Reader Mailbag #68

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 understand what you are saying about supporting the people who make movies/television shows, but how is “trading for DVDs” being supportive? No one related to the production of the show receives any money from a trade.
– Karen M.

I get all my DVD’s from the library, for free. So, am I also telling the people who produced them that their products are worthless to me? I’m asking legitimately, as I don’t know the answer. Not trying to be a smartass. If the answer is yes, then how is using the library any different than piracy? Of course, I return the DVDs, but I probably wouldn’t watch them at all if I had to pay for them, even as a rental. It wouldn’t be worth the money to me at this point in my life.
– Kate

Kate and Karen’s questions are tightly related and deserve a detailed answer, so I’ll deal with them together.

First of all, I don’t see any problem with trading for DVDs or books or CDs. At some point, the original copy of the item was purchased – the person that bought it now owns a single copy of the item to do with what he or she pleases. Trading a DVD is just like trading a wheelbarrow – it’s an item that you now own that you can exchange with others for other items of value.

A similar logic occurs at the library. If a library has a copy of a book or a DVD, that means they’ve purchased that item. Since you pay your taxes, the library is funded by you (and everyone else in the community) By checking it out, you’re simply using your share of an item that you’ve already purchased.

The murky area comes in when you’re able to perfectly duplicate such an item. Many people like to argue that if you can easily make a duplicate of an item, then each copy has essentially no value at all. Going down that road results in a long, complex discussion.

My conclusion is similar to that in Lawrence Lessig’s book Remix – the genie is out of the bottle when it comes to such duplications of creative works, but we’re still in the infancy of figuring out what comes next. I believe that right now is a pretty grave time for many content producers, but the future is very bright, indeed, once new avenues for making money from creative works come to fruition.

You’ve been mentioning a lot of books you’ve read recently on Twitter. Any recommendations from your recent reads?
– Joely

Olive Kitteridge by Elizabeth Strout is fantastic. The titular character is simply the most well-rounded fleshed-out character I’ve read in a long time.

I had a lot of pure fun reading Now I Can Die in Peace by Bill Simmons. Bill isn’t just a great sportswriter – he’s a great writer. I’ve got his next book on my wish list.

Finally, World Made By Hand by James Kunstler presents a wonderfully fleshed-out but realistic look at a world after peak oil and in the aftermath of the fall of the United States government. The “return to basics” is a direction that I think most able-bodied and able-minded people would go.

I am 26 and I will have a $20,000 increase in income next year. Should I put my extra money into a company matching 401k or save up for a down payment for a house?
– Joyce

Depends on how much you’re saving in that 401(k) right now. A good rule of thumb is that your total contribution (yours plus any matching you get) should be around 12%. If you get too far above that, you’ll have a very healthy retirement, but you might be choking off other savings in your own life.

If I were you, I’d just make sure you are saving that 12%, then sock the rest away in a savings account for that house. Just be careful to actually save it for that big goal – don’t get tempted into other things along the way.

Have you heard of AFullCup.com, it appears to be a coupon and deals sharing website. I can’t decide if there is any value in it, let me know what you come up with.
– Ruby Leigh

There are lots of great deal forums out there – A Full Cup is just one of them. The Fat Wallet forums is the place that I often lurk, for example.

With such sites, you usually get out of it what you put into it. If you just go there a bit and occasionally search it, you’ll likely find a few good deals. If you’re really involved and watch it like a hawk, you’ll find many more.

The problem is this: the more you watch for “deals,” the more likely you are to end up buying things you don’t really need, which somewhat defeats the purpose. Thus, I generally use such services only for searching for discounts on things I’m already thinking of buying.

I’ve been with ING Direct for a while, but their savings rates are pretty low. There are other banks out there offering accounts that earn as much as 3%. Why shouldn’t I switch?
– Edgar

In my quick searching, the only bank I could find with savings rates at 3% or above is SmartyPig (I’m mentioning this because I’m sure someone will ask that).

Anyway, I see no problem with simply seeking the highest rate if you’re simply looking to sock cash away for a long term goal and you won’t ever need it in a pinch. This is exactly what high interest online savings accounts are best at.

Having said that, I would be wary about switching away from a primary bank that I was happy with. If your bank has good online bill pay, no fees, offers a bit of interest on the checking, solid interest on the savings, and has never caused you any problems, you should not move all your banking to another bank because of a higher interest rate on the savings account.

My wife has a store credit card that is maxed at $2,500. The only payments they will allow her to make are the bill amount (so if it’s $100, she can’t pay $150 for example) or the full balance. She applied for a loan from her bank so she could pay the full amount off and the interest rate would be lower from the bank, but she was denied. I then applied (same bank) and was denied also due to insufficient credit history.

We called the store to see if they could set up regular payment plans (the amount due each month varies, wildly) or if they could reduce the interest rate, to which they said no to both.

My “quick” question is, are there some other options for her to get a loan in order to pay off the card so she’s not paying out the nose in interest?
– Frank

The first place I would go is to a local credit union. Explain your situation and ask if they can help.

If that’s a no-go, see if one of the two of you can qualify for another card and execute a zero balance transfer onto it.

A third option: make the bill amount payments and sock an extra payment or two into a savings account each month, then pay the whole thing off in a year or so.

What’s your favorite store-bought barbecue sauce?
– Elgin

At least in terms of the widely available ones, I’ve been partial to Stubbs for years. I love using it on everything – but particularly on chicken. Few things are better than a piece of chicken smothered in good barbecue sauce.

Most of the mainstream brands, frankly, taste far too sweet to me. They give me the same feeling I get when I drink a Pepsi – way too sugary, and a bit of aftertaste that I attribute to the high doses of corn syrup.

In the end, though, I prefer to make my own. I use varying amounts of tomato paste, brown sugar, Worcestershire sauce, English mustard, apple cider vinegar, soy sauce, cayenne pepper, and various other things for experimentation (like a shot of Jim Beam, for example). I mix up what I want, boil it for twenty minutes or so, and it’s good to go. It’s a lot of fun and you can scale back or scale up the sweetness or various flavors to your heart’s desire.

I just got my monthly statement from my credit card company, stating that my minimum payment due this month is “$0”. I currently have a balance of about $1,500 on this card.

Even though money is tight right now, I would really like to start putting away small amounts of money into a savings account and then focus on paying down my credit card.

My question is: Should I take the $50 that I normally pay per month on this card and put it toward my savings or should I just pay $50 to my credit card company this month as usual?
– Maya

Depends on the interest rate on that card. If it’s above 5% or so, you’re better off getting rid of that credit card debt.

That is, of course, assuming that you do have at least a little bit in savings to provide for an emergency fund. If your savings is less than $1,000, you’re gambling against Murphy’s Law – and that’s never a good gamble.

So, to summarize: if you have less than $1,000 in savings, put the $50 in savings. Otherwise, put it towards the debt unless it’s less than 5% or so.

If you were eighteen years old and single right now, would you go to college?
– Sara

No, I wouldn’t. But it’s not that straightforward.

If I were eighteen right now, I’d be an eighteen year old with a pretty successful business on my hands that I had built myself. If a person graduates high school and has built a solid business on their own, it makes sense to follow the business, at least for a while.

The purpose of going to college is to grow as a person, and I fully respect that. However, if you’ve got enough talent (and have had enough luck) to have built something successful, that’s an opportunity that you shouldn’t pass up.

I feel the same way about anyone that has exceptional opportunities coming out of high school. For example, if a baseball player is good enough to get drafted and get a multi-million dollar signing bonus out of high school, by all means, they should go for it. Going to college puts that opportunity at risk due to injury and other lost opportunity factors.

If you have something good in the hand, don’t trade it for two in the bush. Don’t avoid college, but if you have great opportunities, don’t look at college as an absolute post high school requirement, either.

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