Reader Mailbag #78

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.

The cost of education is increasing at an alarming rate. At some point it will come down to a cost benefit thing. Is it worth it to pay $150K for a 4 year degree say in creative writing where you struggle to find a job?

At what cost will college be worthless if tuition is increasing at its current rate? Yes you can say that education shouldnt have a price, but what if it cost you $250K just to get a 4 year degree? That’s a 30 year mortgage for a lot of people.
– Jake

I’m going to throw out my own theory here. I think we’ve reached the peak of the power of the bachelors’ degree as a ticket to a career.

What’s happening is that at many schools, the cost – both in time and terms of dollars – are eating up enough of a person’s lifetime earnings that a properly motivated individual can find other avenues for earning a good living without going through that process.

Entrepreneurship doesn’t require a degree of any kind, and the internet has opened the door to entrepreneurship in countless interesting ways. The door is open wider to self-employment and entrepreneurship than ever before.

When everyone can show off their work online, we move closer and closer to a true meritocracy. Degrees were once ways to show that a person had a set of experiences, but today, one can find evidence of experiences and talents online by viewing a person’s Facebook profile, personal website, online portfolio, and shared thoughts.

I’m not devaluing a college degree – the experience of getting it, if properly utilized, is life-changing and life-affirming. But viewing your degree as simply a ticket to riches is on the verge of becoming a thing of the past.

My suggestion to people thinking of entering school: what are you sharing with the world? Are you creating value for others? The earlier you start doing that, the better off you’ll be.

I hate everyone at my job and I want to quit. Why should I bother maintaining any sort of relationship with any of these bloodsuckers after I leave?
– eldrick

Sounds like somebody’s got a case of the Mondays!

You might view the people around you as soulless cretins better suited for True Blood than real life, but those people are still involved in your current career path – and may even hold valuable connections in other career paths.

You might not like some people in your office and will be fine severing ties with them – that’s fine. But if you have a positive relationship with anyone in your office, you’ll always do well to cultivate that relationship.

No matter what, though, don’t burn your bridges in some childish fashion when you leave. All that does is create a negative impression of you – it doesn’t “show them” a thing.

Trent, what’s the problem with shilling for things you DO believe in? You’re in a fantastic position to provide for your family by blogging — blogging, of all things! I wouldn’t trust you any less for getting paid for peddling products and services you actually do find useful. I think the trust has already been established; we know you can’t be bought. Other readers, you with me?
– Leah

I do write about things that I do believe in. I talk about PaperBackSwap and ING Direct and Vanguard and Evernote and SmartyPig and books and games I enjoy all the time.

The catch is that I restrict my positive comments and reviews to things I actually use in my own life. If I don’t use it myself, I don’t endorse it, period. I don’t even talk about it except on rare occasions where something deserves clear commentary.

It would be incredibly easy for me to expand that a bit and cash in big time. I could start recommending banks that seem to have good service, but that I don’t use because I find more value at other banks. Talking about banks is good, right? And I can certainly make some cash from that with affiliate links. The same goes for some credit cards with good rewards programs. Or supplies for cooking at home. Or investments. The list goes on and on.

I don’t do that. If I write something, it’s about what I’ve found useful for me, not what I’m paid to talk about. Period.

Yes, I’ve been asked to try a lot of things over the years. The only ones I’ve bothered to write about at all were the ones that were compelling enough for me to start using them regularly – like PearBudget and Wesabe. I use both of those things semi-regularly (I use the PearBudget spreadsheet with some homebrew modifications and I follow discussions on Wesabe all the time), so I have no problem mentioning them. However, both of those things were brought to my attention by people who practically begged me to try them. I’ve tried hundreds more and never went back – so I never wrote about them.

If I did anything else, I’d not be honest. That means I leave money on the table all the time. My reward for that is loyal readers, like the 2,000+ who have signed up to be “Friends of the Simple Dollar” and the many thousands of others who share my articles with their friends and mention them on Twitter and Facebook.

It’s more than a fair trade, in my opinion. Full honesty has rewards far beyond a few dollars left on the table.

Frugality is for old people. I want to live now, not later.
– Dimes

What do you mean by “live”? Is “living” buying every consumer product you see? Is “living” throwing cash down the drain on convenience foods and convenience purchases. Is “living” burying yourself in credit card debt and watching more and more of your paycheck vanish into the gaping maw of interest payments? Is “living” working at a job you hate so you can “live it up” on the weekends?

I tried living like that for a while. Before long, I found myself masking a lot of pain – big debt bills in the mail, a career that paid well but didn’t seem to have many prospects and didn’t include work that I was passionate about – with a lot of “living.”

The end result? I almost lost everything I had – my marriage, my job, and my small amount of remaining happiness.

What I discovered is that “living” meant figuring out what I actually wanted to do and then doing it with abandon, then paring down the other aspects of my life that weren’t as important. That’s frugality in a nutshell, and it changed my life. Writing went from being a vague dream I tortured myself with to a way of life. My debt bills went away and I was able to start saving for some big goals. I was able to take some huge professional risks to chase what I wanted to do, not what my spending habits dictated.

If your version of “living” involves designer labels, a pile of gadgets, and drinking and partying and eating to cover up the pain of your job and that growing wall of debt, feel free to have at it. I’ll take my version instead.

I live in a one bedroom apartment in Utah and will be moving to Ohio to live with my sister and her family at the end of September. Due to having been unemployed since March, I can really only afford to take whatever will fit into my 2003 Oldsmobile Alero.

My question is this: what is “worth it” to take with me, and which items would best to sell and buy again once I get a new job and a new place?
– Misty

Take the things that have personal value to you or that you use every single day and sell everything else. Seriously.

A move like this is the perfect opportunity to pare down your possessions to the things that are really valuable to you. No expectations of others. No anything. Just you and what’s important to you.

You’re far better off just taking enough stuff to fill a few bags and a healthy wad of cash than to bring a bunch of stuff you don’t really value and a significantly lighter wallet. You’ll save time, save mental clutter, and have more money by going light when you do this.

What kind of correlations have you made between finance and your previous research job? I’m sure there have been some.
– Mol

Science and finance are both about evaluations of data. The biggest difference is that most of the evaluations done in finance relate heavily to human nature.

In its idealized state, science is about making predictions based on facts. Finance does the same thing. However, hard science generally isn’t impacted by human psychology – the facts are often concrete and stable.

Personal finance is much different. Human behavior can only be predicted to a certain extent. I find that personal finance is actually closer to psychology than it is to hard science.

I don’t understand the “absolutely no debt” philosophy. Do people who advocate this really believe that a person should rent their housing for years and years and years before buying a home?
– Flo

From a pure numbers standpoint, the debt free lifestyle makes a great deal of sense. Virtually every debt you incur requires you to pay back that debt with some interest attached, which is a net loss of resources. Avoiding debt means that you retain all those resources and can invest them, generating more resources.

But do those numbers reflect real life? It’s hard to come up with a concrete answer to that one. I certainly believe that having a nice, stable home is beneficial to my children in ways that are difficult to directly express in dollars and cents.

I think that it’s easy to argue on behalf of no debt in areas you don’t personally value in a deep way. It gets harder when debt intersects with your key values, like your family and the decision to buy a home.

What do you think of the third season of Mad Men so far?
– Ralph

A long-time reader sent me the first season of Mad Men on DVD and got me hooked. It’s an incredible series, one that I’ve thoroughly enjoyed…

… up to this point. The third season hasn’t really clicked with me yet. Perhaps it’s because I haven’t finished watching the second season, but something just seems to not quite click.

Of course, I’ll admit that the first episode or two of the first season didn’t quite click with me either. It took a while for it to really click. Maybe the same thing will happen again.

Ignore the experts for a moment. How big of an emergency fund do YOU think people should have?
– Walt

Honestly? I don’t think there should be a limit. I think people should contribute a healthy amount to an emergency fund with every paycheck.

Why? I think that the definition of an “emergency” is often limited to negative things, when it should also include positive things. My life regularly offers me great opportunities that I could jump on if I had a bankroll – investment in businesses, taking advantage of enormous sales, taking giant career risks with potential rewards.

I’m not saying all of that should be in cash – I believe in a CD ladder approach to maximize your returns. But there should still be a large amount safely in cash for you to grab when an emergency – both good and bad – occurs.

Should Pete Rose be in the Baseball Hall of Fame?
– Larry

I’m a lifelong baseball fan, and the whole Pete Rose question is a nugget that constantly gets kicked around among baseball fans. Several readers – a few of whom I’ve played fantasy baseball against – have asked me this question, so I’ll give it my best shot.

I think Pete Rose not being in the Hall, as things are now, is dishonest.

If he’s excluded for his actions, Ty Cobb, Smokey Joe Wood, Tris Speaker and others should be tossed out of the Hall of Fame because there’s similar strong evidence that those guys also bet on baseball. Yet those fellows remain in.

On the other side of the coin, if Rose is allowed in, then “Shoeless” Joe Jackson should also be eligible for the Hall of Fame.

My personal opinion is that the Baseball Hall of Fame should simply reflect the nature of the game itself and the players that had a significant impact on the game’s history. In that regard, Rose and Jackson should unquestionably be in, as should the guys in the modern era who used performance-enhancing drugs (yes, if I were voting, I’d vote for McGwire and Sosa). After all, many players from the 1970s who used amphetamines to get an edge (like Mike Schmidt, for example) are currently in the Hall, and if that’s the established standard, then that standard should apply to everyone. Given that, I would also understand if they raised the guidelines for membership and cleaned house, getting rid of people that would be effectively “banned” by the character guidelines that are already in place.

In my eyes, the disgrace here is the Hall of Fame and the voters, which is clearly using a double standard for determining who should be in. I’ve loved baseball all my life, but I have no interest in going to Cooperstown if it merely reflects some warped view of the history of baseball rather than the true history of the sport. Put Rose in or kick Cobb out, in my opinion – leaving things as they are is hypocritical.

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

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