Updated on 06.05.14

Reader Mailbag: Impromptu Travel

Trent Hamm

What’s inside? Here are five word summaries of the questions answered inside this mailbag. Click on the number to skip straight to that question.

1. Co-signing with bad credit father
2. How many people read TSD?
3. Removing stains from cloth diapers
4. Percentage for emergency fund
5. Personal loan for adoption
6. Gloom, doom, and e-funds
7. Difficult job search
8. Frugality, clutter, and hoarding
9. Regular IRA versus Roth IRA
10. Which debt to pay first?

This weekend, we went to a wedding of an old friend in the middle of Wisconsin. On the way back, Sarah says, impromptu, that we should stop for the night and visit family. My work plans involved us going home, of course, so I’m writing this mailbag on the road between wireless hot spots, sitting in the front seat of a cramped Prius.

My Father is a retired teacher who started in real estate about a year before the current economic crash. He had three houses that he owned and was renting out to tenants. Once the real estate market crashed, he was unable to make a living in real estate and tried to get back into teaching, but hasn’t been able to get much more than temp sub positions.

Needless to say, he wasn’t able to keep his houses. One has gone into foreclosure already and he’s trying to negotiate with the banks on the last two, but it’s looking like he’s going to loose those as well. He has a motor home that he will be able to live in temporarily if he does loose his homes, so he wont be homeless.

Recently he asked me if I’d be wiling to co-sign a new mortgage with him. He wants to leave his area (southern California) and move to an area where the housing market is better and prices are cheaper (Arizona). Since his credit is completely obliterated by the foreclosures, he would never be able to buy any time soon. He’s looking for a small, cheap house that he can live the rest of his life in. He would make the downpayment and all mortgage payments, I would simply assume the risk. I’d love to help my dad out, but how would having two mortgages affect my credit? Would co-signing with someone who has lousy credit affect my credit? Is it even necessary to co-sign, would it be better for me to put the mortgage in my name and treat it like my dad is renting from me? If, god forbid, he were to pass away, which would it be better to have the house totally in my name, or be a co-owner? I know you’re not a real-estate expert, but I’m sure you’ve done some research on this, so any advice would be greatly appreciated!
– Matt

If you cosign, the impact on your credit will be relatively low unless your father stops paying the bills. Then, if you do not, your credit will be in the hurt locker.

If he passes away, the same is true – if you’ve signed the mortgage, then it’s now your mortgage. Better keep up the payments! Of course, if you’re not specified as an owner of the house, the only thing you lose by not paying at that point is your credit.

I am generally extremely hesitant to encourage people to cosign on any loan with family members outside of a parent cosigning a college loan for their children. So often, such arrangements end in fights and broken relationships. It’s just not worth it.

I believe you mentioned it in the past, but out of curiosity, about how many people follow your site or subscribe to it?
– Brandon

I have about 82,000 subscribers. About 28,000 of those get The Simple Dollar by email – the rest get it by their RSS reader (like Google Reader).

The site gets about 700,000 visitors per month, though that varies a fair amount from month to month.

In addition to that, I have a lot of additional readers that are hard to quantify because my site’s content is syndicated elsewhere. For example, I get a lot of readers because my site’s content is syndicated at the Christian Science Monitor, as you can see here. Those numbers are extremely difficult to quantify in any reasonable way.

As a fellow laundry soap maker and cloth diaper user, I’m wondering how you deal with the stains in newborn diapers. I’m wondering if there is an easy method that I hadn’t thought of yet.
– Christina

I turned to Sarah, the resident expert on this:

“It depends on the cloth diaper, but I have the best luck just using a mix of washing soda and Simple Green. I rarely have any trouble with stains when I use the two of them as a mix.

I use about two teaspoons of Simple Green to 1/4 cup washing soda. Usually, I put the Simple Green in a spray bottle and spray it about 12-14 times right into the washing machine when it’s filled with water, then spread the washing soda evenly on the water surface.

I usually don’t have any stains at all when I’m done. If I do, I just repeat the Simple Green and washing soda.”

So there you have it, from our resident cloth diaper washing expert.

I graduated from college last May (i.e. ’09), and am lucky enough to have a job, but I still have considerable student loans and am trying to establish a nice emergency fund. In general, I have pretty good control over my finances, but I have a question I would like your advice on. I just received a bonus at work, and recently had a birthday, so I have a little extra cash than I usually do, and am trying to distribute it effectively. About what percentage should I put towards loans and about what percentage should I put towards my emergency fund? When a person has a little extra cash like this, what percent do you recommend on a little splurge? Although I know it must be done, after getting this money, it can be a little depressing putting it all towards debt retirement and a savings account, as I have done in the past.
– Tim

If you have no emergency fund, it should probably all go towards your emergency fund. I usually recommend that a person have about two months’ worth of living expenses in their emergency fund if they’re single.

If you already have that, then I’d focus more on the debts, starting with the highest interest one.

With splurging, I don’t think it matters too much as long as you’ve thought it out and stick to a consistent policy. My wife and I don’t splurge, per se, but we do often decide on “splurges” together and save towards them and windfalls usually are used to boost that savings to some degree.

My husband and I racked up some major credit card debt several years back (about 34k). We haven’t used credit cards for nearly 2 years now, and 6 months ago we enrolled in a debt management plan through CCCS to simplify and lower our payments; it’s been tight, but we’re doing it and are determined to follow through and not accumulate any more consumer debt. My husband recently got a better-paying and secure job (I’m employed too & we make about $70k total), and our car will be paid off in about 9 months, so we are on track to improve our situation, save some money, and hopefully pay off our DMP early. We pay a very modest rent, have no cable, use prepaid cell phones and free VOIP home phone, no video games, etc. etc. etc. to keep expenses low.

That is all background to my bigger question. We have been trying for many years to have children, but are intractably infertile. I am unwilling to undergo hugely expensive IVF treatments with the risk that they might not work, and we have recently decided to move on and pursue adoption–a path we would have chosen much sooner if not for the potentially high costs, bureaucracy, etc. involved.

We have good friends who suffered from infertility themselves years ago, and took me aside about a year ago to offer to loan us money for infertility treatments or adoption, saying they didn’t want finances to be an obstacle to us having children (they are quite wealthy, and made this offer completely spontaneously). I have been hesitant to take them up on this because a) I don’t want money to distort our friendship, and b) I am hesitant to go further into debt–however long-term and low-interest it may be.

On the other hand, it will take us years to save the $20-25k needed to pay for an adoption; we would be in our forties by the time we saved enough, and we really want to be parents. The federal adoption tax credit is $13k, so we could quickly pay off a portion of the loan ($13k minus our total tax for the year, so say about $6k??). There are also some adoption grants that I would pursue that might pay $500 to a max of about $10k, but of course there are no guarantees of getting one.

I understand the major ramifications of both options (waiting & saving vs. accepting a loan); but it would be very helpful to hear your perspective. Subjectively, it feels like not being able to afford an adoption for several more years–after trying to get pregnant for 5 1/2 years already–is our punishment for making stupid financial decisions in the past. Objectively, I feel strongly that debt and finances should be treated as a practical rather than a moral matter; but the issue of having children is such an emotional one that it is very hard for me to be objective here.

– Lynn

I agree with you about the friendship thing, actually. If the friendship you have with these people is valuable at all, I wouldn’t borrow money from them.

If it’s an ongoing concern with them, you should sit down with them and simply tell them that you really, truly appreciate their offer to loan you the money, but that you’re declining it because you know the negative impact that loans can have on friendships. One only needs to read The Simple Dollar for a while to know how badly it can end, even when people have the best of intentions.

Wait. Use your adoption dream as a focus point to encourage your diligent savings. Work together to reach your dreams without disrupting friendships.

With all the gloom and doom about the poor economy and how another recession is just around the corner, do you think I should beef up my liquid savings? Possibly pulling back a bit on the retirement investments? I just don’t know what I should be doing these days money wise, other than just saving as much as I can. Sometimes I feel like a hoarder.
– Laura

First of all, I think the “doom and gloom” is usually overwrought by “newscasters” and commenters who make a very tidy profit by predicting doom and gloom. People pay attention to negative news and commentary – the ratings prove it time and time again. Rest assured, if it can be spun negatively, someone will be making a buck doing just that.

If you feel uncomfortable with your emergency fund, add to it. Don’t worry about it, either. It’s essentially a very secure investment with a low annual return – no risk, but no huge reward, either.

As for reducing retirement savings, I’d use a retirement calculator and see whether or not I was on pace for the retirement I wanted.

I’m 25 and have been living in the city I live in for 1 year, and the state I live in for about 3 years. I enjoy living in the area and have learned a lot about myself and others while living here. My only problem is that I work in a different city (and state) than I live in, and would like to change this sometime in the future — Its a lot of driving, but it does not really get to me all that much right now. I’ve been trying to apply for as many local jobs as I can, but around here the job market is pretty tight and we dont have much of an employment base outside of government money of various sorts (federal, state). While this has helped the area weather the storm, it is extremely difficult for others like myself to find a job. I’ve been thinking that the best thing I can do to find employment in my area is to get to know as many people in fields that I am interested in as possible. This is difficult, however because I have only lived here a year and am focused on paying down my debt, so I dont really go out that much, and I dont really spent that much time in the city because my commute is long and my job is out of state. I would like to get more involved in the things that are going on in my community, but I just dont know where to start. It seems like you are quite involved in your community (you’ve mentioned it briefly a few times) and I was wondering what all you do in the community, and where you think I should start. I know that a common suggestion is to head to my church and help out around there and network as much as possible, but I’m not really a religious person, so it makes me less inclined to attend church themed gatherings because I feel like they are trying to convince me to do something for them (attend their services) that I’m not positive I want to do. Do you have any suggestions for other quality networking opportunities that will also allow me to help out my city in some way? I’m interested almost everything, and I dont have a problem doing manual labor (such as clean ups) but I usually dont hear about things like that until after the fact.
– Jeff

The first person I would talk to is with a pastor at one of the local churches. Simply explain what your situation is and see if they can help. Quite often, pastors aren’t out to “recruit” you – they’re actually out there doing what Jesus says, which is to help the poor and needy. My pastor is one of the best people I’ve ever been around and she’s constantly helping random people in our community, whether they’re church members or not.

Being involved in the community is great, but it takes a very long time to build up a lot of connections in the community that can help you in such a situation. If you don’t have them built already, it’s pretty hard to just show up at community events and immediately ask for help.

Your best bet, if you want to start on that route now, is to spend your extra hours doing community volunteer work. Start with your city’s parks and recreation department – they usually have tons of things going on that could be aided by volunteer work. Use that time to start connecting with others around you.

Lately, I’ve reading quite a lot about getting rid of clutter (in blogs such as Unclutter.com), and I’ve cleaned my room pretty good, throwing away everything I considered useless. And that felt great. My room is much cleaner and much more organized than ever before.
Now here are my questions:
a. Do you like to keep your room/house/garage clean and tidy? (I mean, we all love clean, but do you actually do it?)
b. How could frugality, bulk buying, etc. live in harmony with a clean and uncluttered house?

– Matthew

It really goes in phases with us. We have three little kids and the only constant with having three children that age is that something will happen to disrupt your best laid personal plans. It’s pretty much a given. So, there are times when the house looks beautiful and everything is wonderfully organized and there are other times where it looks like a hurricane hit the house.

Our biggest drawback, really, is laundry. We do a lot of it but we still often fall behind and have to have “laundry days” to catch up.

Most of our bulk buying is with household goods like toilet paper and diapers. We store the excess in the garage on the shelves, so it’s kind of out of the way. I think if you have a good place to put your bulk purchases, it’s not hard to be organized and be a bulk buyer.

First, I’ve basically been teaching abroad for several years, which means I don’t get any extra help on saving for retirement. I started an IRA during that time under some misguided information, now at around 17k. I now know that I should have started a Roth IRA because I can’t possibly be making less than I do now. My question now is: should I roll over my IRA into a Roth IRA and incur the $1,200 in taxes (estimated by my IRA holder) for the rollover, or just open a Roth account and quit adding to the IRA? At this time, I do have about 14k in savings at the moment with 20k in student loan debt, so paying out of pocket for the rollover is doable.
– Ken

You really should take advantage of the opportunity to roll it over and just pay the taxes.

When you have a low income, you’re far better off having money in a Roth IRA than a traditional IRA because of the tax advantages. If you save adequately for retirement and anything approaching economic normalcy happens over the next few decades, you’ll pay a higher tax rate in retirement than you do now.

That means a Roth IRA wins big time. I’d roll it over.

I just graduated with my Master’s degree, and I have been offered a position with a company in Cambridge, Massachusetts. I have approximately $10,000 in my savings account, and I will be making 44,000/yr plus excellent benefits with my new position. However, I have a few budgeting questions since I will need to begin paying my loans back in November. First, what percentage of my income can I expect as take-home pay?

I have about $46,000 in school loans, including the current interest. All of these loans with the exception of the oldest and smallest loan have a fixed 6.8% interest rate. My dad also has loans taken out for my schooling. Unfortunately, these are from my first years in school, when I didn’t know enough about the loan process, even though I have always been good with personal budgeting. I believe these loans may be around $25,000 with interest in the double-digits. My dad has already told me that I don’t need to rush to start paying for these loans ahead of those in my name or my regular monthly bills, but the high interest rate and my parents’ tight financial situation, makes me think these loans should be my top priority.

Anyway, I suppose my question is where should I funnel my extra money at the end of each month and the $10,000 I currently have saved… my dad for the high-interest loans? the loans in my name? an emergency fund? Starting retirement accounts so they have many years to compound? I just don’t know how to figure out what will put my family and I in the best possible financial situation.

My final question is about consolidating the loans in my name. I know if I consolidate during the grace period, I can get a .6% rate reduction, so I plan on consolidating soon. However, since I have loans with fixed interest rates, the May treasury bill will not affect my rates, correct? I just want to make sure there is no difference between consolidating before or after July 1st for me. Do you know how I can determine if rates are going to increase or decrease in case it could affect the loans in my father’s name?
– Cara

The first thing you need is an emergency fund equal to about two months’ worth of living expenses. Make minimum payments on your debts until you have that in the bank.

The next thing you need to do is sit down and have a serious adult conversation with your father about what the expectations are about the loans. Don’t guess about it. Ask him honestly what he expects in terms of repayment. He might never expect anything. He might expect immediate payment. It’s really hard to tell.

Your conversation there should tell you what the priority is. If you need to pay him quickly, pay him first. Don’t sink that relationship. If he’s fine with delaying it, focus on the high interest loans.

Yes, if you have loans with a fixed rate, your loans won’t be affected by the May treasury rates or anything else. Only variable rate loans are affected in this way. It may be that the offered consolidation rate may change, but that’s more of a business decision by whoever’s offering the consolidation. Rates are really low right now, so it’s a good time to consolidate.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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  1. Chelsey says:

    Just wanted to chime in about the cloth diapers – we don’t normally have a lot of issues with stains, but if the stain persists through washing then I’ve been amazed at how the sun can just bleach the stains right away. I hang them on our little drying rack on our front porch when the sun is at its highest and within a few hours the stains are gone!

  2. Tammy says:

    I’d like to suggest foster care adoption for the gal saving up for a private adoption. There are a LOT of children of all ages – including infants – in the foster care system that need loving families and plenty available for permanent adoption. Costs there are minimal.

  3. Mark says:

    I will 2nd the Sun suggestion – best bleach available!

  4. Julie says:

    Why can’t Matt’s dad rent for a while once he moves to Arizona? He can research neighborhoods and work on rebuilding his credit, rather than jumping in to more debt (bringing his son along with him) and having all those maintenance chores to do and/or pay to have done.

  5. Holly says:

    I would take the loan and offer to pay it back w/simple interest (say 3.5% or similar to inflation rates). This way you are in line for your adoption and your friend will not lose ground on her money.

    I think that the sooner you can adopt and be parents the better — I am sure you know that children require a LOT of energy…just ask Trent!

    I am 40 w/3 kids and my oldest is 15. My sister is 42 w/2 kids and her oldest is 5. My mom is often at her house to help her w/the children. My sister sometimes states that she hopes that she’s not too old to help out her children w/their own kids when it’s her turn to be a grandparent.

  6. Adam says:

    I’ve seen a few posts on your site about cloth diapers now. My wife and I considering using a cloth diaper service for our expected little one. I’d be interested to see one of your cost analyses comparing a diaper service to the alternatives (i.e washing your own cloth diapers or using disposables).

  7. John says:

    According to Alexa.com, women are overrepresented at thesimpledollar.com

    Why do you think this is?

  8. BirdDog says:

    Cramped Prius? I thought the Prius had adequate legroom for your 6’6” frame? Did you have three child seats across the backseat?

  9. Alexandra says:

    To Lynn,

    As a fellow sufferer of fertility issues (I can get pregnant, I just can’t seem to get past the first trimester) and considering your friends went through the same thing, I think you should accept their offer.

    I can understand resentment if the debt is over something more or less trivial, between friends, but in this situation, I think it would be fine. This is helping you AND a child have a family.

    I am going to give a large sum to some friends in your position so that they can adopt, and they also took out a large loan from family, and I’m GLAD they accepted. I don’t even want the money back.

  10. todo es bien says:

    Laura, I never see financial bloggers talk about this, but consider: If you truly hit desperate times from an income point of view, you could always move money OUT of your IRA into liquid accounts. You would pay a 10% penalty, but on the other hand, due to your lack of an income, you would probably be paying LITTLE TO NO FEDERAL OR STATE INCOME tax! An incredible opportunity. Also, if you are unemployed this year and have a low income, now is a the perfect time to move money from IRA to Roth for the same reason. Mysteriously, I have never seen either of these subjects alluded to, though perhaps I just missed it. Anyway, I hope it all goes well for you. jcw

  11. Des says:

    I second Tammy’s suggestion of looking into foster care adoption. In my state, adopting from the foster care system costs nothing, and you would be providing a home to a child in need.

  12. Des says:

    @Cara – I don’t know what industry you’re going into, but if I were you I would explore some better paying job options. Your debt is more than your annual income! At that rate, it is going to take you a very very long time to pay these things off, and in the meanwhile what about things like saving for a house & retirement? Seriously consider either looking for a higher salary, or getting a part-time job on the side until the debts are more manageable.

  13. lilacorchid says:

    To Lynn,

    Make sure the country you want to adopt from allows you to adopt in your 40s. There are many countries that restrict age, marital status, and even BMI.

    If your friends are wealthy enough to offer you $20K, and you say that there are tax credits and grants available, then I think you might want to discuss this further with them and see if they meant it. If so, I’d treat it like a business transaction I’d draw up an agreement about paying back the money to your friends.

    Unless you go through it, I don’t think anyone really understands infertility and the heartbreak that goes along with it. Your friends are trying to help someone in a similar situation and I think that if this is approached properly, it could be done.

    Assuming that you are good for the money, perhaps they could co-sign a loan for the $20K and that way they have helped you without actually taking their money if that is the part that is stressing you out.

    Good luck Lynn. I hope your journey ends with a happy ending!!!


  14. Christine T. says:

    For volunteer opportunities check Craigs List, serve.gov, volunteermatch and your cities government website. Figure out what area interests you (animals, kids, environment, etc) and look for something that matches with what is meaningful to you.

  15. Johanna says:

    @Ken: Please read this before doing your IRA conversion. As I understand it, you don’t have to convert the whole balance of the IRA at the same time, and it might be better for you if you don’t.

    From the estimated tax bill for the IRA conversion, it sounds like your US taxable income is much less than $9350 (the sum of the standard deduction and one personal exemption, and therefore the amount you get to earn tax-free). Since $1200 is less than 10% of $17k, part of the $17k would be tax free (because it falls under the standard deduction and personal exemption), and most of the rest would taxed at 10%. (I can’t run the numbers exactly, because I don’t know whether the $1200 is supposed to include state taxes or not, and you don’t say what state you live in anyway.)

    That means that if you convert just part of the IRA this year, you would pay *no* federal income tax on the conversion. If you’re in the same low-income situation in 2011, you could convert another chunk of it then. And maybe another in 2012. So you might be able to convert the whole IRA for $0 in taxes, rather than $1200.

  16. Craig says:


    You’re far too eager to put a word like “simply” in the phrase “I would simply assume the risk.” There ain’t nothing simple about it. That you’d put things that way really suggests that you haven’t looked at the many ways this situation could turn very, very ugly. Assuming the risk means that you, personally, are one hundred percent on the hook for the full value of the loan for as long as it exists.

    What two mortgages will do to your FICO score should be like number seventy five or eighty on your list of concerns. Concern number one should be whether you, personally, can carry the entire cost of the mortgage when your father is no longer able to. Say he becomes seriously ill in another ten years. Or twenty. You know who’s responsible for the mortgage? You are.

    I don’t want to pile on your father when he’s down, but he is not behaving responsibly, and that really doesn’t argue well for the future. He got terribly over-extended once already in the real estate game, and we’re not just talking about rentals, but his primary residence as well. Now, he wants you to press the “reset” button for him. Because he’s suddenly going to be able to make good real estate decisions in Arizona?

    Will it be the end of the world if he rents for a year in Arizona? Or five? He might find it very liberating, after being up to his eyeballs in housing trouble for so long.

    I would caution you in the strongest terms against co-signing for your father. It is an extremely risky proposition that has every chance to do lasting damage to both your finances, and, in the long run, your relationship with and memories of your father.

    If you insist on this course, you should _buy_ the house yourself, so you have the ownership as well as the risk, and let your father pay you rent. Perhaps even with the understanding that you will deed the house over to him once the mortgage is paid off. (He’d trust you to do that, right? I mean, he sure is asking you to trust him.)

  17. Michele says:

    have you considered the Creighton Method first before infertility treatments? It is a proven method to either prevent pregnancy or increase fertility. 80% of those who have infertility issues conceive successfully by using it. It’s a very simple method once you understand it, and it’s only about $200 for a year of meetings with a fertilitycare specialist. It’s also very natural and helps you and your husband to conceive without using artificial means. It’s really worth a shot. It has 35 years of documentation. http://www.creightonmodel.com/

  18. E says:

    Lynn I would highly suggest you look into foster care. I know that Trent has reservations about it – but we have adopted 2 beautiful boys from foster care and now have a perfect baby girl. There are issues but there would be in an adoption that you did privately as well. In adopting through foster care – we paid nothing…the attorney, the filings and everything was paid for completely by the state. We have our boys – and they have a home.

  19. chacha1 says:

    I’ll chime in to encourage foster-child program adoption. Our state is heavily promoting adoption from foster care. There are kids of all ages and races who desperately need safe, loving homes. If I were inclined to add a child to our household, that’s the way I would go.

    Re: safe bleaching: hydrogen peroxide. Works like a charm.

  20. Theresa says:

    Suggestion for meeting more folks in your local area: meetup.com

    Its worked for me in two different cities, and I hope it will soon work again in city number three. The site is better in larger cities – and it can take some searching to really find the right group for you, but once you do you’re set. They have entertainment, volunteer, hobby, dating and networking groups.

    Do I sound like a company shill yet? I promise I’m not :)

    Also, since you say you’re not opposed to manual laber I might also assume that you enjoy it to some degree. So if you’re an engineer by trade or something more technical (even IT) then you might also try looking for a local “maker space.” Mostly in larger cities, these are rented spaces (I don’t know exactly how it works, I’m looking forward to my first one when I move again) where folks who like to tinker and build hang out and either work on their own (but with others around), get help on a project, or work on a group project. I’ve always thought they sound like such a great idea.

  21. Michael says:

    @Jeff — Churches are great, especially for getting involved in the community. If you’re looking mainly for networking connections I wouldn’t stop there though.

    I would recommend also looking for any groups or clubs that do things you are interested in. Meetup dot com, for example has lots of localized groups. If you can find one that focuses on something related to your career interests it can make for great networking.

  22. Cara says:

    @Des- Thanks for the suggestion. I’m currently looking for a part-time job because I’m in the process of moving for this new job. I’m no stranger to a second job though, I have held one with the job I’m currently finishing up. Unfortunately, with my field (biology/forensics) there isn’t a ton of money with tech positions. I need a few more years experience under my belt and a higher position in the lab before I’m gonna be making an ample amount of money to kill my debts and really start saving.

  23. twblues says:

    Matt’s dad should rent a home in his new location. I’m a firm believer that not everyone is entitled to home ownership, and there is nothing wrong with renting. There is no need for Matt to co-sign for a mortgage. Co-signing is almost always a bad idea.

  24. jim says:

    Matt: Your dad can rent. After failing on 3 mortgages he does not need to rush out and try and get into another mortgage.

    Lynn: First, let me say: You are not being punished. Everyone makes financial mistakes and that doesn’t cause infertility. Regarding the financing: I’m pretty sure you should be able to get the full $13,170 from the tax credit. The Health Care Reform bill had a provision that made adoption tax credit refundable for 2010 & 2011. Even if it wasn’t refundable I believe there were previously provisions to carry forward any credit that exceeded your tax liability. Have you checked to see if your state has any adoption credits? Many do. Some employers also offer adoption assistance as well.

    You’ve got 2 questions: 1) Should you borrow to adopt? 2) Should you borrow from your friend? Borrowing to adopt depends on if having children sooner is more or less important than having debt payments. Its a matter of timing and priorities. Theres nothing wrong with borrowing to buy a home, finance college or get a car. So why would borrowing to adopt be so wrong? Think about this, if you had to give up your car for a child, would you? If having a child is a high enough priority for you then financing is OK in my book. Of course I understand you don’t want to take on TOO much debt. But it sounds like you’ll be paying off your car loan very soon so you could exchange the adoption financing for the car loan payments. Or if you have your current CC debt paid off relatively soon that would free up a lot of cash flow so you could then go forward with the adoption.

    Borrowing from a friend can be tricky. It depends on the friendship. Sounds like your friend purposefully wants to help you out here and they have the means to do so. I would not feel any guilt or problems taking their help. You’ll pay them off right? Even if you can’t I think they’d forgive it. Personally I’d borrow the money from your friends.

  25. jim says:

    Ken: One point to be aware of is that when you do hit retirement that several thousand of your income is going to be tax free simply due to standard deduction and exemptions. So lets say you retired tomorrow with $250k in an IRA that you took $10k a year out of. You wouldn’t face income taxes on most of that. And what taxes you did see would be the bottom tax bracket. I think theres a good case for leaving your money in the IRA for now given that when you retire you vary well may not be paying any taxes on it.

  26. Adam P says:

    @Cara, the rule of thumb is not to borrow more than you expect to make in your first year of employment. You borrowed $46,000 + $25,000 to earn $44,000 (+ benefits). This was a mistake! Too late for that now but if you can find a higher paying job, I would do so immediately as you may have sold yourself short.

    Trent’s advice is good about speaking to your father, but personally I would not be able to live with myself if my parents weren’t well off financially but took on a high amount of high interest debt for me. Its akin to stealing and I would feel very guilty! I’d pay that off or transfer the loans into your own name with a consolidation (hopefully at a lower interest rate) ASAP! Regardless of if your dad tells you they are okay with the loan themselves. He may just be saying what you want to hear and suffering in silence, do you really want that? Doesn’t that make you feel selfish? Ugh. It would kill me.

  27. Sheila says:

    @Jeff, I think someone else commented on Volunteer Match so I’ll just second that–it’s a great resource for volunteer opportunities. Also, figure out what you like to do. If it’s animals, volunteer at your local shelter (I ended up working at mine after volunteering there); if it’s kids, try the Boys & Girls Club. Other well-known clubs like Rotary, Lions and kiwanas have projects that they work on–not sure how you join those groups, but they might be a good networking resource.

  28. Ruth says:

    Lynn: The question of borrowing from your friend is certainly a tricky one and I don’t know if any of us can really know the situation well enough to say if/how much it would damage your friendship. Aside from that, though… you said that your budget is tight right now and it would be a couple of years before you could afford to pay for the adoption. That being the case, can you afford to add to your household right now? If you are adopting a baby, will one of you stop working for a while? Will you have to pay for child care?
    It’s really important to have a financial plan in place going forward, not just for the adoption.

  29. Nick says:

    Question I would like to see addressed.
    My wife has some student loans. She has been out of college and working 3 years as a lawyer. My question is where do you refinance them? They are currently govt. loans but the rate is at 6.5%. This does not seem like a good rate? Her and I both have great credit and jobs but when I asked my bank about it they did not take on student loans. Any Ideas?

  30. Courtney says:

    Nick – You can consolidate through the government program. I had Stafford loans (half subsidized, half unsubsidized) at 6.8%. I consolidated last year at 2% plus an additional 0.25% discount for signing up for automatic debit withdrawals. If you go to the Direct Loan Service Center there is a link to ‘Loan Consolidation’ right in the center of the page under the link for ‘Your Account.’ The process is online and it took less than a month (at the time I applied, they were holding applications until after July 1, 2009 to determine what the consolidation rate would be).

  31. RR says:

    Hi Trent
    I need your help to come up with an approach. Am asking you this question because you also touch the subjects on personal and professional management and it’s also about money!

    Here is my situation: I work for an IT company with no pay raise in the last 4 years (mainly because our company got acquired by a bigger company 3 times and we had our job description changed every time without pay increase, and of course the recession was not helping either). During each performance review, the management would say they totally understand our situation but they are helpless and puts the blame on the new company’s policy.
    What I also came to know is, the new people getting recruited are paid very well and people with 3 years of experience get the salary equal to me who has more than 10 years of experience. I feel totally handicapped and also not in a position to switch companies right now.

    And we will be having our performance reviews in 2-3 months and the fact that I am extremely underpaid (when compared within my own company) makes me feel sick. I am sure there are many people who feel the same way. Now, how do I approach this review? Is it OK to point out the discrepancies in the salary structure within the company? I know I cannot point fingers to cite examples. How will I take this message to the management (that of course allowed this discrepancy in the first place?). Thanks in advance for your help.

  32. P.D. Mann says:

    @Lynn: I think it mostly depends on the friendship, but I would really sit down with your friend and find out what their expectations would be.

    My husband and I loaned a friend a substantial (for us) amount of money a few years ago for a bridge time that was supposed to be limited to a few months, and he was unable to pay it back due to circumstances he hadn’t foreseen. He’s paid us back parts of it whenever he could, and we fully expect to get the rest of it back when he can give it to us.

    We don’t have a contract. We don’t discuss it. We do go camping with him and his family. We do get together with him and his family from time to time. He and I talk a few times a week, since we both work in front of the computer with skype open. We share recipes.

    What would make it a problem?
    If we believed that he didn’t care about paying us back, or if he’d acted differently after taking the loan (other than thanking us.)

  33. Sharon says:

    About adoption….
    Yes you can adopt from the foster care system. You can even adopt some reasonably healthy infants although the wait will be longer. Start as soon as you have the bulk of your consumer debt paid.
    If you decide to go private, shop around carefully. Pay all of your early expenses yourself. If you borrow money from the friend,do so only for the large chunk that will be due when you actually get custody of a child. Then you will know that the debt has a concrete result. You will also know that you will be getting the tax credit. Don’t borrow more than the amount of the credit.
    I don’t usually like the idea of borrowing money but from what I have seen in the adoption world, adoptive parents can be fiercely loyal to each other. Most of them have been through hell and high water to get a finalized adoption and are more than willing to give a helping hand to someone else.

  34. Diana says:

    To the teacher abroad:

    I hope you’re paying U.S. income tax on your salary if you’re plopping it in any kind of IRA. You have to have earned income in order to contribut to an IRA.

  35. Kara says:

    @ Matthew re: cleaning- Check out flylady . net It has really helped me keep my life de-cluttered.. it starts with just keeping your kitchen clean.. they have weekly action plans that target one room in your house.. very easy to follow and worked well for me.

  36. Temi says:

    Before you do the conversion, you should look into amending your prior year returns to add back any tax deductions you didn’t benefit from. Even though the money was deposited in a traditional IRA, you aren’t required to take a tax deduction. If your income fell below your standard deduction and personal exemption amount, you wouldn’t have benefited from the tax deduction and you can file a form 8606 to effectively make those amounts “after tax” in your IRA – then, if and when you convert, that money is your basis and won’t be taxed at the time. Just something to consider… I know some people are intimidated by amending – but $1200 might be worth the effort.

  37. JonFrance says:

    @Cara, I don’t fully understand Trent’s last paragraph of advice to you, since as I understand it your father’s loans *are* the high-interest ones.

    Still, as he says, they should be the priority *if* you both decide that it is your responsability to pay them. If your father is saying, “don’t worry about paying it back quickly, so long as you pay it back”, then it’s still understood that it’s up to you to pay it back. It will cost more money to pay them later if their interest rate is higher, so you should concentrate on those first.

    As others have mentioned you took on a lot of student debt for little reward (so far), so if your parents have sacrificed for you to have done so it makes sense for you to pay them back quickly. They sacrificed for you, now it’s your turn to have to sacrifice some while you get your career off the ground. (Whatever field you’re in, with a few years experience you should be able to move into a new pay grade, so hopefully you won’t feel underpaid forever.)

  38. deRuiter says:

    Dear Laura, In this case, the “doom and gloom” writers are correct. Anyone with a traditional IRA should run, not walk, to convert to a ROTH. You will be paying the low tax rates today during the last gasp of the Bush tax cuts. There is no penalty to converting to a ROTH this year, only the low income taxes you must pay. Starting Jan 1, income taxes in America will SKYROCKET due to profligate government spending, our monumental national debt, and the end of the Bush tax cuts. Federal, most state, and local taxes are going through the roof Jan 1. There are two reasons the American economy is doing as well as it is (not great!) today. One is that the Federal Government is reaping lots of taxes from all the people doing the conversions to ROTH. This is accelerating taxes collected INTO 2010, FROM 2011. The second is that corporations are moving income from 2011 into 2010 in order to take advantage of the low tax rates this year. This is income which will NOT count for the corporations in 2011. There will be a drop in collected income taxes in 2011 because so much income, by individuals and by corporations, is being moved to 2010, which will cause the economy to really tank in the first months of 2011. Anyone with competent financial advice is now moving corporation profits into this year, and converting to ROTHS now. The idea that income taxes will go down in the forseeable future under this administration with it’s “redistribution of wealth from the producers to the leaches”, is a fantasy. Protect your hard earned money by converting to a ROTH now, AND PAY THE INCOME TAXES OUT OF SAVINGS, NOT FROM THE MONEY IN THE IRA ITSELF. You want to move the whole amount into the wonderful, tax free status of the ROTH. Also if you have a business, take your profits this year and pay the low taxes, because after Jan 1, 2011, your income tax bite will be huge compared to this year’s low rates.

  39. 8sml says:

    @Jeff: It’s really not necessary to go to a church to find volunteer resources and networking opportunities if you’re not comfortable taking that route. As others have said, knowing what you’re interested in is key. From there, take an interest in your community (despite your limited time): Walk around and visit libraries and cafes–can you find any popular bulletin boards? The posters there often give details of events you would be interested in. If you go to those events, you will likely learn about other related events. Read a genuinely local paper (or equivalent online blog). If you see articles on topics that interest you, what organizations does the reporter interview for an expert opinion on the topic? That’s how I found my volunteer opportunities in the last two cities I moved to–I noticed which groups kept being mentioned in our local paper, made sure I liked their position, and then found out how to join them. You can also get information from your local politician, especially if their values match roughly with yours.

  40. Karen says:

    Trent, three things are certain about your Simple Dollar readership: 1) the website attracts thoughtful readers with great insights; 2) your readers are blessed to have found TSD; and 3) you make the world a better place by helping people with not only their fiscal but personal lives… and have good recipes, too! Thank you. :) Regarding diapers, try Dr. Bronner’s liquid peppermint soap (smells SWEET and available at any health food store). It somehow got rid of my bathroom grout stains.

  41. Cynthia says:

    To Matthew who is worried about clutter: I live in a 600 sq. ft. apartment, and here’s how I handle the stocking up/clutter issue: 1. I only stock up on things I use constantly–in other words, things like cold cereal or toilet tissue. 2. I try to avoid stocking up on things I only use periodically, especially if they are bulky. 3. I have designated places for storage, so if my collection gets out of hand, I’ll know it. 4. I avoid collecting bulky tools that I use only periodicalloy and “maybe someday” items; instead, I borrow those from neighbors and give them services in return.

    If I had more space, I could save more “maybe someday” items, but this seems a good compromise for me given my modest amount of living space.

  42. Brittany says:

    Jeff– I disagree throughly with Trent’s advice. First off, if you aren’t religious, why volunteer with a church? Religious people just don’t seem to get that some people liek to serve WITHOUT constant mention of Jesus.

    See with your city has a Secular Center branch–a non-religious community service group that does similar secular outreach. Also, if you’re looking to build lasting connections, dropping in at clean-up days isn’t going to cut it. Find an organization you can volunteer with longer (or medium) term. Habitat for Humanity. A soup kitchen. An animal shelter. Something where you’d be working with a semi-regular group of volunteers long enough to actually build a connection with them.

  43. Katia says:

    Nobody else commented about the laundry issue, so I will. I sort the laundry in my bathroom (since nobody usually uses that one except my husband and me) and I put a load in as soon as I get up in the morning. then by the time I am ready to go to work, it’s done and I throw it into the dryer. When I come home, I wet a towel and put it in the dryer with the other clothes and run it for about 10 minutes…this gets the wrinkles out of the clothes that have been lying in there since morning. Then I remove them and hang them on hangers or fold them while supper is cooking.

  44. Craig says:


    Not wanting to be a pest, but could you check your moderation queue on this thread? I spent just a bit of time yesterday writing a response to one of the items in this post, and it’s disappointing to see it vanish into the ether. Thanks!

  45. Michelle says:

    @deRuiter – Per The Tax Foundation – a respected non-partisan organization: a) it’s very unlikely that Congress or the Administration will let all tax credits expire in 2011. Maybe one or two for the highest income earners, but not a wholesale revision to 2001. b) Even if all credits did expire, the average family’s tax bill would go up $2200 a year, $183 a month. That’s certainly a lot of money, but I wouldn’t put that into the panicky capital letters that you use. I’m curious to know where you sourced your information about IRA and corporate conversions being the backbone of the US economy.

  46. Laura says:

    Jeff – find out if your city has an organization that coordinates volunteer projects with other non-profits in the community. Especially in larger cities, there are organizations whose purpose is to help people like you find volunteer work and to bring those willing volunteers to non-profits in need.

    The other thing to do is to talk to people. Ask your friends in town if they’ve volunteered and where.

    You could also think about something you like – you mentioned clean-ups, so it sounds like you’re into the environment. Environmental projects are likely to be at parks, rec centers, or youth programs. If manual labor’s your thing, you could also try finding groups that deal with furniture donations (thrift stores, donation centers, etc). Those groups usually need strong people for heavy lifting.

    More than likely if you call or email an organization you’re interested in, they can help you. Non-profits may not have the budget or manpower to “advertise” their volunteer needs, but if you ask them, they would probably be happy to have your help.

  47. Kim says:

    Regarding the adoption question – I agree with many who have posted. Unless you’ve been through infertility and adoption it’s hard to know what it’s like. I have experienced both. My advice is don’t wait. Consider foster care adoption, at least look into it. Also look into what other loans might be available. People borrow that much for a car that will only last a few years all the time. I realize that goes against the philosophy here but I really believe this is different.

  48. Craig says:


    You’re far too eager to put a word like “simply” in the phrase “I would simply assume the risk.” There ain’t nothing simple about it. That you’d put things that way really suggests that you haven’t looked at the many ways this situation could turn very, very ugly. Assuming the risk means that you, personally, are one hundred percent on the hook for the full value of the loan for as long as it exists.

    What two mortgages will do to your FICO score should be like number seventy five or eighty on your list of concerns. Concern number one should be whether you, personally, can carry the entire cost of the mortgage when your father is no longer able to. Say he becomes seriously ill in another ten years. Or twenty. You know who’s responsible for the mortgage? You are.

    I don’t want to pile on your father when he’s down, but he is not behaving responsibly, and that really doesn’t argue well for the future. He got terribly over-extended once already in the real estate game, and we’re not just talking about rentals, but his primary residence as well. Now, he wants you to press the “reset” button for him. Because he’s suddenly going to be able to make good real estate decisions in Arizona?

    Will it be the end of the world if he rents for a year in Arizona? Or five? He might find it very liberating, after being up to his eyeballs in housing trouble for so long.

    I would caution you in the strongest terms against co-signing for your father. It is an extremely risky proposition that has every chance to do lasting damage to both your finances, and, in the long run, your relationship with and memories of your father.

    If you insist on this course, you should _buy_ the house yourself, so you have the ownership as well as the risk, and let your father pay you rent. Perhaps even with the understanding that you will deed the house over to him once the mortgage is paid off. (He’d trust you to do that, right? I mean, he sure is asking you to trust him.)

  49. Michelle says:

    @Jeff – Volunteering your time to a cause you believe in is a great thing, but if your objective is to meet people who can help you network toward a new job, service volunteering is probably not the right avenue. Sure, you’ll meet people, but you’re not zeroing in on meeting the right people, in quantity, to help you find work in your field. Depending upon your field, you might want to start with the Chamber of Commerce or Rotary Club. You’ll definitely meet people there, though many of them might be doing the same thing as you.

    Another avenue is to attend city/town council meetings, especially when the topic pertains to your field. They usually happen in the evening and you’ll find passionate people attending those sessions. For example, if your industry is banking, go to the budget meeting; if it’s construction, go to the zoning meeting. Or, look for lectures or seminars related to your field.

    Even if you can’t get face time with the people you want to speak to, note who is there (if there is a sign in sheet, ask for a copy). Send them a follow-up note asking for an informational meeting. Offer to do interning type projects over the weekends. Just keep pluggging at it.

    Good luck!

  50. littlepitcher says:

    About two years ago, the Dollar Stretcher community had an active discussion on how to store bulk purchases or manage food storage in small spaces without creating clutter.

  51. Question I asked on my recent post at http://www.mewithoutdebt.com/2010/06/save-and-buy-or-get-0-financing-and-buy.html

    I have been wanting to buy a Nikon D90 DSLR for nearly a year. I know that when we want something, we convince ourselves with bunch of excuses on why we want to buy. I thought about it a lot and came to a decision that I will eventually buy it. However, I didn’t want to get in more debt by buying another expensive item. So, my family suggested that I start a saving account for the camera? They even gave me some gift money to jumpstart the saving. Since I have already cut most of unnecessary expenses from budget to pay off my debt, I don’t have any major places for saving. At best, I can hope to save enough money by end of the year. However, recently I saw that Amazon has 0% one year financing for Nikon D90 DSLR. Should make sense I get it with financing (which means more debt) or should I wait (which means not being able to use it for 1 year)? Rationally, if I am going to buy something after a year, it makes sense to buy it interest free now. It also make sense to pay my debt off with money I will be using to buy the camera (since I’m paying interest). On the other side, we humans are not completely rational and I believe that if I buy now I would not save later. I also think that not buying this camera is some sort of test of my self control. I am still undecided. For time being, it’s out-of-stock in Amazon.

  52. melinda says:

    I would like to leave a comment for Lynn. I am 44 years old and last summer adopted a five and a half year old boy from China. We paid cash for the adoption. A year later it became necessary for me to quit my full time job and stay home to take care of my son and my mother who is very sick. I was able to do this because we waited. We got married when we were both 29 years old and wanted to start a family in our early thirties. The 10 year wait to be a parent was very hard on me but I would not change any of it for the world. By the way, we were able to save all the money for an international adoption in about 9 months. We have no debt expect for our mortgage but we did have two car payments at the time. We never, ever have credit card debt. We pay cash for everything. It can be done. Just be patient and fill your time with lots of reading and educating yourself, taking classes and doing all the things you will not be able to do so easily when the blessing of parenthood does finally arrive.

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