Reader Mailbag: Big Challenges and Business Cards

Welcome to the week-opening Reader Mailbag!

What, in your estimation, is a comfortable (or perhaps average) salary for a young family? Assuming both parents are college educated. I am in a relationship that is leading to marriage. My parents are concerned that we will not have enough money to live comfortably, and will always be struggling. Currently, combined, our salaries equal around $80,000. Ideally, when children come along, I would like to work only part time. I’d estimate that our salary would stay about the same if that were the case (assuming his will continue to increase, while mine would probably decrease).

I do not feel that I have something “normal” to compare to, as I did not grow up in normal circumstances by most people’s standards. (Parents cautious with money, but six figure household. My mom worked only a few hours a week so she was mostly home with us.)

We are both approaching 30 and living outside of Atlanta. I have a bachelor’s degree; he has his master’s. We both work full-time in communications-related fields.
– Monica

In early 2009, the average U.S. family earned $63,000 a year before taxes. That family had 2.5 people in the home and 1.3 wage earners. Given that your family has 2 people in the home right now and 2 wage earners, I don’t think you’re too far off of the average. (It’s important to note, of course, that the average includes prodigious earners like Bill Gates and the like.)

What seems to be going on here is that your parents have some expectation of you having an above-average income level like they have. Plus, you live in a suburban area of a major metro, which almost always means a higher cost of living. They might even have some small concerns of needing to finance you guys in the future.

If you’re both happy with your current level of material wealth, you won’t have any problems doing this. You can certainly get by on $80,000 a year. You just won’t have some of the material trappings that the people around you have – but you will have the freedom to spend tons of time with your kids.

Yesterday, after spending $400, my beloved cat was diagnosed with leukemia. We were given four types of meds to treat her symptoms (anemia, liver problems) and then sent home.

I am heartbroken, we’ve had our kitty for 10 years. Another cat we had for 10 years died in December after a chronic illness that progressively got worse through 2009. Now, three months later, we’re watching our second cat die.

If I’ve learned anything, it’s the importance of having an emergency fund when you have aging pets. Our emergency fund is depleted, especially after the illness of our first cat, and now we are faced with a hard decision.

The vet wants to refer us to a specialist for cat cancer. But everything I’ve read shows that few animal cancers respond well to chemo and radiation. We would maybe buy our cat a year, but at the expense of thousands of dollars and painful procedures — bone marrow biopsy and the chemotherapy.

I know we can’t afford it. I know it likely wouldn’t do any good. And I know she’s “just” a cat. But I still feel like a horrible owner to not have the financial resources to try every option for her. She’s given us 10 years of joy — she was my husband’s and my first pet that we got together, and my husband’s first ever cat. I feel awful, like we’re giving up on her.
– Sarah

In my experience, ten years is a full and healthy life for cats. I know many that have lived longer, but I also know many that haven’t lived that long, too.

You’re the person that knows your cat. You obviously love that cat. You’ve done the research. If you don’t feel that chemotherapy would significantly improve your cat’s quality of life, you shouldn’t put a bunch of money into it.

I don’t believe that throwing every possible medical treatment towards a cat (or a person) near the end of their life is necessarily a good thing. I’ve watched too many people I care about suffer through the last few months of their life in a heap of illness and exhaustion brought on by horrible treatments that only extended their life for a month or two. Give me pallative treatments any day of the week over that.

My wife and I were married in March 2009 and then purchased our first home in August 2009. As such, the combined benefit of filing jointly, as well as the first-time homebuyer credit, means we have $13,000+ coming as a tax refund this year. We’re currently debating how to use this money and I thought I’d get your advice.

We are primarily debating between (1) taking a chunk of the rebate and applying it to our principal, or (2) taking a good chunk of the refund and plowing it back into the house itself. While I doubt this will be the house we ultimately end up in, we expect to be here for a good 5-10 years.

By way of background, aside from our mortgage, we have no debt, so we can’t use any of this money to pay anything off. Our savings are fairly robust and we have a reasonably sized “rainy day” cushion if anything goes wrong, so that doesn’t really need padding.

Further, we were lucky to buy a foreclosed fixer-upper in a very nice neighborhood. We’ve already invested a lot of our own “sweat equity” into the house, having repainted every room, replaced a couple of bathrooms, built a fence, etc. Basically, with the exception of initially hiring a plumber to replace all of the burst pipes, we have luckily avoided needing to hire any professionals, so our actual home-repair costs are just materials (plus, of course, our time). That being said, I think we’ve gotten to the point where there are certain jobs (such as refinishing a wood floor, replacing our driveway, etc.) that just make sense to hire someone to do, because we lack the expertise and we doubt we can really do a respectable job.

In terms of the mortgage itself, we are also doing pretty well there. Our interest rate is only 4.8% and we dutifully pay in extra money each month to the principal (over the course of a year, we’ll end up making a whole extra month’s payment exclusively to the principal).
– Doug

Do you feel that those final repair jobs are ones that will add significantly to your quality of life living in the house for the next ten years?

I can’t make the call on that, but that would be the big question for me as I approached this. Given the repairs you describe, I think you would recoup the investment either way you went.

The advantage of rolling the money into the mortgage is that you know exactly how much your return will be – the interest rate on your mortgage. If you roll it into the house, it’s very hard to judge what the housing market in your area will be like in ten years, but the improvements can only help your value.

For me, the question would revolve around whether the improvements actually were ones I strongly wanted or needed for the house during the time I lived there. If they were, I’d do the repairs. Otherwise, I’d probably chop down the mortgage.

Im currently banking with Bank of America, and just recently opened a savings account to take advantage of the “keep the change” program they are running, but I feel like after the 90 days of 100 percent matching w/ them, I may switch to this account, and leave the bank of america account open as a “rainy day” account.

I read about your hbsc account as well as your ing accounts, but it was dated around 2006 I believe, are you still with this places or is there a different place you would recommend now?
– Josh

I use ING Direct as my primary bank and have been doing so since 2006. I have been almost universally happy with them.

Notice I said my “primary bank.” That means that I use them for my checking account and some limited savings. Why don’t I use them for additional savings? Frankly, I can get a better rate elsewhere, especially for automated savings plans. I usually use SmartyPig for those.

The reason I’ve stuck with ING is that they’ve had every service I’ve needed along the way. I’ve been able to use these services wtihout problem and without fail for years. They’ve never tried to hambone me with fees, either. That type of customer service is something I’ll stick with.

In October of 2001 I lost my job due to the company closing their doors forever. At age 61 I was not able to find a job so I formed my own small printing/desktop publishing company and drew my unemployment until I was 62 and could draw my SS.

I had to draw out my 401K to purchase high speed copiers and other equipment. The best part is that I work at home and have a dedicated office/work place and can take some expenses off of my income tax each year. My brother is gone now, but I still have my small “home” business. It nets about $10,000 each year. Combined with SS that is only about $18,000 per year to live on and some years it’s even less.

Monthly expenses come to just over $1300 per month including thithes, travel expenses and food. I need to rebuild an emergency fund since it was all used for repairs after a major hurricane.

It seems really hard to build that fund and not having savings of any kind to fall back on has given me a lot of stress. I’m now 69 years old, still working at my business and growing food in a container garden to help cut costs. I would be open to any advice you can give me.

Did I mention that I’m one of the most frugal persons I know? I know there must be room for improvement – I just don’t know where that could be. Please help me.
– Alice

The problem here isn’t whether you’re really frugal or not. It’s simply numbers. You have $18,000 a year in income. That equates to $1,500 a month. You’re spending over $1,300 a month in required things. That gives you under $200 a month in breathing room.

That’s simply not enough to build up much of an emergency fund. You’re likely going to have unexpected expenses almost every month that eat through that money.

In subsequent emails, you mentioned a desire to set up an online business. For an online business to earn money relative to the time invested, you have to invest a lot of time in it. There are no online businesses that you can start today, invest 20 hours this week, and start earning significant money.

My suggestion would be to start hitting your public library to see what’s available in that area. If you just wish to start earning a little bit, I would try services where you can earn a little bit from very simple tasks that you can walk away from at any time, like Mechanical Turk. In the very short term – say, the first 40 hours, they’ll earn better than an online business of any kind would. However, over the long term, the business will win out if it’s managed with any level of competency.

Your frugality isn’t the concern here. You need to earn more.

I work for a publicly owned blue chip. I don’t expect a lay off at this point any more than I expect the Spanish Inquisition. I make about $50k/yr. I’ve got about $207k in mortgage debt at about 4.5%. That mortgage is a 5/1ARM, can adjust 1% at a time, and 5% total (so in 9.5 years it could be 9.5% until it’s all payed off). My mortgage insurance will be gone in just about 4.5 years and is basically equal to that first 1% upward adjustment that happens in (basically) the same time frame. I have virtually no other debt (I might carry about $100 on my credit card, but my minimum payment has never been >$0). I’ve got almost 6 months of emergency fund. I have started investing in lending club, and vastly prefer this to stock market, save lack of liquidity (although maybe I’m fooling my self about that). Oh, yeah, and I am going back to school on the GI bill in the fall, and have to find another job with more flexible hours before then.

The question: How big should my emergency fund be? Why (not why have one, but why that size and not twice the size or half the size)?
– Eric

This phrase raises alarm bells: “I don’t expect a lay off at this point any more than I expect the Spanish Inquisition,” followed by “I am going back to school on the GI bill in the fall, and have to find another job with more flexible hours before then.”

That means that you’re going to not be working at that job in six months, period. In fact, you’d arguably be better off if they fired you or laid you off, because then you could collect unemployment insurance.

Given that you’re going to be leaping for another job in six months, I would be searching now, not later. I would also have that emergency fund as fat as I could possibly get it while keeping the minimum payments on my bills.

There is no guarantee that you will find a good paying job with flexible hours in six months. You might find yourself in a long job search at that point, and you might end up working at something that doesn’t pay well at all in the interim. That’s when the big emergency fund comes in handy.

If you do find a job, great. There’s no reason at all you can’t just roll some of your emergency fund (the excess saved) right into your mortgage at that point.

I’ve toyed with a few career ideas and have concluded that writing, or something related to the humanities, is ultimately what I want to do. With that in mind, I’ve recently gotten a position as a blogger at a website for women like and a little older than me, starting up in the work force and all the pressures that come with being a modern woman. I’ve never blogged before. I suppose my question is:

What makes a good blog?
– Emily

Three things: a consistent outlook and focus on a topic, a consistent writing style, and a consistent posting schedule. Consistency, consistency, consistency.

I think the consistent posting schedule is the most important thing of all. Ideally, you want your blog to be part of a person’s daily routine. To do that, you need to consistently have new content for them when they visit each day – or at least three or four times a week, like clockwork.

A consistent writing perspective is also important. By that, I mean that you don’t flop from positive to negative on a certain idea on a regular basis without a well-considered reason (and expect flames when you do it, anyway). You also don’t want to stray too widely from your overall topic area – a bit of straying is good because it illustrates you as a person, but it does need to consistently tie together in some fashion.

Also, figure out which aspects of your life you’re willing to discuss openly and which ones you’re not. I am very open with my life, but there are a few issues that I’m not willing to discuss publicly, mostly because they would negatively impact people that are close to me. This has actually been a difficulty a few times, because those elements have been key in a few choices I’ve made and when I’ve discussed those choices on here, I haven’t been able to give a full reason for them. Readers have flamed me hard for this in the past.

A final note: get a tough skin. If your site gets popular, you will be sent largely-anonymous attacks against you for virtually everything you can imagine – and many things you can’t yet imagine. You simply have to ignore most of it or you wouldn’t be able to continue running a popular site. Just view it as angry people out there looking for a way to vent and don’t let it bother you.

I’m 26, married, and expecting a child in October.

My Debts:
$390k @ 5.5% mortgage
$15k @ 4.9% car payment
$13k @ 4% education loan
$25k @ 3.3% education loan

I have a well-stocked emergency fund already in place and I’d like to start minimizing my monthly payments on other debt. Generally, I would agree the best approach would be to pay down the mortgage since it has the highest interest rate. However, I only plan to be in this house another 3-5 years. When I move, I’ll be moving to an area with a much lower cost of living (and also lower pay). I hope to use proceeds from the sale of my current home to buy a small home with cash in the new area. Since I won’t be staying in this house long enough to truly realize the benefits of extra payments on my mortgage, does it make sense to instead try to clear the other 3 debts so that when I move, I will be completely debt-free?
– Chloe

No, I don’t think it does.

First of all, this argument is banking on the housing market being consistent and increasing in value. Those days are over. I wouldn’t bet on any housing market being easily predictable for the near future.

Second, you can pay off the other debts with the proceeds from your house sale – or at least pay off the highest interest ones.

I would make the minimum payments on the three small debts and make the biggest payment possible on the big debt with the highest interest rate. This will give you the best shot at debt freedom when you sell your house, because you can take the proceeds and pay off the remaining debts. Paying the higher interest ones down now means you’ll have the lowest possible balance across all the debts in a few years when you sell the house.

My husband just started a state job (entry level–just over $40k) that really only has a couple positions above it that he could work his way up to. At the same time that we applied for jobs, we also felt we should apply for PhD’s. He’s in at 2 of the top schools in his field (epidemiology) and has interviewed at two more. None of the schools is ranked below No. 7 in the Nation, so we know he’ll get a great education if we go. The trouble is, he’s about to finish his master’s in public health and has this new job that pays enough to support us in our frugal lifestyle. We have about $8500 of student loan debt left, but we’ve been paying $700 a month for about a year and we know we can knock the rest of that out and be completely debt free in a year if he doesn’t go back to school. If he does, the rest of our debt will defer interest while he’s in school, but I know we won’t be able to get it all paid off (we’ve got some money in savings that could knock it in half, but we hate to lose our savings if we can defer).

Our parents are giving us a hard time about leaving this job in August to go back to school, especially since even with a great grant, we’ll probably need to take some small loans (about $10, per year for 4 years) since we just had our first child and expect one or two more to arrive before he graduates. Everything I’ve seen says that with the PhD he’ll make $60-80k though I’m not sure that’s straight off and he’ll probably want to do a post-doc.

Do you think our parents are right and we should just stick to being grateful my husband has a good enough job that I can quit mine and stay home with the kids? Our gut says that he’ll be happier and we’ll make more in the long run if we leave the job and continue with school. I guess I’m just wondering if there are parts of this decision we haven’t looked at but that will jump right out to you.
– Jennifer

I find it strange that in this discussion you’re ignoring which career your husband would find the most personally fulfilling. That, to me, would be the first question I would ask.

Would he be genuinely happy with his state job? I don’t know the answer to that – in fact, only he probably does. If he would be, I’d probably stick with that job.

If he’d rather have the challenges of chasing the Ph. D. , that’s what he wants to go for.

Life is not about just money, and it sounds like he has two very divergent career options here and you have a lifestyle that can make either one of them work. I would focus more on putting pieces in place for a career that will be fulfilling.

Do you think there would be any problems with going to some local businesses and asking them if they would like to participate in some simple and inexpensive advertising and then have them pay 10 or 15 dollars to have a copy of their business card or a simply designed ad put on a flyer that would be passed out to several local businesses for people to take? I figure that there would have to be some catch like having an article of interest or some type of editorial on each one to get people’s attention. This could be done once a month. If I get just ten people to sign up, then I can probably make about 50 to 75 dollars extra a month by doing this. Where I am located, there are plenty of little restaurants and automotive repair shops and other little out-of-the-way businesses that could probably use the exposure.
– Rhett

I don’t think there would be any problem whatsoever with that. However, I don’t know how much buy-in you’ll get on it. Another concern is that you’ll have to be very careful with the writing you choose, because that writing will somewhat reflect on the businesses represented there.

My suggestion would be to figure out what kind of column you would write, write several samples of it, and take them with you. A movie review might be appropriate, for an example.

You might also want to make a few finished copies of what the flyer would look like, with bogus business cards in place. That way, they can actually see what you’re talking about.

Good luck!

Got any questions? Leave them in the comments and I’ll try to answer them in a future Reader Mailbag. Shorter questions are more likely to receive an answer.

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