Reader Mailbag #30

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.
A great discussion about whether you should report sexual harassment
How I manage my ideas
Should you help people who won’t help themselves?
And now for some great reader questions!

I recently changed jobs and will become elgible for the 401(k) plan soon. While I have invested heavily in the 401(k) plan at my prior company I wondering if it would be a smarter idea to take the money I would be investing to continue paying off my debt over the next 6 months, after which I will have eliminated my credit card debt and half of my student loan debt just leaving the morgtage on my primary home, rental propery, and a car note.
– Marc

Ignore the tax implications and penalties of cashing in your 401(k) early for a moment and ask yourself this simple question. If you cash in that 401(k), are you still on a reasonable pace to save up for retirement? For example, if you’re 30 years old, you should have roughly 1.2 times your annual salary in a retirement vehicle. If you’re significantly below that – or would be below that if you cashed it in – then don’t.

However, if you’re in a position where you saved really hard for retirement and cashing in that 401(k) would still leave you in a healthy retirement position, and you know that getting rid of those debts now would put you in a good place in your current life, then cash it in. Just make sure you’re committed to not racking up more debt once this batch of debt is gone, or else you’re just running in circles.

The real key is making sure you have enough for retirement. Don’t even consider cashing in a 401(k) if it’s going to jeopardize that.

You talk about how you keep a list of ideas for potential writing ideas. Do you somehow organize these, or just keep them in a jumble? I tend to be a collector of ideas as well (my dream house, hairstyles I might want to try, recipes for someday), but it’s hard to figure out a system to make things “findable” again. Any suggestions?
– Mary

I basically just keep them in a jumble. I usually devote a page in my pocket notebook or an individual text file to each significant idea or project that I have, but I don’t organize them much at all.

Instead, I just make an effort to go through each of them on a regular basis and see if there’s anything I can do to move that idea forward. Maybe I can jot down a few more ideas for a great future post. Or maybe I might be able to take a baby step forward on this idea by calling up a friend.

It’s really two pieces: one is writing down my ideas as they come to me and not forgetting them, the other is following up on those ideas and making sure the good ones actually happen. Remembering your good ideas and making sure they don’t die on the vine is the key to creative success.

I just turned twenty and am hoping to open a Roth IRA, or at least a retirement savings account soon.

The dilemma is, I don’t know if I should take time to research where to put my IRA, or start investing now to start earning interest. Should i wait and figure out a good place to start investing, or don’t waste a second and stuff my funds in a place where it can earn interest until i retire?
– Mischa

You’re better off saving now rather than later, even if the savings isn’t optimal. My suggestion is to open up an account with an investment house that you’re sure is good and picking some very broad index funds for investment – in other words, invest in everything. Then, when you feel more confident, you can make changes later on.

More specifically, if I were you, I’d open a Roth IRA at Vanguard and put half my money into their Total Stock Market Index and half into their Total International Index. In other words, your money would be invested in basically every stock in the world – as broadly based as you can be. You rise with the tide of the market.

Then, later on, if you get into investing, you can change things around to whatever you like. The key is to start saving now so that compound interest is on your side.

Trent, what is “personally challenging reading”?
– James

Personally challenging reading is any reading that forces you to think and forces you to re-examine your core beliefs and ideas. I believe that personally challenging reading is truly key for any person who wants to be successful in life. Here are some examples.

An atheist might find personally challenging reading in Mere Christianity by C.S. Lewis or The Reason for God by Timothy Keller.

A Christian might find personally challenging reading in The End of Faith by Sam Harris or Why I Am Not a Christian by Bertrand Russell.

Incidentally, I’ve read all four.

Challenging beliefs just scratches the surface, though. Personally challenging reading also includes digging deeper into topics that you know little about. Don’t know much about art? Philosophy? Computer science? Find a key text on that topic and dig in.

The key to personally challenging reading is to stretch what you know and believe – in other words, to exercise your mind. It’s good for everyone to do.

I recently started a new job. The lower level employees have a “sunshine club” where five dollars is collected from everyone monthly. These funds are used (to my knowledge) to purchase beravement gifts or other similar items. I was wondering what your thoughts on this are.
– Jolie

On the surface, it’s just an office cultural norm. It basically prorates the cost for everyone of giving flowers and such to those who are bereaved.

However, in doing this and taking it to that level of formality, the actual true sentiment and meaning of the expression of care is lost. It’s just another bunch of flowers paid for out of the fund, not a symbol of individual caring.

If I worked there, I’d just contribute to the fund, but I’d also send my own note or flowers to people I really cared about.

What were the last ten albums you listened to in iTunes?
– Phil

To make this list more interesting, I eliminated artist duplicates – if I didn’t do that, the three artists at the top of the list would have had all ten of my most recently listened albums.

Migrations by The Duhks (Americana)
New Magnetic Wonder by Apples in Stereo (really upbeat pop)
You Are Free by Cat Power (folk)
Four Thieves Gone by The Avett Brothers (Americana/alt-country)
Not the Tremblin’ Kind by Laura Cantrell (Americana)
Extraordinary Machine by Fiona Apple (pop?)
One Cell in the Sea by A Fine Frenzy (pop?)
How We Operate by Gomez (pop/rock)
Fox Confessor Brings the Flood by Neko Case (Americana?)
Gimme Fiction by Spoon (rock)

Really random mix, and not what I would have actually guessed. Interesting. I actually like it when bloggers I like post such lists, as it often leads me to discover interesting new music. Also, eight of these ten albums are available on emusic for pretty cheap (all but A Fine Frenzy and Fiona Apple).

I heard something the other day that said most lottery winners lose their moeny within the first 18 months of winning a state lottery. I am just curious, what would you do with the lottery if you played and won the jackpot?
– Bobbi

I’d go somewhere where it would be difficult to find me, and possibly change my name. A “rube” who just won $100 million is a target for almost every scamster out there, and they’ll come looking. If I could, I would keep my identity secret, or perhaps go along with having a “false face” put out there so that I wouldn’t be known.

Given that, I’d buy a patch of land in the country, build the house I’ve always dreamed of having, keep enough for myself so that I never had to worry about anything, then dole the rest out to charity. I don’t really want to have more money than I know what to do with, especially when there are people out there who could use the money.

I’d be perfectly happy administering scholarships and charities for the rest of my years, to tell the truth.

Where do you see yourself in ten years?
– Pauline

I see myself writing, though whether it’s about personal finance, I don’t know. I see myself also heavily involved in local politics.

I will likely still be living in Iowa. I will also likely still be living in the house I currently live in, though I think I’ll have it paid off by then.

I predict I will have four children.

Other than that, I don’t know what to predict. If I had predicted where I would be at now ten years ago, I would have had a few things right but most things terribly wrong.

I am legally eligible for a scholarship because of my ancestry. I meet the minimum requirements for it, even though I know nothing at all of that portion of my ancestry. Is it ethical to apply for that scholarship? Last year, there were more scholarships than applicants, so it’s a virtual lock that I’ll receive one of the scholarships.
– Alex

If you’re eligible for the scholarship, apply for it. When a scholarship is offered, usually much thought has gone into who can qualify for that scholarship, so this ethical decision is actually already out of your hands. I’d say apply away.

I didn’t always feel that way. When I was in high school, I was in almost the exact same situation as Alex. I am 1/8 Cherokee, and that enabled me to apply for some scholarships because of that heritage. However, I have almost no connection at all to my tribe of heritage – no cultural or personal connections that I can think of other than some old family heirlooms. Because of that, I chose not to apply.

Later on, I realized I was silly for not applying for it. I met the qualifications they stated and it would be up to the scholarship board to determine if I would get that scholarship or not.

Alex, apply away. It’s not your ethical decision here.

If you were offered the chance to host a show like Suze Orman’s, would you do it? I’d love to watch it!
– Jenny B.

I actually would be willing to host a personal finance-themed show on television if the opportunity came along, though I think the format of Suze’s show would not be right for me. The type of show I think I’d thrive with would be something more like A&E’s Big Spender, where I actually interact with people out in society instead of behind a desk.

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

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