Reader Mailbag: Easter Eggs

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. Same ideas, different life
2. Credit card switch worries
3. Extreme Couponing
4. Take-home pay concerns
5. Hunting for mushrooms?
6. A big mess
7. Blogging jobs
8. Confusing frugality with cheapness
9. Gas cards
10. Staying on topic

One of the best parts of Easter is the Easter egg hunt. When I was a kid, I didn’t think there was anything better than hunting for those eggs. Now that I’m a parent, I wouldn’t trade the experience of hiding eggs and then watching my children search for them for anything in the world.

Q1: Same ideas, different life
But I’m often confronted with discrepancies in our lifestyles that make it hard to translate the wisdom into my own life, so I wanted to present you with a few of these situations and get your input. The big differences are: I’m single, I live in NYC and I’m a freelancer on one income. Here’s how that plays out in everyday life.

1. Entertainment: Entertaining in my home is not an option. There are plenty of great art/sport events for free in town, but those types of things don’t offer the same opportunities to just sit and converse, and they’re rarely good for groups of four to six people. I’m not as interested in attending these things as I am just hanging out with my friends, any thoughts?
2. Health insurance: As a freelancer, I am left to my own devices when it comes to health care. And New York State is really, really expensive. Buying private insurance will cost me upwards of $1100 a month for a policy that covers check ups, and a disaster policy is $200, with very limited in-network options, huge restrictions and high deductibles. I feel strongly that both policies are bad value. I’ve never smoked and take excellent care of myself. And the disaster policy won’t cover me if I’m traveling for work (which I do often) or if I am taken to the wrong hospital locally. So I don’t buy into it. I travel outside the country once a year for checkups and hope for the best when I’m back in the US. I’m 29 now though and this is feeling more precarious.
3. If you were a freelancer, what would your emergency fund look like? I’ve been very lucky in my work history and have only once, for two months, taken a break I didn’t choose. But I also wonder how much more than the normally recommended 3-6 I should have stashed away.
4. Eating at home- I’m single, groceries are expensive, and with the amount of traveling I do it actually ends up being more expensive to cook at home. (Plus no room for a big freezer) I don’t really have a solid question here, but if you have any tips for what you’d do if you found yourself in that situation, I’ll be grateful!

Thanks for your help and the steady stream of refreshing, optimistic and practical thoughts.
– Lizzie

Entertainment: Hang out with your friends, then. Find interesting things to do with them that don’t involve spending money (or at least not significant amounts of it).

Health care: The truth is that the way health care works in the United States works against full time freelancers. It is freelancers and the self-employed who would truly benefit from solid national health care.

Emergency funds: I am essentially a freelancer. My emergency fund is quite large, because I know that I can have drastic swings in income. I try to have ten or twelve months of living expenses in the bank at all times.

Eating at home: Fill your cupboards with essential things for any meal, such as spices and herbs and other elements of most meals. This way, you only have to buy a small number of ingredients for any meal. That’s really the best thing you can do – keep the basics covered so you don’t have to buy much to have a good meal. Chicken, for one, can be a key part of a huge variety of meals, with the biggest difference being the spices used.

Q2: Credit card switch worries
I recently cancelled one of my credit cards (the newer of my two cards) in order to pick up another card. I’m a huge fan of international travel, and British Airways offers a very good deal once in not-very-often for 100k miles for a new card (50k after first purchase, 50k after $2500 of spending within 3 months). It’s got an annual fee, which is much smaller than the value of the international flight – the way I see it, I don’t mind paying $95 as a fee for a $1000+ flight. Plus, I may just wait a year and then can this card, too.

I hadn’t used the cancelled card in over a year, and use my oldest (a Chase Amazon Visa) daily. I also pay it off once a week. I don’t really see a need for having more than two cards around.

Since hindsight is 20/20, did I just make a significant financial mistake? Or should it add up to approximately peanut-sized changes to my credit score? I have no plans to buy anything major requiring credit (i.e. a house) for at least the next four years.
– Michael

I don’t think you made a big financial mistake at all.

I’m guessing that this credit card swap didn’t change your debt-to-credit ratio much at all (your credit limit on your old card is probably close to the limit on your new card), and you didn’t reduce the length of your credit history, either.

Those are the two factors that are usually affected significantly by picking up a new card or cancelling an old one, and neither one is an issue here.

Q3: Extreme Couponing
I watched a show last night called Extreme Couponing. The savings shown are incredible, but the tecnique and time involved seem a bit overwhelming. What do make of it? Is it worth a try? I would love to read a post about it!

– Pedro

I DVR’d this, hoping for some good personal finance ideas. What I saw was something that amounted to exploitation television, like most reality shows.

For one, many of the “extreme couponers” engaged in behaviors that I consider to be borderline fraud. They misrepresented their discounts multiple times during the show. Beyond that, they were also often rude and pushy to cashiers and to other customers, which left a really bad taste in my mouth.

What really alarmed me, though, is that no one seemed to reveal how much they were actually saving. It’s hard to tell if all of those efforts really made a huge difference.

I didn’t really learn any tactics, either, other than it’s good to live in an area with stores that offer double coupons.

For me, it was no different than watching many other reality shows depicting someone doing something unusual. It’s entertaining, but not really enlightening.

Q4: Take-home pay concerns
My annual salary is $42,000 but I recently received a 3% increase effective April 1st. After my pre-tax 401k deduction of 6%, medical flex account deduction, and then taxes (not sure which tax bracket I fall into) my take-home pay is only an extra $37 bi-monthly. Is there any way I can increase my net pay and/or reduce my taxable income? I’m a divorced mom of 2 so I take 3 exemptions on my W-2. Any suggestions would be greatly appreciated.

– Lacey

That’s not surprising, actually. Let’s do the math.

If you’re earning $42,000 a year and you got a 3% raise, that’s an extra $1,260 per year. That’s spread over 26 paychecks, so each paycheck – before taxes – gets an extra $48.46.

If you then deduct 6% for your 401(k) and, say, another 6% for your flexible health care plan, and, say, 11% for your taxes, you’re left with… are you ready for this? $37 more per paycheck.

Q5: Hunting for mushrooms?
You said recently that you spend some time in the spring walking around in the woods hunting for mushrooms to eat? Are you serious?

– Ellen

I’m absolutely serious. It’s a common thing in many parts of the United States to harvest morel mushrooms from the woods during the early spring months. In this area, it usually happens in late April.

Morels are a delicacy. They often sell for $20 a pound cash around here, and will often sell for much more during poor harvesting years.

I don’t sell them, though. I take them home, grill them, and eat them, often as an utterly amazing stir fry ingredient.

Q6: A big mess
I’m 26, almost 27, and have a number of debts. Currently, I have approximately 7k in a private loan at 7% ($200 a month), 15k in an auto loan that I’m upside down on at 6.99% ($265 a month), and about 101k in student loan debt, totalling about $800 a month (the consequence of very little financial knowledge and my parents falling in love with an expensive school, I wish I’d known better). I have about 600$ in savings, 2600$ in my emergency fund in a money market account, and around 1500$ in stocks and trusts. I also have around 4000$ in my 401k, and another 200 in a roth 401k I just started.

Last year I got a great job at a fortune 500 company, which now pays around 66k a year, plus a 5% bonus (about 3k a month take home after benefit deductions). There are some other great benefits I have gotten, which is why my retirement savings is where it is.

The catch to the job is it made me move about 2 hours from my friends, family, girlfriend and pretty much everything I care about. Every weekend I’d go back to my hometown. Well, last month my landlord sold the building I lived in in the city, and the new landlords exercised their exit clause on the lease. So, I was homeless. The company basically told me it wasn’t their problem which put a very bitter taste in my mouth. I moved back to my home town, and moved in with my girlfriend. I am now commuting 4-5 hours a day total (2-3 hours of driving, plus an hour on the train each way), and working around 10-12 hours or so. This usually entails getting up at around 5am, and getting home between 9 and 10pm, and doing to bed at 10. This leaves me with an hour or less to actually be me and have a life. I’ve asked about telecommuting but the director of my department says he wants everyone in the office. Since moving, I’ve calculated the cost of the commute at a little over $500 dollars a month – before considering wear on my car.

I may have a job opportunity as a systems engineer at a small startup in my home town, and the job and environment sound awesome. No matter where I look to work locally, I’m pretty sure it will be a drastic pay cut… close to 50%, but I won’t know for sure until next week when I go in for my interview. I’ve lived on this amount before I got the big pay increase, but it was ungodly tight. I’ve been working to pay off my debts, and just got my credit cards paid off. Still another factor is that I’m starting to think about a ring for my girlfriend, and I need to be able to afford that, or at least start saving.

I’ve got a massive pile of stuff to be sold at a yard sale when the weather gets nicer. I also have some family heirlooms that I’m selling, and a stack of books. If I do take a job in the area, instead of rolling over my 401k, I’m considering taking the disbursement (swallowing the tax hit), selling off all of my stocks, and pulling the remainder out of my emergency fund to pay off the private loan, which would give me back an extra $200 a month.

As someone who walked away from a high paying tech job, would you say the financial hit is worth the boost to happiness? Right now I’m theoretically making lots of money (though honestly its all getting thrown at debt). But – I feel like I’m just a mindless drone who works, drives, and sleeps. It’s hurting my relationship with my girlfriend, and I’m physically and mentally exhausted all the time. The closer job gets rid of the commuting costs, it gives me back literally hours a day (about 7-8 hours a day).

But at the same time, I feel like taking the chance will also stress my relationship with my girlfriend, since she is a teacher and they’ve been facing pay freezes and job cuts in all of our local districts. Her district just took voluntary pay freezes to avoid firings. Theoretically it would open the possibility of getting a part time job, but I’ll most likely be on call and I doubt a lot of companies will let me call off every other week so I can work my day job. Plus it significantly pushes back being able to look at a ring I really want to put on her finger. She has said before she’s willing to wait for me to get my finances squared away, but she doesn’t think she can wait a decade (the time I calculated to be debt free on my old pay scale).

I really just don’t know what to do. Any advice?
– Chris

For one thing, I wouldn’t stress out about waiting to get married until your finances are in great shape. Have an inexpensive wedding and merge your finances now. Ride this thing out together. It is far easier to overcome a hardship with a life partner in your corner than it is to go it alone.

Do not worry about a ring. Give her a fifty cent one you got out a vending machine, slip it on her finger, and tell her you want to replace it in about ten years with something amazing and you want her to be with you every step along the way.

If she’s sensible at all, she’ll be right on board with this.

Q7: Blogging jobs
I’m looking at Monster.com for job hunting leads. In my in-box, they sent some blogging-type opportunities. Does this type of opportunity look like a potentially good thing? I looked it over, and it looks like if I work it, it would work for me. It would not be something that wouldn’t require dedication. What do you think?

– Edward

Many blogs and other sites will pay people to write short articles for a small amount. They’re starved for content. Readers always want something new to read and if you want to keep your revenue up, you’ve got to give them what they want.

Now, is it a good moneymaking opportunity for you? If you can dash off short articles that are passable and do it quickly, you can certainly make money doing this. Is it something that’s sustainable over the long term? No. Will you get rich doing it? No.

I would view such a thing as a small avenue for side income, not as a lifestyle builder.

Q8: Confusing frugality with cheapness
You may have already covered this and I just haven’t seen it yet, but how do you deal with folks who confuse frugality with ‘cheapness’? For example, I say that I don’t want to go out for the EIGHT (8!) dollar beers, partly because I brew my own and partly because I have goals that I won’t reach with a $50/night bar tab. How do I convince folks that it’s not due to my being a cheapskate, but that I have my sights set on a much larger (and likely MORE expensive) aspiration?

– Fraser

The easy solution is to simply say, “This beer is terrible. I’m going to go drink my home brew.” Don’t make it about the dollars. Make it about the virtues of homebrew.

On the flip side, ask yourself what you’re gaining by hanging out with people who think it’s a wise move to drop $50 on a bar tab drinking $8 beers. I’d inherently wonder about their decision-making ability if they did this with any consistency.

I don’t think there’s anything wrong with doing such a thing on rare occasion, but as a habit, I’d really question the people who were doing that and whether they shared my values.

Q9: Gas cards
I have a question regarding gas cards and if they can help with my credit score. Some quick background first: I graduated from college in 2005 with nearly $10K in credit card debt (spread over 4 separate high interest cards) and $18K in student loan debt. I also had a small bank loan for my car which was around $2500. I struggled to make ends meet and just trying to make the minimum payments on my maxed out cards. I would pay a card partway down and then end up using it for some “emergency”. After a few years I found out about a debt management program from a coworker and with that company’s help I had all of my credit card debt paid off in a few years. This was around summer 2008. All of the credit accounts were closed due to being on the debt management plan. I have not reopened any credit cards since then.

I now have a solid emergency fund in place and am thinking I would like to start saving for a down payment on a home sometime in the next 2-5 years. I want to make sure my credit score is as good as possible down the road and have been thinking about opening a credit card account so that I have solid history of diverse types of loans (I currently have less than 1.5 years on my auto loan). I know from reading your site and some books that about 10% of your FICO score can come from the different types of credit one has. Do you know if this means they want to see something more than credit cards, or does it mean that it is better to have several types currently open such as car loan, mortgage, and credit cards?

I currently have old (nearly 3 yr old) bad credit card history as well as the student loans and the car loan. Would it help me at all to open a new line of credit on a credit card? I know this can actually hurt your score short term, but am hoping the 2+ years between now and my goal timeline of applying for a mortgage would negate that negative effect. Also, while I am open to the idea of a new credit card (which I would be fanatical about keeping at a zero balance) I feel a lot of hesitation due to my previous problems.

Whew, now I am finally to the point! I have seen the offers for gas cards. The websites seem to offer 2-3 options – usually a “plus” or “preferred” card and a (X company) Visa/MasterCard. What is the difference in these cards? My ideal situation would be to use this new card exclusively for gas purchases and pay it down to zero every month. I don’t necessarily want to even have the option of using the card at the mall. Do the “plus” cards only allow you to buy from the associated (Citgo/BP/Exxon) company? And do they carry the same weight in terms of my credit score as a “normal” credit card would? I know you have endorsed a specific “Citi” card on your site, but I guess my inquiry is focused entirely on gas cards as that is the only area I trust myself to use a credit card responsibly.
– Brenda

There’s no real difference between the cards based on the words you used there. They’re marketing terms, nothing more.

You need to look at the details of the various offers to really determine which offer is right for you.

I do think it’s a good move to select a card that you would use only at the pump. Not only do such cards have pretty solid reward programs, keeping it pump-only keeps you from getting into too much credit card trouble.

Q10: Staying on topic
How do you decide how to stay on topic? Sometimes, you write stuff that seems way out there for a personal finance blog. Where do you draw the line?

– Lindsey

In my eyes, the key idea behind The Simple Dollar is that every modern life is built on a foundation of many elements, and finances are one of the cornerstones of that foundation. If you want to live a great life and follow your dreams and achieve your goals, you’ve got to have a strong foundation underneath that.

So, how do you build that foundation? Finances are a big part of that foundation. You’ve got to have your money under control. Hand in hand with that is the ability to earn money, which comes from having other aspects of your life under control. You’ve got to have some basic skills, and the stronger those skills are, the easier it is to make money in this world. Time management. Public speaking. Information management. Specific skills that apply to your career area.

All of these elements allow you to chase your dreams, whatever they may be.

All of the articles I write for The Simple Dollar focus on this house you’re building and the foundation upon which it rests.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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