Updated on 06.03.10

Reader Mailbag: A Bit of Auden

Trent Hamm

“You need not see what someone is doing
to know if it is his vocation,
you have only to watch his eyes:
a cook mixing a sauce, a surgeon
making a primary incision,
a clerk completing a bill of lading,
wear the same rapt expression,
forgetting themselves in a function.
How beautiful it is,
that eye-on-the-object look.”
– W.H. Auden, Horae Canonicae

I’m a 30 yr old professional and have saved up about $40k from living within my means sitting in my savings account (I know, I could put it to better use). I contribute about 10-15% in 401k off and on (due to job jumps and 6-12 months working period for eligibility) and have approximately $20k in it. I recently read “rich dad poor dad” and realized it would be a dream come true to no longer have to “work for money”. The book talked about buying “assets”, as in things that would generate more money for me, and use the money generated to buy more “assets”. But I don’t know what to buy. I’d like to keep $10k as emergency money and put the rest to generate money for me. I know I can always buy index funds, but are there any ideas on what I can buy that’ll immediately start making money for me?

I live in Northern Virginia (DC suburbs), so rental property is out – real estate is expensive and rent is a lot cheaper than mortgage.
– Paul

First of all, be aware that Rich Dad, Poor Dad paints an insanely optimistic picture of “making your money work for you.” Remember that it is supposed to be a parable – in his own words, Kiyosaki compared the book to Harry Potter (in the Feb. 2003 issue of SmartMoney).

The idea that you should really take home from the book is that there is a lot of merit in purchasing investments that earn you money without continued work input from you. Fully managed rentals are one type of this. Another type is a stock that has paid dividends over a very long history (and thus will likely to continue paying dividends). Treasury notes are another very stable example of this – they don’t pay as well as the others, but they’re rock solid.

The book essentially proposes that you look for bargains on such assets and keep accumulating them until they produce enough income for you to live on.

If you have about $10K to start with, one place to start might be stocks that pay a strong dividend, as you don’t have enough to really buy rental properties yet and you don’t need the rock-solid stability of treasuries, either.

It’s important to remember that such “income-paying investments” aren’t necessarily the best investments for the long-term growth of your money. They’re simply nice in that they provide a steady income for the owner.

I am very upset. Our Chevron gas card that we’ve had since 1987 is now handled by GM Money Bank. Our joint account now lists my husband as the account holder with me as an authorized user. I didn’t notice this until they start calling to verify purchases as part of their fraud prevention program. If you don’t respond, they block the card and won’t talk to me about anything. I handle the billing and payments on all our accounts, and am incensed that they won’t talk to me. They wouldn’t even let me report fraudulent purchases posted to the account. Are there no longer joint accounts available? What happens if he is incapacitated and unable to speak?
– Cindy

Many credit cards have moved to a single cardholder with additional authorized users, mostly in an effort to standardize accounts. It’s not really anything to worry about.

If you are the main cardholder’s spouse, you should have power of attorney over his affairs in the event that he is incapacitated. This will give you the right to make choices and administrative decisions about his credit card.

I really wouldn’t worry about it too much. For now, it doesn’t change anything about how you two use the cards. If he did wind up being incapable of managing the card, you would be able to do it for him.

When my wife and I got married, we took ‘control’ of a 40K full-service/managed investment account that had been set up for her in the past by her parents. I have been considering turning that into a self-directed account, as the managers of that account just about matched the stock market, and i prefer to just invest in a long term, low fee indexing strategy.

However, we are also underwater on our mortgage by about 15-25K. We have no trouble paying our mortgage and in fact put a couple hundred extra towards principle every month. We are securely employed, although of course you never know what will happen, and ive been considering putting a chunk or most of the 40K towards the principle of our mortgage, to get us above-water and guarantee the roughly 6% return on that money. It also might give us a better shot at refinancing to today’s really low rates. Also might put 5K towards auto loan at 3.9%, which will cut that loan in half.

We also have 15K in liquid savings and another 45K in IRAs and CDs. Any advice?
– Brian

Honestly, your two choices are a wash in terms of long-term gains. There’s no way to tell for certain that over the long haul, you’ll be able to exceed a 6% return after taxes on a taxable investment account. I usually tend to stick with Warren Buffett’s prediction that the stock market will return 7% annually over the long term in the future, which means that after taxes, you’re pretty close to a wash (since we don’t know what capital gains taxes will look like down the road).

Given that it’s a wash, I’d probably put that money into the mortgage. This would have the advantage of ensuring that you get your 6% return and it has the potential to help you pay it off very early, which is a huge boon to your personal cash flow.

Note: I originally misread Brian’s question and thought he wrote 401K instead of 40K in the opening sentence. Here was my original answer, based on that misreading.

That seems good on paper, but there are very painful tax complications to doing that.

If you take $20,000 out of a 401(k) before retirement, not only will you have to pay income tax on whatever you pull out, you’ll also have to pay a 10% early withdrawal fee. This will quickly eliminate about 30% of your savings (depending on your exact tax bracket, of course).

You’re better off leaving the money there. The 10% penalty alone will eat up any potential “extra” return you might earn versus leaving it in the 401(k).

My boyfriend and I live together and he makes a lot more than me because I’m in graduate school. We split bills 50/50 for the house we rent right now, but we’re moving into a bigger house soon and he will pay more of the rent than me. He also has money saved for when we one day decide to get married and buy a house. Since we’re not married or even engaged at this point, I feel a bit guilty that he will be paying more of the rent than me. How do unmarried couples (or married couples, for that matter) reconcile differences in income? It really bothers me when wives expect too much from their husbands financially and I never want to turn into that.
– Kate

I think it’s completely reasonable to proportion bills in proportion to the incomes of the household members. Of course, that proportion would have to change every time there is a change in income for either household member or in household bills.

So, let’s say you have a $15K a year stipend, while your boyfriend makes $45K a year. A completely reasonable split would be that he handles 75% of household bills and you handle 25%. Then, if you get out of school and get a $30K a year job, the split on all bills would become 60/40. Or, if he lost his job and then just got a full time job working at McDonalds earning $15K a year while you were making $30K, you’d be responsible for 66% and he’d only be responsible for 33%.

This way, you’re both handling what you can each handle, but doing it in a way that does tie you together and does benefit you both if one of you achieves financial success, but also makes you both work harder whenever one of you is in a time of need.

Life’s too short to drive a used car.
– Kevin

I love comments like this.

For me, life’s too short to be kept up at night worrying about my car payments.

Life’s too short to have to skip out on a trip to Italy because I don’t have the cash because it’s all tied up in my car.

Life’s too short to get six credit card bills in the mail that you can’t pay.

Life’s too short to trade it all for a new car smell that you don’t have the cash in hand to pay for.

I realized I need sharper skills to get ahead in my industry of landscape architecture. Basically, I need to improve my plant knowledge and my drafting expertise. The problem is, I am having a tough time deciding which skill set to improve first. Plant knowledge is very important, but it’s more of a soft skill because its just all in my head, and would be hard to demonstrate beyond a line on my resume. I could earn a Master of Ornamental Plants certificate over a two year period(about as fast as possible). Drafting is a great hard skill but I would be taking classes on Lynda.com, and it would be difficult to stay diligent with my work schedule. Finally, I love carpentry, and I was thinking of building some simple furniture to sell to neighbors and friends. This would be great because I really need the money right now, and it would be a really handy skill set for life. Also, you often mention starting a side business with hobbies in your writings.

They are all great skills and would each be very helpful in my life and career, I just can’t seem to make up my mind and pull the trigger. Any thoughts?
– Ryan

It’s simple. Pick the one that seems like the most enjoyable to you when you’re sitting around twiddling your thumbs.

It’s the enjoyable things that you’ll go back to time and time again. For example, writing is something I simply enjoy doing and I would do it every day whether or not there’s income. For me, the work is the other stuff – dealing with advertisers, dealing with comments, and so on.

If you’re not happy doing something, you won’t excel at it unless you are prodigously talented.

You often suggest that people focus on doing whatever they would do if money was no object. What would you do if you had a liveable income guaranteed for life?
– Kellie

Assuming I had a nice quiet place out in the country, I’d spend a lot of my time focused on being a great dad. Aside from that, I’d have a giant garden and I’d continue to write, but likely I’d focus on fiction writing at least for a while. I’d master the piano and slowly build up my running ability until I could run a good 5k.

I’d also spend a lot of my time doing volunteer work. There are several projects in my community that I’d love to participate in, but they get squeezed out because of the raw number of obligations in my life.

I like to travel on occasion, but I’m mostly a homebody.

What personal finance gurus do you like? Which ones do you not like?
– Emma

I like most of them. For the most part, almost every “personal finance guru” says very good, sensible things: spend less than you earn, invest the difference, build your own skills.

I tend to have more positive feelings towards some than towards others only because of some of the specifics in what they say. For example, I tend to think more highly of Joe Dominguez and Vicki Robin (who focus on a message of using money to support what you most value in life) than I do of, say, Robert Kiyosaki, who refers to wage earners as “hamsters” in his book Rich Dad, Poor Dad.

The differences between personal finance “gurus” lie in how they present their message and the 20% of their message that differs from the rest of them. Since 80% of their messages are identical and are simply good advice, I generally like most of them (I would say “all,” but I’m sure there’s someone out there that’s preaching something that’s not very cool).

My husband and I are having a small disagreement on how to pay for a neccesary purchase that has come up. Our HVAC (heat and air conditioning) system has reached the end of it’s useful lifespan and needs to be replaced. It is still working at this point with yearly service, but just barely (thermostat needs to be set 5 degrees cooler/warmer to maintain comfortable temp) and is costing a fortune in energy costs. I am a new stay-at-home mom so we are living off of one income. We have $17,000 in savings and are making it fine off of my husbands income, but it is tight, and our savings rate has been reduced to about $100 a month. We plan on having one more child and me returning to work in the next 5 years.

A new system installed will cost $6000 and last 15-20 years. I have applied for and been accepted for a personal loan from my bank at 3.25% interest with term of 60 months, so a payment of about $109 a month, which we can swing. I think this is a great deal, and justify the cost of financing with the fact that the unit will last 4 times as long as the loan, and that with the $1500 energy tax credit we will be able to pay it down more quickly.

My husband thinks we should pull the money from our savings and pay cash so as to avoid “wasting” money on interest, even at such a low rate.

I am apprehensive about pulling this much money out of our liquid savings with only one of us being employed, and figure I could make many many months worth of loan payments with what we have in cash. And after all, if it comes down to it, we can’t eat an HVAC system.

I know you are wary of credit, but what is your thought on this? Our only other debt is our mortgage. (oh, and going without is not an option- here in Carolina it’s 100 in the summer and 20 in the winter!)
– Erin

This is probably something that falls under the umbrella of an emergency, but I don’t think I would completely wipe out my emergency fund for it.

You currently have $17,000 in savings. Spending $6,000 of that would reduce you to $11,000 in savings. Looking at the average cost of living stats for North and South Carolina, that likely equates to at least a few months’ worth of living expenses for you.

Given that buying the HVAC completely out of savings would still leave you with a few months’ worth of living expenses in your emergency fund, I’d recommend that you go that way instead of putting it on credit.

I saw your summer reading list over on TrentHamm.com. Why did you pick those books? Do you really think you can read them all by the end of summer?
– Fiona

I was looking for a reason to cross-post my summer reading list here, so I’ll do that. By the end of summer (Sept. 21), I’m aiming to read the following 20 books for personal enjoyment and growth.

1. The Lacuna by Barbara Kingsolver
2. The Big Short by Michael Lewis
3. The Children’s Book by A. S. Byatt
4. Freedom by Jonathan Franzen
5. Shades of Grey by Jasper Fforde
6. The Selected Works of T. S. Spivet by Reif Larsen
7. The Beautiful Struggle by Ta-Nehisi Coates
8. Atonement by Ian McEwan
9. Austerlitz by W. G. Sebald
10. Cloud Atlas by David Mitchell
11. Wonder Boys by Michael Chabon
12. The White Tiger by Aravind Adiga
13. Netherland by Joseph O’Neill
14. The Progress Paradox by Gregg Easterbrook
15. American Nerd by Benjamin Nugent
16. The Savage Detetives by Roberto Bolano
17. The First Tycoon by T. J. Stiles
18. Tinkers by Paul Harding
19. Little Brother by Cory Doctorow
20. The Book of Basketball by Bill Simmons

Honestly, I’ll probably not get all the way through this list, but I will wind up slipping in a few additional books along the way. I will also probably read them somewhat out of order, too, because some of the list will depend on library availability and the Franzen book (#4) isn’t available until August (unless I get lucky with a contact I have within the literary community who might be able to get me an early one).

So why this list? I usually have a “summer reading list” each summer where I challenge myself to get through a pile of books. I usually pick a few purely fun ones, but also some challenging ones that will push and stretch me. I draw this list from the ongoing “books I’d like to read” list that I keep, which is made up of books I hear about from various sources.

I’m mostly putting this here because I encourage everyone to have a summer reading list. It doesn’t have to be twenty books long – even a three-book summer reading list made up of books that will push you to grow is a great way to spend the idle hours of your summer in an intellectually productive fashion. Grow your mind. Have a summer reading list.

I keep a “what I’m reading / what I’ve read” list going over at Goodreads, if you’re interested. It’ll show my progress as I wind through these books, as well as star ratings of most of them.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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  1. Patty says:

    Has Cindy checked how it affects her credit report? I recently ran my report and noticed that my ‘joint’ account credit card isn’t listed because I’m an authorized user on my husbands card in the same way Cindy describes.
    “don’t worry about it” Trent must not know the pain and frustration of trying to take care of paperwork (like making or correcting cc fraud claims) when the representatives won’t talk to you. I appreciate the added privacy and security but sometimes it goes too far.

  2. Jess says:

    Just a quick note to Cindy. All of our credit cards have my husband as the primary holder and me as an “authorized user” on the account. I also found it extremely aggravating because they wouldn’t talk to me about anything. However we had success with having my husband call the card companies and requesting that they authorize me to discuss the account. For the most part this has eliminated any problems.

  3. Barb in GA says:

    Echoing what Patty and Jess said, “don’t worry about it” doesn’t work when your husband is unavailable and expects you to handle any issue with the accounts — precisely because he is unavailable.

  4. Kim says:

    I agree, Cindy has every right to be upset, and it is a big deal, since it seems she’s the one who does everything associated with the card. They shouldn’t have to change their family dynamic to suit the cc company.

    As far as Brian, am I misreading? I see nothing about a 401K, I see a 40K dollar account that his wife’s parents had for her.

  5. Nicole says:

    I think your reading list is great Trent! I have a few on that list I’m planning on reading myself. I just finished “The Big Short” and it was great. Good luck finishing them all!

  6. Jonathan says:

    Does anyone else feel like Trent rushes these answers and doesn’t read the questions closely? For example, in the first question Paul states that he wants to keep $10k and use the rest ($30k). Trent answers as if he’s investing $10k. In the third question the person says that they have a $40k investment fund. Trent answers as if they have a 401(k) fund. Seems sloppy to me.

  7. Kim says:

    Jonathan- I had never noticed it before today, but today was so full of stuff like that that I commented for the first time just to check and make sure I’m not missing something.

  8. Jon says:

    @Jonathan #3

    I agree. I think he definitely rushes to get posts out the door. I immediately caught those 2 glaring mistakes just by skimming through the mailbag.

  9. marta says:

    ” I’d master the piano and slowly build up my running ability until I could run a good 5k.”

    You are what, 31 or 32? You can do the running part anytime, you know. Honestly, it doesn’t take that long to be able to run a 5K. A *good* 5K is another thing, but most people can get to a 30 min 5K in a few months at most. After that it’s a matter of increasing speed and doing specific workouts to improve performance. Being a short distance, there aren’t just that many minutes you can shave off your time.

    Anyway, I suspect exercise isn’t a big priority for you, judging from your comments on that. That’s fine, I am just saying the time investment isn’t *that* big.

  10. EmilyP says:

    (I love the quote, Trent!)
    An anecdote for Kate: When my then-boyfriend (now husband) and I first got an apartment together, we were combining our individual $750-800 1B apartments into a joint $1100 2B. He has irregular income, and had been really struggling to keep ends meeting; I had a good job and was keeping my savings up as well as no issues with rent etc. He was excited to be looking at a decrease in rent from $750 to $1100/2=$550, but I thought he needed more slack than that to keep his budget balanced (he’s such an optimist!). Our compromise was that I kept the exact same expenses, and continued to pay $800 in rent, and he made up the difference ($300). For me, it was really important to see him be able to pay his bills regularly and eventually pay off his loans – his financial health became our financial health when we got married, and there’s no reason to create debt if that’s preventable by redistributing the expenses. For him, it was important that I wasn’t paying any more rent than I was in my old apartment – I wasn’t “giving him money” or spending more than I could afford, but could still help him reduce his expenses. It was also nice because it cut down on the daily stress; I didn’t have to worry that he had no money, I didn’t have to pay every time we went out, he could pick up my crazy organic milk on the grocery list without my feeling guilty.
    With my independent nature it would have been a big adjustment to move into shared expenses whether my income was the higher or the lower of the two – so my advice is, stay practical and don’t let money symbolize anything (love, power, possession), and keep talking.

  11. Jennifer says:

    @Erin with the HVAC – I totally agree with taking the 6k out of savings to pay the HVAC off all at once – since you have already figured out what the payments would be if you got a loan for it ($109/month) why don’t you then make “payments” to your savings account at that rate until the “loan” to yourself is repaid? A 0% loan to yourself beats even the 3.25% one you qualified for at the bank! (and likely beats the savings rate you get leaving the money untouched as well :)

  12. Aaron says:

    I thought I’d mention that when replacing heating and air conditioning, a heat pump may lower the replacement costs when you factor in local utility and tax credits and the savings on electricity use over time. I did it several years ago with an added backup furnace for sub-freezing temps.

  13. matt says:

    @kate, I’m in a similar situation with my fiance, I make roughly 3x what she does. The way we work it is she pays half the mortgage and for all of her ‘entertainment’ (dance classes, ice skating passes, fitness club membership), gas, insurance etc, and occasionally picks up groceries, I pay the other half of the mortgage, all of the other bills (water, gas, etc) buy the bulk of the groceries(I’m the cook in our family and she hates grocery shopping anyhow), deal with home repairs and most of the emergency fund. I also manage all of her accounts, pay her credit card bill and deal with her investments. The idea is after we get married to open a new savings account jointly and both direct deposit into that instead of our separate accounts and I’ll still manage all the bill pay etc, just instead of from each of our accounts, it will come from the joint one.

  14. Eva says:

    While I do appreciate that there may not be any real tangible consequences to having one cardholder and then a second authorized user (@Cindy), Trent, I think that the main thing that’s infuriating — and rightfully so — is the assumption that the husband is the default cardholder while the wife is the default second user. That’s just an insulting assumption. If card companies are doing that nowadays (and since my partner and I have separate cards I don’t really know), they really ought to ASK the joint cardholders who should be the primary cardholder. (And as an aside: IF my partner and I were to get a card together, who would they automatically put as the cardholder, since we’re both women?)

    And, in fact, there ARE real repercussions to this set-up. My parents have been married for 30 years and are now getting separated. My mother has always been the primary breadwinner, but their finances were always completely merged. A few months ago, she called her credit card company — of whom she’s been a customer for nigh on 15 years — to see about getting the card in her own name only. THEY WOULDN’T LET HER. Not only was my father the primary cardholder on their joint account (so she wasn’t authorized to close the account), but they wouldn’t even open a new account for her under her own name. Why? Apparently, she has no credit history. My father on the other hand? Who hasn’t earned a steady income in over 30 years? Yeah, his credit history is perfect.

    This kind of set-up, in which men are assumed the financially responsible of a marriage, is devastating to women. It makes me sick. I’m not saying women should automatically be assumed the financially responsible ones. I’m just saying that each situation needs to be looked at for what it actually is, and card companies (and banks, and credit bureaus…) need to be responsible about doing that.

  15. ” For me, life’s too short to be kept up at night worrying about my car payments.
    Life’s too short to have to skip out on a trip to Italy because I don’t have the cash because it’s all tied up in my car.”
    Now THATS what I’m talkin about! Let em know.

    “Because planning to be a Walmart greeter is not exactly retirement planning”

  16. John says:

    Just buy some “New Car Smell” spray. It’s a hell of a lot cheaper than a new car.

  17. Des says:

    Trent – your answer to Brian doesn’t fit the question. He said he has $40k in an investment account, not in a retirement account. There are no penalties for withdrawing funds from regular investment accounts.

  18. Maggie says:

    I don’t think it is right to tell Cindy not to worry that her joint account turned into her husband’s account with her as an authorized user. When my mom tried to buy a condo she discovered that she essentially had no credit history because all of the cards had been in my dads name with her as the authorized user. Their mortgage and any car loans had been paid off long enough ago that they no longer showed up. My brother ended up cosigning the loan for her.

  19. @Erin,
    Is the HVAC company not offering a credit promotion? Every large purchase like that I have looked at comes with an offer for 0% interest for 12 or 18 months. While it sounds like you would be fine to take it from your savings, using one of those offers could be a great deal as well.

  20. Trent, I hate to be a critic, but I think we can all use some constructive criticism at times…

    Jonathan #3 is right. I too noticed those inconsistencies right away, even with a simple skimming of the mailbag. I have also noticed a real increase in spelling/grammatical errors in recent weeks (even long before the baby).

    I know that you have a lot on your plate right now, but it would help to review the posts a little more before publishing. I have been reading your blog for a long time now, and enjoy your insight. It is very distracting though when I see the quality of that work suffer. If it is a time issue, I would prefer to see fewer posts that are reviewed more thoroughly than sticking to your current demanding publishing schedule.

  21. Honey says:

    I also noticed that Paul has $30K to invest, not $10K (a huge difference that would presumably impact the advice) and since the $40K Brian and his wife refer to is an investment account set up by her parents and not a 401(K) account, I would assume that although there still might be some tax considerations, the answer Trent gives is totally off.

  22. Nick says:

    I noticed on your summer reading list you are looking at reading The Big Short. I was wondering if you considered / decided against The Greatest Trade Ever by Gregory Zuckerman which covers the same topic. I loved The Greatest Trade especially the description of how hard it was for John Paulson who was already very wealthy to get people to believe in his trade. I had assumed it wouldn’t be hard to sell something that seemed so logical. I hope the Big Short covers the same aspect to the panic in the same detail.

  23. Kristen says:

    Trent, I was going to chime in with my frustration about your answers to Paul and Brian, but looking at the comments above, I think it’s already been covered. But I had another thought about your response to Kevin regarding the new car, which I’d say is about half right. Consider this: if your wife craved a new car the way she craves really good chocolate, would you still say that it’s just not worth it? I fully plan to spend most of my adult life driving used cars, for all of the reasons you listed, but I really hope that at some point down the road, I can go to a dealership and buy a car that is 100% brand new, just for the pure enjoyment of it. It’s about setting priorities and goals, not digging into more debt or throwing money away.

  24. Rachel says:

    Erin, have your gotten other quotes for the HVAC system. Your house would have to be pretty large for the $6,000 quote to make sense. I am in north Florida and have similar temps to yours. my mom is going to replace a unit in a property she owns, and she was quoted a price on a unit much to big for the square footage of that property. Do your homework.

    Trent, I also have a summer reading list. It is much too hot here to go out and do things, so I read. I am finishing John Jakes “Kent Family Chronicles. Great if you are interested in American history.

  25. Ana says:

    Erin: take 2000 out of your savings account and borrow 4000 for the furnace. Hold on to the 15000 for dear life!

  26. KC says:

    Paul should seriously consider nice dividend bearing stocks. But it sounds like the nature of his work is seasonal and not consistent so I would encourage him to only put about $10k of his saved $40k in stocks. I’d start with 4 stocks and put $2500 in each. Companies like VZ, T, MCD, PAYX, XOM, YUM, MMM, JNJ, LLY are good places to start, but stay diversified. For instance YUM and MCD are both fast food. VZ & T are both telecoms. Pick 5 good dividend paying stocks in 5 different sectors. And remember, just cause one company has a higher dividend than another doesn’t mean its a better investment – don’t be afraid of sound, boring companies that may only pay 3%.

    If in 6 months you feel comfortable doing this you might invest another you might add another $500 to each investment or another $1000 to your 2 favorite stocks. You need to enter this comfortably and not overwhelm yourself or your budget.

    The market is in a pretty steep correction right now, which means you have some time to do your research. Things are fairly volatile due to the Gulf situation and the European banking problems. But both of these factors are bringing down stock prices and some are being brought down for no real reasons – those are the companies to buy. Now just figure out which ones are being artificially pushed down in price :)

  27. Trent Hamm Trent says:

    With Paul’s question, I was unclear whether he was including the $20K for retirement in his $40K of savings. I decided to assume low ($40K – $20K in retirement – $10K emergency = $10K left), but even if he has $30K to play with, it doesn’t change the answer – his best bet right now is dividend-paying stocks if he is strictly looking for income production.

    With the other one, I did misread 40K as being 401K. My apologies.

  28. Des says:

    @Eva – The company did not make the assumption that she was the joint because she is a woman. When you open any kind of joint account, one person is the primary and the other is the joint. They may both have privileges on the account, but only one person is primary.

    I’m not saying it was right to reduce her to an authorized user from joint, but the decision was not a sexist one. There is plenty of sexism in the world, to be sure, but this is not it. (Not to mention that the conversion was almost certainly done by a computer, which is unable to distinguish male from female names.)

  29. Ryan says:

    I think each credit card company decides how to report authorized users.

    I’m an authorized user on my dad’s Chase/SpeedWay card and it appears on my credit report. In fact, it’s the only thing that’s there since I just turned 18 in March.


    Today, I don’t think any card companies allow for two “equal” users. At least when I turned 18 and tried to apply for a student rewards card, there was no place to put any other individual besides as an authorized user.

    I think for any married couple it makes sense for both individuals to have at least one card of their own. Then each can add the other as an authorized user. That would provide for an equal situation.

  30. Sheila says:

    I, too, get upset with the credit card companies regarding two people on an account. It’s annoying trying to get anything corrected or questions answered when you are not allowed to talk with the customer service people because you are not the primary card holder. My husband works outside the home; I do not. So it’s much easier for me to take care of problems during the day, but I cannot unless he gets on the phone and says, “My wife can talk to you.” That means he has to be home when I call the credit card companies so instead of being able to handle the situations during the day, I have to wait until my husband gets home. What I find interesting is that I am the one applying for the credit cards, I always list my name first, and I can’t figure out why he ends up being the primary card holder. We don’t have the same last name either. The only thing I can think of is that he earns money, and I am on a small fixed income.

  31. Crystal says:

    Yep, Cindy, it’s annoying. Any accounts my husband has that would only talk to him have since had me added on the “it’s ok to talk to” list. Have your husband call them and get this sorted out.

    Erin, my husband and I just had a similar discussion about our $10,000 emergency fund, $3000 vacation fund, and our $8500 car loan. We’re choosing to pay off the car loan and pay ourselves back by the end of the year. He’s a teacher with a guaranteed job and mine is very stable though.

    In your case, I’d pay for the HVAC in cash and pay yourselves back $200 a month for 2 1/2 years or something like that. You’ll be saving a bunch in electricity costs! In case it’s available, I’d suggest looking into Gexa for power since it’s so much less than Reliant here in Houston. We live in Houston, TX and run the A/C 11 months of the year and our biggest bill (August) is never over $210 in our 1750 sq.ft. house.

  32. jim says:

    Cyndi, I agree with Jess that you should see if the husband can call them and authorize you to do whatever you need to for the account. If the bank absolutely won’t deal with you as a 2nd card member then you could just find yourself another credit card.

    Erin : One aspect to point out to your husband is that if you keep your money in savings you’ll make interest off it which balances some of the interest you’d be paying on the personal loan. You can get 1.5% to 2.9% interest on 1-5 year CD’s at Ally bank. So if you did it right you could be paying something like $50-$100 interest a year net between the loan and CD. If keeping the cash in the bank liquid is very important to you for sense of security then I’d make sure your husband understands how important it is. He probably doesn’t see the need to keep the cash or feel the same need himself. If $100 a year in interest matters to your budget then maybe you could find some other place to cut back to offset it?

  33. Courtney says:

    No mention of dividend-paying ETFs for Paul? Instant diversification. We have small amounts in SDY (tracks the S&P High Yield Dividend Aristocrats Index) and FDL (tracks the Morningstar Dividend Leaders Index).

  34. Anna says:

    @ #24 Rachel – I was quoted $8,000 for a furnace for a 1400 sq.ft. home in the Midwest, low living expenses. So $6,000 to me seems low.

  35. Eva says:


    Be that as it may — and I’m sure you’re right that that’s standard practice these days — it doesn’t really matter whether the decision about who’s primary and who’s secondary is arbitrary, as you suggest, or intentional.(Fifteen years ago, like for Cindy, they WERE joint, so, as for Cindy, the change happened somewhere along the lines.)

    What is still sexist is the assumption on the side of the credit bureaus that the fact that that means SHE has no credit history, while HE does. It was my mother’s money that paid for the house, the cars, everything — she has had the same employer (she’s a professor at a university) for 30 years. My dad has been unemployed for the bulk of their marriage. Yet, somehow, now that they’re coming out of their marriage, she’s the one who can’t even get a credit card in her own name because she has no credit history! And they’ve never had consumer debt — they even paid cash for their cars. And my father hasn’t had any problems renting, getting new bank accounts/cards, nothing. His credit report shows a long credit history and healthy credit. Even though my mother is the one paying HIM alimony.

    The fact of the matter is that it *does* matter who is the primary person on all of the accounts. That’s all I’m disputing (contrary to Trent’s blase “it’s nothing to worry about”). It seems fishy to me that in Cindy’s case, as well as my mother’s case, and also in Maggie’s case (comment #18), someone somewhere along the line — be it person or computer — decided that the husband was primary.

    I’m not saying that’s sexist as in the kind of sexism where someone actively and consciously makes a decision to the detriment of women. I AM saying it’s the kind of sexist wherein old assumptions (probably even unconscious, and probably even automatically occurring) continue to run their course, and it does have a tangible impact on women’s autonomy.

    Probably Ryan (#29) is right, and each partner in a marriage should have his/her own card. Or, at the very least, care should be made to ensure that each partner is listed as primary on different accounts.

  36. Kingsley says:

    @Trent: I love used cars too, and will never buy new again. But if you want to add to that “life’s too short list” how about “life’s too short to be stranded out of town on a Sunday, have to stay overnight in a hotel, and pay $1,800 in repairs after an epic used car fail”. Just to point out that that coin does have another side!

  37. getagrip says:

    @ Cindy, I feel as others that your husband should be able to call and authorize you to make decisions on the card and that should handle the matter and if they don’t allow that then I’d suggest getting another card.

    I would also agree with EVA above that it does matter that in any relationship each person be primary on some items, be they bills, mortgage, or credit cards. When we were first married I had all the credit becaused I’d lived in an apartment, had a credit card and paid off loans, while my wife had lived with roommates or family (no bills), paid her mother monthly for her car (no loans), and didn’t have a credit card. We made an effort to establish credit for my wife over time. The kicker is that now, despite being a SAHM and only having part time income for over a decade, her credit score is higher than mine. Go figure.

  38. Todd says:

    My wife more often is the one who calls the credit card companies, so we changed her to the primary user on all the cards. It wasn’t as simple as you’d think. One phone rep actually asked me, “Why are you doing this backwards?”

    You won’t convince me there’s not sexism in the process of assuming who is the “primary” cardholder.

  39. KAD says:

    Right on, Eva!

  40. heather t says:

    Hi Trent – love the summer reading list! I just finished The Lacuna a few weeks ago – a little different for Kingsolver, but very very good.

    Just started Shades of Grey by Jasper Fforde – shaping up to be another great alt-universe book from him!

  41. jim says:

    #24 Rachel “Your house would have to be pretty large for the $6,000 quote to make sense.”
    #33 Anna : “I was quoted $8,000 for a furnace for a 1400 sq.ft. home”

    We replaced a gas furnace for ~$2500 and got a quote for AC system replacement for ~$4000. Thats a house in the 1400 sq.ft. range too. But its a rental and we went for basic efficiency and theres no special costs.

    My friend spent $14k replacing his HVAC on a similar size house. But he had to get his ducts replaced and he went for high efficiency equipment with 95% gas furnace and a heat pump.

    The cost for HVAC will have a wide range depending on several factors. But getting 3 quotes from respectable contractors would certainly be a good idea.

  42. Cheryl says:

    Thanks for inspiring me to create a summer reading list. I included books my husband and dad have recommended, ones I need to read this summer with my kids, one from *you*, and I got the rest off of the Goodreads: Books everyone should read at least once.

  43. Julia says:

    Trent’s advice to study what is most enjoyable to you is only half of it.
    Besides that, I’m guessing you didn’t go into landscape architecture because you like draw.

    I’m in civil engineering. My advice is to expand your plant knowledge first. Once you get that program started, decide how much time you can devote to your side business and then pull the trigger on that.

    Drafting is like writing – it’s an important skill to have in your field, but that’s not what people hire you for. They hire you for your plant knowledge.

    My last piece of advice: make friends with somebody that can draft, and be sure to do most of your drafting yourself (as opposed to delegating to the office cad guy, or intern, or whoever). Drafting is best learned by doing. A class can help, but it’s not necessary (depending on how you learn I guess).

  44. jgonzales says:


    You need to have your husband get in contact with the credit card company ASAP about making you an authorized user. I had to do this at one point with my husband and ran into issues where a couple companies only accepted it once we sent them written proof to authorize me.

    Also, check your credit report. If this isn’t showing up, then you need to get your own credit card to build your credit.

    Also, Eva, have your mom look into a secured card. It will start to build her credit and should turn into an unsecured card within a few months.

  45. Laura says:

    Make sure your new AC is not freon based. The government is phasing out the production of freon. In researching more, you may come across what you think is a good deal. But it may not be if the AC will require freon. The cost of freon will be going up as only limited supplies will be made. In 10 years, the government will not allow any freon to be made at all.

  46. Mary says:

    In Cindy’s situation, the credit card company seems to have changed the terms of the contract to suit their convenience. Since their terms are no longer convenient for Cindy, I would advise her to get a gas card with a different company. As to the proposed solutions, Yes, it is a big deal, and if my husband is incapacitated, and there is an emergency with the card, I am not going to be wasting my time on the phone with a CSR trying to convince him or her that I DO SO have a power of attorney, and it DOES NOT have to be on their form to be valid. (No, I’m not bitter.) Seriously, change companies.

  47. Nola says:

    Re: Brian and his wife’s investment account that was set up by her parents. I would ask, what does your wife want to do with HER money? This is her decision, not yours. I find it hard to believe that any modern woman is telling you “I don’t care, honey, do what you think is best” She has an opinion, whether you know it or not. This is the same kind of sexism that exists in the credit industry, as Eva says. Understated, pervasive, and ugly.

  48. Bonnie says:

    @Cindy-I feel your pain. I had the same issue when dealing w/ AT&T (our wireless contract is under DH b/c his company gives a corporate discount). You just have to get your husband on the phone to authorize the cc company to speak to you on all issues related to your cc. That should fix the problem. A bigger issue is whether they’re reporting the card on your credit report or not. Some cc issuers do report auth users and some don’t. If yours doesn’t, I’d call them to see if they could continue to report the card to the 3 credit bureaus for your credit reports. If they won’t, it could seriously affect your credit score, given that the card’s over 20 years old. As a quick boost to credit history, if you’ve been a Costco member for awhile, the Costco True Earnings AmEx card will list the issue year on your credit report as the year you became a Costco member, regardless of when you got the card.

  49. jgonzales says:

    #44, Mary

    The problem is that they can’t tell you by privacy laws. Even though you are married, if something financial is held by an individual, they can’t tell anyone, even a spouse, without authorized permission. A woman actually sued Chase Bank because they gave the information about her separate checking account to her husband. I’d link to it, but links get lost in moderation. It sucks, but the federal privacy laws state that you cannot tell anyone that isn’t authorized.

  50. JonFrance says:

    Eva, the credit association isn’t making any “assumptions”: if they have an account in your dad’s name, and your dad pays it, that’s all their records show. How should they know (or care) that he’s paying with money he got from his wife? Should they do a DNA test to figure out who licked the envelope? Your mother is the one assuming that those payments should somehow magically be attributed to her later, when it wasn’t her account she was paying. Isn’t it more sexist to think this, that the woman should be given a credit history because her husband has one? She had no contract with the bank. If she wants to build a credit history, she needed to be the primary on another contract. The credit association is viewing them both as independent individuals, which should be what a feminist wants.

    That said, I AGREE with you that “the fact of the matter is that it *does* matter who is the primary person on all of the accounts.” That your parents didn’t have this worked out evenly obviously has had an unfair impact, so Trent’s advice in this case is not ideal. But to attribute the problem to “sexism” is really to misunderstand what is in fact a purely financial problem.

  51. Marcey says:

    Agreed that the credit card situation is a problem, and not solved by the “authorized user” status. My mother was listed as one on my late father’s account, and it was cancelled after his death by the credit union, stating they couldn’t just make her the primary account holder. They also wouldn’t give her a new one of her own (little credit history of her own, homemaker of many years so no job.) She did wind up getting one through her new bank later, but it was a frustrating and wholly unnecessary bit of diddling around during an already-stressful time.

  52. cathmom says:

    If life is too short to drive a used car, are you going to buy a new one every day?

  53. Sharron says:

    re: Life’s too short to drive a used car.
    – Kevin
    I thought that way at one time until I wised up and realized that once I drove the new car off of the lot it became a USED car with new car payments. The thrill is gone!

  54. Andrew says:

    @Cindy: The same thing happens with utility bills. Last time we moved, my wife took care of setting up all the utilities because she wasn’t working and had more free time. Even though she was the only point of contact, the utility companies all put ME as the account holder! They would not let her to any account changes when something came up a few months later. I had to take time off work to call them on their sexist discrimination and make it very clear that my wife should be the primary account contact, with full powers over the account.

    It’s just another side effect of the sexual discrimination that we thought was gone, but remains deeply entrenched in our society. I’m by no means a modern ‘feminist’ and I believe that traditional christian family structures often work best, but this kind of blatant sexism really annoys me. It’s not 1953 any more.

  55. Diane says:

    re: Brian
    I think there’s a major point that’s being missed here: That money is HER money that she had before they were married. What are Brian’s wife’s wishes in this case? It feels like Brian is using Trent and TSD to make a case to his wife for spending her money!
    Being “underwater” on your mortgage in your circumstances is a mostly imaginary condition. The market will improve, the balance will be restored, but “your” money will be sunk into an illiquid asset over which you have no control. Ditto for the car. Don’t forget that making the agreed-upon payments on a reasonably priced loan will strengthen your credit standing.

    It’s a lot easier to spend than to save money. Sounds like this “available” cash is burning a hole in your pocket. What do your retirement fund balances look like? 40K invested at a young age (in or out of a 401K!) could virtually fund your whole retirement if managed well.

    Instead of thinking of ways to spend your wife’s money (which was clearly accrued prior to your marriage and thus, legally still hers), try to focus on how much you can save to add to your joint savings balance(s). Don’t even make those extra principle payments unless/until you are fully funding all retirement options and have completely loaded an emergency fund.

  56. GayleRN says:

    The upside of only being an authorized user on a credit card is that in the event of divorce the primary is the responsible party. I found this out the obvious way. I was happy about it then. Get yourself a separate card. I got turned down for a car rental once (many miles away from home and husband) because I was only an authorized user. You can bet I fixed that situation asap by getting a separate card.

    Contrary to popular belief being married does not give you power of attorney. And a power of attorney (unless specified otherwise) does not give you anything until incapacitation. Which is a huge surprise to people who are expecting to make decisions and are quite offended to be ignored in “life or death” situations.

  57. adam says:

    Cloud Atlas was really well done. It’s probably one of my favorite novels ever. I’d start with that one. Don’t let the first 50-75 pages throw you.

  58. prodgod says:

    Regarding the advice to Kate about proportioning payments based on income, I would advise her to combine both incomes and pay all bills from that pool. Who cares who makes what? It’s no longer a matter of who owns what and who pays what; you both become one.

  59. M says:

    When my husband and I got married 13 years ago I kept my credit cards in my own name and did not add his name to my cards. You are right if the husband dies the wife does not magically get her husband’s credit score, but does inherit his debt. Not fair but that’s life. When my dad died mom who co-signed for the house and had her name on all the joint credit accounts could not get a loan because she had no credit history and was a SAHM even though there was an income. All those years of on time payments were buried with my father. I co-signed her loan, got her a Penney’s card and started to build a credit history at 56 years old. My car loan was in my name only, I have credit cards in my name only, I’ve taken out personal loans in my name only which was very difficult because they fought to add my husband, my house was in my name before we got married and when I refinanced it 10 years ago they fought to add his name to the loan because he was my husband. They finally relented and let him sign a paper saying he knew I took out a loan on the house so he would be sure to know if I died the house was only in my name and there was mortgage. Here is the kicker when we sold my house and bought a new one using the proceeds from the sale only, way more than the 20% required, his name is on the deed first. Now most will say what’s the big deal whose name is first? If I died he would have been able to keep all the credit even if everything was joint, if he dies and everything was joint I’d be left with no credit. BTW my husband can buy a car, a house, take out a loan totally without my knowledge, I asked the bank, unless he is using my job, credit score, etc. I don’t have to know.

  60. Brian says:

    RE: Nola and Diane


    You are assuming that I am somehow doing this secretly, behind her back. Why are you so reactionary and accusatory? This is what is so awful about the anonymous world of internet postings

    We make our financial decisions together. I was using ‘I’ statements, as i am the one who does all the actual financial transactions, pay the bills etc, which she happily lets me, but we make financial decisions together after thoughtful consideration and conversation. And your rude and uninformed accusations are quite baseless and are an insult to feminism. Please dont just throw around the word sexism without having a clue about what goes on with my family.

  61. James M. says:

    I love the comments about a new car.

    Sure, I’d like a brand-spanking-new car with all the latest features as much as the next guy, but I drive a 10-year-old economy sedan with 120k miles on it instead, because it works well enough, and it frees up money for me to use in other areas like improving my home, going on vacations, and splurging on the occasional luxury hobby item.

    The way I see it a car is a tool, like a hammer or a screwdriver. I don’t care what my hammer looks like as long as it does what it’s supposed to do (help me pound nails), and at the end of the day that’s exactly the same way I feel about my car.

  62. Kiara says:

    The being an authorized user is a big deal for many reasons. When I divorced, one credit card debt became “mine.” I diligently paid it off, but was unable to close the account because I was not the primary card holder. However, when my ex- ran the debt back up again and did not pay it, it appeared as a bad debt on MY credit for several years. I wrote letter after letter of explanation, but I still had to wait it out. Yes, I should have been aware of this before I signed the divorce documents, but it was a nightmare. Have an account of your own for so many reasons.

  63. Mol says:

    Trent, how is Joe doing with his Money Savvy Pig?

  64. Deborah says:

    I can’t resist adding the Stieg Larsson trilogy as suggested reading. The best fiction I’ve read in decades, possibly ever. I read a lot, hundreds of books a year. Kingsolver’s Lacuna was very close to being in the same category as far as a challenging yet rewarding read.

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