Reader Mailbag #62

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. One reader asked which books I’ve reviewed has made me think the most. I had a hard time with this, actually, because many books have stuck in my mind for a long time, but here are five that I’ve chewed over time and time again for years.
Review: Made to Stick
Review: The Well-Educated Mind
Review: Words That Work
Review: The Paradox of Choice
Review: The Wisdom of Crowds

And now, some great reader questions!

I think it is strange that the same car is sold in Europe it has to have an oil change every 10000-15000miles (20 000-30 000 kilometers) but when it is sold in the US it needs an oil change every 3000-5000 miles. This is true both for european, asian and even american cars sold in both places????
– Oskar

The biggest reason for this is that in Europe, many automobiles have diesel engines. Diesel engines run differently – for one, they’re quite a bit hotter and for another, diesel fuel is formulated quite a bit differently than unleaded.

The end result of these differences is that diesels require less frequent oil changes than engines that run on unleaded fuel.

There are a lot of compelling reasons for the United States to switch to diesel from petroleum-based cars, but in all likelihood both types of engines will eventually be a thing of the past.

Considering this is a financial blog, I’m amazed you didn’t mention Mint as a must-have iPod/iPhone app. If you are not keeping track of your finances, you should start. If you are, you should consider Mint, the free online money management site. Their iPhone app is killer, allowing you do check balances in your accounts and on your credit cards, keep an eye on your investments, keep track of your budgets, and look up recent purchases. I use it on a daily basis.
– spritemv

Mint worries me from a security standpoint. As I’ve stated many times with regards to Mint, it doesn’t offer enough compelling features for me in comparison to the security risks of sharing my bank information and other personal data with another organization. Note that I don’t care what their stated policies are – in the end, I’m still trusting whatever computer resides at mint.com to keep my data safe. Thus, I don’t recommend Mint. I think Mint has a lot of neat features, but it’s not worth the data concerns I have. I would love it if Mint provided a fashion to allow you to upload such data without providing account information.

In comparison, I find the security policies of Wesabe to be much more palatable (and, in my opinion, they have a better iPhone/iPod Touch app). With them, you have the option of giving your account information – or you can do the uploading yourself with any personal data stripped. I prefer the latter.

I do not feel it’s worth the risk to share my account information with a third party unless there’s a very compelling reason to do so.

I had just recently moved into a large apartment and was looking at purchasing some furniture, in attempting to get credit I realized how bad my credit really was. There are several debts on the account, mostly old medical expenses when I was in college and uninsured. Other than the medical expenses, I have one Credit Card with a $500 limit that is maxed. A friend suggested that I apply for a debt consolidation loan through my Credit Union, pay everything off, and diligently make the loan payments. He also suggested that once I pay off the Credit Card to leave the account open as “Available Credit” because it would help my credit score. What is your opinion on this
– Krueck

I think that’s a pretty good plan, both in terms of consolidating the debt and in terms of leaving the credit card open. Go talk to a local credit union and see what they have to say about things.

It’s worth noting that depending on how old the old medical expenses are, they may not be affecting your credit much at this point (unless you’ve been making payments recently on those debts). It’s likely that the maxed-out credit card – particularly if you’ve missed payments – is the real problem on your credit. Your first focus should be in getting all of your accounts up to date, as that will help your credit more than anything else, then getting the credit card balance down should be the next goal.

You said invest the maximum to get a company match in your 401(k), then invest the rest in a Roth IRA. While I completely agree with that, what do you suggest to someone who has problems finding that little extra to put in their Roth because they are tying to pay down debt(while going to college), and invests in a Roth 401(k) at their job? Should I become more fastidious with my budget and go for the IRA or continue with the 401(k) where my investments are doing better?
– Chris

Are you saving enough for retirement right now? That’s really the big question. It’s more important that you’re saving at least 10% for retirement than it is to worry about exactly how you’re doing it.

If you’re having trouble coming up with that 10%, your best bet is to automate the payments. Try to get the payments to your Roth IRA deducted automatically from your paycheck, or have it come out of your checking account the day after your check is deposited. Make it so that you don’t have to think about it and you’ll find yourself budgeting with the money left over.

The earlier you start saving for retirement, the better. The more you save early on, the better. Why? Early investments have a lot of years to compound and multiply their value – later investments do not.

Do you have any thoughts or suggestions on the 2009 tax credit for adding energy efficent windows and doors to a home?
– Jane

If you know the efficiency of your current doors and windows and they’re particularly inefficient, upgrading to efficient windows and doors is a pretty bright move. Not only will you increase the value of your home and enjoy reduced utility bills, you’ll also pick up a tax break this year.

I almost always think that these types of investments are worthwhile because they reduce your monthly bills in the future, and it’s often hard to tell what exactly your future holds, plus they often increase the asset value of your home.

If you don’t know the efficiency of your windows and doors, it’s time to do a proper home energy audit – and you can do it yourself! Here’s a great guide from the Department of Energy on doing just that. This is a great weekend project – it’ll help you identify the big energy inefficiencies in your home and give you some goals to work towards.

You work alone all day long many days. How do you deal with loneliness during the day?
– Bender

My goal most days is to get in a writing zone where I don’t notice the loneliness. If I’m successful, I can easily write for hours without even noticing the time passing – then, suddenly, it’s four o’clock and it’s time to get started on the evening activities.

On the days where that doesn’t work, I’ll usually place a phone call to my mother, who’s always willing to talk and fill me in on all the news from my hometown area.

If both of those fail (and that happens about once a month), I’ll pack up my messenger bag and go somewhere in public to work, just for the sake of watching people and interacting a bit.

What do you do with personal finance books after you read them?
– Lawrence

First, a note: quite often, when I hear about a personal finance book of interest, I’ll write to the publisher and ask for a review copy of the book. Most publishers are happy to send me a copy, even though I’m quite clear that I’m not promising a review at all – I only try to review books that make me think in some way.

So what do I do with those books when I’m done with them? I do lots of different things. Sometimes, I’ll give them away to commenters if they leave a particularly thoughtful one – I’ll just email that commenter and offer to send them the book. Sometimes, I’ll send out the book via PaperBackSwap (usually with a “bookmark” mentioning The Simple Dollar). At other times, I give the book to people I know.

At one point, I tried to give a box of books on frugality away at a food pantry, but there was no interest at all in them, which surprised me a bit.

On Twitter, you said “I buy local when it’s obvious – at a farmer’s market, for example – but outside of that, I don’t worry about it too much.” Could you elaborate on that a bit? What about American cars and American appliances?
– Charles

This was part of a lengthy discussion on Twitter about what it means to “buy American” when parts – and, often, whole products – come from global supply chains. Should I be partial to a Ford Fusion, which is built in Mexico with only 50% American parts, over a Honda Accord, built in Ohio with 70% American parts? (See http://tr.im/k1Kw for more.)

Personally, I prefer the Honda. American workers are assembling the cars. American workers are making more of the parts. In both companies, there are stockholders all over the globe, which is where most of the profits go. The only part of the equation that’s more “American” for Ford is the name on the label and the million-dollar salaries of the top company managers.

Because of all of these factors, I don’t worry about the “nationality” of most products – at least not anything that comes from beyond what I can track. I like buying produce at the local farmer’s market from people in the community. I prefer to buy Picket Fences milk, because that dairy is just a short drive from here. Beyond that, I often have little idea from who or where the product comes from – who was paid to assemble it, who made the parts, and so forth.

So, frankly, I don’t worry about it too much. I evaluate based on the quality of the product, not on the perceived qualities of the name on the label.

How do you decide which questions to use in a reader mailbag? You’ve said before that you get many more questions than you can answer.
– Angie

I get about 50 questions a week for the reader mailbag, of which I answer ten in the mailbag, about five in individual posts, and a few more by direct email responses.

How do I decide which ones to respond to? I don’t use an exact method. Instead, I just look for questions that look interesting. Does this question make me think? Would it result in an interesting answer that might spur discussion (without enraging people)?

I do like shorter questions that get right to the point. I generally don’t like long questions with tons and tons of rather extraneous details.

What are your summer vacation plans this year? You mentioned camping and a potential road trip. Will you be able to speak or meet with readers? We’d love to meet up with you for drinks if you’re ever near Memphis.
– Kylie

My parents, my wife, my children, and I are going on a long “road trip” vacation together in June. We intend to visit the Dallas/Fort Worth area, New Orleans, and possibly Memphis. Later in the summer, my wife, my children, and I are going to camp somewhere north of Duluth, Minnesota.

If things work out, I might be doing a small event of some sort in both DFW and New Orleans, and possibly in Minneapolis. This would likely involve a presentation at a library and/or an open “get-together” with readers for appetizers and beverages. If my schedule works out for this, I’ll post details later on.

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