Reader Mailbag #66

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.

I just turned twenty last month and want to know what else I can do for the sake of financial security. I have a savings plans with ING Direct, but I always see people saying “If I had started doing (blank) when I was twenty, I would be financially secure right now!” How do I learn how to invest, or where, or what into? What should I know about credit cards and banks? Is it good to be in a little bit of debt (with regards to credit cards) for the sake of good credit?
– Eli Skipp

It sounds like you have a ton of questions and don’t know where to start, but at the same time, it sounds like you also have a level head about money.

If I were you, I’d put aside an hour of your time a day for a few weeks and read two books – one well-rounded personal finance book and one book on investing.

My suggestions? For the first one, there are a lot of good general personal finance books out there. Just pick the one tailored to where you’re at in life. If you’re in college, Please Send Money by Dara Duguay is pretty strong. Just go to the personal finance section of a bookstore and browse a little – and find one that fits.

For investing, though, I have one straight-up suggestion – read The Bogleheads’ Guide to Investing by Larimore, Lindauer, and LeBoeuf. It’s the best all-around guide on investing that I’ve ever read, and is a great complement to any more general personal finance book.

Do you think that committing to a blogging schedule out of passion, despite the fact that it promises no immediate revenue streams, to be a productive step? Can I have the expectation that I as continue, I may encounter more opportunities for income than I can see at this moment? How have you experienced the growth of income-creating opportunities on your own blog? How have you best determined how to streamline your interest with insights that your readers will ultimately pay to enjoy?
– Holly

If it’s borne out of passion, committing to a schedule is a productive step, but not for the reasons you’re looking at here.

If you’re passionate about something, blogging gives you a powerful method to talk about it. You’re able to share what you discover. You’re able to explore your ideas. You’re able to grow in that passion.

Setting a schedule, in a way, makes you accountable to that conversation. People will be more likely to read if you consistently and regularly engage in conversation with them. Think about your friends – the ones you call every day or every week are much more likely to engage you than the ones you call every once in a while when you feel like it.

However, you immediately jump to the “income-generating” conclusion. If you’re committing to a schedule under the belief that such a schedule will lead you directly to money, you’re most likely going to be severely disappointed.

If money is the goal of your blogging pursuits, you will fail. I’m not saying that it’s stupid to try to earn money from blogging – it’s not. But if you’re in a situation where you would stop blogging if the money dried up, the blogging isn’t really your passion – and it’ll come through in what you’re doing.

I have about $10K sitting in bank and I feel I should do something about it. Since I do not have Roth IRA account, I plan on spending $5K (max) to invest on Roth IRA. But I am struggling to find ways to invest remaining $5K. I really do not want to invest in stocks, 401K or mutual funds – I have lost quite a bit of money on all these last few yrs nor I have time to do research. Ideally I would like to invest where there is atleast 5-6% return. Pls advice.
– PR

So, you want a 5-6% return right now without risk? You and the rest of the world, buddy.

Here’s the problem. To get a significantly larger return than you would get in a savings account or a treasury note (the most risk-free options, which both currently return at most about 3%), you have to take on risk.

No investment is a guarantee, not even the treasury notes (but they’re as close to a guarantee as you’ll find). When you start seeking higher and higher returns, the risk gets higher and higher.

Stocks and real estate are two areas where you can almost always get a 5-6% return over the long haul. Over the short haul, though, it’s basically a gamble.

If you could accomplish one goal with The Simple Dollar in the next year, what would it be?
– Edgar

I have five one-year goals that I set for myself on June 1 of this year, which means I want to accomplish them by June 1 of next year.

100,000 email/feed subscribers I’m currently just a hair over 60,000. The way to do this is to just keep writing good stuff and make sure at least some of it is welcoming to new readers. If you want to help with this, the best way is to simply send interesting articles you see to your friends.

25,000 Twitter followers I currently have around 4,400 followers, but I’ve just now started paying strong attention to Twitter. I think I just finally realized how useful it can be for generating conversation. How can I get to that huge goal? Again, I just need to keep putting useful stuff on Twitter.

Second book finished I have a pretty strong outline and drafts of a few chapters. I’m hoping to have a complete strong first draft done in September or so, then let it “rest” for a month, then revise it.

6 more “downloadables” I have a big stack of requested downloadables that people want me to make – it’s just a matter of putting aside the time to get them done.

One final thing… There’s a final goal I have that I’m not going to share quite yet, but I think it’s pretty cool. I think it’ll serve as a resource for a lot of people out there.

Some of us have put in a lot of time constructively correcting Trent’s posts in the past. Here he is pretending he does not actually make mistakes; rather, he deliberately portrays one side of a controversy to generate discussion. That’s why errors was in quote – he doesn’t actually think we’re pointing out real errors, or at least that there’s no such thing as an erroneous opinion. We’re a little frustrated.
– Michael

I write a lot of articles where I address only one or two facets of a many-faceted situation – usually, the ones that interest me or that I know would be really relevant to a reader that has contacted me recently. Most of what you actually see on The Simple Dollar is actually reader-driven – I try hard to match post ideas to what people tell me that they are going through or they want to hear about.

I assume that in the comments people will delve into those other uncovered angles because those other angles are the ones that interest them. What I find amusing is that many such comments accuse me of “errors.” They’re usually not errors – they’re just not issues I find interesting to talk about or I choose not to talk about to keep the article reasonably simple – after all, this is The Simple Dollar. If you want The Overly Complicated Dollar, go elsewhere.

Yes, I make real errors. I make a lot of them. But choosing to cut out a point because I think it would cause an article to drag out too long isn’t an error – it’s an editorial decision to make the site more readable and useful to more people. Again, simple.

If I actually wrote about every angle of a complicated issue, I would be writing a book, most of which would not be interesting to you, and something that only a handful of people would bother to read and comment on anyway. That’s not the point of a blog, where the purpose is to generate discussion. I’d far rather get people to think about an issue in a new way or pick up a new useful tip.

Many of my posts are already long enough.

So, if you think I’ve made a big error by omitting something, by all means, call me on it. I welcome it, as long as it doesn’t devolve into personal attacks on me or on another commenter. We all come here to learn, not to hate.

While QuickBooks simple start is def cheaper than the full out Pro version, normally, often times you can get the Pro version for $100 if not less (watch for coupons at various sites) and lately Staples has been throwing in a nice bundle of extra free software which you might or might not use (can always flip it on craigslist or ebay) so don’t rule out the higher end versions just because they seem cheaper at one time.
– Chris

The big reason why I tend to point people towards QuickBooks Simple Start Free Edition is because it allows people to essentially try out QuickBooks for free and see if it matches their needs. If it doesn’t – no investment lost other than the time. If it does, then the upgrade path to a full version of QuickBooks is perfect.

I actually think all software companies should use this type of technique to sell their software – and more and more are moving to it all the time. For example, the free Quicken Online seems to do just that – it’s a mostly full-featured version of Quicken, but the desktop versions seem to have a fair bit more gas in the tank.

If there’s a free option for the software you want to use, try it out.

How does one justify the cost of a house, insurance, property taxes, and maintenance these days? I understand that equity is built but it seems (without running though the numbers) that you’re really paying for a house 3 times over once all the interest is factored in. Add all the previously mentioned expenses and it seems like renting comes out ahead.
– Reflection

For many people, renting does come out ahead. Buying a house only comes out ahead if (a) you have a need for a lot of living space (i.e., you have multiple children) since large houses have huge rental expenses and (b) you plan on staying put for a long time -or- you have the cost of the house ready to go in cash.

If you’re single and just want a small house, you might be able to find something that’s cost effective by hitting foreclosure sales – that’s how my sister-in-law did it. However, my experience has been that family homes in good condition are few and far between at local auctions and the ones that do appear are bid up like crazy.

So, if you’re single or married without children and plan to at least keep your location options open, I think renting is likely the best option. Neither renting nor owning is the best choice for everyone.

I have a question: Is it really cheaper to sew your own clothes, or your children’s clothes, rather than buying them?
– Lisa

It depends on your skills with a sewing machine and the cost and quality of the materials you can get.

A person who has never used a sewing machine or never assembled clothes before will likely wreck quite a few items before making something worthwhile. In other words, there’s a pretty nice sunk cost of time and materials before you get up to speed.

Now, if you’re a skilled sewer and have access to lots of good material, you certainly can make very nice clothes for little cost, and often do it in the evenings while watching a movie or something. It’s just not as simple as sitting down and starting, though – it takes some skill, and that takes time to build.

My wife has the skill to do this. She’s made stuffed animals and doll’s clothes for our children and has made a few shirts. Her problem is that she gets burnt out – she’ll get really into sewing for a few weeks and make several things, then she gets tired of it.

On another blog (which I will not name since they do not deserve to get traffic for this type of content), a writer talked about obese people in the workforce, and how they would not work with them/hire them. They went on to make some claim that overweight people were less effective than normal-weight people. From a legal standpoint, isn’t it illegal to say something like that? Can an employer not hire you even though you are qualified for the job simply for weighing more than they judge normal? Also, what is your opinion on that?
– Marie

Obesity (unless it’s caused by a demonstrable condition) is not covered by the Americans with Disabilities Act. Given that one’s physical fitness can certainly be a criteria for many jobs, I understand how obesity can be used as a hiring factor. If you’re hiring a crew to build a house, for example, a physically fit person will have more utility than an obese person.

Having said that, I think “overweight people were less effective than normal-weight people” is a pretty ignorant blanket statement. Many people that are extremely skilled at white collar work are overweight, largely because of the sedentary nature of the work. Is this person actually going to claim that Lee Raymond, long-time CEO of Exxon who built the company into the behemoth it is, was less effective than other options?

You hire the best person for the job. A person’s weight might have something to do with their effectiveness at manual labor, but it often has very little to do with your effectiveness at white collar work.

Is that really your voice on the podcast or video? Are you using some kind of voice modifier?
– Duane

Nope, that’s my real voice. It’s low, I know, but I think it’s fairly expected. I’m six and a half feet tall, wear size 17 shoes, and a size 15 ring. My voice box is similarly sized, I think.

What I’d really like to work on isn’t the sound of my voice, per se, but my ability to speak in a way that holds attention. I’m currently working on that.

Got a question of your own? Ask it in the comments, and I may address it in a future mailbag!

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