Reader Mailbag: Hand in Glove

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. Investing in a taxable account
2. Pushy mother of child’s friend
3. Buying furniture
4. Going back to school
5. The burden of care
6. Idle computer energy drain
7. Consaidering a job change
8. Low interest debt?
9. Secret Santa difficulty
10. Road trip music

Sometimes, when you see someone you once spent a lot of time with but haven’t seen in a while, the interactions can be awkward.

At other times, you’ll fit together like nothing ever changed.

I’ve experienced both in the last few days.

Q1: Investing in a taxable account
I match my employers contribution of 5% in my 401k (started last year I’m currently 29). I’m planning to open a Roth IRA with Vanguard on my 30th birthday. I have a checking account with Charles Schwab which includes a brokerage account the question is what kind of funds do I invest in? My 401k has an asset allocation of 30/70 Pimco Total Return Bond Fund/Spartan 500 index fund, for the Roth I was thinking of using a target fund, but I’m clueless as to how to use the Schwab brokerage account, I was interested in something that would give me passive income. I’m 29 with a 401k, Schwab brokerage account, and soon to be established Vanguard Roth IRA and I’m earning about $30k/year, less than $180 in debt, and maybe $7k in precious metals, my emergency fund is less than $300 but I’m working on it. What do you say? I started late but am I on track? I’m tired of spending I want to be a saver. Again what do I invest in a taxable account? Thanks

– Ron

The first thing I’d do is figure out what my goals are. Why are you saving? Do you want an early retirement? Do you want a well-off retirement? Do you want a nice home in ten years?

Investing without a goal in mind is like spending four years at a university without a major. You’ll have accumulated a lot, but you won’t necessarily be ready to take the next step.

I’d suggest figuring out your goals before you do anything else. A taxable investment account may be a big part of achieving those goals, but it’s not a goal in and of itself.

Q2: Pushy mother of child’s friend
I left my job earlier this year to stay at home with my two daughters. I left a well paying career because of stress and in order to spend more time with my girls. I’ve taken on a number of volunteer roles as well as enrolled in a co-op preschool with my youngest daughter which takes up two days of my week. Suffice it to say that I’m busy during the week. My older daughter has a friend at school who really likes to come over and spend time at our house so much so that she routinely asks if she can come over after school. This bothers me because I’ve always believed that you wait to be asked over to someone’s house.

Recently, the friend’s mother has started asking me to watch her daughter for several hours at a time sometimes multiple times a week. She is in college and has recently broken up with her fiancee who helped with her childcare. She also waits to ask me until an hour or so before school lets out. This has really started to bother me on multiple levels. She has never offered to pay me or even watch my children in return. I don’t mind helping out but it doesn’t seem fair that she asks me so often. I also don’t like being put on the spot at the last minute. So I started not answering the phone when she calls or making up excuses about why I can’t watch her daughter. However, I feel bad about it. She is in a tough spot right now. I’ve tried to explain to her that I don’t mind helping but I need advance notice but that doesn’t seem to do anything. I’m starting to feel rather resentful. So what should I do? I quit my job for a less stressful life not so I can be the on-call, unpaid babysitter for other people. Do you ever find yourself in a similar situation since you do not have a normal 9am to 5pm job?
– Carla

The mother is taking advantage of the situation, no doubt about it. The solution is for you to simply put your foot down and say that you’re not available to babysit at her convenience.

One thing worth noting, though, is the impact this is all having on the young friend of your daughter’s. She’s clearly got to be aware that her mother is going through a hard time right now and may be looking for some steadiness in her life, something you might be providing for her.

If I were you, I’d help out some, but I would not do it at the drop of a hat. That’s the role of a paid babysitter, which you’re not.

Q3: Buying furniture
My husband and I recently moved into a 3-bedroom house, which we are renting. We have very little furniture – a mattress, a hutch, a couple bookshelves – because we recently finished an extended travel sabbatical, and we gave away all our old furniture before we left. We are in our mid-30’s, have no debt, and no kids (though we hope to start a family in the next year or two). One well-behaved dog. Our 401Ks and IRAs are funded, and our emergency fund is stocked. We plan to eventually buy a home, probably in the next five years, but haven’t chosen exactly where we want to settle down yet (the 20%+ deposit is already in the bank) and we live in an area where the housing costs are very high. We are allergic to debt, and prefer to spend our money on experiences over material things…which leads to our dilemma: spending money on furniture.

Our challenge right now is figuring out our strategy for furnishing the place. Do we buy a few quality pieces that we plan to keep for our future home (sofa, dining table, dresser, end tables) and furnish the rest with inexpensive and/or “disposable” furniture? Or do we furnish the whole place as inexpensively as possible, saving our cash for when we do buy a home? Since you live in a house that is not your long-term dream home and have children, I’m interested to hear your thoughts on acquiring furniture.
– Anne

Our method for this was to furnish our entire home as cheaply as possible, then start upgrading pieces as they wore out or opportunity struck us with higher quality pieces.

For example, our original dining room table was an ancient and well-worn hand-me-down from my great grandmother. One of the legs was a bit wobbly and when it reached a very bad state, we replaced it with a much more long-term dining room table.

I can tell a very similar story about our couches, our chairs, and so forth. Of our first batch, many came from Goodwill or were hand-me-downs. Over time, we replaced them with much better versions, but not all at once.

Q4: Going back to school
I am a 25 (soon to be 26) year old who graduated from my undergrad about 2 years ago. I originally went with the intent to get a degree in education and along the way became involved with a residence life organization (a group of students who work with college students who live in the residence halls on campus) and decided to look for graduate assistantships that would pay for graduate schooling while I worked with residence life and college students. I dropped my education major and graduated with Spanish and English majors.

I received a graduate assistantship in another state (I am originally from the Midwest) and decided to go work out East and enjoyed my time working with the college students. However because of the heavy workload, homesickness and an unwavering feeling that I should be working with different students I decided to leave after one year. Following that decision, I decided to move back to my home-state and take a year off and figure things out.

During that year I decided that I wanted to go back to school to get that education degree but more specifically for Special Education. There have been numerous instances that have pointed me in the direction of working with students that have disabilities. This upcoming year I will be attending graduate school for Special Education. I have started to pay off (very slowly) student loans that I acquired while I was taking my undergraduate degree. I guess I am wondering (since I know that Special Education won’t make money) what the best way about getting funding is. Or if you think this is a wise decision financially? I guess any direction would be greatly appreciated.
– Emily

You can’t make your career choice based on finance alone unless you want your career to be mired in unhappiness. A career that you solely get into for the money will either lead you to a life you don’t like or to a wasted degree.

If you’ve figured out what you want to do, then I would go for that degree. Go for it with relish, get every valuable bit of education and experience you can, and put yourself in the best position you can to get the job you want.

As for funding it, your best route would be to start seeking out scholarships and aid specifically for that area. There tends to be aid available for people who want to take on educational and career paths such as these. Start with the education department at your institution and also check with the financial aid office.

Q5: The burden of care
If everyone takes steps to prevent health care facilities from “taking all their money” then who is supposed to pay for all of that very expensive care? Are you and I supposed to help bear the burden of someone’s care (should he need it) while his children benefit from his […] windfall? I have a parent who is in Assisted Living which costs almost $4000 per month. Because my parents were frugal there was money in the bank as well as a home that will be sold to pay for my Mother’s care for as long as possible. This is her money—not mine – not an inheritance for the Grandchildren. If she did not have these resources she would be (and will be if she outlives her money) receiving Medicaid and living in a Nursing Home although she does not need to be in a Nursing Home – she just needs some help with daily living. My family was not wealthy—they scrimped and saved all their lives and I am sure paid their fair share of taxes to help take care of those people who somehow made sure their children would inherit their money..

Have you considered this aspect of people trying to “hide” or gift that money so that healthcare facilities don’t “get it”? Who IS supposed to pay those (underpaid) medical professionals who care for us when we are old and infirm – especially if we do not or cannot move our parents into our own homes and care for them ourselves?

I could not live with myself if I knew I had all of my Mother’s money while she was forced to live in a Nursing Home when she could no longer live alone but did not need 24 hour nursing care. And Medicaid will NOT pay for Assisted Living – only Nursing Homes.
– Rhonda

It really doesn’t bother me too much, to be honest. If a person has accumulated significant wealth in their life, then they’ve had to pay taxes during that accumulation, likely at a higher rate than people with less wealth. They’ve often paid a lot of taxes over the course of their life.

That money they’ve accumulated is their after-tax money and they should feel free to spend it as they wish. If they choose to spend it by gifting it to family members, then rely on a lower level of senior care as is made available through government programs, that’s their choice. If they want to hang onto that money and have a higher level of care, that’s also their choice.

There’s also the case that you’d be punishing the frugal. If someone can blow every dime they’ve earned throughout their life and then the state takes care of them at the end, but someone who carefully saved throughout their life has to pay for that care out of pocket, the situation is encouraging people to just blow their money.

Q6: Idle computer energy drain
I have become very intent on saving electricity where ever I am able to. Several blogs have told me that saving electricity by unpluging or switching off devices with a constant power draw, such as laptop and phone charger, can save me a few dollars from my power bill every month. All of my devices are on one power strip, but it is a pain to switch it off every time I am not using it (under the desk, hard to get to, etc etc). Am I really saving a significant amount of money by doing this? Or am I crawling under the desk for nothing?

– Craig

It will save you a few dollars every month, but just a few dollars. Is it worth it for you to climb under that desk several times a month to save $2 or $3 or $4? I can’t really answer that for you.

For me, it would be worth it to rewire things so that such a switch is easily available without a lot of effort. What I did with my main computer setup is get a power strip with a “master” plug-in where if the device on the “master” plug-in isn’t drawing electricity, then nothing else on the strip gets any power. I plugged my main computer into the “master” and devices like the monitor and the printer and the USB hub into the other slots.

If the only option is to crawl under the desk repeatedly for $3 a month, it wouldn’t be worth it for me. I would probably look for other solutions to the problem, though.

Q7: Considering a job change
I am in an interesting position right now as a full-time graduate student. I cut back on my hours at my loan servicing job to go to school full-time this fall. (Library Science) I absolutely love my program and being a student again, but I’m struggling because I am very unhappy with my current job. I’ve been at the same job for three years due to the bad economy and the safety net of a job with health insurance. To be perfectly honest, this job also helped me decide to return to school after I realized how unhappy I was working there!

I seem to run into the same problem every few months. I’ll tell myself I need to count my blessings because I have a job with insurance and can go to school full-time. Having this job takes off some of the financial stress as a student, and I’m able to volunteer to gain experience in my graduate field of study. But then I run into a stressful period or become upset with something that happened at work and I find myself dreading the next work day. I’m very frustrated with some aspects of my job that are beyond my control, but it mainly boils down to some business practices emphasizing quantity over quality and the lack of opportunities to advance in my current position. It’s strange because I consistently receive good reviews from my managers but I just hate the job itself. I don’t find very much personal satisfaction with my work, and I don’t like working for a large corporation.

I feel terribly guilty complaining about my job when so many people do not have jobs or health insurance. I also feel that since I repeat this same cycle every few months, I should try to address these feelings and at least think about finding a different job. But I just don’t know if it is smart to try and find something else now that I am a student.

Do you have any advice for me on how I can improve my attitude? Or is it really just a better idea to try and find a different part-time job that will be more tolerable?
– Louise

In your situation, this job is a blessing, but I think you’re looking at it from the wrong perspective. This job is a paycheck. It’s nothing more and nothing less. It is not furthering your career ambitions. It is merely making your path to the degree you want much more comfortable.

Compare it to the other part-time options you have, such as working at Burger King or being a checkout person at your local Target. The compensation would most assuredly be less, you would be without insurance, and you’d probably have many of the same complaints.

Go there, do your work, and conserve your energy and thoughts for your Library Science degree and your career after that. Ignore the politics of the job and other factors. Just do the work, but keep your focus on what your passions are.

Q8: Low interest debt?
I work full time and go to college part time. I have to work in order to pay for school. I am faithful in saving for my tuition every semester, as well as saving for retirement and putting towards an emergency fund. Since I am 27 years old, I know that now is the time to save for retirement in order to take advantage of compounding interest. This is my question: Since my income is not high and I qualify for financial aid, should I just use the financial aid (at a low interest) to pay for school – even though I have the money saved up for it. Furthermore, I would use the saved money to max out my Roth IRA for the year. I think of this because I feel I will be able to pay back my loans when I graduate while taking advantage of about 2 more years of compound interest. On the other hand, I am nervous about having a student debt. What do you think?

– Mike

I would avoid going into debt, even with relatively low rates. Having that debt after you graduate will restrict your options and your career mobility by raising your monthly required bills. This is not something you want to have freshly out of college.

My single biggest financial regret in my life is taking out more student loans than I needed. Student loans became an albatross around my neck for the last decade.

If I were you, I wouldn’t sweat the retirement savings at this point. If you get out of college with a degree and without debts, you’ll be far ahead of the financial game anyway.

Q9: Secret Santa difficulty
At my office, we have a “Secret Santa” exchange each year. Rather than drawing names, everyone puts a $20 gift into a box, then everyone draws a gift out of the box.

This seems like a waste of money to me and I don’t want to participate in it this year. How exactly can I get out of this tactfully?
– Megan

It depends greatly on the culture of your office environment. At many offices, such a gift exchange is just a way to have a social encounter with coworkers, often a lengthy one. The gifts are secondary – the reason for doing it is coworker relationships. If this is a job you value, that kind of relationship building is well worth the $20.

This is also a great opportunity for “regifting.” If you have an item around your home that’s unused that you could easily put into the exchange, do so.

Of course, there are other offices where this is just something people do very casually, without much social interaction or a big deal made of it. If that’s the case, just simply bow out with the person running it. Talk to them privately and just say that Christmas means something different to you.

Q10: Road trip music
Like you and Sarah, my wife and I go on lengthy road trips when we visit family. Along the way, we listen to music. However, my wife and I have very different tastes in music. I like Muse, she likes Adele. I like Tool, she likes Norah Jones.

To put it frankly, I’m not a big fan of “her” music, nor she mine. How do you guys handle music selection on your road trips?

I know this isn’t a typical “reader mailbag” question, but it’s something that we’ve bickered about off and on over the years.
– Andrew

Sarah and I do have different tastes in music, and this causes occasional difficulties on road trips. We have two solutions.

First, we often listen to podcasts. While we don’t like the same music, we do have other interests in common, such as current events. I’ll just get a bunch of podcasts on current events and other shared interests before we go and we listen to those.

Another thing we do is seek out artists that we both like. The way we do that is that we both occasionally build eclectic lists of stuff we each like, then we listen to these together and the other person listens for things that they like. Through this, we’ve built at least one good-sized list of stuff we both like.

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.