Updated on 01.15.12

Reader Mailbag: Friendship

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. Housing challenges
2. Employer matched IRAs?
3. Paying ahead on credit cards
4. Bus pass math
5. Selling a small business
6. Negotiating a promotion
7. Finding a community group
8. Thrift stores in Des Moines
9. PMI or student loan debt?
10. Pocket change

There are so many times that I’m grateful for the friends and the family that I have. They support me in so many ways, both subtle and obvious.

I don’t know how to express it without sounding mushy other than through my own actions: I try to be a good friend in return. I don’t backstab people or try to hurt them. I try to help them when I can. I try to be an entertaining and fun person to hang out with.

In other words, I try to be the friend or family member that I wish that I had.

Q1: Housing challenges
My wife and I currently live in condo that we have a mortgage on. We purchased 4 years ago, rate is 5%. We purchased for $140,000 and have about $135,000 remaining on the mortgage. When we purchased the condo we took the $7,500 housing grant that we have to pay back over a 15 year time period or when you sell the house. The stipulation is if you do not make a profit then you don’t have to pay this back. We have already paid back $1,000 of this. The purchase price is adjusted for any improvements or commissions you have paid in the process. We put in more than $10,000 of improvements so if we were to sell for anything over $143,500 we wouldn’t have to pay back any of the remaining grant. We could also choose to rent, which is what I would do if we didn’t take out the grant, but if we were to do this we would have to pay the remaining balance of the grant back at that time since it is no longer our primary residence. This was the $7,500 home buyer credit, not the $8,000 that you don’t have to repay and can rent after 3 years.

So our current situation, my wife and I are both 27 have no debt (no credit card, no student loans) besides our mortgage and 2 car loans. Car 1 – 1 year remaining $250/month, Car 2 – 2 year remaining $350/month. We make a combined $115,000/year. We currently put about $1,000 a month in retirement (+ company match) and have a combined $40,000 currently saved in our retirement. We also have $10,000 in our savings for a future down payment on our house. We are expecting our first baby in February and at that time my wife will take off 12 weeks of work, she will get 50% pay during this time. I am going to lower my retirement to just the company match during this time period to make sure we have enough money, although I think we should be fine and and will increase the retirement once she goes back to work. We will be incurring day-care costs once she goes back to work of roughly $800 per month.

Here is our dilemma. We have our condo currently listed at $144,000 however we may only be able to get $135K or even less for it, which after commissions would barely break even on our mortgage and could possibly even take a little loss. We want to continue to save and build our savings account up to around $15K before we buy our new place. For us to do this we can’t really afford to lose that much when we go sell. The condo we are living at will probably be too small once the baby gets to about a year old so we are looking at houses in our area at around $200-$250K, (I realize we wouldn’t have 20% down but this is what we are wanting for now). We also want to take advantage of the lower interest rates that are currently in affect right now (I personally believe they will be low until 2013).

Looking back I now realize we should have probably just rented 4 years ago but hindsight is 20/20. Anyway, I guess our options are stay in the condo until we can get a buyer that is willing to give us a decent offer, take a loss on our condo and not have as much to put in a downpayment, or pay out the remaining grant and rent out the condo ourselves until the market turns around in our area (this would also lower our down payment).

It is frustrating because I feel like we are responsible with our money and didn’t necessarily do anything incorrect yet we may end up losing money on this decision to buy our first place, however I realize this is just the times we are living in and going forward I will think more indepth of our decisions. Any advice would be greatly appreciated.
– Kevin

You didn’t do anything particularly wrong. You were simply caught by the collapsing bubble of the housing market.

If I were in your shoes, what I’d do is investigate rent prices in your area compared to the mortgage payments you’re making on your home. If you can find housing that suits you that’s significantly less than the interest on your mortgage payments, you’re going to be money ahead getting out of that condo and then channeling the money you’ll save each month into your down payment fund for the house you really want.

Once you’ve resolved your condo, I would sit on that savings for as long as you can. Build it and wait until your life changes in such a way that a house of your own is really necessary. You’re going to be in far better shape for the long haul if you have a small apartment for several years now before you buy a home than if you tried to swing into one quickly.

Q2: Employer-matched IRAs?
I have an employer retirement plan with Vanguard that allows me to automatically direct a portion of my paycheck to both Roth and traditional IRAs which they will match to an extent. I also have a separate Roth IRA I set up with extra job money in college that I’d like to add money to. My question is, do I need to count the contributions to the employer sponsored accounts towards my $5000/yr limit on IRA contributions?

– Charlie

I tried to find the specifics for the plan you described, but after thorough searching of the Vanguard site and a few emails to people at Vanguard, I found nothing that seems to match up with what you’re saying here. I’ll admit that I’ve read about thousands of retirement plans and I’ve never heard of employers directly contributing to the Roth IRAs of their employees.

The people to ask about this is Vanguard themselves. They would be able to give you a straightforward answer based on how exactly this IRA matching plan is set up

Contact them with your specific plan information and make sure that you understand the taxes and contribution limit issues before you make any major moves.

Q3: Paying ahead on credit cards
In the questions section people mention often that they pay off the credit card monthly. Do you know people who ‘pay on’ or ‘pay up’ the credit card? DH and I do most of our payments with debit card, but when we need the credit card, we discuss it beforehand, then send the money from our account to the credit card, then pay with the credit card. We have about 150 euro positive on the credit card as a cushion; the credit card company gives us about the same interest as the savings account. I was just wondering if we are the only ones to use the card ‘proactively’.

– Stephen

You absolutely can keep a positive balance on a credit card. The drawback to that is that you’re not able to earn anything from that positive balance. Instead, the credit card company is.

Let’s say you had that 150 euros in a bank account instead of sitting as an extra balance on that credit card. Over the course of a year, that 150 euros would generate 1.5 euros straight into your pocket. If it sits on a credit card, you don’t earn a dime.

Perhaps that relatively small loss is worth it for the peace of mind it gives you, and if that’s the case, stick with it. It’s certainly not hurting anything by doing this.

Q4: Bus pass math
I usually take the bus to work. It costs $1.20 for a round trip fare and it’s about two miles each way from work. Since I have a very old car I had somewhat decided that it would be cheaper for me to drive to work rather than catch the bus each day.

Where the math has thrown me is with the bus passes. You can get a bus pass for a month of unlimited riding for $20 and an annual pass for $175. Do you think that this is now cheaper than driving my car to work?
– Larry

Let’s assume you work five days a week and you work forty eight weeks out of the year. That would mean that paying each day, you’d pay $288 in bus fare. The monthly pass is a bit cheaper than your monthly bus fare, and the annual pass is a tremendous savings.

The real question is how much it costs you to commute every day in that car. You can use an online calculator to estimate this. As you can see, the calculation gets complicated really quickly. After playing around with the numbers, I estimated that in your situation, you’d probably be spending about $0.37 per mile driving your car to work, taking into account all of the factors mentioned there.

In other words, you’re still spending more driving to work each day than you would be just paying for the bus out of pocket at that rate. If you buy the annual pass, it falls even more in favor of the bus.

To get that $0.37, I assumed quite a few things, such as not paying toll, that you’re going to keep up your license and registration and insurance whether you drive it to work or not, and that it’s depreciating very slowly because the car is already very old (I estimated a nickel a mile).

Q5: Selling a small business
I am a software developer, I have traditionally worked as a regular W2 employee but I have recently been doing some freelance side work. I am really unhappy at my current day job and I am leaving as soon as I find the right opportunity. I am very lucky in that respect because the market for my skills is really on fire right now.

An opportunity has come up to work on a very exciting project as a 1099 contractor. I have two things I am trying to work out about this opportunity. First, I am trying to figure out how to compare an hourly rate between a W2 job and a 1099 job. I am paid hourly even at my current W2 job (I get no benefits), and I was offered the same hourly rate for the 1099 job. I know that even at the same rate the 1099 offer is worth less in total because I will have to pay the self employment tax, but I cannot figure out exactly how much less. My understanding is that as a 1099 contractor, I will have to pay an additional 7.65% tax, however I can also deduct half of that tax from my income, which makes the calculation more difficult. I get even more confused when I factor in tax-deductible retirement contributions because as a 1099 contractor, it seems like my tax-deductible contributions are worth approximately 7.65% more because I would not being the SE tax on them. I looked at some online calculators, but I could not tell if they took into account the 50% tax deduction. What I really want is a formula that tells me how much an hourly rate under W2 status is worth under 1099 status.

I have a second, unrelated but interesting question about the same 1099 job. I have an LLC which I try to use for my freelance jobs, and every resource I find says that as an independent contractor, I should use the LLC for all my contracts. With this new opportunity, they asked me to sign the contractor agreement personally, rather than through my LLC. Their reasoning was that my LLC has no assets and is worth nothing (which is true), so I basically have nothing on the line when I sign the contract. They are also concerned that potential future investors would be scared off if they can’t guarantee that the company’s intellectual property (the software I would work on) was not protected by a strong contract, and my contract under the LLC would not provide any real protection to the company’s assets. I offered to purchase professional liability insurance for my LLC, but they still want me to sign personally.

I am not really too concerned about having to sign personally, but I cannot find anyone who has ever encountered this problem before. Do you have any insight? Are they being unreasonable by asking me to put my personal assets on the line, or am I being unreasonable by trying to hide behind what essentially is a shell company?
– Charlie

Their reasoning is correct when it comes to the contract, and it’s also the reason why you’d prefer to sign the contract through the LLC rather than personally. The LLC limits your risk and increases their risk.

I don’t think they’re being unreasonable to request this given the current market. I’m assuming that your field does have some level of competition with a lot of people seeking work. If that’s the case, then the power is more in the hands of the employer and they’re able to make such requests.

If you’re wanting to stick to your guns on the LLC issue, you’ve got to be willing to accept that the company may just find someone else for the position. That’s part of the risk of sticking to your guns here.

If I were you, I’d sit down and do a risk assessment. What is your real risk from signing on the dotted line yourself? What is the worst possible outcome? You may wish to contact a lawyer for assistance in reading through the contract you’re being offered.

Q6: Negotiating a promotion
My responsibilities at work have changed significantly over the past year. I have taken on not only more areas of responsibility, but also higher-level responsibilities such as strategic planning. My boss agrees that I deserve a promotion. Today I received a copy of my new job description, which spells out all the things I have been doing plus what else I’ll be expected to do in my new position. Unfortunately, the position title wasn’t the one I was hoping for. I believe I should be promoted to the manager level, but the job description says “junior manager.” My question is, what is the best way to negotiate for the position and pay I think I deserve?

Here’s what I’m thinking to do:
1. Be straightforward and tell my boss that I was hoping for a manager position, and invite her to explain her reasoning for only promoting me to junior manager. I would then try to counter her reasons with concrete examples from my performance this year and my potential for future growth. (My main weakness is that I have relatively low experience and am slightly underqualified; my counterargument is that my instincts have been spot-on so far, and my ability to think through problems has helped me perform well despite my lack of experience.)
2. If that doesn’t work, I will point out that my responsibilities are on par with what other managers are doing, plus I have been assigned to lead those managers on several team projects despite currently being the lowest-ranking member of the team. Thus, I should be promoted to the manager level if I am expected to do manager-level work.
3. If that doesn’t work, I will ask what steps I would need to take to get a full promotion and when we can meet again to discuss my performance. I will try to get a concrete timeline from my boss. If it is within a year, then I will accept the position and work my butt off to get that full promotion. If it is more than a year or if she refuses to specify the steps or set a timeline, then I will accept the position and work my butt off while keeping my eye open for opportunities at other companies.

What do you think? Is this a good plan for negotiation?

One more thing: I have found an interesting job listing at another company. It is in the same field with the same responsibilities, but with 15% more pay, a full manager title, and the possibility of working from home. These are big incentives, but I have not applied yet. I’m rather torn. I enjoy working for my current employer, I am getting a promotion (just not the one I hoped for), and I don’t know if I can get this other job (I would be more confident with 1 more year of experience under my belt). I don’t have pressing financial obligations that are forcing me to search for higher-paying work. In short, it would be safer to stay with my current employer and work toward a full promotion. On the other hand, I am young, hungry, and ambitious, and that job listing is dangling a lot of carrots.

Should I apply for this position? What if I requested an informational interview instead?
– Sandra

If I were you, I’d stick with the third option. I’d go in there, simply state that I would like to have a certain title, and ask what I would need to do over the next six months to achieve that title.

You already have your answer to the first option, and honestly, the answer to the third option is basically what you stated in the second one. If you talk about a gameplan to get you the title you want and you’re already doing the work for that title, then it’s going to be easy. Plus, sticking to the third option makes it appear as though you’re hungry and an up-and-comer, not someone who demands a reward.

As for the other job, there’s no reason not to feel out other opportunities, particularly if you feel like you’re hitting a glass ceiling at your current job.

Q7: Finding a community group
You talk a lot about finding groups in the community to join and participate in and find people that are potential friends. But how do you even go about finding such groups? I don’t even really know where to start.

– Angie

The best place to start is on the website of the community you live in and on the websites of surrounding communities. Look for their parks and recreation departments, their libraries, and their community calendars. Many communities also maintain a list of community groups of interest.

If you’re looking for opportunities, these resources will likely give you more than you could ever want.

If you have difficulty finding these opportunities, simply go to city hall and ask for assistance in locating such resources in your town. They’ll be glad to help you out.

Q8: Thrift stores in Des Moines
I’m going to be in Des Moines in a couple of weeks for business. Can you recommend any good thrift stores in the area? Thanks!!

– Annie

In the Des Moines area, I’ve had success with three thrift stores in particular.

The Goodwill at 1982 Grand Avenue in West Des Moines usually has a pretty interesting selection of stuff. I’ve had quite a few interesting finds in there, including some clothes that fit me well and some vintage video games.

Once Upon a Child is a great place if you’re a parent looking for items for your children. I’ve found some great clothes and a few toys there at awesome prices.

The best place I’ve found for used larger items in the Des Moines area is Changing Places Consignment. They mostly carry used furniture, lamps, prints, bookcases, and the like. If you’re driving a larger vehicle through the area, this is a place well worth stopping at.

Q9: PMI or student loan debt?
I am having a hard time trying to understand what interest rate is higher, my current student loan interest rates, which are pretty clear – 6.55%, 7.65%, and 6.8%. Or my FHA loan, which is locked in at 4%, but I am also paying PMI. I want to know if I should be making my additional monthly payments to my home loan so that I can remove the PMI by reaching 20% in equity or if I should pay down my loans? What makes more sense? My husband and I owe about $90,000 in student loan debt and our home loan is $220,000. We put down only 3.5% when we purchased in December.

– Richard

Unless it is an egregious amount, the PMI on your loan is likely not boosting the interest rate on your home loan to the point where it compares to the other loans. My experience has been that PMI amounts to an increase of roughly one percentage point in one’s annual rate.

For example, on our original mortgage, we had a 5.875% rate, but when you added in the PMI, our rate went to 6.601%.

My suggestion to you would be to call your lender and ask about the effective rate of your loan including the PMI. My speculation is that it will be somewhere close to 5%. Use that rate when comparing all of your loans.

Q10: Pocket change
What exactly do you do with your pocket change? I don’t accumulate much of it and it mostly just seems to take up space. I’m never really sure what to do with it.

– Ed

I keep all of my pocket change (and loose dollar bills) in a jar on my bedside table.

About once every year or two, I take the contents of that jar down to my local bank, fish out the dollar bills, and have them count the change using their change-sorting equipment. That money is then just deposited into my checking account.

I’m lucky in that my bank accepts change and counts it without skipping a beat. This is apparently a feature that many banks don’t offer. If you don’t have a bank available to you that offers this service, there are change-counting services such as Coinstar, but they take a large fee off of the top.

I’d probably try to seek out a bank that accepts loose change.

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. Canadian says:

    To the reader asking about the bus pass: 2 miles is a very walkable distance. If you could walk one way and take the bus the other way, you would save even more money as well as benefiting your health.

  2. Evaluise says:

    Trent, just for information: Stephen (the pay-the-credit-card-ahead-guy) is right, the amount does earn interest just like it would if it were in a savings account – perhaps a bit less, it varies. Obviously Stephen is in Europe and here – at least in Germany – VISA does this.

  3. NMPatricia says:

    For what it is worth, when I have paid ahead on my BofA VISA card, they have refunded it after a month. And no interest was paid. I live in the USA.

  4. Andrew says:

    Trent–could you PLEASE edit some of these questions for length? Q. 1, 5 and 6 in particular are full of endless gasbaggery–Q 1 boils down to “should I sell my condo at a loss?” ( for example).

    These correspondents aren’t nearly as interesting or unique as they think they are!

  5. Wes says:

    Q7: Depending on what you’re looking for, churches can also be a great place to get involved in a community group. While the focus won’t be centered around institutions actually created by your community (such as the library or rec department) the type of involvement you will have at a church would be substantially similar (working with children and other families, singing/playing in a musical ensemble, sporting and recreational activities, fundraisers for the local community, etc.).

    Also, if your trying to meet people to make friends, churches are great prospects. As a matter of fact, a recent buzzword in the church community is actually “community groups”, where families or individuals are grouped with others (sometimes with others in a similar phase of life, but just as often with a range of ages) for get-togethers and social support. And since inclusion is often encouraged at most churches (at least the good ones), you may find that the people already there are just as eager to get to know you as you are to get to know them.

  6. Adam P says:

    The question writer even states in his question that his credit card pays him interest “like a savings” account; then Trent gives an example of the person losing interest (in Euros!) versus if he had put it in a savings account(!). Do you even read the questions, Trent?!


    Q6 – tell your boss you would like the manager title and what would you need to do to get it. It sounds like they’d have to be quite creative to come up with things you would need to do to get it if you are already doing everything necessary to get it that other managers are getting. Have an HR member with you too, I think that sort of neutrality is helpful to be present. AND definitely apply for the other job that pays 15% more. You need to get out of your comfort zone sometime.

    Q10 – I started a coin jar when I moved into my new condo in August 2008. I rob the large coins (1 and 2 dollar coins in Canada) when I have need which is rare, and have never taken it into the bank. I estimate less than $10 in it after 3.5 years. Coin jars are becoming so less relevant for a lot of people in today’s debit/credit soceity. If I never went to bars I would never have need of cash. And even bars are getting slowing into taking debit/credit, most of them do it to keep from paying sales tax and income tax which makes me mad anyway.

    Q2 thank you Trent for not answering a tax question you don’t know the correct answer to, for once.

  7. Andrew says:

    Q5–the best way to figure out how much of a tax differential exists between a W2 job and a 1099 job is to actually sit down and do two sets of tax forms.

    Dig out your 2010 return, print some 2010 tax forms from the IRS website, and redo the taxes as if they had been subject to self-employment tax. This shouldn’t take too long and will give you an accurate estimation of the difference going forward.

  8. Andrew says:

    More on Q5– contract jobs also mean you fill out Schedule C, which opens you up to all sorts of deductions. This variable is a strong reason why no direct formula that converts W2 income into 1099 income ( or the reverse) is really useful or even possible.

  9. Johanna says:

    Q2: Charlie, are you sure that your employer retirement plan is an IRA, rather than a 401(k), 403(b), or similar?

    If it really is an IRA, I’d think that the person to ask about it would be your employer (or someone in your HR department, or whoever set you up with the retirement plan to begin with). They ought to know that what they’re offering you is an unusual plan, and they should be able to give you all the information on it that you need.

  10. Johanna says:

    Q3: Some credit-card issuers aren’t set up to deal with people paying ahead on their cards. If you end the month with what Trent is calling a “positive balance” (which I would call a negative balance – you don’t owe them, they owe you), that shows up in the system as a “non-zero balance,” and you can be dinged with a late-payment fee if you don’t make a payment that month.

    It sounds like Stephen’s card issuer is more sensible than that, but if any other readers are considering trying the same thing, I’d advise caution.

  11. cv says:

    For Q10, I used to roll all my change every so often and deposit it at my local bank, since they didn’t offer coin counting. I got fed up with that eventually and took it to a Coinstar machine, where I discovered that they do take a large fee if you get bills back, but you can get the full value of your coins, no fees, if you take the money as a gift card. Amazon was one of the options, as are various grocery store chains, so it was easy for me to get a gift card that was as useful to me as cash.

  12. Margo says:

    Q10: Coinstar doesn’t charge a fee if you get gift cards. Gift card availability varies by location, but the one at my grocery offers gift cards for that grocery chain. You can use grocery cards immediately, so I like these much better than retail or Amazon cards. A few months’ worth of coins turns into a bottle of wine or steaks for dinner in an instant.

  13. Becca says:

    Q10. Excess change seems to be a guy problem. This may sound radical, but when I buy things, I actually use the change in my wallet. So I rarely accumulate more than a couple dollars worth at a time.
    My husband, in contrast, doesn’t use his change to buy things, and it piles up in a dish on his bureau. I use his change in the summer months when I go to yard sales. If I have change in hand, it is far quicker to make a purchase than if I have to wait for the seller to make change for me. In yard saling, it is all about speed… quick in and out. I often put ten pennies in one pocket, already counted, then use them to make ten-cent purchases. I might put five nickels in another pocket for quarter purchases.

  14. Andrew says:

    Becca– so you’re that woman I stand behind forever in the grocery line as she counts her change!

  15. valleycat1 says:

    Q7 – Also, many public libraries and some locally owned stores have community bulletin boards that local groups post on. Or ask some of your friends if they know of any groups you might enjoy. Or start your own – post a notice in the classifieds (or on the community bulletin board) & plan to meet in a public place – coffee shop, for example- the first time or two.

  16. Roberta says:

    Becca @#13 – I’m with you – I spend my change and it doesn’t pile up. It does seem to be more of a guy thing – I think because in this country they generally don’t carry purses, so any change has to go into their pockets instead of into a wallet in their purse. When we got married, my husband had a five gallon water jug full of pennies he was going to leave for the movers – the horror! I put a small handful of pennies in my wallet every day. In less than a year I had used them all.

    Andrew at #14 – However, I am considerate about it. I would never keep people behind me in line waiting while I counted out massive amounts of change. (On the other hand, the day my son traded me his yearly accumulation so he could have bills instead, I went to the self-checkout line and paid for over 40 dollars of groceries in quarters alone – but I did it early on a weekday morning when there was nobody else in the store.)

  17. beth says:

    Q4: My qualm with that calculator is that it treats car insurance as a “fixed cost”. When I stopped driving my car to work everyday, my insurance went down. I’m not sure if it’s the same in the U.S., but if you’re only a “pleasure” or “occasional” driver, then your insurance rates will be lower than if you commute. Might be worth a call to your insurance company.

  18. Tom says:

    Q1: Babies are not going to judge you for living in a small condo – don’t fall into the this idea that I definitely need to sell this house now because I’m having a kid. I didn’t hear anything that sounded like needs over wants in your detailed e-mail. As the parent of a 1 year old, there are certainly times that I wish I had a smaller space to clean up and chase after the kid.

  19. Michael says:

    My credit union has a Coinstar machine, and they reimburse the Coinstar fee for members only. It’s a good arrangement.

  20. Becky says:

    Q1 :”It is frustrating because I feel like we are responsible with our money and didn’t necessarily do anything incorrect yet we may end up losing money on this decision to buy our first place” — This line of thinking is concerning. Buying a house like anything else can be a risk and this statement is much like saying “I was told I should invest and I lost money. I don’t feel like I did anything wrong” As a whole we need to stop playing victim and taking responsibility for our actions.

  21. josh says:

    Q9 – PMI is on your loan for a minimum of 5 years, even if you pass the 80% LTV ratio. You can refinance to get rid of PMI before the 5 year mark, but that is the only option to remove PMI early.

  22. Tom says:

    Q4 – To do the math another way, the annual bus pass only costs $0.18 per mile (dividing $175 by Trent’s 48 weeks x 5 days x 4 miles total). You’d need a ridiculously fuel-efficient, slowly-depreciating, with a great insurance rate and low maintenance costs to match that. The IRS reimburses about 50 cents per mile for business driving, so that’s a good a ballpark estimation for what the average driver can expect for their commuting costs per mile.

  23. Tom says:

    Q9 – You should have received a Federal Truth-in-Lending document with the effective APR of your loan at closing. Trent is right, it’s about a percent, maybe a little more if you financed after April of last year (PMI calculations went up at that time).

  24. Eileen says:

    Just an FYI that some Coinstar machines allow you to receive an e-certificate for certain stores without the fee. My machine includes Lowe’s, Amazon, Toys R Us and my local grocery store.

  25. Gretchen says:

    i don’t read the questions either (I skim) but I spend change like it’s, you know, money.

    Dh collects coins and he picks through them first.

  26. Other Jonathan says:

    Yeah coins = not that big of a deal. I’ve found they spend just like cash. I keep them all in my car and use them for parking meters and fast food. I don’t collect them nor use them very frequently, so it is never a problem.

  27. Dorothy says:

    Q10 — I’m a woman and I save my change. I almost never offer anything but bills to a merchant so my coins add up quickly. I use Coinstar to get Amazon.com gift card credit.

    My in-laws and I all have Kindles, so we use our coins to buy Kindle books from Amazon. We keep our three Kindles on the same account so we can share books. We rarely have to use a credit card to buy our e-books with this system.

  28. jim says:

    Q1 : I would wait until you are in a better financial situation. THere should really be no rush to upgrade your home today. You ought to figure out how your finances & budget settle out after the baby and your wife is back to work.

    Q4 : Unless your old car gets very good mileage then its likely cheaper to take the bus with an annual pass. Figure it this way. $175 /year for the buss is about 70 cents a day assuming you go to work 250 days a year. For a 4 mile round trip thats 17.5 cents per mile on the bus. If your ‘very old car’ is typical it probably gets less than 20 MPG in the city. If gas running $3.50 /gal then that means gasoline alone is 17.5 cents per mile.
    But that ignores all the other costs for your car. You also have to figure the more you drive that car the more likely it is to need repairs and maintenance, etc. If your old car gets great mileage and has low maintenance costs then it may be a different matter.

    Q6 : I would start by asking your boss how the promotion ladder works rather than get offended.
    It is quite possible that your current Jr. Manager title is simply your employers rules / process. You may have to take promotions one step at a time. At my job I did level IV work from day one and it took me a decade to get there. I had to move up one level at a time cause thats just “the way its done”. Depends on how rigid the bureacracy at your company is. If its a large company (> 500 people) then its more likely to have rigid rules.
    Yes there may be people with the manager title who do the same work you do but they may have had to step to manager from jr. manager. And maybe they took 10 years to get to a level you’ll hit in 3 years. Its also possible some of those people are jr. manager but just call themself manager for simplicity. Lots of people at my company have ‘senior’ in their title but never use it.

    Q9 : Depends on how fast you could hit the 20% mark on your home equity. PMI for FHA is about 1.1%. So you could be paying about $2400 a year on PMI. That PMI us due to not having the additional $36k equity you’d need to hit the 20% rate. So you’re paying $2400 due to lacking $36k. Thats a 6.6% cost for PMI on the equity gap. In other words if you had $36k today and you put it into your home loan you’d save 6.6% on the PMI and 4% on the interest or net 10.6%. BUT… the PMi only goes away when you hit that 20% level. If you put $30k into your homeloan you’d still only save the 4% cause the PMI wouldn’t be gone.

    If you could reasonably pay down the mortgage to hit 20% equity and then refinance to get rid of PMI fairly fast then thats definitely the better option. But if it would take you many years to hit 20% equity then it mostly amounts to the 4% mortgage interest vs the 6-7% student loan interest.

    To get a definitive answer you’d have to compare total interest costs plus PMI either way for a period of time. I ran some numbers in excel and I roughly figure that if you had another $100 to put towards debt then you’d come out ahead about $1700 ahead by paying down the mortgage first.
    THats using some guess work, without knowing all the details its hard to know for sure.

  29. jim says:

    Adam P suggested : “Have an HR member with you too, I think that sort of neutrality is helpful to be present.”

    That may not be a good idea. Sandra first needs to talk to her boss and see what they have to say. Getting HR involved may not be necessary. I also would not assume that HR is neutral. HR’s job is primarily to protect the interests of the company. So they are not neutral. Getting HR involved could even backfire. Bosses can even get upset if you go complaining about them out to HR.

  30. Finance Nerd says:

    One other comment on Q3 — if you pay online, many credit cards will NOT allow you to pay more than the current outstanding balance. So, you’d have to mail in a check to prepay it, and as others have said, this probably won’t work either, at least in the US.

    For the OP, who is in Europe, the situation is different, which once again highlights why Trent should stop answering questions he doesn’t know the answer to.

  31. Johanna says:

    Q4: Can you take the bus for other trips, in addition to taking it to work? That would make the bus pass even better value.

    Q7: What kind of things do you like to do? Many “groups in the community” are organized around a specific interest or activity. If you’re just joining groups willy-nilly (as some people do), that’s just going to be frustrating all around – frustrating for you, because you’re stuck doing activities that you don’t enjoy, and frustrating for the other people in the group, who are likely looking to meet people who share their common interest.

    Once you’ve narrowed down what kind of groups you’re interested in joining, your best bet is probably to search online. The “meetup” site hosts a lot of good activity-oriented groups.

  32. Briana says:

    @josh (21) – I think that you are incorrect ….”For home mortgages signed on or after July 29, 1999, your PMI must – with certain exceptions – be terminated automatically when you reach 22 percent equity in your home based on the original property value, if your mortgage payments are current.” (from ftc.gov referencing the Homeowners Protection Act of 1998)

  33. Briana says:

    @josh (21) – Nope, I was wrong. FHA loans have a 5 year requirement. Oops!

  34. Anitra says:

    Q9…I am looking at buying a house and looked at FHA loans. The loan I was looking at had “mortgage insurance” but it wasn’t PMI in the traditional sense. The way it was explained to me was that since I wasn’t putting 20% down, the lender had to insure the loan so I had to pay insurance on it. However, when I reached 20% equity in my home, the PMI didn’t go away (since all 96.4% was being funded on one loan). I could get rid of the insurance charge by either refinancing or petitioning to get the insurance removed. Not sure how effective the petition process would be. What I am getting at is simply, make sure you understand how your mortgage insurance works as it might not be a traditional PMI situation which I understand to be when you have 2 different loans (like 80% and 20%). Good luck with the process!

  35. Anitra says:

    Oops I meant 96.5% not 96.4%

  36. Sarah says:

    Q6 – I agree with jim (#28) in that it may be bureaucratic rules. At my company, if you are under-qualified in terms of years of experience, it takes really special circumstances to jump up to a level, even if you are doing the same work. (Doing very similar work as someone levels above you is not uncommon in my experience.) Your boss might even agree that you deserve to bea manager, but it isn’t within his power to put you there.

    I would ask your boss to outline the promotion process and specifically get him to to point out any additional responsibilities you’d have as a manger vs. junior manager (if there are any).

    But here’s my main advice for you to consider. If you really want the manager title & salary and you find the reason you can’t get it is mostly bureaucratic, interview for the other job. If you get it, you can use it as a bargaining chip and get around bureaucracy if they want to keep you. If you aren’t offered it, nothing lost.

    There is a risk they’ll let you take it, but the worst case scenario is you have a new job with more money and more responsibility. You have been clear about what you want at your current job, and if they can’t give it to you, you won’t burn any bridges by leaving.

    This is a very common tactic (though examine your company culture and maybe consult with a mentor you trust).

  37. Mark Gavagan says:

    Q-5 Charlie, find an experienced attorney who specializes in these issues to outline all the risks you would undertake by signing personally. You might pay $300 for an hour of time, but it’s well worth making the right decision instead of being cheap and making the wrong one.

    Also, I’d be hesitant to work with any company insisting on having me sign something personally (other than for a business loan), for the purpose of enhancing my liability in the event of losses or litigation.

    Lastly, it’s surprising that a software programmer would need help calculating what an hourly rate under W2 status is worth under 1099 status.

  38. Jackowick says:

    @ #4 Andrew.

    And you’re assuming your opinion is majority rule? I like reading the full questions without oversimplifying.

  39. Aaron says:


    With regards to PMI or any other debt, the goal is not to determine an isolated “effective interest rate”. The goal is to determine the total cost of servicing the various debts, and how much it costs to reduce the servicing costs. That sounds like one and the same, but it isn’t.

    Case in point, this is an extreme example, but it illustrates the point regardless. Let’s say your PMI is removed once your loan to value ratio is 80%, and PMI costs you $100/mo. You are $1000 away from 80% L2V to get it removed. But even when you calculate the effective interest rate with PMI, it’s still lower than a credit card you’re carrying a balance on. It may still make more financial sense to pay the principle down on the mortgage. The reason is it will only cost you $1000 to reduce your monthly payment by $100/mo, which takes less money to reduce your effective interest rate on all your debt. Saving $100/mo in interest may take $5000 on the credit card in extra principle payments because you don’t know if they’ll lower your interest rate just because you paid down the balance (and most times they won’t).

    Paying off the highest interest rate debt normally is the best way to go, but when you’re talking PMI rules, where you know for a fact the effective monthly interest rate will reduce at a given point, the calculus is a bit more complex. Check the rules regarding removal of PMI though, as others mentioned, because FHA loans require a minimum of five years regardless of how quickly you pay down the principle.

    This applies to other debts as well. The goal should be to reduce amount of interest paid, NOT pay down the debt with the highest interest rate. They’re not always one in the same. Another example could be a situation where you have a credit card with a higher interest rate than your mortgage. Mathematically speaking, if you were only offered a balance transfer for the credit card and not the mortgage to a lower interest rate than the mortgage, it would be better numbers wise to take the balance transfer and pay down the mortgage than just pay down the credit card. I know a lot of people who just attack the highest interest rate debt but don’t consider there are other alternatives to reduce interest paid.

  40. valleycat1 says:

    Comment #4 – I agree that many of the questions are too long-winded, but I normally just ignore them or skim them.

    When Trent was editing questions down to just the main point, most of the comments were either disagreeing with Trent until he jumped in the discussion to provide more details, or saying something along the lines of ‘without the specifics, it’s hard to say just what you should do.’ So he cut way back on the editing (so to speak).

  41. Angie unduplicated says:

    Take the annual bus pass. For auto expenses, nobody ever includes the lifetime costs of injuries from a MVA. The bus is safer, you can destress after work and meditate on the way in, and meet new people. If walking is an option, take the bus to work so Mr. Nitpick won’t complain about disheveled hair or perspiration. Then walk or run home, if you have locker and changing facilities available.
    If you can negotiate “employer convenience” benefits sufficient to offset or improve on wages, take the 1099. Employer convenience benefits are nontaxable. Note, though, that non-taxable bennies and Schedule C deductions will not improve your bottom line for Social Security purposes, assuming that it still exists when you and I retire.

  42. kk says:

    Stephen (pay ahead credit card guy), We also pay ahead on our credit cards. (Mostly for traveling purposes.) And yes our credit card positive balance earns interest money as well. It’s a win win situation for us. However, we are located in Europe and the credit card system is different than in the U.S.

  43. SLCCOM says:

    The bus is not necessarily safer. You have to wait for the thing, and it isn’t always a safe place or time to wait. When I was in college I tried, briefly, to take the bus. I had to wait in the very early morning for a bus that may have arrived early and left already, forcing me to wait for an hour for the next one. I had absolutely no way to know if the bus was early, on time, or running late. The bus stop was in a sketchy neighborhood with no way to get help in an emergency. And kids, this was in the Stone Age before cell phones. I figured out quickly that there was very likely to BE an emergency if I showed up there the same time every weekday morning.

    There is also the time aspect. It it takes you 15-70 minutes to get home by bus (including waiting time for the next bus) and 5 minutes by car, that is time you have lost. Depending on where you live, the other passengers may not be folks with whom you really want to spend any time, which eliminates the “destressing” option. The risks of a collision by car when traveling 2 miles is generally minimal, too. Getting hit by something bigger when you are walking is far more likely to be seriously incapacitating. Some of us live where the public transit is, shall we say, less than optimum. If you miss the bus and have to wait an hour for the next one, not so good.

    Looking for community groups: Craigslist has a lot of useful information and leads. However, I have found that the best way to find the groups is to go to the stores that sell the supplies for those groups. I am a musician, and when I move, I go to the local musical instrument store and in minutes am connected with all the local groups. If you paint, go to an art supply store. If you knit or sew, there are yarn and fabric stores. If you run, try the shoe store. And so on.

  44. Des says:

    Q4 – Others have already said it, but you could just walk that distance. Most people can walk two miles quite easily. I walked the 3-4 miles to and from work for years because I was too cheap to pay for the bus, and I figured it was my daily exercise to boot :)

    Depends on where you live, of course. Winter in Michigan? No. Summer in Texas? No. I live in the moderate (if rainy) Pacific Northwest and could walk year-round with a bit of a devil-may-care attitude towards the rain :)

  45. SLCCOM says:

    #44 Des: so, I guess you have rust instead of a tan? :) Send some of that rain to the Southwest!

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