Reader Mailbag #32

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 few readers asked for more big collections of money saving tips – here are a few big ones I’ve done before.
100 general starter tips for saving money
100 free things to do during the weekend
50 free things to do by yourself

And now for some great reader questions!

I am 23 years old and 1.5 years out of college with an engineering degree. I landed a great job out of college that pays well ($55K+) which has really allowed me save a bunch of money for retirement. My company is fairly old (age-wise), and there are tons of great opportunities for me to rise up over the next 5-6 years. However, one thing that I really want to do while I am young (26 or so) is take a year off and travel around the world. I have been saving for this as well (I think 20-30K should suffice). What are your thoughts on this? Should I pursue the dream for the year? Would you recommend anything for setting myself up with a new job when I get back? Should I still try to contribute to my Roth while I am away? Thanks!
– Kyle

You need to be very, very sure of your career potential if you choose to do this. Will this year in the wilderness prove to be damaging to your long-term career aspects. You are, after all, taking a year in which you would be working hard to further your career and turning it into a year traveling around the world.

The first question really is whether or not you’re happy with your career path. Are you? I can’t really answer that question for you, but I’ll say that if you’re strongly interested in leaving for a year, it’s not burning a fire within you. You may decide to take this year to figure out if this is what you really want to be doing, and if that’s the case, you probably should go.

If you’re still sure about your career, then talk to some people around you about it. Also, if you’re a very valuable employee, see if you can get a one year sabbatical where you can return to your old job after it’s over. If you discover that you can take that year without sacrificing your career prospects, then make that move.

One of my closest friends likes to play video games quite a bit. He’s going to graduate in December and take a job that will involve a lot of traveling, so I decided to buy him a Nintendo DS with a few games to play. He likes all kinds of games except sports games. I intend to spend about $200 on the gift. What do you suggest?
– Amy

First of all, don’t mess around with a used console. Fork over the money and drop $130 of that money on a new Nintendo DS. I’ve never had a successful experience with a used console, and the console makers usually won’t repair used consoles, either.

However, especially since the DS uses a cartridge-based format (much more sturdy than the scratchable disks of other game systems), I’d head down to my local used game store and pick up three or four great used games with the remaining $70. What’s a great used game? I largely agree with this list of 31 good DS games. The five I’d look for first and foremost, though, would be Mario Kart DS, Final Fantasy IV, Advance Wars: Dual Strike, New Super Mario Bros., and Planet Puzzle League. Those five would be very diverse choices and I’ve thoroughly enjoyed them all.

My parents are financially well-off and come round to visit every now and then. They are particularly interested in home/garden stuff and often notice if a bit of work needs doing on the house and ask me why I don’t get it done. The reason is almost always because I am saving for it (being on a tight budget myself). They will then always offer to pay for it, saying what’s the point in them having money and whilst I don’t. I’m not against accepting help but I don’t want to live off other people’s charity (even my parents). On the other hand am I an idiot to turn down help like this?
– Ian

If I were in this situation, I’d accept my parents’ gifts under the premise that they are in fact just gifts – no strings attached. They obviously have money to spare and if they choose to spend it on you, that’s fine.

However, I do understand why it makes you uncomfortable, as it may make you feel reliant on them. So here’s what I’d do.

First, I’d have a genuinely open talk with them about it separate from an incident when they do this. Let them know exactly how you feel, that you often feel as though you’re “living off their money” when they do it. Tell them that you do appreciate it, but also let them know that you have conflicting feelings about it. Talk through it. You’re all adults.

Second, never rely on such gifts for anything. If you begin to rely on regular gifts from someone to sustain your life, you’re not an independent person, and that dependence will strain any healthy and adult relationship.

How is your “get healthier” plan going? I know you mentioned a while back that you were ramping up the excercise. Has it resulted in some weight loss yet? You mention that you eat a lot of fresh, organic foods. This must help as well.
– Mark B.

It’s going all right. My biggest problem honestly is that in the daily crunch of my work, raising two kids, and several other personal things going on, exercise is the thing that often gets dropped. I don’t have much of a problem keeping a relatively healthy diet, but I don’t get as much exercise as I’d like.

What makes it even tougher is that winter is approaching in Iowa, which makes outdoor exercise even more difficult. Quite often around here, people get seasonal gym memberships to keep in shape, ones that last from October 15 to April 15 or so, simply because of inclement weather. While I’ll probably look into it, I may just stick to Wii Fit and the lifetime fitness ladder.

I’ve worked at a place that has a state pension plan for 29 years now. We have something called “30 and out”. Means that when I finish my 30 years there, I can “retire” and begin drawing on my pension, with no penalty for my being only 50-something at the time. I’ll be eligible to get ~80% of my current salary; not an enormous sum, but I could live modestly on it alone. It seems like a no-brainer to leave next year, begin drawing the pension til I die, and get another job. Or *is* that the way to go?
– graybee

First of all, does that pension completely replace your salary? If it doesn’t, are you sure you could get work as fulfilling as what you do now that would add up to your salary? In short, would switching jobs actually net you more money at the same level of fulfillment?

Another thing to consider – how safe is the pension? Is there any history of people in your line of work eventually losing their pension? If there’s any history at all, I wouldn’t jump on board the pension train immediately.

Alternately, you could use this as an opportunity to follow the career you’ve dreamed about. At first, you might have to deal with lower wages (or no wages) in your new career, but you’d have the pension as a financial backbone as you build up the things you want to do. Perhaps you’d like to get into community politics, for example, where many of the “starter” positions don’t pay well, but build up a resume that helps with bigger positions.

What sports do you follow? Do you have a favorite team?
– Chuck

I follow baseball pretty fanatically, and I’m a life long Chicago Cubs fan, mostly because I love Wrigley Field. I’ve been to tons and tons of baseball parks in my life and none have that atmosphere that Wrigley has on a warm June day.

I enjoy watching other sports on occasion, but in fairly small doses. In the past, I worked with a large contingent of overseas workers and they got me into football (soccer), starting during the 2002 World Cup and later extending into the Premiership and Serie A seasons, among others. I don’t get to see many games, but I follow it online without directly following a specific team.

How long can debt stay on your credit report? For example, I had a car repossessed a little over five years ago. Since then, the debt has been sold back and forth between two companies. Does each new sale result in a new account, or will it come off after seven years? And what can I do if it doesn’t?
– Nicole

Missed payments and defaults stay on a person’s credit report for seven years, with the impact slightly lessening the older the issues are. In your case, the impact of that repossession is now less than it used to be, but it won’t completely vanish for another couple years – it’ll still drag down your credit for the time being.

I was wondering–how did you go about proving your 1/8th Cherokee ancestory? I’m 1/8 Choctaw, but they require a birth certificate, but we can’t locate one. I’m not sure that one even exists.
– Lindsay

Typically, you have to trace your ancestry back to someone who appears on the tribe’s membership rolls. My great grandmother is apparently on a tribe membership roll, so through a sequence of birth certificates and other documentation, I can trace my ancestry back to her. This would enable me to count as a tribal member if I wanted to push it.

You talk all the time about keeping risk in mind while investing. You also encourage people to be entrepreneurs. But like 75% of small businesses fail within a few years and only some of the rest turn a profit. Why waste your time doing that?
– Phil

The big thing that people forget when they look at stats like that is even if a business fails, you still retain a lot of value from the experience. You learn a lot about yourself. You learn basic accounting. You learn how to talk to customers and how to sell what you’re doing.

Perhaps most importantly, though, you build a network of people that you associate with. You build a list of business partners and suppliers. You build a list of clients. You build connections with people as you promote that business. And those connections stay with you after the business fails.

Plus, that 75% failure rate includes many, many people who failed for easily avoidable reasons. They had no plan going in. They didn’t do a bit of advance research to see whether there was a need for the business. They had no relationships to tap for help. They got involved with a business structure (like MLM) that restricts success and from which most people fail. They didn’t start off with sensible capital for what they wanted to do. Or they simply didn’t have the right drive to make it work.

If you have the desire to do it, entrepreneurship is a valuable experience. It teaches you a ton about yourself, builds up tons of relationships with other people, and has a good chance of providing financial strength in your life.

Having a dinner party sounds like a great idea, but I don’t even know where to start! How do you plan them?
– Emma

In my opinion, a great dinner party revolves around an interesting guest list. Pick a diversity of people who have potential overlap in interests and might be able to build useful relationships with each other. Don’t overcrowd it, though – a smaller number usually works better, like 8 to 10 people.

The meal is important, but not vital. Pick something that you can prepare mostly in advance for the party so that you’re not spending all of your time preparing food. Keep it quite simple and have lots of finger foods as those encourage conversation. I’d look for a guide on dinner parties at the library for a good suggestion on how to get started.

The best dinner parties are the ones where everyone enjoys themselves and perhaps begins to build a new connection with someone else. I usually like to have it start an hour or so before the actual meal so you can personally introduce people who might not know each other but you think they might have some possible connection. Introduce them and get them to converse about that topic – get the conversation started, then back away and go start another one. That’s what a good host does.

Good luck! Dinner parties are about the best possible way for people to start building some strong connections with people.

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