Reader Mailbag #38

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 about how to deal with a large set of collectibles. Here are three articles that might help.
Dealing With Those Piles Of Old Baseball Cards In Your Closet
Personal Finance and Nostalgia
An Inheritance of Collectibles

And now for some great reader questions!

I am a 32 year old mother of 2. Stable employment w/ the same company for 12 years, in school, own my 1st home, been working on paying off charge cards, braces and an auto loan. I am getting ready to go kick my partner out of my home and my life, which will leave me w/ just my income. I can’t make ends meet w/ all of the bills alone. My partner started using heroin a year ago and I have been doing my best to keep on her w/ her methadone treatment program and have spent all of my savings and am now in debt trying to save her. She wrecked my brand new car. I lost $17,000.00 in equity w/ that accident. She keeps getting fired and now I have simply had it. I can’t stay afloat. I put my home on the market. I am going to take a huge loss of close to $50,000.00 w/ this sale. I have to move as soon as I send her packing. How and what do I do to keep paying the bills?
– Tanika

It sounds like you’ve made a very tough emotional decision, one that’s resulting in some big financial consequences.

The best move you can make is to make a clean break as soon as possible. If you’ve decided for your own personal reasons that the relationship needs to end, end it. Don’t dance around the issue and get yourself in an even worse situation.

From there, turn to your family and friends for support. Explain the real truth of your situation to them and ask for emotional help and advice. However, do not ask to borrow money – a borrower-lender relationship is an easy way to ruin friendships and family bonds.

You need to spend some time and get a very accurate picture of your financial state, then come up with a debt repayment plan to get out of it.

It won’t be easy, but it can be done. Let your children inspire you to more than you ever thought possible of yourself.

Do you think the horrible economy has made an impact on the success of the Simple Dollar? We have all had to think outside of the box to make ends meet in this recession.
– Mol

It probably has helped somewhat. More people are seeking answers to their financial questions, mostly through searching Google, and have thus stumbled upon articles here.

I’m not really convinced it has helped the site acquire more long-term readers, though. The people that stick around here seem to mostly be those who are genuinely seeking answers to their financial situation, not those who only worry about their money if People tells them to.

So, it’s helping a bit, I think, but not any sort of avalanche. My traffic is going up, but it’s not a tidal wave.

With ING’s recent interest rate drop from 3.00 to 2.75% for their orange Savings account, would you consider switching to other banks with higher interest rates, ie: Dollar Savings Direct (4.00%), or would you keep your money at ING?
– Chris

I generally think that rate chasing is a pretty weak game. No matter what the interest rate is, good customer service from your bank wins out. I stick with ING because of the service, not because of the rate.

As for the rate question itself, most banks, and online banks in particular, tend to change the rates offered on savings accounts quite often. It is a mistake to make a long-term banking decision based solely on a snapshot of compared interest rates.

That being said, if you are looking for an online account just for your savings, it does make sense to use interest rates as a major consideration – above, I’m mostly speaking about using an online bank as one’s primary bank.

What would be a better kitchen investment, a stand mixer or a food processor? I make bread about 2-4 times a month. I cook dinner at home 5 times a week (with leftovers the 6th night and we eat at the in-laws the 7th night). Dinners often have diced chicken breast, chopped veggies, etc. I bake cookies maybe 1-2 times a month. Can food processors make cookie dough or cake batters with the dough blade? Or just bread doughs? How do I determine the size that I need to get (for either appliance)?
– silver

We use the stand mixer substantially more than we use our food processor. For most family uses, the food processor takes about the same amount of time and has substantially more cleanup than a sharpened knife – the only time I use it is for processing large amounts of something, such as shredding zucchini for future loaves of zucchini bread.

The stand mixer will handle pretty much any kind of dough you throw at it with the dough hook or the baffle.

I’m not sure entirely how to determine which size is appropriate for you. For my family of four, I’ve found the KitchenAid Pro 600 Series mixer perfect for our uses. We use it so often that it occupies a permanent spot on our countertop.

I’ve heard that during a recession and the recovery is a good time to buy stocks and commodities, during the upswing is a good time to buy stocks and property, and during the peak and start of the economic decline is a good time to invest in bonds. What do you think about this? If you are investing on a regular monthly basis, is this a good way (in general) to allocate funds if you already have an emergency fund and adequate insurance?
– Oliver

That’s a reasonable approach to follow, excepting that I’d replace “bonds” with “bonds and cash (such as CDs).”

The only problem with that approach is clearly knowing what phase you’re in. Are we at the bottom of the market and just beginning an upswing right now, or is there still room to fall?

That’s the reason most market timing tends to fail. A much better approach is this: determine your desired allocation up front, say 50% stocks, 30% real estate, 10% bonds, and 10% cash (for example). Set up an investment account at Vanguard and buy index funds of each type – a stock index fund, a real estate fund, a bond fund, and a money market fund. Then automatically contribute to each one in that appropriate percentage for the next six months no matter what the market is doing.

After those six months, look at your balances and see how close they match your desired percentages. If one segment is bigger than you’d like and another is smaller, don’t buy or sell your investments – just change your allocations for the next six months. Lower the allocation to the “big” piece and raise it to the “small” piece. Then check again in six months.

If you want to change your allocation, change it by altering your contributions. Let’s say you want to go down to 40% stocks and up to 20% in cash. For a six month period, contribute 60% of all of your contributions to your cash fund and none to the stock fund, then see where you’re at and adjust accordingly.

This way, no matter what happens, you can ride through the changes with a secure, steadily-growing portfolio.

Granted, party affiliation matters less on a local level, but do you see yourself always running as an independent, even though that will inevitably limit your potential to gain office? Or are you just leaving off partisan politics until such time as your political career is developed enough to warrant it?
– JonFrance

The problem is that parties tend to function very differently on a local level as compared to a national level. What the Democratic Party stands for in my county has seemingly little relationship to what it stands for nationally.

Having said that, I’d probably sign up with the party that represents my views in a national sense and just follow my own judgment when it comes to local issues. If that meant I was a Democrat who acted like a Republican locally or vice versa, so be it.

Due to a company-wide reorganization, I will be losing my job at the beginning of February. I am only 24 (with no dependents) so this isn’t absolutely devastating. As part of my severance package, I will receive 4 weeks of pay and a lump sum of about $7000 (after tax). My goal is have another job lined up come February so I can save my severance package and eventually put it towards a down-payment on a house or a new(er) car in 2-3 years. Given the lackluster job market, this may or may not be realistic.

Currently, I have around $10,000 in my savings/ emergency fund and no outstanding debt. I take home around $2275 (after tax and insurance deductions) per month and automatically put $500 in savings. I have around $850 in fixed monthly expenses which include rent, utilities, cell phone, etc. and have already take action to reduce my spending and expenses. However, I feel like I am not doing enough.

What else would you be doing in this situation?
– Cara

The only other thing I’d be doing is honing my skills and making professional connections. Right now is when you should be polishing up what you know and reaching out to people in your field for openings or other opportunities.

If you have any chance to hit up conferences or other events in your field, right now is the best possible time for you to be doing so. Learn what you can, build relationships with your peers, and continue to build those relationships in whatever you find yourself doing early next year.

Would you prefer to raise children in the city or in a rural area?
– Morgan

I’d vastly prefer a rural area, but not one too isolated. I’d prefer to have some access to an urban area within an hour’s drive.

There are valuable growth opportunities both in cities and in the country, and I’d ideally like to have my children experience both worlds. I actually tend to believe it’s easier for children in rural environments to adapt to and enjoy the city in small chunks than it is for city children to adapt to and enjoy the country in small chunks.

I just moved to a small town far, far away from anyone that I know. The only people I’ve met so far are my coworkers and the elderly couple in the apartment next door. I’d like to find a circle of friends who don’t spend money, but I don’t know where to look. Any advice?
– Yancey

Look to your own personal interests. What do you enjoy doing? If you enjoy reading, hit the library and see if there are any book clubs. Take a peek at the community calendar and see if there are any events in the community that might interest you.

If there’s a university nearby, look for cultural events there that appeal to you, particularly ones that include a discussion opportunity and some room to meet others. If you’re of a religious stripe, join a church and get involved in a Bible study.

All of these activities tend to be havens of people who don’t actively spend money and can provide a good source of social enjoyment without a high financial price.

What’s your biggest regret when it comes to The Simple Dollar?
– Angie

My biggest regret is that I didn’t go full time with it sooner than I did. I wish I had gone full time with it earlier on.

Why? There are many, many big projects related to The Simple Dollar that I’m in the midst of. Most of these projects had their original ideas planted before I made my career choice.

If I had quit earlier than I did, more of these ideas would have come to fruition by now instead of just dwelling on the back burner for months and months, slowly coming together.

I guess what I really regret is that I don’t have more time for my ideas.

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