Updated on 08.24.11

Reader Mailbag: Educational Television

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. Life expectancy and Social Security
2. Generational inequality
3. Discretionary spending
4. Refinancing timing
5. Renting a car for vacation
6. Sticking to self-set deadlines
7. IRAs and brokerage fees
8. Parents and finances
9. Motivated to keep grinding away
10. Handling serious spousal disagreements

We’re pretty selective about what things our children can watch on television. We highly limit the total amount of time they can watch and we filter what they’re allowed to watch.

What’s interesting is that, given enough time, our children eventually begin to express interest in child-targeted fads even though they get no exposure to them at home. Instead, it rubs off on them from their peers.

As a result, we’ve actually watched some commercials lately with our children and talked about whether or not the items in those commercials were really as great as they seemed to be.

Critical thinking about such things will help them avoid becoming thoughtless consumers.

Q1: Life expectancy and Social Security
Love the blog, and I’m a long time reader. I’m also a master’s student in public policy, and I read a blog post of yours which mentioned Social Security. I sense that you seem to think that raising the age eligibility will help solvency, since Americans are living longer.

Here’s some food for thought. It’s not that all Americans are living longer – just the ones who are more financially well off. And since Social Security is truly important to the ones that aren’t well off – well, I think the statistics really lead to some interesting conclusions.

http://theincidentaleconomist.com/wordpress/subtleties-of-life-expectancy-ctd/ (Not my blog, just something I came across)
– Elizabeth

The challenge here is that those people who are living longer because they’re well off are typically people who are actually getting maximum benefits from Social Security. They hit the income cap for their qualifying years, which means that they paid in the maximum amount in those years and thus receive (or will receive) the largest benefits from the system.

I actually have thought about this phenomenon a lot and the only real solution I can come up with is to give people more options for when to start their Social Security benefits. Right now, there are different levels of benefits that people can get at different ages. Why not expand that? Is there any reason not to keep expanding the benefits on beyond that?

If I’m a well-off person in my upper sixties who’s happy with my job and I know that if I wait until, say, age 73 to start my benefits but I’ll get a lot more per year by waiting, I would be tempted to wait. Although it would take a lot of number-crunching to prove it, my intuition tells me that this would be a net benefit for both the Social Security program (more years to invest the Social Security money before it’s paid out) and the borrower (bigger annual benefits for the years they receive it).

I don’t think it would balance things, but it would certainly help. I know that I’d probably wait to cash in Social Security until I relaly needed it.

Q2: Generational inequality
I’m 28 and very annoyed with baby boomers, unions and the job market. I luckily just found a job I love but I was looking for years for a job like this…I just keep my fingers crossed that they renew my contract in a year. I constantly find people in their twenties hired for less than they are worth …excluded from unions…and in crazy debt. The job I eventually want to get into in 5-10 years is union ran and very difficult to get into, not at all based on skill, experience or work ethic. Its all in who you know. It kinda makes me furious when I think about what a position we are in….the kids of baby boomers….but maybe this is because I had very bad parents (drug addicts their both dead now and died without insurance).

Do you seen generation inequality? I find it really horrible but here I am wishing disabilities and deaths on boomers..ideally people I don’t know just so there are job openings. It seems like their generation gets all the rewards and ours is kinda screwed with the job markets, inferior school systems, high tuition rate increases.
– Alison

I think you’re painting unions with a broad brush here. The union issue is a complicated one with abuses on both the side of the unions and on the side of people who would exploit non-union labor. Humans aren’t perfect and will certainly go the extra mile to get a better bargain for themselves, never minding the overall situation.

The real nut of your question is that of generation inequality. My parents will be the first to admit that, in many respects, their generation had it easier in early adulthood (their twenties) than my generation has. They were making far better real wages and the cost of a home compared to the average annual salary was much lower. They also had much lower expected costs, as they just paid Edison and Ma Bell and that took care of their utility bills.

However, put yourself in their shoes for a moment. Wouldn’t you take advantage of the situation as well? If you’re in a protected job, you’d be a fool to make it less protected. If you’re in a job with great benefits, you’ll naturally fight for those benefits.

The best thing we can do is make our own opportunities and bide our time.

Alison has a second question.

Q3: Discretionary spending
I just got this great job. It’s a pilot project and so next year is totally unknown. Keeping this in mind I am keeping a very good savings account and GICs around just in case I am making more money than I have ever made before and for the first time in my life I am allowing myself to spoil myself…nothing extravagant but the entire time I was in school, on maternity leave, underemployed I lived so lean I got laughed at. What percentage of your income do you spend on treating yourself? I feel like there are some purchases I need to get out of my system (a wardrobe upgrade, a living room upgrade) but once I am done I have no idea what I should spend on myself to keep me reasonably dressed and groomed. My office environment is a little snobby so there are expenses to fit in at work. I would say 100-200 a month.

– Alison

I’d say we probably spend 15% of our income on stuff that isn’t necessary. However, if we were in a pinch, we could easily lower that percentage without seriously downgrading our quality of life.

The biggest piece of advice I can give you is to not let what other people say about your personal choices bother you too much. Much of the time, they’re saying these things to make themselves feel better about the choices they’ve made. They want to reinforce that they’re doing the right thing, and for them to be doing the right thing, you have to be doing the wrong thing.

Don’t let their judgments bother you. Focus on doing what you do well.

Alison also has an additional question.

Q4: Refinancing timing
I took out a mortgage in a dumb way….a 200,000 dollar mortgage on a [5/1 ARM] with a 3.9% interest rate. I can’t get 15 year fixed rates anywhere near what you get in the US. So in four years our rates will likely increase. We knew that when we took out the loan and knew at the time I was going to lose my job and so we can handle a rate increase presuming I get a new job which I did. At what point would you refinance? Once the rates start rising?

– Alison

I wouldn’t wait until rates start rising to refinance that mortgage. I would refinance as soon as possible while rates are still low.

It’s far better to spend a year paying 4.5% when you could have been paying 3.9% than to miss the boat and have to refinance at a higher rate.

A bird in the hand is always worth two in the bush. If you have a chance to lock in a very, very good rate, lock it in.

Q5: Renting a car for vacation
In late September my wife and I will be taking a vacation that will last 10 days, cross 6 states, and involve around 2,000 miles of driving. Normally we drive our car on these trips, as it gets excellent gas mileage. The car has 110,000 miles on it, though, and we plan to drive it until it completely gives out on us. So far we have had no major issues, but I know that things will start going wrong and the more miles I put on the car, the sooner things will go wrong. I am wondering if renting a car for this trip makes more sense so that we decrease the rate at which we are putting miles on our own car.

From our research so far we should be able to rent a car for under $300. The gas mileage will be a bit less than in our own car, so there will be a small increase in expenses there. One advantage of renting a sedan is the closed trunk, since our car is a hatchback. Without taking trips we average driving maybe 500 miles/month, so theoretically renting a car for this trip will mean that we will be able to wait 4 months longer to replace our car than we would otherwise have had to. Is that worth $75/month? I can’t figure out a way to do a calculation that helps make that determination. When we do replace it we plan to pay cash for a low-mileage used car.
– Andy

There are a lot of variables in play when you’re calculating this type of thing. I think you’re on the right page when you look at the $75 per month figure, and I think it’s probably worth it in your case to rent because of the miles you’ll be putting on the car.

One potential way to look at this is to examine the reimbursement rates that the government offers for driving. They suggest that each mile driven is worth 51 cents. This takes into account costs such as the purchase price of a car, a complete maintenance schedule, and so on. It does include some costs that you won’t really be counting here, such as insurance, and it also assumes the entire lifetime of the car (and not just a fractional bit late in life), so this figure is definitely on the high end.

Another factor is the sheer reliability for your trip. Taking a rental (which is going to be fairly low mileage) is simply going to be more reliable than taking your old car.

It’s a long road trip. I’d rent at the rate you’ve been quoted.

Q6: Sticking to self-set deadlines
I just finished grad school and have substantial student loans ($70,000 total). Our only other debt is a $6,000 car loan, for which we are a year ahead on payments. One $6500 student loan ($7400 with the capitalized interest) has a high interest rate (7.9% compared to 6.8% for the other loans), and I’d like to pay it off before the grace period ends at the end of November. We have exactly $7400 in savings, which we are currently maintaining, not increasing. We rent an apartment, have no children, and both have/will have secure jobs in the public sector (and I could use public transportation to get to work if one or our two cars died), so I am not particularly concerned about that fund at the moment.

I am quitting my job in a few weeks to return to the public sector, for a 10K pay increase. My initial plan was to take a week off between jobs to get my head on straight. I think this was part of the reason I had a rough start to my current job, because I had no real break after graduation. However, since we are trying to pay off the high interest loan, I realize giving up a week of pay is not necessarily the best plan. It is difficult to calculate when we will pay off the loan as the new job will increase my salary and switch my pay from monthly to biweekly, but even without losing a week of pay to take a break, I estimate that I might have to take $1500 out of savings to make my (self-set) deadline. So — do you think it is worth it to take some time off between jobs for the mental break, or should I minimize the time off so I can continue paying up on this loan take less money out of savings? Alternatively, am I being silly with this self-imposed deadline?
– Julie

The amount of interest you’ll have to pay if you let a small portion of it outlast the grace period is much less than the situation you’d be in if you tapped your emergency fund to pay for all of it and actually needed that money.

You’re approaching a job transition, one that can often have ripple effects that you don’t see yet. You might loathe the job. It might have hidden costs.

Entering into a new job is not the right time to be tapping out your emergency fund. Let a small amount of the debt roll through your deadline and you’ll be better off come what may.

Q7: IRAs and brokerage fees
I have a question about Roth IRAs and commissions. Do trade commissions that I pay my brokerage count against my $5000 contribution limit? Do any brokerages allow you to buy stocks with your contributed funds but pay commissions from a separate, “non-IRA” source?

– Jordan

No, none of this will affect your contribution limit.

I will say that if you’re paying significant fees to contribute to an IRA of any time, I would consider setting up an account directly with an investment house instead of through a brokerage. I have my accounts directly through Vanguard and never see brokerage fees.

At the same time, I am limited to investing in Vanguard funds, but they meet all of my investing needs without having to pay extra.

Q8: Parents and finances
My name is David and I’m 30, living alone in Lisbon, Portugal’s capital, in Europe.

I’ve been having some problems with my parents and would like to ask some advice to you and the other readers, because the more I try to talk them into finances and savings, the less they pay attention and want to talk to me about this particular subject.

I know (by my father), that they have a social security debt of about 10000€. Long story short, my mother didn’t pay the social security, and my father didn’t knew about anything because he leaves all the accounting for my mother. He’s employed and earning about 1300€/month, and my mother is unemployed.

Adding to this debt, that (I suppose) they are already paying, they have the car mortgage, that takes about 500€/month from my father’s salary. The car will be fully payed in 22 months.

So the situation is bad. I have the notion that they don’t have savings and can’t save any money by the month’s end. Nor do they show interest in this. One of the big problems is that they have a letargic attitude towards finances. They simply don’t bother to understand where all the money is going. I’ve tried talking to them, giving some “easy reading” books about personal finances, I’ve even gave some simple advices like “take 50€ in the beginning of the month and save it”. They simply ignore what I say, and now every time I try to bring the subject up they just say “yeah yeah, sure..” and divert the subject.

I live about 100 miles from them and visit them from 2 in 2 weeks, but it’s getting really frustrating dealing with them and this situation. It almost seems that I give more importance to this problem then them. I have saved enough to pay all their debts (that I know of), but I will not do that, nor do they want me to. They simply don’t accept any word of advice from me, and won’t do anything to improve their situation.

They are really good people and help everyone that they can. But they don’t seem to want to help themselves. They don’t have great and expensive lifestyles, and are modest and honest persons (that was my opinion before I knew few months ago that my mother hadn’t payed social security for 4 or 5 years). But in general, they are lovable persons and everyone in the neighbourhood loves them.
– Paul

You can’t make other people care about their finances, no matter how much you might want to. You can lead a horse to water all you want, but you can’t make that horse drink.

Your best approach is simply to protect yourself. Make sure that the impacts you see coming from their mistakes will not affect you in any significant way.

At the same time, continue giving advice if it comes up, but don’t push it. You can’t make them do things the way you want them to. Just keep reaffirming good principles when the opportunity comes up and let them know that you’ll help them work through it when the time arises and they decide that it really does matter.

Q9: Motivated to keep grinding away
Let’s forego the reasons for how I got here and why. Everyone has their reasons, and mine are no more or less valid than anyone else’s. Let’s focus on the facts of the situation: I’m 26 years old, and I’m struggling under about $44,000 in debt, $42,000 of which is student loans. Since hitting bottom, I’ve been steadily working hard to try and improve my situation, but it’s slow going because in a good year I make $20,000 a year. I’ve minimized my expenses about as much as I can (I’m sharing a small 1-bedroom with my brother, to save on living expenses). I’m constantly looking for outside sources of income, or a job that pays more, but everytime I think I have a “lead” it just doesn’t pan out.

The fact is, I /have/ been making some progress. Unfortunately, I calculated last night that at the current rate, I’ll be paid off in 10 years. I can handle living below poverty level for the next 10 years. I don’t require a lot in the way of creature comforts to be happy. But the need to minimize expenses to nothing just to make the smallest progress has necessitated putting EVERYTHING in my life on the back burner. I don’t date, because what’s the point? I can’t pick up and move to pursue a career I would really enjoy and that might even be ultimately more profitable, because I can’t give up a guaranteed source of income right now. I’d like to have kids someday (probably through adoption), and when I see you write about your kids, it’s really hard for me. At the rate I’m going, I’m going to be 36 before I can even begin to think about starting any kind of life for myself. How long after that before I’ll be stable enough to bring children into my life? I feel like my life is going to be over before I even have the chance to get started with it, and that most of it will involve grinding away at a job that I have no special passion for (and which I actually have certain ethical objections to) just to have a chance to do something worthwhile someday.

No one has been able to help me figure out how to fight off depression and convince myself that it’s worth it to keep grinding away like this. What would you do in my situation?
– Michelle

I was in that situation a few years ago. My suggestion? Keep grinding and spend your free time looking for ways to produce more cash, either through selling stuff or through a side business or other form of gainful employment.

You’ve got to recognize that you’re doing the hard things now to give yourself a platform to stand on later. If you don’t do this hard work now, you won’t have great opportunities down the road.

It’s not easy. It’s painful at times. But with every sacrifice, know you’re building a better life for yourself.

Q10: Handling serious spousal disagreements
I have tried EVERYTHING and my spouse and I cannot agree.

His excuse – “We don’t have THAT much debt” “We are better off than most of our friends” “We already live frugally” “We already have a lot of money in our 401k’s, Why do we need Roth IRA’s too” Which are all true, but not good enough for me.

He’s okay letting me do the budget and getting an “allowance” – however, his allowance is $100 a week (Gasp) and he still cannot seem to live within his means. He seems to be dipping into my account more and more lately. He has one bill he pays with his allowance that his choice – netflix ($8). I have repeatedly asked him, told him, yelled at him, begged him, and asked nicely again to not spend money out of my account. I can’t seem to get through to him.

Even though I wish I could reduce his allowance and put that money towards debt, I can’t even get him to live on what he is given. He seems to “shut down” when I try to talk to him about his spending. I don’t feel like I have any reason to distrust him – he just spends money without thinking or tracking. This week alone he has spent $30 out of my account at gas stations!?! He thinks I am controlling and I worry too much. Because he (a) doesn’t think we have a problem and (B) thinks I worry too much – he discounts my attempts at being debt free.

I believe we have a lot of room to further reduce our cost of living and get bills paid off faster, but my determination wavers between steadfast and giving up because I’m the only one actively pursuing the goal. He’s content to let me handle it and do whatever he wants. I don’t want to give the impression that I’m blame free – but I feel like we both need to hold each other accountable. We are in a cycle where I complain to him about everything he spends, then I give up and do whatever I want and then I have to take money out of savings to cover our spending or pay off the credit card (again) and put money back in savings (again). I have a tendency to be a perfectionist and beat myself up when things go “wrong.” Even though I know that is useless behavior I can’t seem to break the cycle.
– Carrie

Much like my answer above, you can’t make someone else care about their finances, no matter how much you care about them.

Also, much like my answer above, your best solution is to minimize the damage he’s doing to your finances. Make sure your requirements are met and your obligations – the ones your name is attached to – are paid for.

It sounds like there are some significant problems in your relationship. If you want things to work better, you may want to seek out some counseling.

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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  1. TLS says:

    To Julie, Q6

    Take the week off between jobs. You have a good job lined up, and you will be able to cover the financial implications of not working for a week. Whenever you can, choose mental health and sanity over saving a little money (and you can easily do this in your situation).

    I personally just postponed a planned trip to see a family member, because of personal and work circumstances. It will cost me probably in excess of $100 to change my plane ticket, and I am ok with that. I did not want to spend the next month stressed out and spend a week away while I am not able to relax. My sanity is more important. Always.

  2. Josh says:


    I am going through a similar situation with my wife, and this is an incremental, ongoing process. Your husband’s bad behavior has probably been his M.O. for years (possibly inherited from his parents), so it’s likely to take a long time to fully correct. Just focus on getting him to take the first step. Showing him some numbers might help. You can use a retirement calculator or show him how you could become debt free sooner. Do whatever you can to get him to acknowledge his spending problem and the fact that his apathy is poisonous to your relationship and financial future. Hang in there.

  3. Johanna says:

    Q10: The purpose of an allowance (for an adult) is that they get to spend the money on whatever they want, no questions asked. Agreeing to let your spouse have $X for an allowance, and then continuing to complain that $X is too much, or that he’s spending the money on stupid stuff, is contrary to the whole point of the allowance.

    What concerns me, though, is that you say he’s spending money out of “your account.” What does that mean. Is this your own personal fun money account, so that he’s spending all of his fun money and some of yours as well? Or is it a general account for household expenses? What makes it “yours”? And if it really is yours, why does he have access to it?

  4. valleycat1 says:

    Q10 – I basically agree with Trent. However, although you say your husband is ‘ok with receiving an allowance’, his actions say otherwise.

    Other options: – set up a separate checking or savings account in your name only & then keep just enough in the joint account to cover what you two have agreed on as your monthly budget. The rest goes into your individual account, which your spouse can’t get to without your buy-in.

    Or, (probably better) would be to figure out how much ‘over his allowance’ he’s usually going, and just increase his ‘allowance’ by that much, with the understanding that that is all he will be able to get his hands on. And maybe don’t call it an ‘allowance’. I’m assuming you have a set amount allowed weekly for personal spending too? If not, I could see why he’s non-compliant with the agreement.

  5. Adam P says:

    Q10 Your husband is not following what he agreed to do, for whatever reason, he’s being deceitful and disrespectful. If he agrees to curb his spending to $X then takes money from your allowance (how I took it), then he is showing he doesn’t care about you or the relationship. Trent was right, your problems are not financial they are to do with your relationship. Get counselling, and if he won’t do that, start planning an exit strategy because you have issues more pressing than your 401k.

  6. JS says:

    Q2: “I find it really horrible but here I am wishing disabilities and deaths on boomers..ideally people I don’t know just so there are job openings.”

    Trent, I find it disappointing that you would answer not 1, but 3 questions from someone who is wishing such things, even facetiously.

  7. Carole says:

    I watch Suze Orman a lot and she always advises people with spouses with no money sense to get out of the marriage as it will only get worse with time. It always seems like harsh advice to me, but she may be right.

  8. Johanna says:

    Q9: I’m not a doctor, and this is not a diagnosis, but it sounds from your letter like you might be dealing with clinical depression, and that some form of treatment might help you. I know that there are nonprofit groups that exist to help people in your situation, but I don’t know how to tell you to go about finding them. Maybe somebody else does.

    Beyond that, it sounds like you think that if you were living in another city, you’d be able to pursue a better paying job? Can you apply for those jobs remotely? Depending on what kind of job you’re talking about, you might find employers who are willing to consider applications of people living outside the area, and will pay for you to come in for an interview, and might even pay your moving expenses.

    And what’s the point of *not* dating? Human companionship is free, even if having children isn’t. If your schedule and transportation budget allow for it at all, I’d encourage you to get out and socialize as much as you can.

    Best of luck to you. Virtual hugs if you want them.

  9. Johanna says:

    Q8: “My name is David,” yet the letter is signed “Paul”? Hmm.

  10. Leigh says:

    Q2: I’m with Alison on the Baby Boomer issue. She should be thankful that she hasn’t been trailing this selfish, indulgent generation for as long as us “Xers” have.

    They have acted like a pack of locusts and won’t stop taking more than their share until the bitter end. Good riddance to bad rubbish.

  11. Johanna says:

    Q1: I saw that blog post too. I’m glad to see that Elizabeth sent it in and that it got Trent’s attention.

    As for Trent’s reply: Keep in mind that although the people who pay the most into Social Security also get the most out as a raw dollar value, they get the *least* out as a percentage of what they paid in. I think that this is still true even if you take into account the differences in life expectancy. So raising or removing the cap on taxable earnings – and raising or removing the cap on benefits accordingly – would be a big help for keeping the program solvent.

  12. valleycat1 says:

    Q2 & Leigh @ 10 – These days ALL generations are in the same boat and competing for the same jobs. FYI, when we were the youngest generation looking for job, some of us felt the same way about our parents!

    As a boomer with a GenY child, I want to relay this. My GenYer is in the job market, competing with GenX & Boomers in the same job market because they’ve been laid off/downsized. She recognizes that ALL generations present their own unique qualities to the hiring companies. GenY – freshly educated, enthusiastic, and, yes, beginning at the bottom of the ladder. GenXers, more experience but still relatively fresh training/education. Boomers, much more experience and on the job training which in many ways is more valuable after a certain point than education, but often wanting or expecting higher pay & benefits because of that – & because it was what we were used to in our earlier jobs.

    Yes, boomers who have jobs are still working. Not much I can offer there, but, really, wishing we’d die? But realize that when we’re laid off or want to make a job change, we face a bunch of fresh new talent as competition and we often still have more family responsibilities we have to cover. I don’t resent the younger generations for being in the same job market – I just take it as an additional incentive to keep my skills up to date.

  13. bogart says:

    Q10 you don’t provide (or Trent doesn’t include) enough information for us to know where on the continuum from reasonable to unreasonable your and your DH’s behaviors/views stand.

    If you can afford it, it might be worth paying a fee-based financial planner to sit down with the two of you for 1-2 hours and go over whether you are or aren’t “doing OK” relative to your long-term goals — or what your futures will look like if you continue using his approach and ditto, your approach. Maybe hearing an unbiased professional’s view of likely outcomes will reshape your DH’s views. Heck, maybe it will reshape yours. But either way, you’ll both have more information and can make choices about what changes you do and don’t want to make, financial and/or otherwise.

  14. Des says:

    Q10 – Wow. The problem here is not that he is spending too much, that is just the symptom. I 100% agree with Trent – this is a relationship issue for which you should consider counseling.

    DH and I were in a similar (though less extreme) situation where I was the one who managed the finances and he just didn’t care or even really want to know. That isn’t healthy. It is easy to fall into that when one person likes doing the money and is good at it and the other person just doesn’t care, but both partners NEED to have a hand in the finances. What worked for us was, oddly, Dave Ramsey’s FPU class. As the family CFO, I already knew all the info there, but that wasn’t the point. Going through the class together helped put us on the same page, and it was easier for him to hear from a third party (and a male, too). We don’t always adhere to DR’s principles, but our relationship with each other and money was greatly improved by taking that class together (which, while not cheap, costs less than a financial planner or therapist.) YMMV.

  15. Cortney says:

    Q9 Michelle- Did you complete your degree? I’m not sure if you are aware of this or have looked into this option, but there are hundreds of jobs overseas teaching English, and all you have to have for a lot of them is a B.A. in any subject and a clean criminal record. In South Korea, you don’t even need a B.A.- just at least two years of college under your belt. There are many jobs that offer free health care, free housing, free visas, and they pay two to three times what the average local makes. It is very easy to save a large portions of our monthly paycheck in this manner, especially in countries like South Korea and Japan, which pay very well.

    It would take some upfront money to get over there- a plane flight and some money to tide you over until your first paycheck- but most of them refund you the cost of your plane ticket at the end of your contract, or some of them pay for it outright. I have taught English overseas in Japan, and even with having to make $400 a month in debt payments (back before I paid off all my debt), plus pay for an apartment/utilities/food, plus any entertainment expenses, plus traveling all over the country, I was saving $500 a month (without even really trying). Plus I had 6 weeks paid vacation a year, plus another week of random holidays that gave me three day weekends.

    You would be making substantially more than what you are making now, and your cost of living would be drastically cut- free housing, free healthcare, etc. I am currently in the middle of researching for my next job overseas, and if you have any questions or if you are interested at all in doing this, I would love to help you. It sounds like you need to do something truly radical. $40,000 in student loan debt should be netting you a job substantially more lucrative than $20,000 a year. A lot of my teacher friends that have been laid off for a year or two refuse to move overseas- even for jobs making $6K a month tax free with free housing- because it’s too hard or too far. And it definitely is a drastic change. But it’s something to consider. You would also be able to really live your life, travel, meet new people, see new places, all while earning money.

    And just to clarify- no, I’m not affiliated with any schools. I’m just a person who has taught overseas, and who has a vast network of friends all over the world who make a living- an excellent living- teaching overseas while getting to travel.

  16. Steve says:

    Q9: When I read your story, I had to do a double take. This is uncannily similar to my situation back in 2005 – including the exact same student loan debt balance of $42,000 (plus a “bonus” $15,000 in outstanding credit cards and auto loans). To make matters worse, I was unemployed at the time and only able to pay the rent on my 15″ x 13″ studio apartment through an intermittent series of temp job assignments.

    And did I mention this was at age 38?

    You better believe I felt many of the exact same feelings you’re dealing with right now – including the dating/relationship issues (try being broke and attempting to date well-ensconced career women with high paying jobs, high value condos, and high expectations in their potential suitors – it was not a pretty picture!).

    The big turning point for me came when I finally disassociated my ego from what I was doing to make a living. I started to view every job – no matter how trivial – as simply a way to generate cash for my newly hatched “Financial Freedom and Future Security Plan.”

    In other words, I stopped caring about what others thought of me – and of where I SHOULD be at this point in my life – and I began to selfishly concentrate on making myself a healthy and financially independent person.

    So while I kept searching for a stable higher paying job, I continued the temp jobs, did focus groups for quick cash, and signed up to be an on-call banquet server during the holiday season (which at one point was my only source of income!).

    I won’t pull any punches – it really sucked at times (like when I would run into my friends who were guests at the weddings I serving at)! But I kept telling myself, “It’s all honest cash, and it all goes towards my grand plan.”

    Fast forward to now at age 44. I have a stable, high paying job despite the recession. I’m getting ready to pay off the rest of my student loan balance (my only debt) next month. And I’m secure enough financially and emotionally that I can confidently move forward to the next big step in my relationship with my girlfriend of three years.

    The Tao Te Ching says that “Great talents ripen late,” and I believe that. But you don’t have to start as late as I did!

    So build your own plan, stick to it, and keep the faith. It’ll go really slowly at first, but things will accelerate very quickly as time goes on.

    Good luck!

  17. getagrip says:

    Q10 Part of the problem is that he feels there isn’t one and you seem to feel there is a huge, looming, out of control ready to swoop in and crush you one. Unlike some of the previous posters, I’ve got a slightly different take. Maybe *you* need to be the one to let it go a bit. Given the tone of what was written it makes it sound like you and the husband are on the brink of disaster. But I’m wondering if that really is the case.

    You say it’s an allowance, but then make him pay a bill out of it and also complain he spends the money “badly”.

    He says you’re saving enough, are frugal enough, but you don’t give us any data on what percentage you are saving, how well you are doing etc. so we can discern if you’re overreacting or he’s underreacting.

    You want bills/debts paid off faster, but how fast is fast enough? Are we talking two years versus five years, or 20 months versus 24 months? Is the difference going to kill you? If you had to pay for a couple more months or another year to get out of, say a car payment, will anything realistically change besides your breathing a sigh of relief because the imagined crushing burden of that debt is gone. Or will you not even breath such a sigh and turn right around and sweat bullets that you aren’t taking that money and saving enough for retirement/house/next car/baby/etc.

    In our relationship I’m the one who hates debt, who does the budget, gets ulcers worrying about paying for kids college, and sweats the retirement. But via knowing my wife I’ve had to learn to let it go and enjoy today a bit more. Could we be better off financially? Sure. Would we really be better off emotionally? I don’t think so. It’s hard to enjoy a vacation, a dinner out, a movie, etc. when you’re worried about every penny spent. But like I said, we don’t have enough to fully base a judgement one way or another, and I just wanted to provide the other side of the coin.

    So I, as others, advise councilling since this seems to be a major button for you. Just don’t be surprised if the councelor asks you why you feel the need to get all this debt/savings/etc. done. It’s not likely to be a one way street.

  18. Tom says:

    Regarding the 5/1 ARM vs Fixed Rate, you can find a really nice ARM mortgage calculator from Vertex42. Google it.
    Being fixed for 5 years at below 30 year rates actually takes a while after your rate adjustment to “break even.” What I mean is, if you had taken a fixed rate mortgage at 4.5%, maybe you paid $61,000 towards principa and interest over 60 months, whereas the 5/1 you’ve paid $56,000 in that time.
    I plugged in your numbers for a 3.9% ARM with 2% increases in rate every 12 month after the initial period, capped at 7.9% max (is this likely? It’s anyone’s guess, but I view this as a worst case scenario. Your loan documents should list your personal the max rate increase and Interest rate cap). It would take 83 months before you would’ve been better off taken the Fixed Rate Mortgage from the beginning.

  19. valleycat1 says:

    Q5 – we once rented a car for a road trip for similar reasons (mainly reliability) & were very happy with the decision. When we are ready to buy our next car, we’ll probably go a little smaller since we’d use it for day to day use for one or both of us, and rent for the rare occasional times we need something larger (taking people with us on a trip or needing more luggage space for a trip).

  20. valleycat1 says:

    Q10, again – If I were in your husband’s position, where my spouse controlled all the $ and gave me an allowance, I might act out some too, unless my spouse also agreed to a specific weekly allowance for personal spending (which might be more or less than mine). Otherwise, it seems the other person can spend at will but I’m stuck with X dollars. If either of us had estimated a weekly allowance but was routinely going over, would re-visit the conversation to decide what adjustments needed to be made.

  21. JP says:

    Q10, Carrie… be careful about making some of the more adversarial moves based upon the advice given here. It sounds like you’re playing a bit of a maternal role in your relationship. That isn’t good for either of you.

    Be careful about making any adversarial moves though, that could send some unintended signals to your husband. I strongly recommend that you get counseling.

  22. STL Mom says:

    Q2 – I too find boomers annoying, but I don’t hate and resent them. Most economists don’t think there are a fixed number of jobs, and that one person has to quit/retire in order for another person to get a job. When boomers retire, they will buy fewer goods and services, which means less jobs for other people. When people work, they spend more money, and that creates jobs.
    For a darkly humorous take on the younger generation’s resentment of baby boomers, read “Boomsday” by Christopher Buckley.

  23. Jonathan says:

    @getagrip (#17) – Unfortunately without more details we can’t really know what the situation is. However, it seems like Carrie’s husband is spending around $500/month ($6000/year) on wants. Do you not agree that his spending is likely excessive? I am going to assume (hope) that their household income is much higher than the average household income, otherwise he alone is spending roughly 10% of the families entire income on his wants.

  24. Johanna says:

    @Jonathan: You’re right that there’s a lot we don’t know about the situation, but 10% of the family’s income on wants for one person is not excessive. The “All Your Worth” balanced spending plan recommends 30% of your take-home income for wants. That could be 10% for Carrie, 10% for Mr. Carrie, and 10% for things they do together (Carrie doesn’t mention any kids), for example.

  25. bogart says:

    @Jonathan I absolutely agree that without more details it’s impossible to assess Q10’s situation. But DH and I each spend ~$400 plus each on our hobbies every month (my horse, his golf) without blinking an eye (and yes, that is about 10% of our family’s entire income between us) — really, without more information it’s just impossible to know what is and what isn’t reasonable “discretionary” spending.

  26. Kim says:

    To the person renting a car: make certain you are getting the lowest rate possible. Go to mousesavers.com and click on the transportation link to find a huge number of rental car discount codes that will work everywhere. I have had the best luck with the coupon codes in the entertainment books. I also check rates every day. Usually they will drop significantly for 24-48 hours and then bump right back up. I adjust my rate when it is low. It takes a few moments a day, but saves me hundreds. Using these tips, I once paid 147 including taxes for an 11 day rental with unlimited miles and a free extra driver. Also, many credit cards include rental car insurance, so check and you may be able to avoid the expense.

  27. Des says:

    Q3 – Really? In this job market, if I had a job that might not be around in a year, I wouldn’t be worried about what percentage of my income to spend treating myself. You should be piling up cash in case you lose your job and focusing on making yourself a valuable asset. I understand that you feel “repressed” because you are flush with cash after some lean years, but this is certainly not the time to be updating your living room. Spend what you must on your work clothes, but everything else should be on hold until your future is more secure. I mean, obviously you can do whatever you want with your own money, but from a wisdom standpoint this doesn’t sound like splurge time.

  28. Susan D. says:

    Q2: I suggest that Alison get some counseling to help her get over her vicious resentment of boomers and HER feelings of entitlement.
    Right now I’m thankful that my department supervisor, who is Alison’s age, doesn’t have this attitude. (Yeah, I’m a boomer.)

  29. Jonathan says:

    @Johanna (#9) – I’m not sure if Trent always does this, but I think he changes the names, I assume to provide anonymity for the submitters. Looks like he got sloppy with this one. The reason I know he does this is I’m Andy in Q5 :-)

  30. Jamie says:

    Wow, problematic issues here…

    #2: Attack on Baby Boomers? Not just specific people in the job market, but an entire generation of anyone between the ages of 47 and 65? Does anyone else find that a little psychotic? Have issues with policies, have issues with behaviors, but for goodness sake, hating an age group is like a hating a race of people. Not cool.

    #10: There is always a ton of info that we’re missing that could drastically change our responses, and while this seems to be a deeper issue (like everyone is saying), maybe instead of playing mom and giving him an allowance and a time out when he spends it on 7-11 candy, sit down and have a grown-up talk to figure out what a better weekly cash amount would be for him. If you are expecting him to hand over all financial control and let you dictate the spending, you have to be a nice money queen and be a little flexible!

  31. Tanya says:

    To all those who are attacking Baby Boomers (no I’m not one), just remember – someday you’ll be their age, and you’ll need money, and a job. Wishing death and disability on ANYONE does no good at all.

  32. jim says:

    Q1 : Increasing the retirement age to 70 would cut the SS shortfall in half. But that wouldn’t give the retirees bigger checks. I don’t see any way that you can have retirees get better total benefits and save the government money.

    Q2 & Q3 & Q4 : Do we need to post the questions that are just rants like Q2? I don’t understand why she spends one question ranting about how old people and unions are stealing her jobs and then in the next question declares she just got her dream job. Also from Q4 its clear she doesn’t live in the USA so we really don’t know the situation in whatever country she is from.

    Q5 : First I’d ask, is $300 an easy amount for you to spend or is that a stretch and could you use that money better elsewhere?? If $300 is ok expense for you then it comes down to figuring the net financial difference for you. You first have to figure out the difference in cost of gasoline as that won’t me minor. If your car gets 30 MPG and the rental gets 25MPG and gas costs $3.50 then the rental would cost $55 more in gas. Figuring the cost of the miles for your car is less straight forward. The answer is not 51 cents a mile. Theres 2 ways I’d look at it. a ) What is that car worth today and how many more miles can you expect to get out of it? If your car is worth $5000 and you expect 50,000 miles then each mile is worth 10 cents. b) Go to Edmunds and get an appraisal on your car. Then run the numbers for an appraisal with +2000 miles and see how much difference that would make on the resale value of your car.

    Q6 : Yes take a week off.

    Q8 : I agree with Trent. I was even thinking of the horse / water saying when I read the question.

    Q9 Michelle : You may qualify for income based repayment on at least your government subsidized loans. I dont’ understand why you aren’t dating. A large student loan debt should NOT keep you from dating. Lots of people have student loan debts and its not like you’re going to be treated as a failure because of it.

    Q10 : I’d consider getting marriage counseling. Or you could apply to be on the TV show The Marriage Ref and have celebrities tell you who’s right.

  33. jim says:

    Additional on Q9 :

    You have $42,000 in debt and make $20,000 per year. If all that debt qualifies for the income based repayment program then you could cut your monthly payments from $450 to $50. I don’t know what kind of loans you have so I wouldn’t know how much might qualify for IBR. But in your situation this is exactly what IBR is made for.

    It would also make sense for you to look into jobs that have student loan repayment bonuses. Working for certain government or non-profit organizations can get you some debt forgiveness.

  34. Finance Nerd says:

    @Q1, Trent is wrong on this one — the amounts paid at various ages are actuarially equivalent. The government is indifferent to paying you $x at age 65 or $x+ at age 70, because on average the cost to them is the same.

    Adding new options would only benefit if they weren’t actuarially equivalent, and if they weren’t, no one would take them!

  35. Finance Nerd says:

    @#11 — actually that is not correct. Raising or removing the wage cap, if done in conjunction with proportionally raising or removing the benefits cap would have little to no effect on long-term solvency. Revenues go up, and benefits go up, in roughly the same amount.

    Actually, since the whole thing is underfunded, this would make the program less solvent in dollars, although insolvency as a percentage of revenue would be about the same.

  36. Johanna says:

    @Finance Nerd #35: No, according to the CBO, it is correct. Google “CBO Social Security Options.” They find that eliminating the taxable maximum (and increasing benefits accordingly) has a large positive effect on the solvency of the program. That’s because at high incomes, benefits go up more slowly than income does. So it’s not “roughly the same amount.”

    If I’m misunderstanding something about their study, please correct me. But I’m pretty sure I’m right.

  37. jim says:

    Darn my comment hit moderation limbo. I’ll try a short version then :

    Johanna is right in fact the CBO found that eliminating the cap on the tax alone would make SS solvent indefinitely.

    That cause people making higher incomes get lower benefit rates proportional to how much they put in. So high income people effectively subsidize the system for the lower income people.

  38. valleycat1 says:

    RE: Q’s 2-4 from same person – No matter how sane or bent any questioner is, if Trent gets hundreds of emails a day and has tons of questions hanging out there to answer, I don’t understand why he’d select one extremely long multiple questioned email to ‘eat up’ 3 of the day’s 10 questions? Why not use those for a solo post & use 10 separate questioners’ for the Mon/Thurs question page? Actually, if he’s dealing with the multitudes of questions he says he receives, I’m surprised he even considers reading an email that long.

  39. kristine says:

    Q2- Yes, anyone between the ages of 47 and 52 should just go jump on front of a bus, so the much more altruistic and less selfish new generation can have their jobs, armed with the delusion that experience and the knowledge gained through time count for nothing.

    I am 46, and my in-laws have a golden pension and full health insurance for life, as well as SS. They must be costing those companies, and the gov, quite a lot. Will the boomers ever see that kind of carefree retirement? No. Hmmm, I’m jealous. Maybe they should kick-off too! After all, it’s all their fault the world is the way it is- I am helpless to clean up their mess!

  40. Maggie says:

    I am 65 and thought by now, my husband and I would have lots of money in the bank and could retire. Instead, I am still working and will need to do so for the next 5 years (at least). We worked hard, paid off our house, maxed our 401K’s, had CD’s, IRA’s, and yet, in one short month a few years ago, fully 1/2 of our savings hit the dust. Our health care is tied to my job and we have figured that when I retire, it will take my entire social security check to pay for our meds (with a retiree’s health care plan). What makes the Xer’s and the Yer’s think I have the good life? I work hard and do the same job, have the same commute as my younger co-workers. I’m just more tired at the end of the day. Don’t say that I should get out of the workplace and give my job to someone younger. I just wish I could.

  41. Courtney20 says:

    Q9: Two thoughts. “I don’t date, because what’s the point?” Two incomes but not two sets of expenses? I’m not saying anyone should get married just to add a spouse’s income to their budget, but if you’re just arbitrarily deciding to not date because it’s too expensive, you are potentially limiting your happiness AND your financial success. Also, you are probably not going to make only $20K a year for the next 10 years. As your income goes up, your available money for debt payments will too.

  42. Courtney20 says:

    “and yet, in one short month a few years ago, fully 1/2 of our savings hit the dust” – no offense to you Maggie, but this highlights the importance of appropriate asset allocation for one’s age. At 63 one should not have had so much of one’s retirement portfolio in stocks as to lose half of one’s savings.

  43. Jonathan says:

    I agree with Courtney. Also, money invested in the stock market (whether through a 401k, other retirement account, or individual stock purchase) should not be through of as “savings”. Too many people look at their investment account balance and think it as their money. Until those investments are liquidated, and any return realized, there is no guarantee. The drop in the stock market did not wipe out half of your savings, your investment decisions wiped out half of your portfolio value. Its a big difference, especially in one’s mindset.

  44. mary w says:

    Q2-4. Here’s some thoughts from a grouchy boomer…you’re 28, college educated, a mother, a homeowner and just landed your dream job. Not sure you’ve got much to complain about. Even many sucessful boomer’s were older than you when they accomplished that.

    With regards to unions, yeah, sometimes it helps to know or be related to a member in order to get in. But that isn’t just unions. Lots of times in life that happens. Get use to it.

    With regard to refi-ing your ARM it may depend on how long you plan to stay in the home. It you plan on moving in 5-10 years stay with the ARM unless rates start jumping up. If it’s a forever home it might pay to go to a fixed rate. As another commenter suggested you need to do the math on your loan terms.

  45. Cheryl says:

    Re: Q5 renting a car on vacation…
    5 years ago, we traded in our dying 8 passenger ford club wagon. Rather than buying a minivan, for our 5 kids that were starting to move out, we got a sedan with low mileage that will seat 6 in a pinch. when we bought, it came down to paying 300 for 60 months or 250 for 42 months, it was a real money saver to get the car vs minivan. But we save enough on car payments, that I don’t feel bad about renting a vehicle for our road trip vacations. We get unlimited mileage, don’t have to worry about piling miles on our older cars or breakdowns, and we can customize the rental for the needs at the time. One year we got a 12 passenger van, one year we got by with a new minivan with a dvd player and all the bells and whistles. murphy’s law has your older car breaking down on road trips, flat tires and overheating! renting usually provides an almost new vehicle and is a great way to go!

  46. Mandolin says:

    On the generation inequality issue. It is true that boomers have been very lucky.

    I think some of you missed some of the points of what this person was saying yes its bad to wish bad things on people. However she also said she had very bad boomer parents who are both dead. Everyone has had different life experiences. Who knows how young she was when she lost her parents or what happened prior to their death. I am just saying reserve your judgements…our opinions are based on our own experiences….and she may have it very tough.

    As for ticket prices its really true that the cheapest isn’t always the best option but this is true for all things in life.

  47. Finance Nerd says:

    @Johanna #36 — Here is a quote from page 31 of the cbo document:

    Social Security’s total revenues would increase by 0.9 percentage points of GDP in 2040, or by 19 percent relative to current law, and outlays would increase by 0.3 percentage points of GDP, with further increases in subsequent years. This option would improve the 75 year actuarial balance by 0.6 percentage points of GDP and extend the trust fund exhaustion date to 2083.

    The increase in benefits for the highest earners would be slightly smaller than the increase in their payroll taxes in percentage terms. In dollar terms, benefits would increase by much less than taxes because, under current law, over their lifetimes most high earners receive much less in benefits than they pay in taxes

    I think this is primarily due to Social Security using the highest 20 years, when I would think those in higher incomes would be disproportionately more likely to have longer careers (although counter-examples are easy to find). So in effect, raising the cap and the benefits gets more dollars because they pay higher “taxes” for 40 years, but benefits are only based on the highest 20. So, under this proposal, you are right, it would help solvency.

    But, I guess it depends on what is meant by increasing benefits proportionally. If they just scale up the existing benefit structure, this would happen. If they actuarially matched the increased revenue with actuarially appropriate increased benefits, the impact would be a wash. I was thinking more of the latter, while you were talking about the former, so I apologize for misunderstanding you.

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