Reader Mailbag: Alarm Clocks

For the first time in almost two years, I didn’t set my alarm this morning. I woke up about an hour and a half later than I usually do and I felt really groggy. I’m not really sure what to make of that, considering that by now I figured my biological clock would have been set to just wake me up at the appropriate time.

Anywyay, on to some reader maibag questions.

In 2009 we exceeded the income limit for our Roth IRAs. Here are our current yearly investments:

401k – 9% (6% + 3% company match) – husband & wife each
IRA – 5k (Was in a Roth, but we’ll have to re-characterize as we exceed the income limits) – husband + wife each
Money Market – 24k (cash savings, emergency fund) – joint
Money Market – 7k (travel, home repairs) – joint

The only debt we have is 215k in a 15 year mortgage and an 11k auto loan. We have a comfortable emergency fund. After all our expenses and investments, we still have around 2k in disposable income (which I’d like to bring down). So after all that, I guess I have two main questions:

1. Would we be better off increasing our 401k contribution (which may put us under the Roth income cap), maxing out a traditional IRA and converting to a Roth every year or a combination of both?
2. Should we be focusing some of our disposable income on the car loan or mortgage or adding it to one of our savings/retirement vehicles?

– Sean

If you’ve exceeded your Roth limit, I would increase my 401(k) contributions by an appropriate amount so that your after-tax income is reduced by an amount equal to what you contributed to the Roth IRA. So, if you’re in the 30% tax bracket, for example, you should contribute about $7,200 more to the 401(k).

Since I don’t know your overall balances in your various investments, I can’t really say whether or not you’re on good pace for your retirement. However, I think your current level of retirement savings adds up to 12-13% of your income in a year, which is an appropriate amount. Your emergency fund (according to my envelope math) should cover at least three months’ worth of living expenses, so if the balance in that is much above $25,000, I would redirect the excess toward debt freedom. The travel budget is more a matter of personal taste and value.

Overall, I think you guys are in very good shape from what I can see. Good work!

You often advise couples to figure out a post baby budget when they ask you about having their first child or adding an additional. That is at least 5 years away for us and really hard to pin down. If we wanted to be sure we could still afford all of the “fun” things we want and children, it would be easier to save ahead of time and let our bank accounts do the talking. If you tried to set a savings goal for covering the costs of a child, maybe the 1st year of expenses?, what would it be and what would it be comprised of?
– Becky

It depends on the level of quality you want for your children. Are you going to stay at home with them? Are you going to send them to an average day care center? A top day care center? Are you going to hire a nanny? Are you going to have a Graco crib or a custom-made one? Are you planning to breastfeed or are you going to use formula? Each of those things is going to have a radically different cost.

You don’t have to make any sort of final decision at this point, of course. The reason for talking about such things, in your case, is so that you have at least a good estimate on what you need to save. The child care question will be the biggest one, as those options have vast differences in cost – tens of thousands of dollars annually.

Saving ahead for this is a really good idea. If I were you, I’d make the whole thing automatic. I’d probably use SmartyPig for it. Identify a number that you’re shooting for, set it up with a target date five years in the future, and make contributions to that goal automatic. You could even share that goal with overbearing in-laws who keep asking when the baby is going to come.

I quit my job back in January (variety of reasons) and am now signed up with a particular international company. When I am finished with my current job I will be doing something I have NEVER ever done before…commission only sales. *gulp* I am very nervous, but also excited. I really like this new company and I *think* I can do this even though I have no sales background. I’ll be my own boss, which is great, but also overwhelming. My question though is this…how in the world do people who earn non regular income budget and save???

My husband is still working and we’ll get his paycheck regularly but I’ve crunched those numbers and we will be in the red if I don’t make any money. So…on the assumption that I will do a good job and hopefully make some sales, how do I budget?!?!? Again, I’ve never been in this sort of position before. I’ve always had a regular paycheck. I’d like to be as un-stressed as possible when I finally start in my new role and having a plan for budgeting will help (I think).
– Megan

I have a non-regular income. Here’s how I do it.

First of all, I have a really hefty emergency fund. I keep several months’ worth of living expenses on hand in the form of cash. There simply are months where my income is not very high, and during those months, we live out of that emergency fund. It’s fine, though, because those down months are usually months when I’m working on some sort of project that will help turn things around.

How do you get there? When you have a great month, don’t spend it all. Instead, take a very large chunk of it and put it straight into your emergency fund, then forget about it. Keep doing it this way until you have at the bare minimum six months’ worth of total living expenses for you and your husband in that account. In other words, you could make nothing and your husband could lose his job and your account would cover everything from food to bills to even some entertainment – what you spend in a typical month.

During the down months, you may contribute less. During really down months, you may be taking money out of the account. Both of these are fine when you’re working a job with a variable income.

I purchased a car second had about 7 or 8 years ago now, it was $9000 then but it would be lucky to be worth $1500 now. I have full comprehensive insurance on it which comes to a little more than $500 a year. I can’t imagine keeping the car for more than another year, what do you think of changing my insurance to 3rd party instead and saving a couple of hundred? At what point is comprehensive insurance no longer worth it?
– Dan

At this point, comprehensive insurance is overkill. If you do more damage to your vehicle than the blue book value of the car, they’ll just “total” the car and issue you a check for that value. So, in other words, you’re paying more than $500 a year so that, if you get in an accident, they’ll give you a check for roughly $1,000 (depending on your deductible). Unless your odds of a major accident are approaching the 50% mark over a given year, that’s a pretty poor deal, particularly if you have an emergency fund of any kind.

My general rule of thumb is this when it comes to deciding whether to carry comprehensive insurance on a vehicle. Look up the blue book value of the car. Subtract your deductible from that. Then divide that by the annual cost of your insurance. If the number you get is less than 3.5 or so, I would stop carrying the comprehensive insurance.

Why? Even if you were in a serious accident that required a lot of repairs, your comprehensive insurance would likely just pay you the blue book value of the car (minus the deductible). If it’s 3 or less, you might as well cut the insurance and start saving that money in your own savings account.

I have a question that I hope you can anwer from your personal experience with Le Cresuet. I have been saving up and plan to buy an LC enamel french oven and want to purchasse the right piece. My question is about the difference between a round or oval oven. Does the round one heat more evenly and consistently than the oval? Have you tried both, and if so, what do you think? I have read reviews on every site immaginable, but no-one mentions round vs. oval.

I question this because I have used a slow cooker for 20+ years, and have noticed a difference in how things cook in my relatively new oval crockpot. I used a large round crockpot for many years, but unfortunately it broke in the sink. When replacing it, I decided on oval so that larger cuts of meat would fit better. I am using the same recipes, so I know how the dish should turn out. My theory is that the oval shape does not circulate the heat evenly as a round one does. I don’t want to make the same mistake with the french oven, since it would be a very costly mistake.
– Cherie

I have used both round and oval-shaped enameled cast-iron pots. They are spectacular. I use them for virtually everything in my kitchen.

With a round versus an oval shape, what I’ve noticed is that the metal heats up very evenly in the oven. Thus, they do cook a bit differently. There tends to be a slightly cooler spot (usually unnoticeable) right in the middle with either one of them, but that’s true of anything you use. The round pot tends to have a bit of a round cool spot, whereas the oval tends to have more of an oval shaped spot that’s not quite as big around as the circle. For most practical uses, there is no difference between the two (I won’t say ALL practical uses, but I haven’t seen a practical difference).

I think the issue with the slow cooker is more of a brand thing. It’s likely made quite a bit different than your old one and perhaps produces more or less heat than your old one. That likely accounts for much more of the change you’re seeing than the shape of the pot.

How would you recommend adapting the “work hours” […] for someone who has an instable job, or who is currently seeking employment? My plan was to use a 40-hour “work week” and to pretend my time at home, cleaning, working on my research, etc, is all working towards my greater goals, because finishing school is a gateway to generating income for my dreams.
– Deborah

If you’re in a situation where you have the money to keep the bills paid for the moment, then you should absolutely fill that time with whatever activities put you in place for the career you want.

In your case (as this question was excised from a long email), you’re clearly filling that time with educational purposes that seek to push you not only towards learning valuable things, but towards a degree. That’s unquestionably a valuable use of your time.

I think it makes a lot of sense to, in effect, start getting used to a regular work routine. Putting in forty hours a week (or maybe even a bit more) in a schedule that will match what you’ll experience professionally is a great routine-builder.

One of my long-term goals is to read 1,000 books. While I have plenty of academic works and classics in mind, in terms of finance, personal growth, or any other subject, what would you recommend to a young woman who has just finished an undergraduate degree?
– Deborah

Here are three titles (all linked to my longer reviews) that I would add to your list for personal finance and personal growth.

Your Money or Your Life by Joe Dominguez and Vicki Robin is the single personal finance book I would recommend that you read. It is the book you’ll find at the foundation of my personal finance philosophy.

Mindset by Dr. Carol Dweck is probably the best book I’ve read on what I would generally term “success.” To succeed at anything, you need an appropriate growth-oriented mindset and this is the best scientifically-backed book I’ve read on it.

The Creative Habit by Twyla Tharp discusses making creative thinking routine in your life. Given that professional life is valuing ideas more and more and more, I think this is essential for being a complete, thriving person today.

I would strongly encourage you to check out some of the many books I’ve reviewed on The Simple Dollar. Almost universally, they’re good – though I’ve reviewed a couple of blatant train wrecks, too. Additional selections really largely depend on where you’re going on your life’s journey, but I think those three really are good for everyone to read in your situation.

A plea to share your kraut making experiences?
– Wayne

My father made sauerkraut almost annually when I was growing up and I helped him with the process several times when I was in high school and in college. It’s pretty straightforward, but what set his making apart is that he had a large earthenware crock in which to age the sauerkraut.

I’ve attempted it on my own twice and it’s been a complete failure both times. I attempted making it without the crock, which I think is the chief problem. The first batch I made was inedible. I believe I did not make it briny enough and some sort of growth occurred in it. The smell alone told me I shouldn’t even try it.

The second batch was closer, but it was incredibly, incredibly sour. I could eat it in very small amounts, but it was so far beyond the level of sour that would be enjoyable on anything that I tossed that batch out as well.

I am going to attempt it again later this year after investing in a similar crock to what my father has and following his procedure to the letter rather than attempting to “make do.”

I am a 21 year old college student, I work part time and still live at home.

About a year ago and half ago I totaled my paid off car and had to get a new one. Basically I had to start over. I ended up leasing a car( I know how you feel about leasing a car) however I did it because my parents thought it would be a good idea for me to have a new reliable car and I needed a car right away. Except for registration and such I did not have to put anything down for the car. My monthly lease is about $360.00 for the car. I struggled to make the payments every month as I go to school over full time and work about part time. I told my parents I didn’t want the car anymore as the payments were to much and I was very frustrated that the car would never really be mine even after I made all these “payments” on it. My dad decided that he would agree to make half the payment every month. Well I still have another 17 months before the lease is over. I also have DMV registration coming up which will be about $350 plus a maintenance that will be about $300-400. I guess right now the decision I am trying to make is should I just keep the car for another 17 months and suck it up making half the payment every month and the maintenance and DMV coming due or should I try to find someone to take over the lease and figure something else out?( My parents and I were considering the possibility of having my dad take over the lease and driving the car) I have some savings however if I bought a car cash it would probably eat up all my savings, which is really frustrating Right now I have a lower payment (plus maintenance and DMV of course) however payment toward what…?( as its not really my car) I am not really sure what the best thing to do at this point would be.
– Alan

The real question I have is whether or not you actually need a car. Do you need it to get back and forth to your classes or would public transportation suffice?

If you can survive easily without a car, I’ve got to wonder why your parents convinced you to buy one. I also don’t understand why a college student would purchase a car that has a $360 a month lease on it. That’s the cost to lease a Lexus. If you were going to lease something, I would have thought it would make much more sense to lease a low-end car at $180 a month or so.

I don’t think you should continue the lease on that car if you can possibly do so. You would be much better off in a used car at this point, one with low payments. Your monthly income on a part-time job does not equate to a new car unless you’re spending every dime you make on that car and you’re working 30 hours a week (figuring in gas, DMV, oil changes, maintenance, etc.). I would sit down with your parents and show them the real dollars and cents of all of this.

My husband and I live in SoCal – Long Beach, to be exact. My question is about gardening for SOME of us. We live with – seriously, now – 8 different grocery stores (Fresh & Easy, Stater Bros, Ralphs, Albertsons, Pavilions, Vons, Food4Less, and Trader Joe’s) within minutes of our house. Actually, there are a couple more than that, but those are the stores DH and I frequently go to, in addition to Costco. Because of this, we have a tremendous opportunity to “shop the specials” at grocery stores. Drug stores are the same: several to choose from, in addition to “super-stores” like Walmart, Target, K-mart, etc.

Anyway, DH and I just went to Lowe’s Hardware today to pick up potting mix for our planting containers, plus a few tomato plants and other gardening extras. Once home, DH and I were talking about the expense of gardening: not only the potting mix, seeds, plants and misc. supplies, but also the WATER. It is my job to plant, then DH takes over from there with the watering. BTW, due to neighborhood cats’ habits, gardening in a traditional ground-level garden bed is not an option.

DH was saying today that, with the super-great sale prices we can get each week throughout the summer and a good deal of the rest of the year, it’s just not worth the cost or effort for us to raise our own veggies. Seriously, cantaloupe goes down as low as 19 to 25cents per pound, peaches get as low as 59cents per pound, etc. All we have to do is scan the weekly ad flyers, plan our route, and we have a week’s worth of fruits and veggies – almost all at bargain prices.

So, considering this, do you feel it’s worth it for us to continue with our yearly container gardening ritual (which neither of us particularly enjoy, but don’t dislike, either), or should we just aggressively and consistently shop the store specials at multiple nearby stores for produce, the way we already do for our other groceries? We do not garden organically, so that is not a factor in our decision.
– Lisa

I think, in your situation, gardening doesn’t save money. Even with a small ground-level garden, there’s an argument to be made that it doesn’t save money in terms of the pounds of food produced (although there’s a real premium on pulling a strawberry from the vine and popping it into your mouth).

Gardening shines when it’s in line with other values that you have – eating well (produce eaten immediately from your garden is more nutritional than produce eaten from your local grocery store that was picked a week ago), the act of gardening itself, or a firm belief in organics and controlling what goes into your plants (we basically grow organic, using a compost bin as the source of our fertilizer). Also, the larger a garden gets, the more cost-effective it becomes to garden because the food density goes up and the cost of tools per square foot is lower.

If it’s not in line with your personal values and it doesn’t save money, I wouldn’t garden. In my own situation, however, it saves us money and it’s in line with some of our beliefs, so we love spending spring and summer days out there.

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.