money wouldn’t finish? Does any of this sound reasonable?

  17. Shevy says:

    A few comments:

    Sorry to hear the cooking blog is on hold for now, but it’s true that it would have taken a ton of time to get it up and running to the standard we expect from you.

    If you want to prepare for a globally devastating event, a classic book that has been revised for the 21st century (he also did the same for Y2K, but well, we know it wasn’t necessary then) is Howard J Ruff’s How to Prosper in the Coming Bad Years . While it’s not really likely things will ever get as bad as he envisions (IMHO) it certainly spells out preparedness on a number of levels.

    And I have to laugh at the wine advice. It probably works very well for general readers in the US and moderately well for their counterparts in Canada (maybe bumping it up by $5), but it doesn’t work for the kosher consumer! If I stuck to an under $10 price range here I would have exactly one choice, fermented liquified grape jelly, I mean Manischewitz Concord Grape Wine.

    I can buy a few things in the $16 to $20 range that are decent (there is literally no kosher wine priced between $8.99 and $14.99), but you need to pay $25 or more for a nice bottle. Not that the BC Liquor Control Board permits much in the way of choice, even though there are a large number of very decent kosher wines nowadays from everywhere from the US to South Africa to Australia to Israel.

  18. Chris says:

    the consumer reports and money recaps were one of the things that turned me into a regular browser of the site. one or two times i’d actually go to the store and read the articles myself based off the recaps.

  19. Louie says:

    i dont think you should change the simple dollar’s face. i like it how it is, and im not saying that because im afraid of change or anything but because i dont want to see it get super glamorized or anything. it is an excellent site and i pray that you do not glitz it up and next thing you know trent is a tv icon etc.

  20. teelag says:

    I also miss the CR and Money summaries.

  21. Travis says:

    The foresaken Customer Reports summaries appear to be more popular than once thought.

  22. Travis says:

    Wow, I’m in my fourth decade here on this planet and I’ve been spelling “forsaken” wrong the entire time. See, I learned something else from this site.

  23. Mike says:

    I too miss the consumer reports overviews. I really enjoyed going back and reading them once I found your blog. Please reconsider bringing them back, and maybe catch up on the missing volumes too :)

  24. KLevy says:

    Curious- How do you make your money? It’s clear this blog takes quite a bit of time to write and organize. Are you able to support yourself with this bog? If so, how? You don’t have many ads. I know books don’t pay a lot…

  25. Mike Nash says:

    Please bring back the Consumer Reports and Money magazine reviews. I canceled both subscriptions as I enjoyed your overview much better plus I was saving money.

  26. budi says:

    hey mate
    i have a rather simple question to ask regarding investment. Say for example I have just won a $1 million lottery and I would like to buy a new house that is worth $700 000. Assuming that I am considering these 2 options:
    1. pay it outright and invest the rest in the stock market
    2. pay a 20% downpayment and pay off the 80% over 30 years period with an interest of,say,6%. Since I still have a large sum of money left over, I shall invest the left over in the stock market at an average rate of 10%.

    Now, which would be the better option? I understand that the 2nd option sounds logical, since you’re earning 10% and paying 6%. However, with regards to the stock market, there are other issues to consider such as liquidity, tax implication (whenever I withdraw my money) and also the extreme volatility of the stock market.

    Do you have any suggestion?

  27. Louise says:

    Thanks for answering! I wonder if you are measuring popularity by clicks or by comments. Those summaries aren’t really conducive to much discussion but it looks like I’m not the only one who appreciated them.

  28. Kate Osborn says:

    For the people looking for online money management tools, check out moneycenter.yodlee.com . Its got pretty handy charts, graphs, etc, and seems to be a little more useful than Wesabe and works a lot better than Mint.

  29. Karen says:

    Trent – my question:

    How do you get a spouse to recognize the amount of money they spend on a ‘hobby’ is a huge expense? I have suggested tracking how much is spent, but the response was – “No way, I’d be scared to see the real number, I know it’s huge.”

    My husband’s fishing hobby is really starting to get expensive at this point. The weekly and monthly expenses his fishing costs us are starting to get steep. Boat payment ($150 monthly), insurance ($200 yearly), tags, registration, ramp fees, gas to and from the lake for the truck, plus gas for the boat, live bait, and incidentals probably/definitely all add up to several hundred dollars or more every month (I don’t know the exact amounts – I don’t see all of the recipts). Not to mention the new lures he ‘has to have’ even though he has 3 (or more) of the exactly the same lures, maybe some in just ‘slightly’ different colors or the new rod and reel combos he just ‘has’ to get for just one fishing technique. He even admits he has too much stuff and buys way more than he needs. This statement, however, is usually followed with, ‘But I don’t have half as much as some guys I know, so you should feel lucky.’

    New lures, rods, reels, bait, and ramp fees all come out of his weekly allowance – usually. The other actual bills – boat payment, insurance, tags, registration and some of the gas – are budgeted for in the weekly/monthly household budget. What gets the budget in a mess is his desire to fish has increased, while the amount of money available for this has not. For example, he’ll sometimes want to go fishing 2-3 times per week when the gas budget may only allow for him to go once that week. Or he’ll spend the remaining amount of his weekly allowance on lures on Thursday (sometimes as much as $20), use the debit card for lunch on Friday instead and then pull his full amount of allowance out on Monday – essentially double dipping in my mind.

    Don’t get me wrong – we can afford his fishing habits to an extent, but we are still paying off debt mistakes (including the boat) we made from several years ago. Every extra dollar he spends on fishing is one I have to readjust the budget for (less on debt repayment or groceries – if I’ve already paid the bills – for example). When I stand my ground and say – no, we can’t afford that this week – while he says he understands and says we’re on the same page, well, he has pouted and sulked like a child before.

    While this is his one true passion and I don’t want to discourage him from it – how would you suggest we come to an understanding on this budget issue without me feeling like the bad guy all the time? Also, I believe the core of the issue for him is that if he sees the real cost associated with his fishing, he’ll feel guilty that he spends that much when we’re trying to get bills paid off, so he’d rather remain clueless so he can blissfully go on his merry way.

  30. Dave says:

    http://nbcsports.msnbc.com/id/25585243/ Michael Vick is filing for bankruptcy – he says he is “10 to 50 million dollars in debt” to creditors. If you could give Vick one single piece of advice, what would it be? (PS how do you become tens of millions of dollars in debt!?)

  31. Jennifer says:

    Thanks for the comments, K!

    Trent: I miss the Consumer Reports articles!

  32. Luis says:

    Trent, hi, as you can see my name is Luis, Im writting to you from Mexico.

    First of all I have been reading your blog for months. I will be finishing my studies this December and I will move away to start a life on my own (In Mexico normally you live with your familiy until you finish your studies, including University). So I searched the net to find saving tips, thats how I stumbled with your site.

    I have a question, I think no one has asked you something like this: Have any advice to get extra money for a student with no time, not even for a half-time job? I know it sounds maybe even ridiculous but the situation here its pretty hard since… ever and things will not get any easier when the time for me to move on comes.

    Thanks in advance.

  33. Carol says:

    Question for Trent:

    How do you feel pets factor into a frugal/simple lifestyle? In particular, dogs.

    Thank you.

  34. mia says:

    thanks for the link to the pearbudget spreadsheet. :)

  35. K says:

    The rule of thumb I’ve heard is to withdrawal 4% of your total assets per year, so your annual income multiplied by 25 is what you would need. This is 300 times your monthly income (25 x 12). This allows you to give yourself a raise each year. A smaller number might work if you planned to do some part time work or expect your expenses to decrease in the future (kids moving out, etc).

    I would say buy the house outright. You’re right that it goes against logic, but there are very few people who would keep a mortgage if they had the cash to pay it off. Especially if you consider that your mortgage payment would be over $3300/month, you would be freeing up a lot of cash flow.

  36. Erika says:

    I have a question about what to do with college funds for my kids who are now 5.5 yrs and 4 yrs. We have a trustworthy acquaintance who is a broker with Smith Barney. We opened a 529 for each child in the broker sold College America of Virginia program. We live in Maryland and just last year we opened a MD 529 account now that fees have decreased quite a bit. MD offers $2500 tax deduction per child and if you put in more than that you can defer it. We have maybe $5,000 per child sitting in a brick and mortar bank paying almost nothing. I’ve lost about $400 in the MD account over the last year but I know the market is down. I honestly haven’t paid much attention to the VA account. What I can’t figure out is whether to put their money in an ING account, the MD account or the VA account. How would I determine what is the best thing to do in this market?

  37. Simone says:

    Trent, the wine discussion brought this recent study to mind. The full article on the study is even more interesting, but this will get you started:

  38. consumer_q says:

    The wine price range is very state specific within the USofA.
    Buying a bottle of okay $10 wine at a Safeway in California will cost you $15 in a state like Utah where you have to buy at a State Liquor Store and get taxed out the wazoo. So if you live in a monopoly state, a palatable table wine will be $15.

  39. Jennifer says:

    I have a silly question about gardening, but with the price of produce (and everything else) going up, I really want to start a garden. My biggest question about gardening is: do I have to wait until the start of the season or can I start a vegetable garden right now, in the Midwest (90 degree temps) and still have some vegetables grow this summer? If I have to wait, when is the best time to get started? That has been my biggest downfall, getting started at the “right” time.

    Thanks so much! I love your blog-you are so helpful! Can’t wait for your book!

  40. ontguy says:

    What is your general approach to proofreading; articles, emails, letters, etc.?

  41. Erma says:

    I just stumbled upon a website called rudder.com. They help keep track of your money after you enter information about your debt, income, etc. Is this a safe site?

  42. I had a discussion with a friend and I’m not sure how to answer his question.

    He is 24 with student loan debt, a decent-paying job, and no retirement savings. His argument is that if he saves a large percentage of his income and invests is appropriately (in mutual funds, treasury bonds, etc) why should he also fund retirement accounts like a 401k or Roth IRA. If he can make enough “regular” investments to be able to live off in the interest in only 10-15 years (a la Your Money or Your Life), why should he tie up money in retirement accounts that he can’t touch for another forty years?

    My answer is tax benefits and self control (since most people wouldn’t be able to grow the money without touching it), but I think he’s right in that he’s got the self control to handle this kind of plan. Is there a legitimate argument for the “normal” method of retirement investing?

  43. Erika says:


    I don’t know much about gardening but from what it seems in my area of Maryland, you could do an early and a later planting. You didn’t mention specifically what state you are in but most states have some kind of ‘extension’ office which lists planting dates for crops. Many of the large universities or government offices have these. http://www.thevegetablegarden.info/cooperative-extensions

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