Updated on 08.31.10

Reader Mailbag: Dream House

Trent Hamm

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. 401(k) profit sharing
2. Online job application tips
3. Illness and challenges
4. College freshman advice
5. Mortgage decisions
6. Annuities for retirement?
7. Refinancing questions
8. Universal life policies
9. Using self-help advice
10. Getting started with credit

Two readers this past week wrote to me asking if I would detail what I would like to have in our dream house. I’d like a five bedroom house (one for the parents, one for each child, one for guests) – we currently have four. I would like a larger kitchen than we have now, but most of the other rooms are fine. I would like to have an office/library (right now, I’m using one of the bedrooms in our house for this) but this isn’t vital. I estimate we’d add about 500-600 square feet to our current house.

The biggest change would be the land. I’d like to live in a place that had forested land nearby and was not positioned close to a major road. I’d also like a barn and the possibility of raising chickens.

That’s really my dream – and it’s very pastoral.

My husband and I have $30,000 in credit card debt. My dilemna is that I was laid off and am now making 2/3 less than I was, and my husband’s employment in the construction industry right now is spotty at best. I have $60,000 in a 401K/Profit Sharing Plan at my old company, and I’m wondering if I should take that money and pay off the credit cards, even though I know I will pay prepayment penalties on that amount. The pressure of the debt right now is killing us, and it’s a matter of the worse of two evils, leave the retirement funds alone and risk losing the house, or pay off the cards and be able to make our mortgage payments . . . what would you do?
– Laurie

The number one thing you need to do is adopt some new spending patterns. If you racked up $30,000 in credit card debt when you were making three times as much and your husband was fully employed, you’ve got to be in the hurt locker now. Burn the credit cards. Do not use them.

The next step is to call your creditors right now. Call those credit card companies and explain your employment situation and money situation. Offer to prove your situation with pay stubs if they’re interested. Ask for special help in resolving this. Don’t get enraged at what they say – after all, you borrowed their money.

When you’re talking, make sure the person you’re talking to has the power to change your rates or terms. If they do not, politely ask to speak to someone who has that ability.

Remember, it’s not beneficial for them to enter into a situation where they have to chase you for the money and eventually have to sell your debt at a loss. Take action.

I am finishing up my college education this summer, and am simultaneously applying for jobs. I need any job I can get because my parents aren’t exactly chomping at the bit to let me come home. My question is, I’ve been applying mostly online for all these jobs and I haven’t received any responses at all. Since they’re sent online, I receive confirmations that my application has been received, but I can’t help the feeling that I should be calling and checking in on the stores/companies to see if they’ve received my application. Is this rude, considering I get email confirmations? Also, my very nicely formatted resume’s and cover letters get ruined when I have to copy and paste them into online resume builders and text boxes.

any suggestions or good resources for how to apply to jobs with online application services? Is everything I learned about paper resumes moot?
– Michelle

Many online employment applications are utterly deluged with entries from people out there just spamming everything. People will see thousands of applicants for a particular job, and 90% of them aren’t even qualified for it or have submitted junk.

So how do they do this? They usually do some harsh filtering on the applications, looking for people in certain age ranges, certain locations, and so on. Most of the time, this filtering eliminates quite a few good applicants, but because of the huge numbers involved, they don’t have the time or resources to look at each one.

Your best bet is to try to apply for jobs that are close to where you’re at and ones you’re qualified for. This won’t guarantee a thing, of course, but it does improve your chances of getting some sort of response. Calling the place you applied to for follow-up certainly doesn’t hurt, either.

I. Have a disease. And I wish not to disclose what it is; but to say the least, I work at Wal*Mart and sift through financial issues and debt because I can’t afford medical insurance. My boyfriend can’t find a job because we’re 15 miles out from any real place to work. We live in the middle of nowhere. I need treatment, and I need to get my life on track. I’ve had jobs where I’ve had to walk five miles there and five miles back- and trust me, I don’t mind, because I feel like it empowers me to do something for myself.

Basically, is there any advice you could give me on how we could go about improving our lives? Also, to avoid further downfall. No one can, or will, or ever has, had the time to teach me how to drive. I’m 21, and have a permit. There’s nothing I can do about this. I have tons of artistic talent. I’m great with music, painting, whatever… Massive amounts. And I want to get into college… My fear is affording it, and transportation. But as smart as my boyfriend and I are, we’re so far behind in what we should be doing due to poor families and background history that it’s disgusting, and I’m really just trying to keep my chin up, here.

Ontop of my own issues, my parents are falling into a 50 thousand dollar medical debt trap. My mom is sick, and doesn’t work, and can’t work. And the things that come out of my father’s mouth scare me sometimes. He talks about the money I would get if he died… I don’t want to hear him say things like this. So as you guess, they often ask me for money. (As I said before, I have a part time job. At Wal*Mart. In other words, I make the absolute crap of money.) I’m in a complete hole, in the middle of nowhere, with no transportation except to work. I want to help them, but I can’t just keep giving them all of me, or else I’ll end up just like they are.

I NEVER wanted to have kids. I hated the idea of having kids. I’ve always been the tomboy. Always. Until I met my boyfriend. And I’m so afraid to have kids, due to debt, that I just don’t know what to do here. I don’t want my kids to live the way I do. I want them to grow up with positive attitudes and the ability to learn and maintain themselves- and above all, prosper.

This is basically my issue. If you can take the time, can you heed any advice?
– Sara

I think you’re in a bad location with bad influences all around you. My honest suggestion would be for you and your boyfriend to move to a different area for a while, preferably a place with lots of opportunities. I would suggest a city with a low cost of living, like Des Moines, IA or Omaha, NE.

Go there. Find some work. Use mass transit to get there. Use every service you can get for low income people in the city. If you feel the need, send some money back to your parents.

Look for opportunities in the city to share your artistic skills. Volunteer to produce art for community groups so that you’re seen in a popualted area. Share your talents so that people see what you’re capable of.

I know that you feel strong family ties and responsibilities, but the longer you stay there, the less likely it will be that you’ll ever actually do the things you dream about.

I’ve read your blog for a little while now, your posts are very helpful and make for an enjoyable read. But what further advice would you give to a college freshman? For instance, I just turned 18 and set up my own Checking and Savings accounts apart from the savings account previously held under my parents’ account. What specifically can I do right now to set myself up for financial success? Because of college bills, I won’t have much money to use but I’d like to get some kind of “head start” on my future finances. I’m trying to read a few financial blogs to at least get informed on personal finance but I’m still unfamiliar with many terms and processes. I’m going to a private school with about 1/3 paid for by scholarship, and the rest to be covered by myself and my parents — without loans. What would you advise?
– Christian

Your best move is to educate yourself. Pick up a few well-rounded books on personal finance, read them slowly, and absorb what they’re saying. Use the internet to look up terms that you’re having a hard time understanding.

I’d suggest starting with two books (and these are linked to my reviews of them): Your Money or Your Life (puts personal finance in a whole life context) and The Bogleheads’ Guide to Investing (drier, but more information-based). From there, you’ll know enough to figure out what directions you should go in next.

The best solution for your problem is education, pure and simple.

My husband and I purchased our first loan last year. Since my husband had been self-employed for roughly 8 months at the time, we only qualified for an in-house 5/5 arm loan at a local bank at 5.7 %. The adjustable rate loan is very reasonable (tied to prime, can not adjust up or down more than 2 percent, etc), but we are looking at refinancing now that rates have dropped and my husband’s work history would let us qualify for a 30-year in a few months. Our bank will do a refinance for $1200.

Unfortunately, if we refinance we have to pay PMI, which will be about 90 bucks a month. If we refinance into the 30-year at 4.75%, it will take us over 3 years to see a savings at all. We also have an option to refinance into a 7/1 ARM at 5.1% and NOT pay PMI. We would break even with the cost of refinancing after 15 months, however we still won’t be in a 30-year mortgage. AND, I am wondering if the 5/5 loan is better since it can only adjust every 5 years.

I love the security of a 30-year mortgage, but the reality is that I have four more years in my PhD program, so the longest I could see us staying in this town is 4-6 years (if I took time off for some reason). Should we just get the 7/1 arm?
– Amanda

I almost never think an ARM is a good idea. It will often look like a good idea at a certain point in time, but it looks like a good idea because it locks in well with what your plans happen to be at this given moment.

If there’s anything that’s certain right now, though, it’s change. Your plans today will likely not match what you’ll be doing in five years, and if you’re in a situation where your mortgage is about to adjust and you’re made to either refinance at a higher rate or suck up the adjustment (because rates are going to go up).

If I were you, I’d get the lowest rate with the PMI – the 30 year mortgage. Focus on getting that debt paid down to the point where you don’t owe the PMI. That way, you’re not stuck in an adjustment or refinancing choice if your plans don’t go exactly as you think they will.

I’m trying to help my fiance sort out her retirement benefits at a new job, which offers two plans. The first is a pension-type account they make the entire contribution for, but the second is a 403(b) Tax Sheltered Annuity Plan, either traditional or Roth, offered through one of three companies. I’m completely adverse to the idea of investing in annuities; everything I’ve read indicates they’re much more expensive than general mutual funds, and since we’re only 25 I think the extra growth potential in index funds makes more sense. Her company does not match her contribution to the annuity account, so I don’t see much benefit to it.

Currently I fund my 401(k) to get the entire company match and max out my Roth IRA contributions. My fiance has minimally funded her Roth IRA in the past. Given my aversion to the annuity option, the other route I see is to direct all the money she would have steered there into her Roth IRA. If there’s money left after this, we could increase my 401(k) contributions.

Should I be giving more consideration to the annuity plan?
– Jeff

It really depends on the specifics of the plans. What kind of fees are involved? Are the companies stable? Are the annuities insured?

As a very general rule of thumb, you’re probably right in saying that your current investing plan is superior to the annuities because annuities often have heavy fees with them. However, if you’ve got that much money to sock away, it helps to do some research.

I’m willing to bet that her best move is to just fully fund her Roth, because it’s probably a stronger investment. If there’s still money left, upping your 401(k) is an option, but she may balk at that because it leaves her funding your retirement, which would be a raw deal if you ever got divorced.

I owe 530,000 on my mortgage.I’m currently paying back at 5.125 %.If I refinance, which is a better choice?A 5 year fixed at 4.25% from ING or a 30 year fixed from another company at 4.875%?
– Phil

I’m going to guess that you meant a 15 year fixed.

If that’s the case, the 15 year fixed is the better deal. You’ll pay a lot less interest over the life of the loan. The drawback is that your monthly payments will be a bit higher, but you’ll also be done paying them 15 years earlier than you would be with the 30 year.

If you can afford the monthly payments easily, take the 15 year loan.

A friend sold us a universal life insurance policy for each of us. We have 3 children and the premium per month is about $1500 for the 5 of us. My husband is the only breadwinner of our family. the friend who sold us the policy showed us some complicated math about all the money we will receive if we wait so many years, how it is a great gift to give our kids when they are 21 etc. I have been paying $1500 t for 8 months now.My question is ,is this a good investment as he says it to be or is a term life insurance better? My husband is about 40 years old. Kids are around 12,7 and 5 yrs old.
– Penny

Whole life insurance is way better… for the person who sold it. They earn a lot more commission on whole life insurance than they do on a term policy and thus salesmen often become true believers in the greatness of whole life policies.

To put it simply, whole life policies don’t earn well enough to make up for the fees and expenses tied to them. Yes, over the long run, you will see some returns from it. However, it’s not as good as simply buying a term policy and then putting the money you save away in an investment account elsewhere, like a Roth IRA.

Doubt me? Dave Ramsey says the same thing.

I regularly read a lot of self-help stuff, from books and online resources. I subscribe to many blogs, including yours, that talk about how to live a better life and self-growth. And, since I´ve been doing that, I feel I know more about me, my problems and what must be done to solve them. But the thing is that I have a hard time making the transition between theory and the actual application of all I´ve learned, I can´t seem to make it work. It´s like I can´t effectively “internalize” all the information to make it useful. For example, recently I finished reading this great book, Mastery, by George Leonard. It talks about a lot of things that make so much sense to me (I had a lot of “A-ha!” moments during the reading), and is full of practical tips that are key to improve many things that I´ve been struggling with. At the time I finished it I felt really energized with all the wise words and so, and managed to apply that through the whole day. But as the days went on, I apparently forgot all that, and got back to the normal state from before the reading, feeling only an itch of the amazing sense of flow that I had experienced. I wish I could really retain all this good stuff and make it a part of myself, going beyond the knowledge by making it functional.

I know you are an avid reader, so I would like to know how do you go about this. How do you take the wisdom you come across and turn into positive changes in your life? What´s the best way to do that?
– Liana

Many self-help books have hundreds of suggestions for behavioral changes. They talk about many, many things you can do to improve your life, and they’re often inspiring.

The problem comes when you try to apply lots of changes at once to your life. The more changes you try to execute at once, the easier it is to utterly fail and wind up making no changes at all. It’s like going on a “diet” and eating nothing but lettuce for a week. That will fail, almost always.

The best solution is to take a self-help book and try to apply one specific principle at a time to your life. I can’t comment on the book you mentioned, but if you read Getting Things Done, you can get started by simply having a “collection” weekend or carrying a notebook in your pocket and jotting down everything in your mind. If you try to do the whole system all at once, it’ll be tough.

Take life changes one step at a time, especially changes that are easy to backslide on.

I have a couple of questions concerning credit and the need for it. Just for some background I am currently engaged and will be getting married next month. I have been out of college for almost 6 years and have a well paying job and have a mortgage on a duplex. I have no other debt than my mortgage and have a nice credit score. I have had a credit card for the past 10 years and I have never carried a balance. My fiancé on the other hand has never had a credit card and has always used a debt card since he didn’t trust himself when he was younger. He feels now that he can handle using a credit card wisely. He has tried to look into get a credit card but is having difficulty with the way credit card companies are being picky on who they lend to now and he doesn’t have a credit history. This wouldn’t be an issue but we are worried that in the few years after he completes a program to become a physician’s assistant that we will start having kids (and I will stay home) and want to move into a single family home and keep the duplex. At that time he will probably be the only income besides rental income. I am hearing that they are now taking the lowest credit score of the couple into account vs. they used to take the higher one. This could create an issue with my husband’s lack of a credit score if it is true. If it is true how would you recommend him getting started with a credit score? He has checked his bank but even though he has had accounts with them (a national bank) for awhile they won’t even give him one since of the lack of credit history. How does one get a credit card if they are past college age and have no credit history? Does applying for any and every credit card in hopes of getting one hurt you in the long run? We are trying to get one that will not have an annual fee so there will be no financial impact on our end. We own both of our cars and do not plan on replacing them in the near future. Thank you so much for you help.
– Alison

There are a lot of benefits to establishing credit for your husband and you outlined some of them above.

The simplest way to get started is to co-apply or co-sign for a new card for your husband. Don’t worry if it has a low credit limit or other such drawbacks – the purpose of the card is to raise your husband’s credit.

Use the card for some very routine purchases, like gas, and pay off the balance of that card in full each month. Over time, try raising the credit limit of that card – call and ask for a credit limit increase.

You may also inquire about adding him to the mortgage you have on your home. Call your bank and ask. This can do nothing but help his credit if you’re diligently making payments.

In short, use your credit to prop his up in the short term.

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. KT says:

    The ING loan really is a 5 year loan. I’ve investigated it before. Unless you’re planning on paying off in 5 years, it’s never struck me as a great deal.

  2. zee says:

    RE: The online job applicant

    1. Reformat your resume and cover letter so they are plain text only (.txt) files, remove all pretty formatting and strip it down to just text — this makes it easier for the machines to read
    2. Fill the resume and cover letter with the appropriate key words for the job you’re applying for — like you wrote, those sorting through these resumes use filters and you WILL get caught in that filter if you use the correct keywords
    3. Seek out the employees of these companies you want to work for via socially acceptable means (such as LinkedIN) and try to establish a connection
    4. You’re a college student, Google this! There’s tons of advice out there on how to fix up the resume to take advantage of the online process. Do some homework, do some research. There are so many career focused sites specifically for new college graduates.

  3. SwingCheese says:

    I think you were suggesting Mass Transit as a way of *getting* to a larger metro area, which is a good idea. Having lived in Des Moines, though, I have to say that DART (the mass transit system) leaves A LOT to be desired. DSM is very much a “car needed” town.

  4. Johanna says:

    @Jeff: Not all annuities have high fees. It sounds like “everything you’ve read” are articles warning elderly customers against buying annuities from door-to-door insurance salesmen and the like. The annuities available in a 403(b) are likely to be a very different animal.

    And do NOT put your fiancee’s retirement money in your 401(k). I’m not a lawyer, but it seems to me that you should each have your own retirement savings in your own names, especially since you’re not yet married.

    I wouldn’t count on her to “balk at” a plan that gave her the short end of the stick, considering how little involvement she seems to have in her own finances. That Jeff used “I” instead of “we” in his last sentence is fairly telling. Future Mrs. Jeff, if you’re reading this, please take the time to learn what is going on with your money.

  5. Sara says:

    @Jeff: Have you looked into the investment options for the 403(b)? The university where I work calls what I have a “403(b) Tax Sheltered Annuity Plan”, but it’s not what most people consider an annuity–it has the same investment options that you’d find in a standard 401(k). I have my money in a regular old target-date fund, although we have a lot of mutual fund options. It’s possible your fiance’s situation is different, but don’t let the name scare you off.

  6. Moneymonk says:

    “I have four more years in my PhD program” <–what?

    Had no idea a PhD takes that long

  7. krisitne says:

    Sara, look online at Copper Union’s home test. See if you think it is something you can do. Cooper Union is free if you get in, and it is a world- renowned art school. Talent is not enough, you need exposure to time periods, genres, etc. to produce informed deeper work, and be conversant in art terms to be taken seriously. I suggest getting from your library: Jansen’s History of Art, and Robert Hughes’ Shock of the New.

    Take the standard college exams if you have not. I got a full scholarship to Pratt based on my portfolio, but it was the exams that clinched it. Unless you have energy and drive, pick an art major that guarantees an income right away-not printmaking or painting! I did not go for the major I wanted to, but I supported myself off the bat- like you- I had no safety net.

    If you are any good at caricatures, make one at a place you work for someone’s birthday, then let people know you will do them for pay. Do NOT set your price lower than 25/hr. You set the value of your work by what you charge. Accept cash only, in case your bank account has issues.

    Look for a trompe le olei artist in your area, offer to apprentice on your off days, and then take your skills elsewhere-diner windows, store windows, etc.. What the heck, get your work together and try out for the Next New Artist. I am not a fan, but it is a venue! Produce work constantly when not at a job.

    And for goodness sakes, get away from your family. It was my life goal to get out of my hometown, and lift myself out of a horrible family situation. I was poor for a long time, but in the end, it worked. You are barely swimming, and you have drowning people threatening to drag you down with them. Your first responsibility is to take care of yourself.

  8. Steve says:

    @#4, depends on the school and the program. For example, my sister is starting her third year of a 6 year program that takes her from high school straight to a Ph.D.

  9. Katie says:

    Steve, in the U.S.? 5 years post-college seems to be a pretty standard minimum length of PhD programs in the U.S. Often they’re shorter in European countries which don’t require coursework in addition to the thesis.

  10. wisnjc says:

    Ph.D.s straight out of undergrad (with a BS or BA) usually take 4 to 7 years. If you have to get a Masters degree first before starting your doctorate, that is often 2 or 3 years, some of which may be credited to your PhD time depending on school and program.

  11. Cheryl says:

    How does a single mom get started with credit? Our daughter, 27, is currently going to school (which we are helping to finance). She will finish in 2011 and has been asking us what she should do to get a credit card so she can establish some credit history. What about a card that requires an up front deposit?

  12. DougR says:

    This is to Sara: Wow, that’s a real collection of adversity you’re in there, and I admire your spirit so much! I assume you’ve scoured the local government agencies to check about disability and any bennies like food stamps you may be entitled to. I really like Debtors Anonymous as a source of help, because they really helped me get my priorities straight, plot a course of action for myself, and learn for myself what I can and can’t control. I no longer do the program, but I’ve incorporated its elements into my life. I guess apart from that, I’d echo Trent–if you’re too out of the way for most of the best alternatives, it might be time for a fresh start elsewhere, painful and difficult as that may be. I can see you have a real light that wants to shine, and I hope you can get to where (geographically) it can. You’re very smart & sharp about the issues, I guess the thing that leaps out at me is the accessibility (and being able to clear your head enough to plot a course for yourself). Heartfelt good luck & best wishes.

  13. valleycat1 says:

    Q10 & comment #8 – Yes, getting a credit card where you pay up front & then draw/pay back to that level will be reported toward your credit history & is a safeguard in learning how to responsibly use credit (since the $ limit is usually pretty low).
    Q4 – Christian – also check out Dave Ramsey & Suze Orman. They both have books out & info on their websites for young people in college/just starting out. They’ve both earned my respect by adjusting their advice depending on the economy and on specific situations in a person’s life.

  14. Charlotte says:


    Do NOT take money out of your 401k to pay the credit cards or mortgage. In the event of bankruptcy, your 401k can’t be touched to pay off creditors, but if you drain it in an attempt to avoid bankruptcy, and end up there anyway, you won’t have a house or a 401k for retirement.

    NEVER take out 401k money to pay off debts.

  15. Amy B. says:

    @Liana- I think the advice to take self-improvement one step at a time is valid. Try one item a month. During times of high stress, I have also had to take a step back and make my “month” focus just about getting enough sleep. Then, I’m better able to tackle more active tactics to moving forward.

    @Sara- Is there another family member (like a cousin, aunt, uncle, grandparent) or family friend who can provide a low-cost “change of scenery” for you? You could also look at being a live-in attendant for someone who needs help, like an elder person. This would help provide shelter, with less financial cost, though more time. You might also consider bartering for driving lessons (some ideas: babysitting, cooking meals, errand running).

  16. Gal @ Equally Happy says:

    I highly recommend you follow Trent’s advice. I found myself in a place a few years ago where there were so many things about my life that I wanted to change, and I just felt overwhelmed. Pick one thing at a time, make the change, make it successful and then move on. Don’t even pick the biggest things first by the way, sometimes you need a little victory or two to keep you going.

  17. chacha1 says:

    @Sara – that is a hard row, and your parents planted it for you. I’m sure they never meant you harm and still don’t, but they will ruin your life if you try to take care of them now when your own situation is so insecure.

    Your father needs to be reminded that it’s his responsibility to take care of your mother, not yours – and also that you’re an adult now and the only help you need from him is for him to manage his own responsibilities. Tell him that you want to help, but you can’t unless you can work, and you can’t work unless you leave.

    Then get out. There was an article on the web this week about ten states with low unemployment (you may even live in one of them). Do some research, pick a city, and move. Don’t choose just on the basis of low cost of living. Choose for income possibilities and strong public services. Get a job, get driving lessons, get any benefits you’re eligible for (as DougR suggested), barter (as Amy B. suggested).

    A young person who demonstrates a willingness to work and a positive attitude will get a lot of support from a community that can spare it.

    You can help your parents later, after your own situation is secure. I sincerely hope your BF will be on board to do whatever it takes to achieve security – which includes NOT having kids until you are financially secure.

    Given that you have a known health issue and a known parental-support issue, this is not one of those situations where you can just let whatever happens, happen.

    You really have nothing to lose right now; you are close to hitting bottom. That means it’s a perfect time to make some new opportunities and start pulling yourself up. We all wish you well.

  18. Ryan says:

    Advice to Sara: Get away from your father as soon as possible.

    He talks about how much money he’d get if you died? CREEPY!

    I may just watch too much Dateline NBC, but “accidents” have been known to happen. Be careful!

  19. Johanna says:

    @Sara: Go to college. Find the best college you can get into, and go. The fears you mention are not insurmountable. Many otherwise expensive colleges have generous financial aid programs for students from low-income backgrounds, so you’d very likely get a lot of help there. (I can’t help you with specifics off the top of my head, but the information is out there, and you can find it.) And many colleges – especially ones where most students live on campus – are in neighborhoods where it’s easy to get around without a car. Once you’re there, you can probably find a friend who can teach you to drive.

    I wouldn’t advise going to college specifically for art, since that can leave you less qualified to do anything else. Get a good general education, and hone your artistic skills on the side.

    Best of luck. I think you have a lot of potential.

    And by the way, if you don’t want to have kids – either not ever, or just not right now – that’s absolutely fine. Good for you for knowing yourself so well.

  20. brad says:

    @ sara

    i cant help but think moving might be a bit extreme. i mean, the whole idea of uprooting yourself and picking a new city to live in without housing/jobs/prospects; its all a little “fivel goes west” to me. in my eyes (who hasn’t ever gone through anything like you, mind you), it seems a poor choice.

    can you guys get a bike off craigslist? or maybe you can get a slight discount on one at walmart. either way, if you can secure a bike for yourself or your boyfriend, those jobs that are 15 miles away are now an option. 15 miles on a bike one way will probably k1ll you for the first few weeks, and it will be a time investment, and there will be days when its raining and at that point you have to determine whether you call in or pack your work clothes in a backpack and wrap that in trash bags and brave the weather.

    but it sounds like it could be the easiest way to solve SOME of your problems.

  21. PB Jung says:

    Hey Trent!

    For Q2, I do agree on your input for the online job applications, that you should look more local. For example, I wanted to work in downtown buildings, so I went to the directory and got all the names of companies (you will be surprised how many small companies there are) I was interested in.

    Personally when I apply online, I usually get 5% call back rate. Which for the time input is almost not worth it.

    I advocate networking to the MAX. Friends. Friends of friends. Moms. Moms of moms. Just getting your name out there and tell people what kind of job you want.

  22. prodgod says:

    @Laurie: I would cash out the 401k. Pay off the cards, but make sure you also set aside enough to pay the 10% penalty and taxes. Don’t bother trying to negotiate with the CC companies; just pay them off and move forward.

  23. marta says:

    Ryan, it was the other way around:

    “He talks about the money *I* would get if *he* died… “

  24. Anna says:

    @Sara: Twenty years ago I was where you are: ill, worse than broke, no car, family burdens. But like you, I believed in myself and knew that I had dreams and something to offer life.

    I think if you could manage to move as Trent and others suggest, you could attend a two-year community college with very small tuition costs, even part-time, and get started on your education that way. That’s what I did – I went to a cc for 2+ years, then transferred to a low-cost state university to complete my degree. I eventually went on to get an all-expenses paid Ph.D. at a top university, and now I’m a college professor! So I know that your dreams are possible – you can and will do it, one small step at a time.

    Going to college could help with the income aspect of things. You would likely qualify for work-study as part of your financial aid package, which at my college pays around $10.00 per hour. A college’s financial aid counselors can work with you to figure out how to fund your education, so that’s something you don’t have to figure out all by yourself.

    Good luck to you. You will be past all this one day.

  25. liz says:

    I agree with prodgod – pay your credit cards off and take a vow to destroy your existing cards otherwise in a few years you will find yourself in the same boat.

  26. Steve says:


    It’s in Pennsylvania. I don’t want to name-drop the school, but it’s a relatively small private school with a fairly well-known pharmacy program. The course work is rigorous and if you have one bad semester you’re out, but it awards a Pharm.D. in a total of 6 years.

  27. Kaz says:

    Jeff: I think you and your fiance should be more considerate of the 403b (especially the Roth 403b). For overall considerations, consider the 403b more like your 401k rather than your idea of an annuity. Unlike most annuities that investment reps might try to push on you, the 403b allows you to either pay less taxes upfront (traditional) or not pay taxes at the end (Roth). Assuming your fiance wants and can save for retirement, I would certainly suggest that she think about the Roth 403b (after she’s maxed out the Roth IRA since that gives her a larger range of investment choices). As far as costs of the 403b funds are concerned, she’ll need to contact the right people in her institution to get that information (or it might be online).

  28. Nick says:

    Re the 401K, be very, VERY careful. You really would be borrowing at 40% or so to pay for credit card debt. Really do a close evaluation of your finances. Did you know that in most cases 401Ks are exempt from bankruptcy? So if you really are bankrupt (I seem to think 30K in cc debt is probably not enough, but your house payment may be enough – your total debt may be) you may be better off filing bankruptcy and coming out with your retirement intact.

    But I would not borrow from the 401K to pay it off. I would do anything I could to find other sources including calling the CC companies, selling stuff, mowing lawns or other side gigs if you can find them. If you can control your spending habits and find money by selling stuff and second or third jobs, you may be able to dig out. Good luck.

  29. spaces says:

    Steve, a PharmD is NOT a Ph.D. The coursework, research, writing requirements, etc are not remotely comparable.

  30. Daniel says:

    Look, I don’t mean to sound like the grammar and spelling police here, but seriously … some of these messages are so ridiculously put together that they are hard to read. Trent, would you mind editing some of these in the future so that they are readable?

  31. Charlotte says:

    Laurie should do everything she can to keep from taking money out of her 401k to pay off her credit cards and mortgage. Bankruptcy court does not force people to use their 401k to pay off creditors. If she uses the 401k money to prevent bankruptcy, but ends up there anyway, she will have lost both her house and her 401k.

    Here is the relevant information from an LA Times article (http://www.latimes.com/sns-yourmoney-0106marksjarvis,0,2341000.story)

    “If you are in very serious financial trouble, borrowing from a 401(k) can be a tremendous mistake, said Odette Williamson, an attorney for the National Consumer Law Center. People sometimes try to avoid bankruptcy by taking money out of their 401(k), but if they end up in bankruptcy anyway, they will find they gave up their money needlessly. The bankruptcy court forces people to use some of their assets–even their homes–to repay credit card companies and other lenders. But the court does not require people to use any of their 401(k) money to cover their debts.”

    Suze Orman is adamant on this topic too (from http://www.ibtimes.com/articles/43826/20100817/suze-orman-on-underwater-mortgages-and-personal-finance.htm)

    “IBT: Let’s talk about personal finance scenarios. What should you do if your mortgage is underwater, and you’re basically one broken refrigerator away from not being able to make your mortgage payment?

    Suze Orman: In the U.S., the very first thing you should do is not touch a penny from a retirement account. Remember that money, especially in a 401-k plan, is absolutely protected from bankruptcy.”

  32. jim says:

    Sara: Sounds like you are pretty low income. If you want to go to college then you should qualify for grants due to financial need. I’d apply to school and fill out the financial aid form. Also, could your boyfriend teach you to drive? You’re only 21 years old and there should not be any rush to have kids. You’ve got good 10 years to have kids if/when you want to.

    Jeff: Sounds like your fiance is choosing between a pension that her company contributes everything to or an annuity they contribute nothing to. Is that right? Then the pension is better cause she gets free money from the employer and the annuity gets her no free money. Or am I missing something? Annuities are not all bad, in fact many annuities are perfectly good. Its good to be wary since some annuities can be poor investments with hefty fees. But many annuities are perfectly fine with reasonable fees.

    Phil: How long will you be in the house? If you plan to move anytime soon then the 5 year rate from ING is better. But if you plan to be there a long time then locking in a rate below 5% for 30 years should pay off. The 5 year rate from ING will save you 0.6% or about $3180 a year over the 30 year loan. But 5 years from now rates might be 7-8%. I’d go with the 30 year if you plan on being in the house for at least 5-10 years.

    Penny: Doesn’t sound like you wanted or needed whole life insurance and you don’t seem to entirely understand how it works. Given that I’d dump that whole life insurance for sure. Did your friend explain anything about “surrender fees”? Its too bad but you might have essentially wasted $12000 :( And be aware your friend made a big fat commission off you by selling something you weren’t asking for or needing.

  33. Sam says:

    Jeff – It is more than likely the Roth IRA is the way to go.

    You might want to confirm that the 403(b) only offers annuity options. Many plans are actually 403(b)7 plans which work more like a 401(k). If her plan isn’t a 403(b)7, you should encourage her to send her employer a letter requesting a change to the program.

  34. AnnJo says:

    Re: Sara,
    OK, maybe I’m just cranky today, but I question the wisdom of advising Sara to pick up and move to a strange community OR go to college, when she can’t even figure out how to learn to drive (says “there’s nothing [she] can do about this”! What? Nothing?!) and when 15 miles sounds like a reasonable excuse to her for her boyfriend not getting a job.

    Tough love here, Sara:

    1. Find someone to teach you to drive: Boyfriend, Dad, Mom if she isn’t too sick, a volunteer from your local church, post a note on the employee’s bulletin board at work asking if there’s someone who would be willing, call your eight closest friends from high school, middle school and elementary school, try aunts, uncles, cousins.

    Do it. Get your license and mark that as your first step to taking responsibility for your own life instead of blaming it on “poor families and background history.”

    2. Ask for full-time at Wal-mart, and offer to cover shifts for people who need time off. Whenever you hear of an opening, get your boyfriend in to apply. Save every penny you can. (Since you haven’t said what your disease is, I don’t know whether you can do full-time, but if you can’t do it at Walmart you also can’t do it in Des Moines or Omaha.)

    3. Your Dad sounds like he’s depressed, and if he’s got financial problems and is the sole caregiver for your Mom, he’s got good reason. You can’t afford to give him money, but can you arrange for at least one afternoon or evening a week where you or other family members take care of your Mom and your Dad can go out with friends and catch a ball-game or bowl or whatever? Ask him if he’s talked with your Mom’s doctor about how bad he’s feeling and see if he can’t get some help if he’s depressed. Ask him if he’s talked to a bankruptcy lawyer or credit counselor; they might be able to help on the financial stuff. (And don’t blame yourself if none of this helps him. Ultimately, he’s responsible for his own life, but we all need help sometimes and you can at least try.)

    4. Get some independent objective assessment of your “massive amounts” of artistic talent before you spend huge amounts of money and go further into debt with college. Someone who won’t care if they hurt your feelings. And remember that most of what you can learn in college you can learn in a self-directed way on the Internet and at your local library.

  35. Ryan says:


    Ah, how embarrassing! Thanks for the correction!

  36. Bookaunt says:

    A way to start may be at the place you are – that is WalMart. It is probably not what or where you want to be long term, but there may ways to leverage yourself there. Do your best work and see if there are ways to move up. You can use the system to get a job at a WalMart in another part of the country. A friend of mine did that. He transferred to a store in a town and state he wanted to live in. He will take college classes in that town while working at his new job.

  37. Courtney says:

    @Sara: Unless I am misunderstanding what have written (and I hope I am), it sounds like you are considering having kids with your boyfriend. Please don’t. Bringing a baby into your situation would be totally irresponsible and just about the absolute worst thing you could do. You need to have your life straightened out before you have kids – and fortunately, you have plenty of years ahead of you to do that.

  38. Johanna says:

    @Sara: Forgive me if I’m way off base here, but are you trying to say that you’re pregnant now? Is that your “disease”?

  39. Mike says:

    #7 @Phil; The better option is the 30 year fixed rate loan. You can always accelerate your 30 year payments and turn it into a 15 year loan. But you’ll have the option to go back to the lower 30 year payment if your cash flow goes down from a loss of job, other life expenses go up (medical, college, etc.). You won’t have that option with the 15 year loan. Remember, it’s primarily about cash flow, now and in the future. Your mortgage payment will surely be the same for 15 or 30 years unless you refi. Can you say the same about your source of income to make those payments? And remember your primary residence is consumption of shelter, not an investment. Why devote more cash to something that gives you no return on your money?

  40. deRuiter says:

    Penny, He isn’t your ‘friend.’ He’s a financial vulture who raped you for a fat comission and it is going to cost you a lot of money to dump this policy immediately. Then get a plain vanilla life insurance policy which pay off in case of death. TAKE ALL THE EXTRA MONEY LEFT OVER AND DUMP IT IN A ROTH IRA FOR YOU AND ONE FOR YOUR HUSBAND. Dump the ‘so called’ friend too because he has just officially screwed you over.

    Sarah, Get more hours at Walmart. They do have a bare bones health insurance policy through your company. Move close to town and better still move away from your family who will only drag you down further. Get your boyfriend a used bike and a job or dump him if he refuses to bike to a job. DON’T GET PREGNANT; IT ISN’T FAIR TO THE REST OF US WHO WILL GET STUCK PAYING YOUR WELFARE AND AID TO DEPENDENT CHILDREN FOR 18 YEARS.

  41. Charles Cohn says:

    I beg to differ with you on annuities. The big advantage of annuities is that you never have to worry about outliving your income. Of course, you have to get your annuity from a reputable firm like Vanguard or TIAA-CREF.

    Once you have an annuity, your task is to take super care of yourself so as to live as long as possible and squeeze as much as you can out of the system. Toward that end, I highly recommend the new book “TRANSCEND” by Ray Kurzweil and Terry Grossman, MD. The theme of this book is that medical science is progressing so fast that if you can make it through the next few years, you have a good chance of being able to live forever.

  42. tbryan says:

    You mentioned raising chickens – I bet you could do that now! Google Backyard Chickens. I built a small coop off my deck with recycled materials from a friend, painted it with paint I found around the house and bought chicks for only $3. Most cities allow a limited number, check with zoning. The feed is not expensive and we give scrap vegetables & bread as treats. The kids enjoy them. Free eggs everyday. Which has been a blessing since I lost my job. BTW love this daily email, it has given me great perspective!

  43. Maria says:

    @Sara – I agree. Get out. Your parents seem to have their own problems and you are wilting there. If you and your boyfriend are truly committed to each other – there are many resources for a smart, hardworking person out there. If your illness is a disability – have you applied at Social Security?
    I think the ‘tough love’ advice above is great but in a different situation. I don’t think someone who has not been nurturing to a sick daughter is going to very receptive to her advice on getting help for depression.
    Getting out of a toxic environment (if that is what is going on there) is usually the first step to creating a better life.

  44. Lisa says:

    @Jeff – If you decide to dump extra money into your 401K because the options are better, you need to protect you and her. I don’t know what state you live in, but the rules in case of divorce vary. One way to ensure equality in the case of a split is to have a pre or post nuptial agreement. This can spell out the rules for dividing your 401K should you go this route.

  45. Margaret says:

    Penny, my husband and I bought a universal life insurance policy. We had gone to our financial planner and said we wanted to get life insurance, so that is what she came up with. Being young and dumb, we signed away. It was COMPLETELY inappropriate for us!

    Some years later, feeling the crunch of buying our first home and having kids, we ended up cancellling the policy. Here is what I learned:

    Universal life has 2 components — the actual life insurance (of our $150/month premium, only about $45 was paying the actual life insurance part — we were in our 20s when we got the policy). The remaining money went into an investment fund. She told us that it would be worth blah blah at whatever age. What I did not know, being young, is that the amount that she said it would be worth was only a projection assuming a certain interest rate. This was before 9/11, so actual interest rates were much lower than the projection. Therefore even if we had kept the policy, it would only have been worth maybe a third of the projection.

    When I finally realized what was going on (e.g. started learning about financial stuff that said get term, not universal), we decided to surrender the policy. Unfortunately, there was ZERO surrender value. The way it was set up was that you would only get the value of the account that was over a certain amount — roughly 3 years worth of premiums, and due to the financial crunch, I had reduced the premiums we were paying after a year or two (because you only HAD to pay a minimum, and then your account would just not grow or they would take money OUT of the account to cover the life insurance part of the premium). So even though we were getting a lovely little statement saying our account was worth almost $3000, we did not get any back because only the amount over $3000 would be returned.

    When I did some research, I found an article that recommended that universal life only be sold to people who had stable incomes, maxed out other retirement savings plans (RRSPs in Canada) and were looking for some other tax sheltered investment. We were starting our lives with (what should have been obvious to her) the high probability that we would be encountering all those major life expenses that people get when they start families, and making only tiny contributions to our RRSPs with loads of contribution room. Needless to say, we no longer deal with that financial planner (there was another instance where she should have advised me about a change in the RRSP rules when I did something, and the last thing was when she gave me some flat out incorrect information about RESPs (education savings for kids)).

    I am mad that I didn’t cancel the policy earlier, because I had started to have misgivings about a year before. On the other hand, it could have been worse.

    I have heard advice that says to get your other insurance in place before you cancel your old insurance just in case something has happened and you no longer qualify. But my gosh — $1500 a month? If you just saved that, in 6 years you’d have as much saved as our life insurance payout would have been! (Yes, we were underinsured, and now, for roughly the same premium, we have half a million in term insurance).

    So my advice is CANCEL CANCEL CANCEL, and the sooner the better, because the term insurance rates increase the older you are.

  46. Margaret says:

    Here’s the link to the article on Universal life:


    “With a few exceptions, UL makes sense only if the client

    can commit for the long term (need is for long term)
    has used all available RRSP-room, and
    is in one of the higher tax brackets.”

    We were NONE of those three when we bought universal life.

  47. Elizabeth says:

    This is to Michelle:

    About your formatting issues, I have a certificate in Professional Writing and we tell EVERYONE that today you need to have two versions of your resume. One that is beaufitully formatted with your nice heading and designated areas for your Education and Professional Experience and whatnot. And a second resume with the exact same information but with all the formatting stripped from it. This is your “Electronic Resume” and you should use it a lot.

    When you send someone an email with a PDF of your beautiful resume (I always send in PDF so the formatting does not get messed up and they can’t see any of the marks on Word), you should copy and paste your Electronic Resume in the body of the email after your closing. In the cover letter/email you send you should tell them that you have included an electronic resume at the end of the email.

    They may also prefer the Electronic Resume. Many larger companies will now put all the resumes onto their computer and search them for keywords. Many beautifully formatted resumes won’t be picked up by the keyword scanner and however qualified the candidate, they will never be called.

    I hope this helps! Good luck! It’s tough out there, I’m in the same boat looking for regular work. I’ve found that calling if you can really does make the employer think of you and remember you. They put a person to your qualifications making it harder for them to trash your resume.

  48. littlepitcher says:

    @Sara–check out Pell grants, at your local community college. They’re for people in your circumstances. Also, check with WalMart on financial aid.
    Somewhere close to you is a very large parking lot with lines. Find someone with a junker who will let you use it, if necessary bringing them along. Go to the parking lot, after hours, and practice driving there. Read everything on driving in your state’s drivers’ manual. Once you can handle that car effectively, do evening driving after rush hour, in smaller neighborhoods on back streets.
    Post your willingness to sub on the lounge bulletin board. This will get you hours. Even if you work 40+, though, big retailers will not allow you full-time status or bennies unless you are someone’s relative.
    Keep a hairy eyeball on that dad. Anyone can get a policy on anyone through newspaper coupons or AAA or other auto clubs. Humans are predators–I have a family full of them, and staged collisions, pneumococcus sputum or bacteria from feces and raw meat on the coffee cup or in the spoon rack are not that uncommon in such families. Be careful, please.

  49. reulte says:

    Laurie – Get rid of your credit cards, return the latest items you purchased. Can you get a loan on your 401K rather than cashing out? did you receive unemployment (have you applied)?

    Sara – My first reaction to your dilemna is also move. Relocate. My second reaction is to have your dump your unemployeed boyfriend (if he gets a job there he is no longer unemployeed and you can keep him). If he can’t find a job then how could you? Ergo – there are jobs available. For more money freelance your artistic talent — the other day I saw someone selling artwork out of her car on the street. What does your boyfriend do all day? Do you live with your parents? If not, is moving in a viable possibility – your boyfriend could help your dad take care of your mom. Maybe you’ve had a lousy childhood in relation to money but you’re a grown up now and need to take responsibility for yourself.

    Liana – “Mastery” by George Leonard really is a wonderful book. In your case, I’d re-read or at least skim through it for one or two ideas to incorporate into my life. Just one or two; no more. After a month, if those two ideas were becoming habitual, I’d add one more idea.

    Trent – I’d really suggest reading “Mastery”, it is excellent.

  50. jim says:

    I think AnnJo makes some very good points above in comment #25.

  51. Todd says:

    Sara–Please listen to Johanna (#15). Get enrolled in college. You would be amazed at how many students I’ve taught in situations just like yours. Will it be difficult? Yes, very. It is possible? Absolutely. I’ve seen so many students improve their lives dramatically. (The ones who can’t are those who don’t have the courage to break away from bad relationships and destructive family situation.) You can do this for yourself, and you can do it on your own. You’ll be surprised at how many people in the world want to give you a hand up when they see that you are willing to work hard to improve yourself. It may take 5-7 years of hard work, but where will you be in 5-7 years if you don’t do it?

  52. Sharon says:

    Ask a local church about the driving lessons. I bet there are a ton of unemployed people who would love to give driving lessons for gas money and the privilege of running their errands on that gas money.
    I like the bike idea. And moving to a city with great public trans. Esp. if you can move your Wal-mart job with you…

  53. Tom Denver, CO says:

    @ Christian: My advice…read The Simple Dollar “cover to cover”. There is advice all over this blog and when there’s a term you don’t know, there’s likely a link explaining it. If not, Google it.

    I was 35 before I found it. This site oozes info a Freshman can use to get a jump start on financial freedom.

  54. morgan says:

    @Michelle – Sorry, everything you learned about paper resumes and the job hunting process has moved on. Calling an HR Dept to see if they have received your application wastes our time and yours. We know our system sent you a message and you aren’t going to get any additional information out of us by calling, showing up, asking who the hiring manager is, etc.

    You made reference to wanting *any* job. Those with generic applications in search of any job with no focus are the first ones I trash. This may sound basic, but READ the job posting and only apply for jobs for which you are qualified. Spend less time on how your resume and cover letter look and more on content. We can’t see formatting, but a well written letter and resume (no errors!) puts you leaps and bounds above more experienced applicants.

    Best wishes in your job search.

  55. matt says:

    Penny – You should be able to get a 30 year term policy w/ 500k in total coverage for $100-$150. You are getting absolutely hosed by your “friend” Find a local primerica office or any insurance agent who can sell you a term policy. Whole life insurance is an absolute rip off.

  56. Gretchen says:

    I’d call not having a car or (probably) being able to afford car insurance a bigger hindrance than not knowing how to drive in Sara’s case. It’s not that hard to drive an automatic trasmission. Good advise given already, there.

    The kids thing in that comment seems not to fit- so either Trent really edited or the other poster is right and the “disease” is a baby. Or neither.

  57. Mol says:

    Do you like veggie meat? And are you familiar with if it is better or worse for you than real meat nutritionally? In particular I am crazy about Morning Stars breakfast patties, links, and breaded chicken, but I am afraid it’s just some form or another of processed corn.

  58. Johanna says:

    @Mol: Well, you can always look at the ingredients. :) I don’t know about the Morningstar Farms products off the top of my head, but mock meats tend to be based on either soy protein, wheat gluten, or a combination of the two. Usually the worst thing nutritionally about mock meats is that, like pretty much all processed foods, they tend to be high in salt.

  59. Caroline says:

    Regarding the reader who reads lots of self-help books, why not try the Pathfinder? I just picked it up again this weekend and re-read all the parts about “why you don’t get what you want” and how human brains are wired.

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