Reader Mailbag #88

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.

What is your take on the cost and necessity of supplemental insurance (disability, cancer, et al) from companies such as AFLAC?

I purchased cancer insurance through AFLAC when I first started at my job because cancer is very prevalent in my family’s medical history, but today I realized that I’m spending $358.80/year on it and wondered if it’s actually worth it. That’s $358.80/year I could be putting towards my debt and/or emergency fund.
– Joshua

In situations like these, I think the real question to ask yourself is what the insurance is actually buying you. Insurance buys you two things.

First, it buys you financial protection against a certain situation – in this case, cancer. The odds of such situations are known to the insurance company and calculated into an actuarial table. That basically means that they believe, on the whole, if thousands upon thousands of people exactly like you paid $358 per year for the insurance, the company would expect to make a profit. You can use that information (and the approximate value of your payout) to make a reasonable guess as to the odds they have calculated for your likelihood of the condition. That’s what you’re protecting against.

Second, and perhaps more importantly, it buys you peace of mind. This has more power than you realize. People with certain psychological profiles are very open to worrying – perhaps excessively – about potential bad scenarios, and knowing that a scenario is protected against can be an enormous peace of mind and stress reducer to those folks.

For me personally, part of the equation revolves around one’s financial state. If you’re very secure and have a lifestyle well below your means, insurance becomes substantially less important.

What I’m trying to say is I can’t give you an answer to your question. That answer comes from you – what kind of person you are, what the real odds are of cancer, and so on.

Foods prices fluctuate so rapidly these days. What are your suggestions for keeping a pricebook for when store prices change so much?
– McKella

I’ve largely given up, to tell the truth.

What I do is about once a year or so, I’ll spend an afternoon in the grocery stores. I just mark down the regular prices on 25 or so of the staples we buy most frequently. Whichever store has the cheapest total for those staples is the one I shop at. The only exception to that is if I notice an enormous sale in a flyer or something to that effect.

For us, that means we do almost all of our food shopping at Fareway, with occasional stops for specialty items at other stores. Jumping from store to store based on price book entries that are outdated in a month just isn’t worth it to me.

Trent’s comments were less than PC but they don’t bother me. Very few people are really PC all the time and at least a large minority are not PC at all any of the time! We just don’t talk about those people any more because it’s not PC to do so!
– Shevy

You know what, I’ll say it.

People are different. People who grew up in different parts of the world see the world in a completely different way. They have different cultures, different behavioral norms, different thoughts, and different ideas. They’re treated differently due to their physical appearance (as much as you might want to wish it away, it’s still true).

There are good traits and bad traits in everyone. There are prevalent traits – both good and bad – in almost every possible slice of the demographic pie.

And that’s awesome. The world benefits from this kind of diversity. I want to get to know everyone I meet because we all see the world so differently. It’s beautiful.

But it’s different when I consider where I want to live – the place where I put my head down on a pillow. I want an environment where I’m not afraid to leave my door unlocked for a half an hour while I go to the hardware store. I want an environment where people will simply leave me alone to do my own things and think my own thoughts. I want an environment where I’m not concerned about random acts of violence beyond an occasional playground fight. I want an environment where I can breathe clean, fresh air. I want to live in an area where politeness and courtesy towards others is a cultural norm. I want to live in a place where neighbors bake each other loaves of bread and don’t mind if they erect a compost bin. I want an environment that has strong winters and hot summers, as I love weather variety. I want to live in a state that has a high standard of education and funds its schools well. This is what I want – it may or may not reflect what you want and, in fact, it probably does not.

Whether you like it or not, that pretty much prescribes that I live in parts of the world that are dominated by certain demographics and underrepresented by other demographics. In the United States, the only place where I’ve found this environment is the rural upper Midwest – a part of the nation that’s pretty accurately described by “A Prairie Home Companion.” Some other regions have come close – the Olympic Peninsula in Washington state is nice, as are some rural areas in New England, but nothing captures it quite like Iowa, Wisconsin, and Minnesota.

Guess what? The rural upper Midwest tends to have a lot of people of Scandinavian descent. Immigrants from Norway, Sweden, Finland, and Denmark chose this part of the country to settle in because it reminded them of their home country. I’m not of Scandinavian descent at all – I’m part German, part English, part French, and part American Indian – but the places where I most want to live tend to have a large Scandinavian demographic. I recognize that and I’m not afraid to say so. The area near Decorah, Iowa is where I would most want to live – for the reasons described above – and Decorah prides itself on having an event called “Nordic Fest.”

I’ve alluded to this in a variety of ways over the years and been called racist for it. If that is racism, then I’m racist.

If you want someone to be perfectly PC all the time, go to another blog. I speak my mind and my heart here and I don’t waste time mincing words and worrying about whether some group of people will be mildly offended by some comment. Political correctness hurts diversity because it suppresses raw, fresh thoughts and encourages people to filter what they say and think, spitting out milquetoast that destroys the diversity that political correctness is supposed to preserve in the first place.

If you had the option to get a refund on your social security taxes, in exchange for not recieveing SS benifits when you retire, would you take that deal?
– John

Absolutely. I’m already assuming I won’t get a dime from Social Security when I retire, so if I could get a refund of the money I’ve paid in, I’d happily take it.

In fact, I think that’s a good policy for anyone planning for retirement, especially when they’re young. Ignore Social Security. If you do end up getting it, view it as a pure bonus.

Why do I feel that way? Given the skyrocketing budget deficit since 1980 and the huge flood of people Social Security will get in the next twenty years or so, there will come a point when the math doesn’t add up. When that happens, there will have to be major changes. I see that point happening well before I’m old enough to even sniff benefits.

My Wife and I bought a home recently and have determined that we do qualify for the $8K tax rebate on our 2009 taxes. This will likely mean a significant tax refund this year, we’re thinking in the neighborhood of $10K as we always overpay to get a refund (I know, blastphemy to some), and are wondering if you think it is best to put it on the mortgage (5%) or pay off our credit cards completely (11 to 19%)? This seems a no-brainer to me, but it has started a healthy debate at my house and I was curious as to what you had to say on the subject.
– Paul

Credit cards, without a doubt. It comes down to the interest rates above all else, and the interest rates in this case aren’t even comparable.

I can’t think of a case in which someone would think it was better to put the money into the mortgage. Is the logic that one could then borrow from it – via a HELOC – much more cheaply? Or maybe it’s a lock-and-key philosophy – they believe if you pay off cards, you’ll just charge ’em up again.

Whatever the reason, you’ll be much better off if you just pay off some cards and, if you’re having control issues, cut them up.

Do you have any books you’d recommend on motivation? Particularly on motivating others?
– Kellie

I think perhaps you’re looking too specifically for a solution.

From what I’ve seen, people tend to fall into one of two camps when it comes to personal motivation. Either they have a major well of self-motivation that they can draw from, or they’re motivated by the presence of a great leader or someone else in a position of authority who can tell them what to do.

There’s not a whole lot you can do to help the self-motivated except give them the tools they need and some encouragement. The real value in motivation comes from the other group, and the best way to do that … is to be the best leader you can be. Almost all jobs where you help others revolve around these two roles – giving the self-motivated space and tools, and giving everyone else leadership, direction, and inspiration.

So, I’d look for books on leadership. The one book that’s been recommended to me over and over again on leadership is On Becoming a Leader by Warren Bennis. This is a book I’ve strongly considered reviewing on The Simple Dollar and may yet do so. Why? The skills described in that book are universally helpful in improving your career and your position in society.

What movies and television shows do you allow your children to watch?
– Ellen

Unless there’s a major news event, we pretty much never watch live TV. Instead, we have a DVR and use it to record programs so that we have a large selection of quality stuff on demand instead of having to channel surf.

Most of the stuff we record comes from PBS – Sesame Street, Sid the Science Kid, Caillou, and a few others. I really wish Mister Rogers’ Neighborhood was still showing – that would be an auto-add. So, when we decide to watch television, we choose one of those.

Our DVD collection is mostly Pixar and Miyazaki, with a few of the older Disney films mixed in.

Our one “splurge” outside of this realm is for our older son, who is a huge fan of Spider-Man. We DVR The Spectacular Spider-Man – which is actually quite good, as it focuses a lot on Peter Parker’s internal struggles with right and wrong – and let him watch an episode as a treat every once in a while.

Along those same lines…

What kinds of educational games do you play with your kids?
– Eldon

We play a lot of Memory – that’s the most played game with the children around here.

My daughter just turned two and has a difficult time comprehending games with any level of complexity. With her, we focus on games that are mostly about mastering the idea of a bit of patience and taking turns, with maybe just a touch of cooperation. The big hits with her are Go Away, Monster and hide and seek with highly restricted hiding rules if she’s seeking.

Our son, who is almost four, plays a lot of games and even participates in the games that adults play, at least a little. His favorites seem to be The Kids of Carcassonne, Blokus, and Ingenious.

Do you ever feel like you’re running out of ideas?
– SueB

Not really, and I don’t think I will unless I stop changing as a person and my family stops changing around me.

Most of my ideas come from the things I do in my own life, and those things change over time. I’m becoming better and better in the kitchen. My kids are getting older. My parents are getting older. I’m getting older. I read new things. I push myself into better habits. People come and go in the context of my life. I join different groups. All of these are fodder for ideas.

Beyond that, readers are constantly sending me ideas and suggestions for posts, many of which are angles that I’ve never considered.

Plus, I’m often anxious to tackle topics I’ve already covered in a new way to help out a different group of people – retirees, twentysomethings, parents, teenagers, college students, mid-career professionals, stay at home moms, and so on.

Add that all together and I have mountains of ideas. The trick is often filtering them and figuring out which is the wheat and which is the chaff.

Do you feel guilty when you give erroneous advice?
– Shane

I strive to write accurate stuff, but I don’t feel strongly guilty when I make a mistake. I get called out enough on the tiniest things by commenters on here that it serves as a constant reminder that I’m far, far from perfect – or even good.

If I got bogged down in that, I would pretty much just quit writing – and that wouldn’t do anyone any good.

So, no, I don’t really feel guilty about it. I just try to learn something from my mistakes and move on.

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

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