Reader Mailbag #37

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 people have asked questions lately about how to get by on a very low wage, particularly after exiting a higher-paying job. Here are three articles that might help.
Ten Steps to Financial Success for a Minimum Wage Earner
Ted’s Dilemma: Planning for the Future on Minimum Wage
Everything’s So Easy for Pauline: Thoughts on Luck, Fate, Money, and Life

And now for some great reader questions!

I started a Roth IRA with the financial adviser my entire family uses. The thing is that he charges a 100$ fee every year to maintain the account no matter what. Is this the standard or am I just paying for the convenience? What are my options here? Can I move my account? Is it difficult?
– Paul K.

It depends entirely on your agreement with the advisor, but you should be able to roll that Roth IRA into another Roth IRA that you manage yourself. My suggestion would be to contact an investment house that lets you self-manage, explain the situation, and ask for their advice. I use Vanguard for my own Roth IRA and I’m extremely happy with them – they certainly aren’t charging $100 a year. In fact, they charge nothing beyond a small percentage of the investments themselves – 0.2% or so in most index funds.

Situations like this – which pop up with alarming frequency in my email inbox – are the reason I am often loathe to recommend financial advisors to people. There are some good people out there doing financial advising work, but there are a lot of sharks in the water, too. If you’re considering turning to an advisor, only use one that accepts an up-front fee for the work – no commissions at all.

I hereby challenge you do get into good enough shape to ride RAGBRAI (the full week event) in 2009. I, personally, need to lose weight and get into better shape. So, are you up to riding RAGBRAI with me (or other friends who will be riding in 2009)?
– Carlos

I would love to take you up on this, but a week away from my wife and kids just to ride a bicycle is not something that’s high on my priority list.

Instead, my focus is to train to run a good time in a 5K run late next summer. I’m mostly focusing on getting in good cardio shape during the winter using home exercise and then intend to work on the actual running during the spring and summer.

Could you address how folks with disabilities or who suddenly become disabled can mitigate some of the financial issues they may face like long term care, life/disability insurance for those who often get refused, and perhaps resources folks should look to for a little bit of help?
– Nicole

The first place I’d start looking for information would be DisabilityInfo.gov, the federal government’s site on disability issues. This site actually answers many of the questions you raise here in an easy-to-use format.

I would also strongly encourage you to contact the leaders of local churches. These people are usually intimately involved in the charity work of the local community and will be able to point you to resources that you can use locally to help yourself get back on your feet.

At 9 p.m. I am in bed with my youngest reading a story until both he and I are asleep. My alarm signals a new day at 415 a.m. that next morning. There are so many things I would like to learn with regard to finances and other interests, but I cannot seem to find dedicated time during the regular day. My choices are forcing myself to wake-up after I put my son to bed and work “after hours” or I get up at 3 a.m.? Which would you do?
– Chris

My first suggestion would be to delve into audio books for your commute. Audible.com is a great place to start.

Another suggestion would be to turn off the television. Institute a family reading hour in the evenings where everyone is involved with books. While my children are too young to really grasp this, I know many families with older children that do this quite well.

I usually devote an hour of my “work day” to learning new things, and that usually revolves around reading all sorts of things, many that are only tangentially related to personal finance. Perhaps your job enables you to do something like that.

Please suggest a “Simple Dollar” for the folks in their early/mid 60s who are learning what retirement really means, i.e. retirement does NOT equal permanent vacation, thank God I saved/prepared enough to enjoy it, and there are still a lot of questions needing answers, new questions, new answers. Thanks for letting me/us know if you can recommend anybody/thing.
– Michael Bash

I think there is a huge audience for a retirement-age personal finance blog. The only problem is finding someone to write it.

The truth is that most bloggers tend to be young – in their twenties or thirties – and are simply not facing these issues. That’s not to say there are not older bloggers, it’s just that the blogger demographic tends towards Generation Y.

Why is that? I think there is more of a willingness among the young to reveal their flaws openly to others, to tell the truth. I don’t know whether that’s a generational divide or a old versus young thing, but I know I’ve heard from many older readers who seemingly can’t believe I would admit to giant mistakes so freely.

I would love to see an older blogger in his/her fifties or sixties take on the issues of people facing retirement.

Thanks for the freezer recipes. My question is, how long do they last in the freezer? Not too long ago, I threw away some sausage that had in my freezer about a year and a half! (I felt really guilty about it.) I things tend to get lost in there.
– Sally Villarreal

I would not keep a prepared meal in the freezer for more than three months, no matter what the meal is. The texture of the meal would be extremely poor beyond that point.

Given that, it’s okay to freeze most uncooked meats for a year or more. Here are some useful guidelines as to how long to freeze various kinds of meats.

As a rule of thumb, I don’t keep frozen vegetables for longer than six months with the exception of juice or pureed vegetables.

I know that your children as still quite young, but do you have any plans to handle spending on “luxuries” for when they’re in their teenage years? For instance, will you purchase a cellphone for them, and allow them to choose their own clothing? The reason I ask is that my parents were very frugal with things they didn’t deem to be necessities, and this had an impact on my social life. I was constantly “out of the loop” due to not owning a cellphone, and I was frequently teased about my clothes.
– Amanda

My plan is to basically include such services as part of their allowance. If they want more pocket money, they go with the cheap cell phone and the cheaper clothes. If they want less pocket money, they get nicer clothes and the iPhone 7.0.

This allows the kids to make some choices – and to realize that those choices have consequences. You don’t just get the snazzy phone – it has a cost, and that cost will be reflected in limiting their other choices.

I am not in favor of letting kids run rampant with spending. My children will have pretty strong caps, but they’ll have opportunities to earn more – I intend to encourage both of them to be entrepreneurial in their spare time.

You list the books you read all the time, but you never tell us what you actually like. What books have you read in the last year that you’ve ENJOYED the most?
– Fran

The Brief Wondrous Life of Oscar Wao by Junot Diaz is the best book I’ve read this year, bar none. Run, don’t walk, to your local library or bookstore and pick it up. I thoroughly enjoyed it.

The Demon-Haunted World: Science as a Candle in the Dark by Carl Sagan is the best explanation for the necessity of scientific exploration in the modern world. We must ask hard questions – and we should never throw out answers that are backed with evidence simply because we don’t like them.

Watchmen by Alan Moore and Dave Gibbons is the best graphic novel I’ve ever read – and I’ve read a ton of them. If you think it’s a “superhero comic book,” you’re selling it – and yourself – short.

Those are my three picks from my most recent reading.

Why are CDs such a popular investment choice? They don’t return nearly as much as stocks do.
– Billy

CDs are popular because their return is stable. If you buy a long-term CD now, it will return that nice, steady 4% (or so) annually without losing a drop of the balance.

If you invest in stocks, on the other hand, you put your initial balance at risk. For example, if you had bought stocks a year ago, you would have likely lost 40% or so of your holdings, whereas with a CD you’d be up 4%.

The reason people invest in stocks is because over the long haul, the good years tend to outweigh the bad, resulting in a long-term annual growth rate that appears better than CDs. An individual year, though, might be a 2006 – with a 15% return – or a 2008 – with a 35% loss.

The people who buy only CDs are either in it for the short term – less than five years, say – or are highly risk-averse. Most people just use CDs as one element of a wider portfolio, treating them as the “safe” part of their investments.

I’ve tried to cut my own hair, but every time I do so, it looks disastrous. Do you feel that the $20 invested in a good men’s haircut is worthwhile if you’re single and can’t do it well yourself?
– Ed

It depends wholly on your career, actually. If you are in a situation where your appearance is an important part of your job and you can afford it, then a quality haircut is definitely worth the investment.

However, if your job is one with low responsibility and low wages, then $20 a month is an unnecessary expense. A pair of clippers can give you hundreds of haircuts for just that price.

In this case, let your situation guide you.

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

Loading Disqus Comments ...