Reader Mailbag #20

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.
Does it make financial and social sense to consider moving?
Is a roommate worth the financial benefit?
Using Sunbird to schedule home maintenance tasks

And now for some great reader questions!

Do you use your homemade laundry detergent to wash your diapers? Just curious. I am pregnant and planning on making my own cloth diapers.
– Brandi

My wife spent some time researching what works well for washing cloth diapers. She was interested in a very biodegradable solution, as well as one that actually got the diapers very clean. What she settled on – and what we’ve been using for a while – is three tablespoons of washing soda plus three squirts of Simple Green. We fill up the washer with water, then add both ingredients and stir, then toss in the diapers. We usually wash them once cold, then wash them again on warm, then do a rinse cycle. They come out smelling great, plus both washing soda and Simple Green are biodegradable.

After doing some math, we estimate our cost per load for these cleaning agents is about six cents (this includes both loads). Cheap and environmentally friendly – and it works! We’re happy!

What is the story behind the art element (your logo) at the top of The Simple Dollar?
Did you design it or did you find someone to design it for you and how did that happen?
Does the design at the top of a blog have to be any certain dimension?

– Kate

I designed it myself using Adobe Photoshop. I’ve been teaching myself Photoshop gradually over the years, but I am far from a master. Often, I don’t really have anything in mind when I start with a Photoshop project and I just experiment until I find something I like. While that makes for some neat stuff, it often makes it hard to repeat.

There’s no specification for anything with a blog in terms of size. It’s all about the layout you define yourself.

How are you doing on your 2008 financial goals?
– Tori

For a reminder, let’s jump back to my 2008 goals:

By the end of 2008, we intend to have fully eliminated my wife’s student loans, contributed $1,200 each for the year to our children’s 529 plans, and increased our retirement savings to 1.3 times our combined annual living expenses.

Currently, my wife’s final student loan is on the home stretch and we hope to have it gone by the end of September. I contribute $100 a month automatically to our children’s 529, so that’s well in hand ($700 contributed for each). Our retirement savings is now actually above 1.3 times our combined annual living expenses, so we’ve already accomplished that one.

What will we do in September when our goal has been achieved? We’ll start in with the 2009 goals, of which the big one is eliminating the rest of my student loans.

Do you use Angie’s List? Any thoughts?
– Annie

Yes. For those unaware, Angie’s List is a collection of reviews on services available in various metropolitan areas.

I signed up for Angie’s List during the “grassroots” period as it got started in Des Moines, in which I got a year’s worth of free subscription. Frankly, I’ve not found it to be very useful at all, simply because Des Moines is a metropolitan area not well covered yet by Angie’s List. For most types of service, there are only a couple of reviews available, and most service providers in Des Moines have no reviews at all.

On the other hand, I peeked at a friend’s account covering the Chicagoland area and I was blown away. It was incredibly easy to find well-recommended services in almost every category.

I think if you live in a large metropolitan area, Angie’s List is worthwhile for finding services. If you’re a bit more off the beaten path, it quickly becomes less useful.

Why not seek the highest interest rate for cash accounts? Several on-line banks consistantly pay higher interest rates than the others. The difference between 3% and 3.5% interest rate isn’t 0.5%, it’s nearly 20%! That’s an additional $500 per year into a $100K emergency fund and requires zero time once the account is established.
– Lurker Carl

I don’t advocate for using interest rates for comparing banks because interest rates change very regularly. For most online banks, interest rates are used to lure in customers, and they shift the interest rates around all the time. Plus, whenever the Federal Reserve changes their rates, the online banks follow suit, often at very uneven intervals.

When you mix all of that together, it quickly becomes clear that a specific rate comparison is only useful in the moment, and that comparison will be invalid in a month or two. So I simply don’t bother to use the comparison – I just make sure that the rate is competitive (meaning within a percent or so of the ones on the bleeding edge at the moment) and then look for other features, mostly customer service.

Some people advocate rate hopping. I personally think that if you have enough sitting in a savings account that you can actually earn a good wage for the time invested hopping from online savings account to online savings account, that cash should be sitting in a better investment somewhere. If you have $100K in your emergency fund, that’s far too much, and you’re denying yourself some real opportunities for growth by putting most of that in index funds.

Do you think you’ll ever outgrow video games? Do you want to? Do you think having a system in the house is good for your kids, bad for your kids, or a wash?
– GVR

I don’t think there’s anything to “outgrow” when it comes to video games. I usually view statements like that as being statements by people who have already made a decision that video games are somehow beneath them as a form of entertainment. Personally, I find video games to be substantially more rewarding and intellectually stimulating than television and more than most movies, too.

I think video games are a net benefit for children if played in moderation and mixed with reading and physical activities. My two year old already plays some Wii Tennis on rainy days, in fact, and understands the idea behind Guitar Hero and Dance Dance Revolution (though his coordination isn’t quite there yet). Not only is gaming like this good for hand-eye coordination, it also has social benefits. Many games have problem-solving qualities – I can certainly vouch that the old King’s Quest games helped fuel my addiction to puzzles, as I remember staying up all night at a friend’s house piecing through King’s Quest V and VI.

How much faith do you put in individual stock picks or fund recommendations?
– Lila

Almost none. I don’t think individual stock picks from places like investment blogs, CNBC, newsletters, magazines, or other places are well-researched enough to put my money in.

Before I invest, I want concrete reasons not only why this specific investment is a good one, but why I should be investing in this class of investment, how long I plan to hold it, and so on. Jim Cramer shouting out a pick on Mad Money most definitely does not fit the criteria.

What is success, and how did you arrive at your definition?
– Natasha

I think success is an inherently personal thing. Every person is going to have a different definition of success, and thus when one person has achieved what they define as success, it might not be success in the eyes of another.

So what’s my definition? To me, success occurs when you can spend your time mostly doing the stuff you want to do and earn enough income from doing that (or from investments) so that all of your life expenses, needs, and reasonable wants are covered.

I have not achieved that as of yet, but I’m far closer than I was a few years ago. While I do have the freedom to mostly do what I want, I can’t do exactly what I want. There are a lot of days when I’d rather work on fiction writing, or nonfiction writing on something else entirely different, or just go out and work in the garden or just play all day with my kids.

That’s my goal, and when I reach it, then I’ll view my life as being a success. Thankfully, I’m at least somewhat close to it.

I’m going to be financially advising a person who does not have a home computer. I’m only going to be doing the basics with her—budget, Dave Ramsey’s baby steps, those types of things. I admit, all of my money stuff is on a computer with excel spreadsheets and such, so I’m at a little bit of a loss as to how to help. Do you have some good tips or links to forms I can print out for the non-computer savvy person?
– Angel

My honest suggestion would be to buy one of the very solid personal finance workbooks sold in most bookstores. The best one, in my opinion, is Dave Ramsey’s Total Money Makeover Workbook.

Another option is to contact some groups in your area that offer financial assistance meetings. One great place to start is by stopping by the offices of large local churches. Almost every large church has some form of faith-based financial planning going on, but most of the actual working material is completely secular and can be used without change in non-faith environments. Stop by, find a contact, and see what they have.

If there is interest, I’d be willing to prepare a document like this for download as well.

Who was the greatest U.S. president?
– Nick

For some goofy reason, I loved this question.

It’s easy to give a typical answer like one of the Roosevelts, Lincoln, Washington, and so on. But each of those were led to greatness by tumultuous periods in history – they had powerful opportunities to make themselves great. To me, a great president is a president who accomplished powerful things in a relatively calm time, who did it quickly and efficiently and got out of the limelight.

Thus, I think the greatest American president was James K. Polk. He was president for just one term (1845-1849), but managed to accomplish an incredible amount. Here are seven things he did:
1. He pushed through the Walker Tariff, which drastically lowered the tariffs on all trade. In other words, it became very cheap for the United States to trade internationally, which was the first big step towards the U.S. becoming a global economic powerhouse.
2. He established an independent treasury, which meant that at last the funds of the United States government weren’t held in private banks, as they were prior to Polk.
3. He annexed Texas and convinced it to become a state.
4. He bought the Oregon Territory from England, which included Washington, Oregon, Idaho, and parts of Montana and Wyoming.
5. He signed the Treaty of Guadalupe-Hidalgo, which (along with the Gadsen Purchase) added California, Arizona, Utah, Nevada, and portions of Wyoming, Colorado, and New Mexico to the United States.
6. He opened the U.S. Naval Academy, the Smithsonian, and the Washington Monument.
7. He issued the first postage stamps in American history.

He set all of this down as his agenda upon becoming President and accomplished all of it in just one term. That, to me, is an incredible success – he set some big, giant, audacious goals and got them done in just one term.

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

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