Reader Mailbag #79

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 have a very good friend, who is also very frugal. She has recieved this habit from her parents, who have told her to study hard, work hard, get a good, steady job and save your money. This is working out really well for her so far, and in our peer group, she actually has the highest savings ( most of the group still living from paycheck to paycheck).

My concern for her is that she is not really enjoying herself and the money that she works so hard for. In the past, I would invite her out for a coffee, and although I offered to pay for her she would only buy water as she wanted to save money. She has improved since then, but she always feels guilty about spending any money on herself. Moreover, she is extremely risk averse and when I suggested that she look at investing some of her money in an indexed mutual fund, she simply kept repeating that the stock market is down, and I don’t want to lose any of my money. However, her family regularly ask her for money and she has actually lent a family member $30,000 for a house deposit however I’m not sure when she’ll ever see it as this family member is still working part -time, and is looking to start a family soon with her husband.

How do I get her to see that she should look after herself more and that it is okay to start enjoying your money guilt free?
– Donna

At first, my impression of the friend was that she was in fact living “too tight” and was in danger of becoming a miser who misses out on life-fulfilling experiences in an effort to conserve every dime.

Then I read the part about loaning a family member $30,000 with little expectation of getting it back – I’m sure she was aware of this – and my opinion changed quite a lot.

It sounds to me like your friend has her values figured out – and it’s just that those values are fairly different than yours. Your friend’s values center around her family and she’d rather do without little things in life to help out her family – and possibly her close friends, too.

I know a couple people who do this – they scrimp and save, then occasionally help the people they care the most about in a big way, swooping in to do things like make down payments on houses or buy new cars. They also often do things like write $50,000 checks to charities when those charities most need it. At the same time, they won’t go out for coffee because it’s too expensive.

Is that miserliness? I’m torn. On one level, I think that these people are missing out on some of the joys in life. On the other hand, I think that perhaps they’ve just figured out what really makes them happy – helping their family and closest friends and the causes they care about.

It’s not a tradeoff I would make, but it’s a tradeoff I understand.

At last NBC began streaming Days of our Lives full episodes online, so theoretically, there’s no reason for me to subscribe to cable anymore, since this is the last of my “must have shows” to become available this way. I am considering giving up cable, in favor of a combination of internet and TV with rabbit ears. I live in an apartment, so indoor antennae is my only option, and since my TV is digital, would I even need a converter box? I am very low tech, but the reading I have done indicates no, however higher tech friends say I would. Also, I am thinking a VGA cord to attach my PC and TV would give me TV size streamed programming, any other considerations?
– Mary

Days of Our Lives? I actually watched that one summer almost two decades ago when I was convalescing. All I remember is that Satan was actually a character on it, which I found hilarious.

Anyway, if you have full access to the programs you want to watch, I see no reason to not abandon cable/satellite television. You can get emergency weather from a weather radio, local news from the internet, and there are lots of sources for the programming you want to watch.

Frankly, I’ve been watching almost no television over the last several months. I’ve watched some programs, but almost all of them have either been on sites like Hulu or on DVD.

On Twitter, you mentioned seeing District 9. Did you enjoy it?
– Ev

Very much so.

The best science fiction is basically just a morality tale on modern life where one element is altered in a fantastic way in order to make you consider the situation in a new light.

District 9 is essentially about immigration and looks at an individual’s change in perspective if they go from being the established citizen to being the immigrant.

In the end, I thoroughly enjoyed the movie and the questions it raised floated in my head for a good week. That, to me, is a sign of a very good movie.

i have a work offered HSA (health savings account) and high deductible health insurance. They take the money (i decide how much) out of my paycheck and put it into an account that i can then use to pay my deductible and other health related expenses. this is all pre tax money, its a great deal for me,a nd i can keep it as a sort of ‘health nest egg’ of sorts. what I guess I was wondering is, how should this affect my emergency fund, given that I have a fund which is of equivalent size for health emergencies alone?
– akb

I would consider that account to be a useful tool, but given the many restrictions on how the money can be used, I would not consider it part of my emergency fund.

To put it simply, many, many serious emergencies in life happen in situations where a health savings account won’t be able to help. It can’t help with a serious engine problem on your car. It can’t help with a job loss. It can’t help with a big unexpected personal expense. It can’t help with a forgotten tax bill.

It also can’t help with any big opportunities that come your way, either.

Thus, I would not count a health savings plan towards one’s emergency fund. That being said, I’m not sure putting a “cap” on an emergency fund is a good idea. I’ve been moving more and more towards looking at my cash savings as an emergency fund and an opportunity fund, so I don’t hesitate to continue to add to it over time.

If you don’t mind me asking, how do you promote the site, just seo or do you market as well? all tips gratefully received.
– Lee

I don’t promote The Simple Dollar directly at all. My audience has been built by word of mouth. I didn’t have any “connections” in the blogosphere to tap, either – no one has helped me with traffic because they’re an “old buddy.”

I also don’t worry that much about SEO. My only real concern in that area is just to write meaty articles. If I write meaty, thought-provoking, and useful articles, they’ll naturally attract links and search engines.

In the end, it comes back to good content.

Why do you think Skype is better than Magic Jack? Doesn’t Skype require you to have your computer on all the time?
– Kelly

I’ve used Skype and Magic Jack and personally found Skype to be the superior service. I’ve had fewer problems with it (using it for more than a year versus a few problem-plagued weeks with Magic Jack). I can use it on pretty much any computer, for starters, and I can use it for videoconferencing, too.

As for having a computer on all the time, I tend to do this anyway. My desktop machine does several different automated tasks (collecting data at certain times, mostly), so I just leave it on and have Skype run on startup. Thus, Skype is almost always running.

Skype’s not a great telephone solution for everyone, but it works pretty well around here.

I’ve been accepted to a MBA program and got a two year deferral so I can work for a couple years. My school’s website says that they don’t consider retirement assets up to $100k in their aid decisions. I’m looking about $50-55k per year in MBA expenses.

I’m maxing out my 401k and Roth IRA this year and plan to continue to do so until I enter the program. My question is how I should invest the new money in my Roth IRA over the next two years (three years of contributions)since I could potentially take it out to pay for the MBA.

I have about $30k in other savings and expect to put $2.5k per year (state tax deductible) in a 529 plan.
– AK

Since you’re investing for a short term goal, you should invest in something very stable, like bonds or even cash.

Markets that don’t have a guaranteed return (stocks, metals, commodities, currency, etc.) aren’t stable short or medium-term investments – over a three year period, there’s enough fluctuations in those markets that you have a very high likelihood of simply losing money. Most such markets do gain money consistently – and quite nicely – but that’s over a long period, much more than just three years.

Just go conservative. It might seem like a small return, but it is a return, after all.

We purchased our home 6 years ago with 100% financing split between our 1st mortgage and a HELOC. We are able to make both payments. The 1st is at a 6.375% APR and the floating HELOC rate is 2.75%. We have an emergency fund equal to 105% of the HELOC balance. My question is this, should we: 1) take advantage of low rates to consolidate the 1st and HELOC, or 2) just pay the HELOC off and use that as our emergency fund?
– Michelle

I’d lean towards the first one, provided you don’t have to get PMI or other such insurance. Contact your local credit union and see how you can consolidate.

On the surface, that might not seem like a great idea because of the very low HELOC interest rate, but that rate is floating, which means that from here it’s got almost nowhere to go but up. I’m also assuming that the HELOC has a much smaller balance than the primary mortgage.

I would not tap your emergency fund to pay off debt, especially debt with this low of an interest rate. It’s a great goal to get rid of it, but Murphy’s Law pretty much guarantees that if you were to wipe out that emergency fund in this way, you’d need that emergency fund the next day.

I was just wondering how you first got into blogging, and what you used when you first started out.

Did you start with your own domain or did you start of with something like a Blogger account?

Reading your blog and seeing your passion for writing about frugality and life has made me rather inspired to perhaps start blogging myself.
– Kayla D.

Whenever I start blogs – just to see if I can write consistently on a topic – I start on Blogspot. That was true for The Simple Dollar – I played around with some ideas on Blogspot in October 2006 before launching the main site.

I’ve also started a lot of blogs on Blogspot that never really went anywhere. They just didn’t click.

Once I realized that The Simple Dollar might be something that I could do for a long time, I got my own domain name and my own hosting plan, then migrated to WordPress. However, doing that is overkill if you’re not really committed to what you’re doing.

Your list of books you read last month was really impressive! Do you really read that much? What about the books you review here? Where do you find the time?
– Jason

Yes, I read that much. I read a book for personal enjoyment every three days (on average). I also read about a book a week for The Simple Dollar beyond that.

Most of my leisure time, frankly, is spent reading. My wife does the same thing – in the evenings, 90% of the time, we’re either both reading or we’re playing a board game against each other.

I also make a point to read in front of my children for at least a little while each day. This serves a lot of purposes. For one, it shows them that reading books is part of a normal adult life – I do it as a role model. For another, it gives them time to play independently and make up their own games, which I consider vital for child development.

I also usually take at least an hour out of my work day each day to simply read. Perhaps once or twice a week, I’ll read a book for personal enjoyment – the rest of the time, it’s reading for The Simple Dollar.

Add that up and it’s clear how I manage to read so much.

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

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