Reader Mailbag #65

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. Several readers have asked about our decisions with regards to child care, something I’ve written about extensively in the past (because it was a very challenging issue for us to work through). Beyond these articles, I will likely write an update soon.
Daycare: Personal, Family, and Financial Responsibilities in Balance
Should I Send My Child to Daycare or Should One of Us Be A Stay-At-Home Parent?
The Stay At Home Parenting Question Hits Home – Hard
Stay At Home Parenting: Is It Worth It?
Rethinking The Costs Of Child Care – And Considering Some Major Choices

And now, some great reader questions!

Question – I just became the Senator of Finance in an International Honor Society I am a part of. Most members are not too active, but I have a lot of gusto, and I am wanting to do a fund raising event every month, but not overwhelm or bore our chapter. Did you come across any interesting ideas catered towards this kind of thing in college?
– Mol

Find out what people enjoy doing, and create a fundraiser based around that. Have a Guitar Hero tournament. Have a softball tournament or a basketball tournament. Make your fundraiser into something that people would do anyway, except add a bit of organization and a bit of a carrot to it.

Even better, look around the community for sponsors. Ask them to contribute prizes, then plaster that company’s logo all over your promotion for these events. This lets you keep all of the proceeds for your fund raising purposes while giving out interesting prizes.

Remember, a fundraiser isn’t purely about the money. It’s also about raising the reputation of your organization. Doing something fun that gets people in the door is the best way to do that.

I have started a new job which will leave me with quite a bit of extra money to save, spend, invest, whatever. Over the next year I plan on establishing a fairly healthy emergency fund, paying off all of my debt, and still having enough left over to do something with. I’ve contemplated putting the money into my Roth IRA, but I’ve also contemplated using the money for a business venture; I don’t have a solid plan now, nor would I really need one until I have that money to make a decision with anyways, but I was wondering your take on the issue – when would you advise one or the other?
– Dave

If you don’t have a concrete business idea, put the money into your Roth IRA. No matter what happens, the window of opportunity for contributing for retirement is never better than when you’re young.

What about if/when you come up with a great business idea? Develop it a bit. Do the basic research to make sure it would work, and write a business plan. If the idea comes together to that point, then you might have something worth thinking about. Until then, it’s a dream.

Never sacrifice your future for a “maybe” or a “could be.” Keep your eyes open for opportunities, but don’t avoid saving for retirement for it.

Right now we are using a 529 plan to save for college for our 3 kids. Someone told us that we should be saving in a Roth IRA because we could have more flexibility in how the money is invested, getting a better return and we would have more flexibility in using the money, so if our child got a scholarship and didn’t use the money, we could just apply it to retirement, whereas with a 529 it must be used for educational expenses. Our state’s 529 plan isn’t that great, but they offer a matching grant every year that we are eligible for right now, but will not be after this year. And if we move our money, we will lose all the matching funds.

What do you think of this? Is it worth it?
– Michelle

The real question is whether or not you’re adequately saving for retirement elsewhere. Are you saving at least 10% of your income for retirement right now? Do you have poor retirement investment options at work? If these things are true, you’re likely better off just using the Roth IRA for retirement. (Remember, also, that you’re not restricted to using your state’s 529 plan – there are great plans in other states that are open to you, like Iowa’s).

If you’re completely covered for your retirement savings, then a Roth IRA is a potential investment vehicle for your children’s education. It has one disadvantage – if you don’t use it for the education, you can’t touch it until you’re at retirement age (without paying an extra 10% tax penalty beyond what you’d normally have to pay). On the other hand, a “savings plan”-style 529 allows you to access the money for any purpose with no penalty other than the normal taxes.

I think the flexibility of a good 529 plan, plus the need to use a Roth IRA for retirement, makes the 529 a better move for my children’s college education, but your situation may vary.

That said, I think you’re wrong, in that pets CAN be compared to humans. It’s not as black-and-white as you think. If you had to choose between saving the life of your dog, or the life of your child, the choice is obvious. But what if instead of a child, it was an adult stranger? What if it was a convicted murderer? What if it was a cancer victim who only had a few days left to live anyway? Which would you save then?
– Kevin

Here’s the problem whenever you make purely moral comparisons, particularly when comparing one life to another. Different people have different experiences and thus different sets of values. Some people look at pets and value them as much as people, while others do not. Some people think the life of one human (say, their child) ranks above the life of another (say, a stranger), some do not.

There is no absolute answer to questions like this. One can argue until they’re blue in the face about it, and it doesn’t change the simple fact that different people have different values and, for many of those cases, there is no absolute right or wrong.

That’s the reason I usually avoid issues of moral gray areas. There are reasonable, rational people that are on both sides of an issue, and they feel very strongly about their side, believing that they are right and the other person is wrong. No amount of arguing will change it, because the people on each side are coming from a different set of life experiences which have led them to different sets of rights and wrongs.

So, can you compare pets to humans? I see both sides of the coin here. Which one is right? I don’t know. I know how I feel about it, but it really doesn’t (and shouldn’t) impact how you feel about it.

We invite a small group of people over to our house every Tuesday night. The group has grown from 2 people, to 20 people….and counting. I love hospitality and my husband and I decided we wanted to feed them dinner everytime they come over.

With the group being the size that it is, I have started to use paper-plates instead of normal plates to serve up the meal. While in jest, one of the group members commented that paper-plates were environmentally unfriendly, but my rational was that washing 20+ plates would be more of an environmental offence. Afterall, where we live, we’re actually in drought and are on Stage4 water restrictions! What is your stance? Which is the lesser of 2 evils? Which option is more environmentally friendly?
– Daniella

Given the water restrictions and also given that you can recycle paper quite easily, I think paper plates are a reasonable choice in this situation.

To me, this is another example of the “moral absolutism” I mentioned above. What’s a greater impact on the environment – the amount of a tree required to produce a handful of paper plates (and the processes therein) or the amount of water and detergent used to wash twenty plates (and the processes therein)? There’s not going to be an absolute answer to this question.

The real solution is to just be mindful of the environment. If you use paper plates, make sure you recycle them. If you choose to wash the dishes, do it with any water restrictions in mind.

Trent, here’s a question: What do you do in those situations when you go out to eat with a group of colleagues or acquaintances and they decide to divide the bill equally among each participant? I never order the expensive stuff and I don’t drink beer or wine, but often end up paying the price. Any ideas on how to politely get out of it?
– anna

If I’m concerned about this, I just request a separate check early on in the meal. When the waiter comes to take my order, I simply say that I would like my own check. That’s trivial for a waiter to do, and it also pulls you out of splitting any bills.

Of course, if there are appetizers ordered or something else shared, you shouldn’t dig in, since you won’t be sharing the cost of those appetizers. The only way out of that is simply agreeing to contribute to the appetizers – or ordering an appetizer of your own and sharing it freely with others.

I personally think that individual bills at a restaurant is the best policy. Splitting a bill at the table has so many potential ways to cause hurt feelings that it’s just not worth it.

You wrote about how you give your business to ethical businesses and businesses that provide good customer service. I would like to make my purchases at these kinds of businesses, but it seems there is a Walmart at every other intersection. Do you have any suggestions on where to start offering your business when you are looking for these qualities?
– Mol

You have to go by your own experience. I find all the time that some branches of chain businesses have spectacular customer service, while other branches have atrocious service.

You should also factor in the other costs for you. If you have to drive ten miles to go to a department store or a grocery store with better service, it’s probably not worth it for the inexpensive purchases you’ll make there.

For most of my regular needs (like groceries and household items), I simply tried all of the local stores until I found ones I like with good service and reasonable policies and prices (Fareway and Target, namely). For larger purchases, I shop around – I don’t have a “regular” place for those purchases.

Is it worth installing tankless water heater in the house to save money on energy cost?
– Mateen

It depends heavily on your water use. The heavier the use, the less efficient they are. Factors that cause you to use more hot water include more people living in the home, frequent shower and bath use, heavy laundry use, and so on. If you’re single, it’s probably worthwhile – if you’re in a family of five with frequent bathers, it’s not going to help as much.

Here’s why. A tank hot water heater just holds a bunch of heated water in it. As it cools, the heater will kick on to warm it back up – on and off, on and off. Now, if you’re using that hot water frequently (and thus not using much energy to constantly re-heat the same water), they’re almost as efficient as tankless heaters – and they’re much less likely to cause you to run out of hot water. On the other hand, if you’re single and you rarely use much hot water, you’re going to waste a ton of energy just heating and re-heating that same water.

We’ve thought about a tankless heater, but we’ve decided to hold off for the time being until our tank heater starts showing significant problems. We don’t feel the advantage is enough to replace our current heater.

You seem to have upgraded your Nintendo DS Lite to a DSi. How did you do this? Why? Isn’t it a waste of money?
– Thom

Shortly after the new DSi was released, I traded my old Nintendo DS Lite and a small handful of games that I’d played through for it. My old DS Lite was beginning to have some issues with recognizing games when you put them in the slot, so I knew it would have to be replaced before long, anyway. So, the DSi was essentially free – I got rid of a system that was beginning to fail and a handful of games I’d already beaten.

Was it worthwhile? Since I’ve picked it up, most of the time I’ve spent with it has revolved around playing with the cameras on it with my three year old son (taking pictures of him and me, going around the house with it, and so on) and playing Dr. Mario, which was a free download for the system – neither of which I could have done with my old DS Lite. Plus, the screen is a bit larger, which is great for the eyes.

Would I have paid for it? Probably not. I would have just stuck with my old DS until it failed, then spent some time without a DS to see if I actually wanted it.

Do you still keep in touch with your high school friends? I’m about to graduate from high school and many of my family members tell me that most of my friendships will die off slowly over the next few years.
– Eddie

I’m married to one of my old high school friends. Aside from her… not really. I keep in touch with a few of them on a very irregular basis, but that’s about it.

It wasn’t an immediate transition. I kept in close touch with several people for years after college. But, as time went on, it became more and more clear that there was a widening gulf between us. We had fewer and fewer shared experiences to talk about and were often separated by many, many hours.

I think that today’s technologies (like Facebook and Twitter and text messaging) make it much easier to keep those connections alive, but I still tend to think that over time, your experiences will diverge more and more and you’ll have less and less in common, until you find yourself with perhaps just a friend or two from those days.

That’s fine, though. Over the years, I’ve picked up other friends. Life goes on – you grow and change.

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

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