Reader Mailbag #60

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. Readers regularly ask me for recommended frugality books. Here are three I like besides my own (links go to my review):
America’s Cheapest Family by Steve and Annette Economides
The Complete Tightwad Gazette by Amy Dacyczyn
The Ultimate Cheapskate’s Road Map to True Riches by Jeff Yeager

And now, some great reader questions!

I’ll need a set of wheels for after graduation to get to my job. I’m considering leasing a vehicle. Should I open up a new credit card before signing a lease, or wait until after? Does the timing even matter, and will it affect my ability to get a lease? I’m not too familiar with how car financing works, but I want to be in the best position I can.
– Liz

First of all, avoid leasing if you can. Leases leave you with no car at the end of the lease, meaning that if you’re not in a good financial state at the end of the lease, you’re going to be out of a car. Instead, if this is your first vehicle, start off looking at a late model used car, but with the current economic environment, don’t be afraid to compare the prices you see on those to the prices on a new car, because on many models, the price difference is relatively small.

Having said that, getting a credit card several months before purchasing a car can be of help, especially if you don’t already have a student loan that’s in repayment. A positive history of repaying your debts is the basis of good credit, and good credit is what you need to get a low-interest loan. My recommendation is to get a card, but use it minimally – use it just to buy a few things that you would normally purchase, like groceries, and pay off the balance in full at the end of the month.

Yes, dealerships will check your credit before giving you a lease or a car loan. The worse your credit is, the more likely you are to have to pay a higher interest rate, a larger down payment, or a security deposit, all of which are less-than-optimal ways to use your money. Thus, you’re better off, whichever way you go, to do what you can to improve your credit.

Two years ago, Santa put a gecko under the tree for our then 7 year old. Unfortunately, Santa didn’t consider the fact that a gecko costs between $12-15 a month to feed (and that feed – live crickets and meal worms – can only be purchased in a town 50 miles away). How would you go about convincing a now 9 year old that the gecko needs to find a new home because the cost of keeping him (and the headache of reminding said 9 year old to feed him) is driving Santa and Mrs Claus crazy?!
– Stacey

My solution would be to make the gecko solely the child’s responsibility. Give the child an allowance that more than covers the cost of the gecko, then turn the responsibility for gecko care over to the child entirely. Once the child begins to see that the expense of the gecko is really affecting his/her life, the child will either become more committed to the gecko or make the choice to sell the gecko back to the pet shop.

Another possibility is that your child may become interested in catching appropriate gecko food. Here’s some advice for catching crickets and for growing your own mealworms. These could be great garage/outdoor projects for your child.

The best way to make a child aware of responsibilities and costs is to put those responsibilities and costs onto their plate while you stand by for the support they’ll need.

Our son is turning 18 and will be attending college this fall. Right now he has a job with our school district, just a few hours a month and that will end in June. I say he needs to get a summer job (any job). He doesn’t want a summer job. His father/my husband says he should only get a summer job if it’s related to his future career plans, other wise he can just stay home and work on his hobby projects. We are NOT wealthy by any means and will need student loans for his education. I know this is a no-brainer but at least now it will be in print – what do you think?
– deb

I think it depends on his hobby and projects. Are they actually related to his potential career? Is he growing in any appreciable way because of them? Do they earn him any income?

If you go through that list and say “no, no, and no,” then it’s likely that he could be doing something more productive with his time, whether it be getting a job or investing himself in a worthwhile project of some kind.

The most important thing one can get from their college years is personal growth, and there are many better options for personal growth than a menial job that earns minimum wage.

I’m curious of your thoughts on the Watchmen movie. I saw on facebook you had seen it recently. I left a comment that my boyfriend had me read the graphic novel before I went, which I’m really glad I did. I thought they did a fantastic job.
– Ashleigh

It was good, not great. It was obviously intended to be as literal as possible, following the graphic novel very closely, but I feel that film is a very different medium than graphic novels and should use different techniques. There were some lines of dialogue that almost made me cringe, for example, and the choice of elements to keep and elements to toss changed the story in a number of ways.

Watchmen was written to be a critique on the tired cliches of superhero comics, from the often one-dimensional characters to the static storytelling, and it really helped push the entire genre of comics and graphic novels forward. Watchmen was great because it took a different angle on the familiar elements of the format.

The film really didn’t do that. It retained a very good story, but something was lost in the process. A great Watchmen movie would take a serious look at the cliches and techniques of other superhero movies and turn those on their ear.

Question(s): I was just curious, what did/will you do with the car you replaced? Since it is starting to have a lot of problems I didn’t know if you would sell it, junk it, trade it, etc? I plan to drive my current car as long as I safely can do so. What’s the best option for getting rid of a car that’s not in the best condition?
– Jessica

We seriously discussed trying to sell it. It was a 1999 Mercury Sable with 175,000 miles on it, bad struts, an intermittent “check engine” light that we hadn’t yet figured out, and a transmission that was on the verge of failure (something that was pretty obvious if you drove it for a few miles). We used the blue book and had people look at it and we were given honest appraisals that the car would be lucky to put more than $500 in our pocket. We were also given estimates for repairs on the car that totaled into the many thousands at the same time, so we decided to give up the ghost.

To put it frankly, it had reached a point where we no longer felt safe driving the car for any significant distance. My wife was hesitant to use it for her commute.

In the end, we decided to trade it. The dealership offered us $1,500 in trade value for it, which was obviously part of the negotiation process, but if you take that $1,000 difference and apply it to the price we actually paid, it brought the price of the new Prius south of $20K, which made it actually cheaper than some late model used cars we had looked at.

I live in Alabama. We have a Prepaid Affordable College Tuition program that in the poor economy has suffered. I am sure you are familiar with these programs, but basically you buy the plan for your child and when you enroll in college the tuition is guaranteed no matter the cost at a state school. You can cash out for the average tuition in the state if you choose to go to a private school. We are blessed that my grandparents purchased this for my 2 year old, but the state has decided not to allow anyone else to purchase the plan – in effect ending the program. I have a 6 month old and my grandparents had planned to purchase the PACT plan for her. That is not an option anymore and we are not sure how to proceed. They have $18,000 set aside right now. What would you suggest we do with the money?
– Summer

If I were you, I’d open up a more general 529 plan, something I talked about a few days ago.

Putting your money into such a plan lets you grow the money without any sort of tax penalty for the next eighteen years, and you can then use the money in the account for college education anywhere – again, without having to pay taxes in the gains.

While the effective return might not be as good as a prepayment plan like the one in Alabama, you get the huge advantage of not being restricted to only attending a specific school. With a savings-style 529, the possibilities are endless.

I have changed to a new job where the norm for my colleagues is to go out and purchase their lunch (and it seems, breakfast, morning tea and afternoon tea as well). While I bring my morning tea and lunch each day there is considerable pressure, at least once a fortnight, to go out for lunch at a restaurant in the interest of ‘team building’.

I realise that, financially, we would be in a far worse position if I purchased my lunch each day and then went out for team lunches, but I still find it frustrating that attending the team lunches come at the expense of the saving goals my husband and I have set down. I feel that if I don’t attend the lunches (and drinks) I will be seen as not being a ‘team player’ and this will be reflected negatively in my performance appraisal, even though I have worked well in a number of team projects within the organisation.

As I know you started on your frugal journey prior to leaving the workplace, do you have any suggestions arising from your work experiences for dealing with this kind of pressure?
– Sarah

Given that these events are roughly every fortnight, I think such “team building” events are worthwhile, even if there’s an individual expense with it. If they were daily or multiple times a week, it might come across as a bit excessive, but given the irregularity, such events are definitely worthwhile.

My suggestion is to just order a very light lunch that day – a salad, or something to that effect. If that’s not enough to sate your hunger for the day, bring along some healthy snacks with you to work and munch them throughout the day.

If you stick to a very light lunch, you’ll find that it isn’t too much more expensive than brown-bagging it yourself. The few dollars’ difference (comparing your brown bag and the salad) is well worth the value of building a better relationship with coworkers.

Is there a point in a job interview that it’s appropriate to mention a planned upcoming vacation (i.e. “I’ll need to take these days off if I get the job”) or should a person hold off mentioning anything until an offer is made?
– Helix

I’d only mention it if you’re directly asked. If you’re not, I wouldn’t bring it up.

If the job you’re applying for is going to really require you to be on-site during the first several months of work, the employer should ask you this question or they’re not doing due diligence.

You can, of course, ask about their vacation policies. You need to make sure that your vacation plans will fit within their policy. If it does not, then I would hold onto this as a bargaining chip once you’ve been offered a job and are negotiating.

I’m a graduating senior this year with a lot of student loans, but no credit card in my own name. So, my credit score is based almost solely on the amount of debt I’ve taken out to pay for school. Now that I’m graduating, I’d like to finally get a credit card and start building up good credit. Do you have any suggestions for good student credit cards for those just getting into the credit world?
– Liz

The best first credit card is one that matches your regular spending. Don’t sweat the interest rates too much, because if you’re using the credit card in a healthy fashion, you’re paying off the balance in full each month.

I’ll use myself as an example. One of our biggest expenses is our automobiles. My wife commutes to and from work and we also travel regularly, taking weekend trips to visit family (an eight hour round trip) multiple times a month. Thus, we get a lot of value out of using the Citi Driver’s Edge card, because we get 3% back on our gas purchases plus a one-cent rebate for each mile we drive.

We also use the Amazon.com Visa (for our Amazon purchases, which is where we buy many gift items and other staples) and a Target Visa (we shop there for prescriptions and household supplies). Those cards offer great rewards if used at that merchant specifically, so we just use the card for those merchants.

I realize baking items at home tastes better and also is comparatively more frugal..given the electricity consumption of an oven, wanted to see if you had done any analysis on what the effective savings would be..i.e will the increase in the cost of electricity make the effective savings of baking at home less attractive from purely a frugal perspective.thanks
– C

There are a lot of variables at work here. The average oven uses around 4.4 kilowatt-hours of energy, which means that if you use it for an hour of baking, it’ll cost you around fifty cents in energy use. However, that’s not an exact number – it varies quite a lot depending on how exactly you’re using the appliance and the energy rates in your area.

Most from-scratch items at our house requires quite a bit less time than that to cook. For example, I can finish off a loaf of bread in about forty minutes, meaning I’ve used roughly thirty cents’ worth of energy in the process. If I bake two loaves at the same time, the cost difference is negligible.

Another note: oven use heats your home, so the impact is somewhat greater in the summer (because you have to cool down your house to make up for the heat) as compared to the winter.

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