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. IRA inheritance and goals
2. Fighting over small amounts
3. Calculating “real” salary?
4. Saving inheritance for retirement
5. Driving totaled car
6. Moving up in fast food
7. Housing difficulties
8. Selling old autographs
9. More aggressive with my money?
10. Money bragging
Recently, I was called upon to serve for jury duty.
I think jury duty is a wonderful thing and I absolutely don’t mind serving. However, there’s one issue I do have with it.
In Iowa – at least in my county – you have to call the night before to find out if you actually have jury duty in the morning. For a busy person like myself, jury duty can be a gigantic schedule disrupter.
Since you don’t know whether you have jury duty or not until literally the night before, you have to plan as though you do have jury duty and make the necessary contingency plans, which means a bunch of extra work in advance, often including hiring a babysitter and such.
Then, quite often, you don’t even have to go. If that’s the case, sure, you get some of your time back, but you’re hung out to dry on the babysitter and other things that you had to cover to make room in your schedule for jury duty.
I understand the logistics of juries make it difficult to schedule… but I wish it were easier to schedule.
Q1: IRA inheritance and goals
I am a 36 year old male, fully employed making around $60,000 a year. I owe $123,308 on a mortgage at 4.75%. I have no credit card debt and no car payment. I have about $19,000 in student loan debt at 4.3%. I also have about $37,000 divided between checking, savings, and a money market account. I have about $26,000 in a 401k with my work (but will likely lose some of that since I am currently planning to leave 2 years before I am fully vested in their 6% match), and $7,000 in a 401k that I am fully vested in from my previous employment. Also, I have just recently inherited a $336,000 ROTH IRA that gives an annual payout that I plan to reinvest in some way. And finally, I am expecting some additional from money the inheritance that I am planning to put towards my student loan.
My first question is about what to do with the inherited IRA. It’s currently still with the bank that was managing my father’s portfolio, but I have no relationship with them and there is a 1.5% wrap fee, which seems high to me. Is that actually a high fee? If it is too high, what are the things I should consider when evaluating other places to put the money, and where would be a could place to move it to? I am only interested in keeping that money in an IRA and not cashing it out.
Second, in terms of my savings, I am want to keep about $5,000-6,000 in an emergency fund, but I don’t know what to do with the rest of the rest of the $30,000. I don’t have an immediate needs to keep that money liquid and have considered investing it (maybe $20,000 in Vanguard Total Market Index Fund and $10,000 in a stock account that is a spread of blue chips). Is this a good place to start investing or what would you recommend (all one or all the other or something else)?
That’s a very high fee. I have my IRA with Vanguard, manage it myself online, and there are no fees except for the small amount charged by the fund I’m invested in. Fees would be the biggest thing to investigate in your situation, and places like Vanguard and Fidelity usually have very low fees for this.
Your investment plan seems like a reasonable thing to do with it, especially since you have no real plans for it.
If I were you, though, I’d spend some time figuring out a goal for that money. What do you want to do with it? Is it basically just a glorified emergency fund? Or is there something else you’re shooting for. Having a goal and a timeframe will help you figure out what you should be doing with it.
Q2: Fighting over small amounts
We have a weird money problem. Whenever we talk about big money like our retirement accounts we can talk about things rationally. Whenever we talk about little amounts, we end up arguing. We spent fifteen minutes arguing about $3 the other day. Any suggestions on how we can treat our small money disagreements like our big ones?
I think the solution here is to have each of you have a “free spending” amount that you can spend without question each month.
Then, whenever you’re out and about and have an incidental spending choice, the person that actually wants to do it can pony up out of their personal money.
You need to define what expenses actually come out of this spending amount. If you’re out and about and you choose to eat at a restaurant, how is this covered? That’s something you can talk about calmly, away from the actual situation.
I gross $46,500 annually at my full-time remote job. My office address is in a suburb outside of Chicago but I work remote from Missouri (for now). I now have MO residency plus the benefit of a low-cost college town compared to my previous Chicago residency.
Since I work remote, my husband and I don’t pay before and/or after care for our 2 kids during the school year. Also, we easily get by having one car, I can get in an afternoon run/bike/yoga class, and I have time to work on side projects. I recently graduated with my MS in Accounting (night courses which did incur childcare expenses) which was paid about 50% by my employer’s tuition reimbursement program and about 50% by what I saved up for each semester (no student loans).
I have people who tell me I’m underpaid since most with my education & experience should be making at least $60K…more if I pursue the CPA route (I don’t currently work as an Accountant). Considering what expenses my remote schedule allows us to do without, what is my “real” salary? Is it closer to $60K than most realize?
You don’t figure “real salary” by adding on nebulous numbers. You figure it instead by subtracting the job-related expenses.
For you, comparable people are subtracting the cost of a work wardrobe, the cost of a car, the cost of eating meals out with coworkers, and the cost of additional taxes from their salary. You’re not subtracting any of these.
Thus, your “real” salary doesn’t drop nearly as much as theirs does because of all of those expenses.
You can figure out your own “real” salary this way, but you don’t have anything concrete to compare it to.
Q4: Saving inheritance for retirement
I just inherited about $300,000 in real estate in the form of a piece of farmland that I will never use. I would like to somehow put that money aside for retirement. How should I go about it?
If I were you, I’d hold this land and lease it to farmers in the area. Farmers will often lease land to use it for farming, so you can work out such arrangements with a farmer.
Then, take the money the land earns from leasing and put all of that into a retirement account, like a Roth IRA.
When you retire, you’ll not only have the proceeds of the land, you’ll also have the land itself.
Q5: Driving totaled car
A few weeks ago a woman drove into my parked car and dented the bumper. I own a fully paid off, well-maintained 10 year old minivan with 100,000+ miles on it, and I anticipate at least 3 more years out of it. Replacing the bumper would cost more than the value of the car, so it was technically ‘totaled.’ It’s still drivable, so I took the 5400 dollar insurance claim pay out and am keeping the car as ‘salvaged.’ Since the damage is cosmetic and I don’t care if my car has a couple dents, it’s basically free money. Like, thank you for bumping my car, ma’am. I do have a 3000 dollar student loan to pay off, or I could put the money in a high yield savings or CD to hold onto until I do need a new car in the next few years. I am 20 years old and still living with my parents for at least another year, so my expenses are very low. I currently have 2 part time jobs and save around half my earnings a month (which varies, but usually I save at least 150 dollars and sometimes up to $300). I maintain an emergency fund of $1000. I may be going back to college in the next year, but can’t decide whether or not I want to take on that kind of debt just yet. (Most people my age have huge debts, and I’d like to avoid that trap, but I’m not sure it’s possible to advance in a career without a degree these days.) Anyway, I think my best option for this new cash is to pay off the loan and put the leftover in an account just for car savings. Any thoughts?
This seems completely reasonable. In fact, I applaud your plan – many people refuse to drive cars that are in poor shape like this, but it’s a great way to save money.
My parents drove a totaled car for a while. I drove one that was totaled in high school. It can certainly do the job.
Student loan debt can be scary, but beware that it becomes harder and harder to find time to go to college when you have more and more things in your life, like a spouse and a family and a job where you’ve received some promotion.
Q6: Moving up in fast food
My son recently graduated from college and got a job as a cook at a local Taco Bell. He hasn’t started yet, but he’s made it clear that he views this job as a way to make a few bucks and burn time until he finds his real job. I suggested to him that he should take it seriously and he responded, “Why? So I can become head line cook?” How does one move up in fast food?
Usually, the best people become managers. They learn how the restaurant actually works and move into a managerial role.
Depending on what your kid is doing, this could actually be valuable experience for him. However, it requires that you apply that kind of mindset to your work. What’s best for the business as a whole? What does each role provide that’s good for the business?
At that age, though, you may simply not be able to convince him.
Q7: Housing difficulties
My husband, two kids, grandmother, and I are renting my parents’ house from them for a total of $500 monthly plus utilities. We personally pay my grandmother $400, and she gives $500 to my parents and pays the utilities herself out of social security money. This is in a great neighborhood, close to a lot of family, and within walking distance of my five-year-old’s elementary school.
My parents are essentially housing us, because their mortgage payment is about $900 a month. They have pretty bad money problems themselves, and need to do something with this house we’re living in. So, it’s come down to two scenarios:
1. We can pay my parents $760 a month, which my mom has deemed a fair rent-to-own price from her quotes from zillow.com. My husband and I would take over the utilities, taxes, and homeowners ins, and take $300 in rent from my grandmother. This would bring our total monthly housing costs to about $750, assuming that my grandmother will even agree to continuing to live with us.
2. We can stay until spring paying what we are now, and use our savings and tax returns to put a down payment on a small foreclosure in a nearby area, closer to work and still in a good school district, but further from family. In the price ranges of foreclosures in the area we’re looking at, it would be between $500-600 a month of housing costs. We wouldn’t have to live with my grandmother (a huge success), but we wouldn’t be as close to family or within walking distance of our schools, grocery stores, and banks.
Here’s the problem I’m having- my husband and I together average about $1500 in income a month. We don’t have any debt, but I’m still scared of the idea of essentially being out on our own. I’d love to stay where we are, but my grandmother is under the impression that she was here first and treats any possibility of us buying this house as the worst idea ever, and might not stay or pay us $300 a month if we do end up staying here, which would leave us paying 2/3 of our monthly income in housing costs. Any insight you can give would be greatly appreciated.
I don’t think there is a “best answer” here, not unless you know what your grandmother is going to do.
Your first step should be to talk to her about this. This has a cost and a benefit to her, too – it’s certainly cheaper to have you living there, but it may not be the life she wants. She needs to figure out what she’d do if you stayed or if you left.
Without knowing that, you can’t really make a decision here. You need to go for the cheapest option, and her decision really determines that for you.
Q8: Selling old autographs
My great grandmother had an autograph book with signatures from pretty much everyone you’ve ever heard of from the silent era and early sound era of movies. Charlie Chaplin, Judy Garland, Douglas Fairbanks, Mickey Rooney, and a bunch of other people signed this book. I don’t have any sentimental attachment to it and I would like to sell it, but I don’t know where to start.
Go to the library and find an autograph price guide. I’m not familiar with these, but it seems that Sander’s is a standard guide. Get a sense as to what these are worth to collectors, but remember that virtually no one will pay you book price for these unless they’re in perfect shape.
If you have several valuable ones, I would contact an auction house that deals with autographs.
If you don’t have anything of too much value – I think you do, but who knows? – I’d just hold onto it as an heirloom.
Q9: More aggressive with my money?
My question is in regards to savings versus investing. I have over 100k in investments (private and 401k-max out every year), and I have over 100k in savings. I have a great job that pays me well, and I’m renting (1200/mo). I have zero debt.
I’m not sure if you’ll answer this since i’m sure my “problem” is not all that grave, it is nonetheless a financial one that I think about a lot. I’m 33 years old, no kids/wife/pet…i currently just throw most of my paychecks in savings, but i read one of your replies to a reader that mentioned if you’re not buying a home, you should be putting that money into the market to earn higher interest than savings. Would you still recommend that in my situation? I consider my personal investments to be of the more conservative variety (mid/large-cap), but always risks right?
Should i be allocating a certain percentage of my paycheck in the stock market for long term gains? my current split is 120 cash to 220 investments, so i feel like i have enough in the market….but I keep thinking about that response if you’re not owning a home for long term finance growth.
Don’t worry about owning a home for long-term financial growth. A home is just one kind of investment, one that comes with costs (maintenance, insurance, property taxes) that they don’t talk about when they discuss homes as investments.
Some people do get into the rental business and do well if they own property in the right area, but if they don’t, they’re not so lucky. It can also be a lot of work.
I think your investment plan is a good one, but as always, you should be establishing goals for that money. What do you want to be doing over the long term? When do you expect that goal to actually happen? The further away you are, the more you should be investing in stocks.
Q10: Money bragging
My coworkers often sit around and brag about how valuable their home is and their car is and such. We live in a modest home and I drive a used car. I know these people are all in debt up to their necks, but we don’t have the assets to brag about like they do. How do I engage in this conversation?
I’d just simply say, “We have no debts.”
You might not have a pile of assets, but you’re going to be accumulating wealth at a much faster rate than those other guys. Their income is likely going down a rat-hole of interest, disappearing straight out of their wallets and into the bank’s coffers.
You’re doing just fine. Don’t sweat it.
Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.