Reader Mailbag: Free Will Donations

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. What’s really needed for baby?
2. Where is Fringe headed?
3. Retirement savings or house purchase?
4. Cleaning house
5. Frugality and awareness
6. Budgeting for future purchases
7. Ashamed of passions
8. Retirement planning abroad
9. Helping newly widowed friend
10. Setting financial goals

I am never quite sure what to give when I go to a free dinner that has a freewill donation. Should I drop in what I consider the meal to be worth? Should I drop in more than that?

I realize that putting a “suggested donation” sign might actually cause some people to donate less, but for people like me who puzzle over situations like this, it would be a great help.

Q1: What’s really needed for baby?
My husband and I are expecting our first child at the end of the summer. We are really excited, but want to be realistic about preparing for and raising our child. We feel like there is a lot of pressure to purchase or register for so many items that just don’t seem to be necessary. When we ask our friends and family for advice, everyone has a different opinion and the stores we’ve considered registering at are very “generous” by providing a suggested list of items you “need” to register for or purchase. Based on your experience as a Dad and a frugal thinker, can you give some insight as to what you thought was actually helpful in raising and caring for your babies?

We’re planning on cloth diapering and have already purchased 7 gently used aio’s and pockets. We’ve also received some clothing as gifts. That’s about as far as we’ve gone so far in terms of preparing for our little ones arrival.
– Lily

Three babies have been born into our family and all of them have safely and happily reached toddlerhood. Looking back on it, I realize now that we didn’t really need very much at all when the children were born.

They need diapers, as you mention, as well as some cleaning wipes (cloth or otherwise). They do need clothes, but you can get those in abundance at secondhand children’s clothing stores. Depending on how you’re feeding the child, you may need bottles and formula and perhaps a pump. You’ll probably need a crib, and you’ll want a sturdy one. A blanket or two is good.

Aside from that, you really don’t need much at all. The child needs to be held and loved and comforted. The baby needs to hear the voices and feel the touches of his or her parents. There are no products that you have to buy to accomplish this.

Q2: Where is Fringe headed?
Your past mailbags got my husband and I hooked on Fringe and we finally caught up to the current episode recently. This show is fantastic and more people need to be watching it. Anna Torv and John Noble are two of the best actors I’ve ever seen.

That being said, we’re completely lost as to where this show is going. We have some theories and guesses, but we’d love to know what you and Sarah are thinking about it.
– Claire

John Noble’s acting just blows me away every week. The fact that he can play two variations on the same character with enough subtlety that you can tell which one is which within about a second and also imbue them each with different types of humanity and with different flaws is just amazing. He deserves awards for it.

Anyway, where do I think things are going? If I had to harbor a guess – and given how Fringe swerves all the time, I’m probably wrong – I would speculate that David Robert Jones is actually trying to stop the Observers. I don’t think he’s trying to destroy everything. I think he’s trying to do something to stop the Observers from taking over, the consequences of which would be pretty bad (as seen in Letters of Transit).

I think the Fringe team will stop Jones, but the twist at the end will be that the actions of Jones was what was keeping the Observers in check. Season 5 will be about getting rid of the Observers in some fashion or another, probably with the help of September (the only seemingly nice Observer).

Q3: Retirement savings or house purchase?
The company that I work for participates in a housing assistance program. The company puts in a certain amount towards the purchase of a house in [our county]. The grant program triples that amount and along with other qualifying grants gives you an amount to use towards down payment/closing costs. This program also includes a rehabilitation assistance. My total qualifying amounts as of right now are about $32k for the down payment and $35k for the rehab program. This is a great deal of money and I want to be able to take advantage of the program. The “problem” is that I am not comfortable with a $1100-1400 mortgage payment per month. I make slightly more than $42k. I put 8% in the company 403(b), they contribute an add’l 4.5%. I am putting $160/mth in a Roth IRA. I contribute $25 to a 529, for my god-daughter, as I dont have kids yet. I recently got my emergency fund up to $5,500, which with a mortgage I’m not sure I’m comfortable with that amount but I feel like I need to start working on my down payment fund, which I want to get to $20,000. $9k plus an additional $6k would come from this housing program also. Essentially I am looking to get $5-6k saved up and start looking more seriously for a location. How detrimental to my retirement fund would it be to lower my saving now so that I can save up a larger down payment that I would be comfortable with, saving $750-900/mth until I purchase a place?

– Virginia

If I were in your shoes, I would not let my total retirement contribution go below 10%. That’s a very standard rule of thumb for younger contributors to retirement plans. If we assume that your employer contributes 4.5% regardless of what you contribute, that means you would be fine cutting your contribution down to 5.5%.

That would give you an extra 2.5% of your salary to work with in terms of this savings. Depending on how much is taken out for taxes, that’s roughly another $1,000 per year that you’ll be bringing home.

This will certainly help with savings, but you’ll obviously need to supplement it with other spending choices.

Q4: Cleaning house
Our house is a mess and I’m not sure what to do about it. Before we had kids my wife and I kept things pretty clean. After our first kid, things were still mostly okay, as we would take turns taking care of the baby and handling cleaning tasks. Now we have a three year old and a one year old who constantly make messes and between our jobs it feels like we just can’t keep up. How do you do this with three kids?

– Jeffrey

Roll with it. There are times when our house is very messy. We have three young children and they can completely trash a room in a short amount of time by dragging out toys and moving quickly from one thing to the next.

Being an involved parent means you don’t have the time you once had for household perfection. It’s okay, as long as your house remains a safe and healthy place.

If you’re really bothered by it, consider re-prioritizing. Maybe you could have some times where one parent takes the kids to a park while the other parent cleans, then switch tasks the next time.

It is far more important to have well-adjusted kids with good relationships with their parents than an immaculate house.

Q5: Frugality and awareness
I am a recovering shopaholic and I am a single mom now and I am trying to get out of debt.

I was wondering if you think people can really change their mindset about being frugal.

I have several things that I could spend money on now and I don’t yet it seems to bother me a lot.

For example, I have to have special shoes and bought a pair 18 months ago for $75. I wear them almost every day to work and they have started to squeak which is pretty embarrassing at the office. I am trying to wait until Christmas to buy myself a new pair.

My son broke a picture frame and I walk by that empty spot on the wall every day and it bugs me.

I got some new glasses and they are like fish bowls to look through, and some people have told me that Costco does a much better job but my insurance doesn’t cover that, so I am wearing my old glasses for now.

My cat sneezes and wheezes a lot and I have spent several hundred dollars trying to get her better without any improvement and at this point the next step is to spend $500 to $1000 on more tests and I haven’t been willing to do that, yet I feel really guilty when she wheezes.

I am just wondering if frugal people just aren’t bothered by these things, or if over time I will care less about them as I get used to being frugal, or will it always be this hard for me and I just have to care more about saving money than I do about each thing.
– Tessa

Frugal doesn’t mean being cheap in every aspect of life. That’s being a cheapskate.

Frugal means being cheap in aspects of your life that you consider of low importance so that you can easily afford what you need in aspects of your life that you consider highly important.

These things are important to you. Look for places where you spend money where you don’t really care – like buying name-brand laundry detergent or something – and cut those back. Then, use that found money to support the things you care about.

Q6: Budgeting for future purchases
So when it comes to budgeting how do you handle things that are purchased during one part of the year but used during another part? For example I have some groupons I’ve purchased for summer activities with my family, or a CSA portion that won’t start until July but was purchased in March? Or even the irregular car repairs you never know are coming? I have a grocery budget, a car expenses budget, and a entertainment budget but if I count these purchases under the month they were purchased in I run out of money in that category for they current month. And like with car repairs/expenses I feel like I never have enough time to stock that line item up with a number of months budgeted money before an expense comes through that puts me in the hole that budget. So I wondered if you had any tips because this seems to be the one thing I can’t overcome in my budget.

– Kevin

Most of the time, I have some “flex” in our spending budget. I usually budget more than we spend for a typical month in groceries, for example.

Let’s say I budget $500 a month for groceries and household expenses. Most months, we only spend $400. Every once in a while, we buy something like a CSA membership and spend $900 that month. Because of the leftover money from the $400 months, the CSA membership is easily bought.

As for actual emergencies, that’s what an emergency fund is for.

Q7: Ashamed of passions
My passion is painting. I have a room in my apartment that I’ve converted into a studio and in there I have all of my supplies. Nothing related to it comes out of that room.

I hide it from everyone because they make me feel like it would be looked down on if I told them. No one in my circle of friends is interested in art at all and they make fun of it sometimes. My family would not be supportive either and they’d just say I was wasting my time with something stupid.

How do I make a real move with this without telling all of them?
– Brock

I’m not sure what you mean by a “real move.” Are you considering trying to sell your paintings or have a gallery showing?

If you’ve reached that level of success, you should tell your friends. It’s obviously something you’re passionate about and that you have skill with. If your friends are unsupportive, then they’re not really friends at all.

I suspect that if they’re decent people, they’ll come through for you better than you think.

Q8: Retirement planning abroad
I’m 28 and a US citizen working abroad for a private company (non-US, non-military). The country I’m in is tax-free with no retirement planning, and I send my savings back to my US bank. Due to restrictions on investing in the US while living abroad, my retirement and savings are sitting in ING accounts. I’ve tried and failed at opening 401ks, IRAs, and mutual funds. I’ve looked for financial planners here where I live and they’re all on 100% commission-based salary and not interested in “small” investments like mine. I have $20,000 in retirement and another $14,000 in emergency / savings funds.

I’ve been living out of the country for 4 years now, and I can’t help but stress that I’m losing significant returns on my retirement account. I have no debts or dependents. I plan to return to the US within 2-3 years.

Should I keep trying to get an investment portfolio within the US? Should I transfer my money back out of the country and look for an offshore investment company? If I leave it in savings, when I move back to the US will I have problems investing the entire account? The only other option I can think of is to enlist my mother to open and manage an account for me, but it seems like cheating the system and I would like to check in on the account and have some control over it.
– Natalie

I would not worry about losing significant returns on your retirement account.

Let’s say, hypothetically, that the stock market returns at the long-term average, which is 7%. You have $20,000 to invest. Right now, you’re getting 1% (or so) in your savings account. Over those two years, you’re missing about $2,400.

Now, let’s say the stock market repeats what the S&P 500 did in 2011, which is stay almost perfectly flat. You’ll earn $400 more by staying in the savings account. If there’s a swoon, you’ll earn even more by staying in the account.

Essentially, the concern is that you’re in an investment that’s more conservative than you’d like. The savings account is very steady, but has a slow return. However, the stock market, over a short period such as the 2-3 years you mention, is a bad investment. It is extremely volatile and you could just as easily end up with losses as gains.

Don’t sweat it. Leave your money where it is, then when you get to the U.S., get it into retirement accounts as efficiently as you can.

Q9: Helping newly widowed friend
A friend of mine recently lost his wife in a car accident. His world is completely shaken. The two of them were really deeply in love with each other and had been married for fifteen years.

Right now, he seems to really be drifting. We work at the same company (but not in the same department) and he mostly just seems to come into work and fill space. His boss is being pretty tolerant of it all, but it’s hard to tell how long that tolerance will last.

I don’t know what I can do as a friend to help him. I don’t think it would be good for him to lose his job.
– Alvin

The best way you can help him is by spending time with him. Invite him over for dinner. Invite him to do things with you.

If you know of other friends this guy has, have them do the same. Right now, he needs human interaction and a return to some semblance of a life routine.

Another tactic: you might want to push him to at least redecorate his home. A home that’s still full of her stuff is going to emotionally drain him every time he’s at home. Offer to help him go through her stuff and donate a lot of it and keep a few things for mementos. It will be very hard for him, but you seem to be a caring friend. This grieving process needs to happen, as does the next steps forward in his life.

Q10: Setting financial goals
I recently graduated and am doing a research fellowship at an American University. I have a four year contract and make 38K/year ($2570/month after taxes+health insurance premiums). I do not expect to lose my job over the next four years. Bearing that in mind, I have a few questions on what my financial goals should be.

I have accumulated the following debt:
– $31000 in student loan (5.5%)
– $580 in credit card debt (I plan to pay this back as soon as possible)
– $1500 to a family member (The relative told me that I can pay them back when I can, but I am obligated to pay them back sooner).

My monthly expenses (rent, transit pass, food, utilities, minimum payments on my loan) work out to be $1865 and I am left with $705. My question is after I pay off my credit card bill and repay my family member, should I continue making minimum payments on my loan or should I make larger payments to pay it off sooner? Do I need an emergency fund if my job is stable for the next three years? If so, how much should I plan to save? Also, I am 28 years old, I do not have any retirement savings presently. My employer contributes 5% of my income on my behalf and offers to match an additional 5% that I would contribute to a 403b plan. Does it make sense for me to contribute to this fund? I am a bit unsure if I will live in the US after my fellowship ends (I am currently in a relationship with an American. After my fellowship ends, we plan to either live closer to his family or mine based on where we both find work). I am a bit reluctant to contribute to a retirement fund in Canada as I lose money with the current currency conversion rate. Please advice me on what to do.
– Monica

If I were you, I would plan on having an emergency fund. There are always emergencies, even if your job is very stable.

The first thing I’d do is build up a $1,000 emergency fund while making minimum payments on the debts. After that, pay them all down in the order of interest rate. I’d probably hit the credit card, then the personal loan, then the student loan.

Debt freedom is incredibly worthwhile because of the personal freedom of choice it gives you, as you’ll have very low monthly bills. This is especially true if you’re not entirely certain where you’ll be in a few years.

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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