Reader Mailbag: Balancing Act

One of the interesting things in my own life as of late has been the tricky balancing act between my professional work and my personal life. Right now, I’m in a big crunch time with my professional work, as my second book is coming out in late June. There’s a lot of book finalizing, a lot of promotional work, a lot of legwork in other areas… just lots of details to cover. I also have the normal stuff to do for The Simple Dollar website and email newsletter.

At the same time, my wife is past due with our third child. I’m spending an awful lot of the rest of my time helping to prepare for the baby’s arrival. Again, this is on top of the time I set aside for my children each day.

Add these all up and what do you get? Someone who needs sleep and is really looking forward to how life will be about two or three months down the road.

My husband and I are both unemployed and job prospects don’t look too great for either of us any time soon. Part of that reason is we both have been around long enough to know what we like, and what we’re good at, and working at jobs that don’t suit us just isn’t worth it. We don’t have any debt.

It seems to me that we’re going to have to put ourselves in a position to either wait it out until one of us finds a job that is a good fit or learn how to live with part time or sporadic incomes which I’m not sure we could pull off in our current situation.

I’ve been wanting to downsize and live car free for a while now. We live in a 2200 sq ft home, I’d like something closer to 1,000 sq ft. We have a couple acres of land, I’d like 1/4-1/2 acre at the most. I don’t want to live in a big city or in suburbia, just on the edge of a small city w/ enough back roads for me to bike to wherever I need to get to (bike paths would be even better). If we sell our house, we could probably bank about $200k (I think we’ve got about 5 more yrs on our mortgage).

Should we relocate to a less expensive part of the country (I’m in New England now) and plan to rent for a while? We are both very laid back people and spend our time volunteering for causes important to us (animals rights, bike advocacy), hiking with our dogs, cooking from scratch, reading — nothing expensive.

I don’t see either of us ever going back to working long hours with long commutes — that chapter in life is closed for sure. What I’m saying is that time is more important to us than money, we don’t have a lot of expenses to start with, have a decent amount saved for retirement and just need to figure out where to go from here since staying in our present home doesn’t really meet my my objectives of being able to downsize more (getting rid of the high cost of winter would be nice too), have less to take care of, less need for money, and more time to spend on nurturing friendships and working for causes we care about.
– Maria

I think it somewhat depends on the kind of work you’re wanting to do. Is it possible to do that work in a smaller community? Most jobs are possible, of course, but some are simply too tied to location or other factors. There’s also the cultural change – a city of 50,000 is different than a city of 5 million.

If you could work there, I’d strongly consider moving. I don’t see any drawbacks to it, in your case.

I’m not entirely sure where your current income comes from – I’m guessing from savings or a benefactor. In either case, the money you save by downsizing and relocating will help you wait until you find the right position for you.

I really liked the idea of creating a CD ladder, which I learned about here on the Simple Dollar, and have put $1000 in a 6-month CD for each of the past 6 months. Now that the first one is about to mature, I was checking out rates, and realized that I would make more by just keeping my money in my savings account (currently, 1.10% APY) rather than reinvesting it in another 6 month CD (0.75%). Should I just hold off on creating a ladder until interest rates get better? Are shorter-term CDs always money losers, or is the current interest rate situation really unusual?

Or maybe I misunderstood the purpose of the CD ladder – is it not for safe money earning, but rather aimed at people who have difficulty saving money? I don’t have any trouble saving, I’m a teacher and manage to save about half of my salary each month. I was just so disappointed when I realized that I was *losing* money by investing in CDs.

I think that for the time being I’m going to put my ladder-creating on hold. Making a new savings account called “CD” will net me more money.
– Kristin

The entire purpose of a CD ladder is to take advantage of the higher rates offered by CDs while keeping at least some of your money liquid. If you’ve found a savings account that beats the prevailing CD rates, then you should keep your money in the savings account and not in the CDs.

Right now, with interest rates as low as they are across the board on savings, CD ladders don’t offer the nice benefits that they once did. In fact, it’s quite possible to find higher savings rates (say, with SmartyPig) than with CDs.

If that’s the case, keep your money in savings and wait for the CD rates to go up to a level that’s notably higher than what you can get in savings.

i am 50+, considering divorce and of course have no money. but i do have a regular job, no benefits, that doesnt really pay very well but i know will last at least a few more years. depending if the company can survive all the worlds financial probs. what ideas would you have for a female in my soon to be situation?
– Cindy

First, start stockpiling your own cash reserves independent of your current marital situation. You do not want to be in a cashless situation if you’re over fifty and working at a job with no benefits.

Second, work on improving your skills with an eye towards finding work that does offer benefits.

This will be a challenging leap. You need to build a destination for yourself on the other side that protects you in case of a medical crisis, job loss, and so forth. The best way to do that is to conserve every dime you can and build your skills with the goal of finding more stable work.

I’m 21 and my wife is 20. I work full time and she works some out of our home and filling in at jobs she’s worked at in the past. My wife has one class left to finish her associate’s degree where she plans on stopping since she wants to be a stay-at-home mom. I have about year’s worth of school done and had planned on quitting my job in the fall (which I can’t wait to do) and going back to school to be a teacher while working at another job part time. The only debt we have is about $20,000 combined school loans.

We also recently found out that we’re going to have our first baby in late fall/early winter. We’re really excited about this change but it presents some interesting challenges.

Our lease at our current apartments ends August 1st, and we’re looking for cheaper place to live. This will put our moving date right before quitting a job, going back to school, and having a baby. We’ve decided the best option would actually be to buy a house at a low price. In the price range we’re looking at our house payment would be less than half of our rent payment (obviously with taxes and insurance on top of that).

Another thing to consider is that if I quit my job this fall we won’t have any health insurance which is a problem considering we’re about to have a baby. I would probably be able to get insurance through school, but I’m concerned the change in insurance will be a headache especially since we’re currently using a high deductible plan with an HSA and planning on finally meeting our deductible by the end of the year if we keep this insurance.

I am considering not going back to school until the spring semester, but I really don’t know if I can stand this job that much longer. If it’s something I have to do, I am definitely willing, but it almost feels like I’m giving up after all this time looking forward to going back to school.

Any thoughts on what to do or at least how to stay sane and keep our heads above water?
– Adam

If you do not have health insurance, the cost of having the baby will be back-breakingly tremendous. I don’t think it’s realistic at this stage to walk away from health insurance because adequate prenatal care plus birthing care and infant care will be almost insurmountable for you if you pay out of pocket.

Your best bet is to stick with the job you have now and actively search for another one (since you’re dissatisfied with the current one). Going back to school right now, unless you can find other sources for medical care, isn’t a reasonable choice.

You’ll likely need to keep working until your wife is ready to return to the workplace in some capacity.

Yes, babies certainly cause some difficulty when it comes to life planning.

I have a auto loan with a 4.25 interest rate. My CD will be paying 1.25% when I renew it in May.

I am seriously considering taking about 40% of my saving and paying the truck off and then just keep making the payments to myself.

I have no other debt.

What is your opinion on this?
– Dale

I think that’s a pretty good move.

I’m assuming, of course, that you have money socked away besites your CD for emergency purposes. If you don’t have such an emergency fund, you’d be better off socking some of that money away in an ordinary savings account so that you have access to it in the case of an emergency – job loss, truck breakdown, and so on.

It sounds like your CD is large enough to enable you to do both, however.

I’m in my late 20s and having a “mid-20s crisis” a few years too late. When I was a teenager right out of high school money was tight and I was left by myself to care for a severely disabled mother (no other family). I sort of wanted to get into science, biology was always my favorite, but for reasons I will explain in a minute, lost out to computer science/ web programming. But I didn’t even get time to study that until 4 years ago, when I finally put my mother in a nursing home and concentrated on bettering myself. So for these last 4 years I’ve just blindly been studying computers and doing IT work. I’m finally going to get my associates degree (a 2 year takes a while 2 classes at a time..) and I’m scheduled to go start work on my bachelors in comp sci with a minor in biology. The school I’ve picked out is almost completely online but they only offer minors in biology, not majors.

Sometimes I feel like I should be majoring in biology at an “in person” college instead of minoring online. But:
1- I’ve got this computer degree. Should I just completely throw it away and have wasted these years?
2- I’m afraid to go to an in-person school because if I lose my current night job then I’ll have trouble finding another job I can do while going to school. And I want to get off night shift anyway.
3- I hear research positions pay low and aren’t good for people who want to start a family. (That’s another thing..I’m married, husband has a low paying job, and we want kids but I grew up poor and will not have them until I am sure I can afford them. And my biological clock is ticking louder now.) But I don’t really even know enough about biology careers to know where to go to figure all this out.

The short version of all this is is that I think I want to change to biology, but I don’t want to start over just to find out I picked a bad major again or will end up poor. The last thing I should mention is why I originally did not pick biology as my major (besides the money thing) : I could never kill an animal. I know that genetics researchers are doing wonderful things and that often the only way to do that is to sacrifice animals for research, but I just couldn’t do it. If it’s already dead, sure, I can dissect it. But anything that requires euthanasia (Vet school) or killing an animal for research is out. That’s kind of a big limiter…I realize now it’s much less of a limiter to a biology career than I originally thought, but how much of one I don’t know.

I’d just go to the biology dept. at my community college or ask an adviser at my comm. coll, but the advising dept is not very good at my comm college and I don’t know the biology faculty. Any links, advice, anything you could provide would be so appreciated.
– Kat

There are a lot of well-paying jobs in the life sciences. The problem is that many of those jobs require a Ph. D. for entry. The jobs that people often get with just a bachelor’s degree in life science often have low salaries at the start.

It is more important, though, to pick a major that you’re actually passionate about and want to be involved in deeply for a very long time than it is to choose a major that seems on the surface more likely to earn you money after graduating. If you just choose a major for the money, you’ll never be among the leaders in your field – the people with passion will be doing that. The big earnings come to those who are truly passionate about their field, whatever it is. They get the best jobs and the opportunity to grow an amazing career.

Sit down and figure out what you’re most passionate about and follow that path. Don’t worry about what you’ve already spent – that’s a sunk cost. Look instead at the path ahead and the benefits and drawbacks of each option.

I am trying to decide if I should use my money to pay off the house earlier or put more in my 403B account to augment my retirement. I get STRS and my husband gets federal retirement.

He will retire in 4 years but will continue to do some kind of work. I will work for full time for one more year, 83% for three more years and 67% for three more. Currently I am putting $1000 a month into my 403B. My husband is putting in 16% of his pay into another type of retirement account. He makes about $105,000 and I make $83,000. We owe $200,000 on our house which will be paid off in seven years if we keep paying the amount extra we are paying.

We own two rental properties which, between the two of them are breaking even at the moment.

So, given those facts, would it be wiser to take that $1000 a month I am currently putting into my 403B and pay the house off earlier or continue to put it into the 403B? I make a guaranteed interest rate of 5% and more if the market goes up. The interest rate on our mortgage is 4.875%.
– Angie

I’m going to assume you’re fairly close to 60 years old. If that’s true, I would continue to put the money into the 403(b).

In a few years, you’re going to be able to start taking withdrawals from that 403(b) if you so choose (or you may delay it further – it’ll be up to you), so the 403(b) gives you a bit more freedom at this point.

Also, since you own two rentals, you’re likely filing long form for your taxes, meaning the interest rate on your mortgage is likely saving you money on your income tax – it’s actually less than 4.875% if you figure in the taxes.

All around, I would put the money into the 403(b) and forget about it.

I have my roth IRA and non-retirement investments with Vanguard. Is it wised to have all my investments with one company? Would/could it be another Enron? (Note: I practice asset allocation, diversification, and rebalancing…so my portfolio is quite balanced with my risk tolerance.) I am just scared that Vanguard might go under, and I’d lose everything. Thanks for your response ahead of time.
– Trinh

The only reason to diversify among companies is if you’re exceeding the amount insured by the SIPC, which is currently $500,000.

Most brokerages (Vanguard included) have SIPC insurance on their accounts, which basically means that if the brokerage fails, up to $500,000 of your account balance is insured – anything over that is not.

So, unless you’re nearly a millionaire and worried about the long term health of your brokerage, it’s not really a major concern.

Any other secret tricks to paying your mortgage off early other than taking the amount of one extra payment per year divided by 12 and paying that monthly?
– Laurel

The best method I know of for paying off a mortgage early is what is known as “snowflaking.”

Basically, snowflaking means that you actively look for ways to save money in your life. You choose to make dinner at home instead of going out as you regularly do, saving $20. You buy soap in bulk, saving $6. And so on.

You keep track of these “flakes” and, at the end of the month, you total them up and add them to your mortgage payment. Since these “flakes” are savings above and beyond your normal monthly budget, the money is free to be used in this way.

This works very well for turning what seems like little choices into bigger benefits. That $5 saved here directly makes for a bigger mortgage payment, which then reduces the interest in all subequent months a bit and pays off your mortgage sooner.

I know that you’re a big advocate of reusable diapers, but my wife (and, admittedly, I) will not go that far. At the same time, we do want to be frugal and we’re wondering what the cheapest place is to buy diapers – a Costco/BJs type place? a supermarket? Online? We’re expecting our first child in the summer, so we’re new to all this. Since we just moved into a house, we have plenty of storage space, so the idea of buying in bulk to save money doesn’t scare us. Any thoughts?
– Avi

I’m a big advocate of cloth diapering and I would have never believed I would have been when our children were born. We used disposables for the first year or two on our son before a friend of ours convinced us to get on board the cloth diapering train and we found out that it was much easier than we expected. We’re planning to fully cloth diaper our soon-to-arrive son, in fact.

When we were paper diapering, though, we found the best deals at the warehouse clubs. Per diaper, we couldn’t top the deals we found there. However, at least twice, we had discount codes for Amazon.com that actually enabled us to get a lot of diapers shipped to us very cheaply with Super Saver free shipping, so keep your eyes out for those.

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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