Reader Mailbag #22

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.
How I build and use a price book
Money merge accounts – my thoughts

And now for some great reader questions!

What are your thoughts on the Gerber Life Grow-Up Plan? Since having a baby two months ago we have received three applications in the mail from Gerber. We are already planning on starting a 529 as soon as the enrollment period begins. Thanks!
– Angela

The Gerber Life Grow-Up Plan is a whole life insurance policy targeting children. I generally don’t recommend it for two reasons. First, your young child doesn’t have a need for life insurance. If he or she passes away, there are no significant costs that will be incurred. Second, you’re far better off, in terms of the investment aspect of the policy, to just sock the money away elsewhere.

We were quoted $16 a month for the policy for our daughter several months ago. If I put $16 a month into a savings account bearing 3% interest, she’d have $5,240 cash on her twentieth birthday, a big boon for college. If I put it into a long-term investment account that returned an average of 8% a year, she’d have $9,200.

With the Gerber Life Grow-Up Plan, things aren’t quite so good. After twenty years of paying in that premium, according to Gerber’s literature, “the cash value is equal to or greater than 100% of the premiums that have been paid.” That means on her twentieth birthday, she’d have a cash value of $3,840 under the Gerber Life Grow-Up Plan.

You’re better off just putting the $16 a month away in a savings account somewhere safe.

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?
– Lola

Office Space is one of the funniest movies I’ve ever seen – it has frightening accuracy in the way it depicts office life. Along those lines, both the British and the American version of The Office fill that same niche, with the British one being a bit more subtle in the humor.

I think all three of these do an excellent job of showing the realities of an office environment with an appropriate level of humor and uncomfortable moments. In fact, it’s the uncomfortable moments in all three that really make them click – the ones where someone says something painfully inappropriate in the office or makes a horrible mistake and you’re torn as to whether to correct them or just let it go.

I do not understand the idea of giving all children exactly equal monetary gifts. I come from a large family, and I am pretty sure that my parents helped out a couple of my siblings much more than they have helped me out, financially. I am totally fine with that. I am thankful that I have the common sense, luck and intelligence to manage my finances without as much help from my parents.
– SAB

You’re lucky that you’re from an understanding family – many families do not weather inequality nearly so well. Often, one or two children are outcasts – they either succeed more than the other siblings or are failures compared to the other. Often, they’re treated differently by the parents as well – sometimes better, sometimes worse.

The end result is that there are many families that I know of where the siblings simply want nothing to do with each other. Quite often, it’s the result of the attitude of the parents – one child “deserves” more help than another child, when it’s often the first child asking and taking while the second child stands by, wishing only to help the parent.

I’ve seen so many situations of sibling inequality and parental overcompensation wrecking families that I simply won’t let it happen to mine. The best solution I can think of is aiding them all equally – or at least offering equal aid to all of them.

How is your 101 goals in 1001 coming? Are you still actively tracking them?
– Nate

For those unaware, I created a list of 101 goals I wished to accomplish before Friday, January 29, 2010.

So far:
+ I’ve completely accomplished 1, 5, 7, 11, 12, 17, 19, 21, 28, 33, 34, 35 (close enough), 40, 42, 43, 67, 75, 89, and 90.
+ I’ve partially accomplished 10, 14, 22, 23, 24, 30, 36, 49, 58, 59, 60, 61, 62, 63, 64, 66, 69, 71, 72, 78, 79, 91, 92, 96, 97, 98, 99, 100, and 101.

I still have roughly 600 days to go, so I’m feeling pretty good about it, actually.

I am 21 and always have trouble figuring out how much to withhold and what to claim on the W4’s. Any advice or sites you could reccomend?
– Sonya

For those unaware, Form W-4 is a document that employers in the United States require their employees to fill out so that the employer can withhold an appropriate amount of money from their paycheck for income taxes.

If you’re only working that individual job, the best strategy is to simply list your number of dependents and have nothing else withheld. If you’re having multiple jobs, use the tax tables to figure out how much you’re going to owe and also use them to estimate how much they’ll be taking out for each check. If that sounds too complicated, call a tax preparer and ask for help.

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…
– KLevy

I make solid money on The Simple Dollar only because it gets a lot of traffic, over a million page views a month. This allows me to keep the ads down (or at least unintrusive) while still earning a solid amount. I try very hard to balance things, which basically means I keep a firm control over the number of and the ethics of the companies that advertise on the site, but in exchange for that I don’t earn nearly as much as I could from the site.

For example, I give an immediate and firm “no” to any organization that wants to buy a spot in the content I write. I give an immediate and firm “no” to any organization that wants to run an ad that disrupts the site (something that flashes across the screen, for example). I give an immediate and firm “no” to any ads I think are unethical, like payday loan ads. All three of these stances have cost me a huge amount of income.

My income is earned by getting a very tiny amount per page view for each ad – a tiny sliver of a cent. It’s only because I get a significant level of traffic – due to the support of a lot of wonderful readers – that I’m able to both support my family and keep the ads unintrusive.

This isn’t a giant cash-in for me. If I wanted to use this platform to cash in quickly, trust me, I have opportunities every day to do that. I say no to all of them because I actually want to help people with every article I write, and I think it’s that desire to want to help that comes through and has brought enough readers to The Simple Dollar to make this crazy thing work.

If you don’t think walking away from mortgages is okay, what should a person do if they’re way upside down in their mortgage?
– Jen

They should go to their lender and simply state that they’re not going to be able to continue to pay the mortgage – their financial situation makes their escalating mortgage payments impossible. Then, they should work with the lender to come up with a solution that works for both parties. This might involve refinancing into some sort of fixed rate mortgage. This might involve short selling the house. It might involve some other creative idea.

The key is to not just walk away. Not only does it hurt the lender severely, undermining the lender’s liquidity and damaging the national economy as a whole, but it also damages you. You’ve effectively dropped a nuclear bomb on your credit, and that means you’ll have a hard time passing a credit check for anything for many years. Car loans will be impossible. Your insurance rates will skyrocket. All of your credit card rates will go through the roof. In short, your day to day life will cost more after walking away.

Working with your lender to come up with a better plan is not only the more honest solution, it’s also often the more financially sensible one, too.

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

For emails and other personal correspondence, I don’t sweat it at all – a little grammar flub-up isn’t worth worrying about.

For posts for The Simple Dollar, I usually complete the article, let it sit on ice for most of a day, then read it again and correct any big red flags, then I post it. I find it much more urgent to make sure I’m writing in a conversational tone and also that I’m presenting interesting ideas – good grammar is important, but grammar perfection wouldn’t be a productive use of my time.

For articles and book proposals I’m submitting for publication, I sweat over them a ton just to make sure everything is right. I want to make sure everything is grammatically correct while also striking the exact tone and presence I want. I’ll revise these articles and pieces dozens of times before submitting.

How much cash is reasonably safe to carry in my wallet?
– Mel

I think it depends on what you’re doing, because in some situations it is a risk to not be carrying any cash. For example, if you’re traveling in a rural area, having a reasonable amount of cash available to you can be really useful in a pinch.

I tend to think the closer you are to home, the less cash you need to carry, and the higher population density in the area you’re going to, the less cash you need to carry. For me personally, I don’t keep much more than $20 in cash on me if I’m on foot in a populated area fairly near my home. On the other hand, if I’m in a rural area a very long way from home, I might be carrying as much as $300 in cash.

What’s more important than anything is that you’re comfortable with what you’re carrying (so that you don’t act nervous about it) and that it’s not all centralized in one place. I usually keep at least a couple twenties hidden somewhere else on me if I’m in an unfamiliar place – in my shoe, for example. This way, if my wallet were to get pilfered, I at least have some resources available to me.

You talk a lot about gardening. Let’s see a peek of your garden!
– Louis

Here you go.

Our garden

I heavily annotated this picture at Flickr, so you should jump over there and check out all of my notes about the picture. I’ve pointed out all kinds of little details.

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