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. Credit card limits
2. Pest control option
3. Returning to work
4. Watching football without television
5. Hint of identity theft
6. Daytime heating and cooling
7. Value of a Kindle?
8. First budgeting steps
9. My budget
10. Movie night
It’s mid-December and we’ve had barely a dusting of snow. This is in complete contrast to the last few winters, when I had already run the snowblower several times.
I went back and looked through my journals and it looks like winters are really on a seven year cycle. We happen to be on the “mild” end of that cycle, which should include next winter as well.
My journals noted that the winter of 1997 and 1998 were bad ones, 2003 and 2004 were bad ones, and 2010 and 2011 were bad ones. In between them were mild winters, so we may be in for a pretty mild one.
Q1: Credit card limits
I have three credit cards at the moment. Two with balances that I am paying down as quickly as I can and one without a balance that I use occasionally for things I will pay off immediately. Recently two of my cards’ limits were increased. I am wondering if that affects me negatively at all. Should I call them and ask to have it lowered? (Both went from around $5,000 to $7,000). I know at one point in the past I had a huge limit of $18,000 on a card with no balance and I was almost denied a car refinance because of the potential to go into debt there. At that time I lowered the limit to $5,000. What do you think?
This is a prime example of where credit scores and credit reports can be really confusing.
Normally, an increase in your credit limit is good for your credit score. It improves your debt-to-credit ratio, which makes up a big component of how your score is calculated.
However, some lenders do manual underwriting, where they just pull your credit report and do their own analysis of it, not relying on credit scores. In those situations, one thing they often look for is a comparison of your total credit limit to your salary, and if you have a lot of potential room to borrow and a relatively low salary, that will look bad to them.
What’s the solution? I’d probably keep my total credit limit to somewhere between 25% and 50% of my income.
Q2: Pest control options
I am constantly trying to cut back some of the expenses that we have so that we live within our means. We have a Pest control company come and inspect our house once every 3 months for pest and termite. They spray the outside of the house and lawn at each visit(to kill roaches and fire ants). They do spot treatment inside the house if there are any pests. This costs me about $85 every 3 months A few months back they inspected the attic and found some rat poop.They set up traps and caught a couple of rats.. The sealing of the house and setting up the rat traps cost me $500! Now this is one expense I am trying to cut out. Also I am concerned about the health impact of all the spraying they do out of the house and inside the house. Will you be able to suggest how I could prevent pests in my house without employing a pest control company. I am hoping to save some money and also eliminate use of harmful chemicals from our lives.
There are lots of home remedies for getting rid of pests. The problem with them is that they generally don’t work as well as the stronger methods that pest removal services use.
If you have consistent problems with pests, you should probably keep hiring an expert to deal with them. However, if you’ve gone a period without any pest problems, you can certainly look into methods for preventing the types of pests you have.
For example, if you’re having a roach problem, boric acid and catnip are common solutions to send them scurrying away. Orange oil is often a good measure against ants. For rats, the best solution is what they did – trapping and sealing holes.
Q3: Returning to work
My husband and I live very frugally, but the cost of living in our area is quite high. It’s a rural area, but rent is $1100/month (cheap for around here), food is expensive (we live in Alaska), and electricity is even more expensive. So all of my pay (just under $2000/month) goes toward living, with maybe a few hundred dollars into savings every couple of months. We rarely drive, and the vehicle we do have (an old truck, in great condition but very fuel inefficient) is on long-term loan from my in-laws so we don’t pay anything other than fuel.
We have a decent emergency fund built up (just under $10,000) and my husband has about $35,000 in student loans. We also have about $35,000 in investments, which are making more in interest than the student loans are so we’ve decided to keep that money invested.
After being unemployed for most of the last year (minus 3 1/2 months during the summer–most of that money went to savings or paying off some medical bills), my husband has decided to go to graduate school and will be taking some classes in the spring. I work for the university so we won’t have to take out more loans. Additionally, he’s also been promised a part-time student job at $10.50/hour.
So here’s my quandary: what should we do with the extra money? We have quite a few goals. I’m investing the maximum amount to my retirement fund (I get a 50% match), but since I’m the only one with retirement savings I feel like it’s not enough for our future goals. (We’re in our mid-to-late 20s.) We would also like to buy a house sometime soon, since we like our area and want to stay here long-term. (After pricing it out, a mortgage would be comparable to our rent, although utilities are included in the rent so we’d have to figure those into the price.) We’d also like to start a family in the next year or two, and we love to travel so we’d like to go to Europe again in the next few years. Finally, I’d like to save up some money and buy a vehicle of our own. I know my in-laws have loaned us this truck in the best spirit and with no hard feelings (when we give it back, it will mostly be sitting in their driveway as a backup vehicle since the selling price wouldn’t be worth their time and effort) but I feel like I’m taking advantage of their generosity. Additionally, when we do drive it costs us a lot to fill up the tank. (We’ve got it down to about one tank each month at about $80-90 to fill it up.)
When we start getting the extra money, would it be best to split up our savings into different goals accounts? After all is said and done, we’d be saving around $800/month, probably a little more during the summer. Should we keep our investments as a sort of backup retirement savings and focus on our other goals? Or would it be best to open a RothIRA and fully fund that during the year, keeping the investments for a down payment on a house? Or should we plan to wait on buying a house until after my husband has completed graduate school? Should we fund our goals in any order, or just put a little bit of money toward each of them all at once? I’m certain that we’ll be making much more money within the next 2-4 years.
The one statement that causes me worry is the last one. “I’m certain that we’ll be making much more money within the next 2-4 years.”
It is always a mistake to make personal finance moves based on what you think your future self will be doing. Your future self is incredibly unreliable. Careers change, health changes, personal circumstances change.
What would your life look like if your current income level remained the same for the next ten years? I would plan for that, and then treat any raise in income as a big bonus.
Q4: Watching football without television
I’m on board with your idea of eliminating cable except for one thing: football. I love watching football on Sundays and Mondays (and Thursdays) and I’d hate to lose that. Any ideas?
I like watching football, too, but I almost never watch it on television any more.
What I usually do is use something like ESPN.com. I’ll watch the “gamecast” of a game and participate in the messageboard discussions while the game is going on. Plus, I have easy access to statistics for my fantasy football team.
If you’re willing to pay some for it, NFL.com offers some pretty good streaming packages. I have a friend who uses this – the only thing he watches on television is football.
There isn’t a legal way to watch football online for free, though. Yet. I wouldn’t be surprised to see an ad-supported NFL stream in the future online.
Q5: Hints of identity theft
I recently received a bill in the mail for $69 from a scooter store in Dallas, TX. I do not have and have never had a scooter, live in NY, was not in Dallas on the date specified. I have visited TX twice a year for the past 5 years to see my son, although not Dallas.On the bill, my address was slightly off, the street name had an extra e at the end and my PO Box was not listed, but everything else was my info. I called the store and they said they would take my name off the account, but that was the name and address given to them by a customer. I am very careful with all my info, shred all mail, check my one credit card each month ( paid off in full every month) and credit report. Since someone is obviously using my name and address, is there anything else I could be doing? This has kept me awake nights, thank you very much for your input.
My immediate suspicion is that someone connected to your son somehow got your address and tried to use it. I’m not saying that your son did it at all, but that someone your son knows got your address and somehow managed to use it at that store.
If I were you, I’d start keeping a close watch on my credit report. You can do that for free through the federal government at annualcreditreport.com. Just examine everything on it and make sure you know where those statements are coming from.
That’s far and away your best defense against some kind of fraud.
Q6: Daytime heating and cooling
We’re first-time homeowners and i also work for a major water heater/HVAC company. Daily, customers ask me for tips on reducing their hydro/gas bill with respect to the water heater which, according to industry estimates, makes up about 60% of the hydro bill (electric water heaters, I mean; I don’t know about natural gas) until the winter when heating costs factor in.
Our hydro bill can easily hit 3-400 in the winter if we had to heat with electricity.
Right now, we have a dual electric/wood furnace which is *highly* efficient. we’ve been burning wood and 4 to 6 pieces a day is enough to keep our house nice and toasty but the hydro bill is still around 200 which is far too much for a couple with 1 child (4-1/2yrs old).
Hydro has a program called “peaksaver” which sends a signal to major appliances such as the AC to turn things down by x% (i think it’s 15) but i’m wondering if it would be worth it to shut the WH off completely during the day – i’m on the phone working all day and there’s only my husband who is off doing his own thing. wouldn’t be difficult to reschedule showers, baths, etc to bef 7am or after 7pm and we already do all our laundry in cold water and wait until after 7pm to dry if we have to use the dryer.
Currently, the rates are as follow:
Mon-Fri 7am-11am and 5pm-7pm = 10.8c/KWh, 11am – 5pm = 9.2c/KWh
Mon-Fri 7pm-7am and all wkend = 6.2c/KWh
The water heater is 3000KW, takes roughly an hour to an hour and a half to fully heat.
If you have an opportunity to shut such things off, it’s almost always worth it.
Think about it: doesn’t it make sense that it takes a lot less energy to heat up water once than to keep it hot during the day? Instead of having your heater kick on for, say, ten minutes every hour, it would just run for twenty minutes or so at the end of a much longer period.
Unless the temperature is extreme, for example, I turn off both the heating and cooling in our house during the daytime and just flip it back on for a comfortable evening for our family.
It depends on what you read. If you’re very picky about your books and will only read one or two specific books when choosing a new one to read, you probably won’t save a whole lot of money.
However, if you’re willing to mix it up a lot and try out new authors and patiently wait for and then pounce on sales, you can get a lot of great reading in for not much money.
For example, I keep a close eye on the Kindle Daily Deal and check out books from my library all the time using my Kindle. I don’t always get the book I want to read, but I always have something worthwhile to read.
Q8: First budgeting steps
I’m 25 years old and just started my first job. I’m married and was wondering what do you reccomend i do to start budgeting? Alot of people i talk to have no clue what to do and where to start, are there programs that are better then others. My parents never worried about budgeting and now im stuck. PLEASE HELP!!!!!
The first step is to simply keep track of every dime you spend for a while. Every cent that leaves your pocket, whether it’s a bill or a soda at the gas station, needs to be recorded for a whole month.
Once you’ve got enough information, sort all of that spending into groups that make sense to you. Rent, utilities, entertainment, food, and impulse expenses are all good categories, but use what you like.
Total up each of those categories, then figure out which ones you could control a little better (like your entertainment spending or your impulse spending). Then, at the start of the month, just withdraw the cash for those categories you’re trying to cut back on and use only that cash for those expenses until the end of the month.
That’s budgeting in a nutshell.
Q9: My budget
I would love to know what other people’s budgets are, for those with certain lifestyles. For example, my husband and I do not have children but our food budget is still higher than the FDA charts because we eat organic, free-range meats and local. And as a reformed bookworm, I’ve tried hard to curb my spending at Amazon but what do average people spend on books and magazines? I find this information educational and fascinating.
Here is a great infographic that depicts the budget of the average American family, both in raw dollars and percentages.
Of course, that’s the average. You’ll probably never find anyone that perfectly matches it.
Having said that, I don’t think our family’s budget is too terribly different than that one.
Our six year old often sits through a full movie, and our four year old will if it’s a movie that really draws her in (like The Princess and the Frog). It’s really our one year old that makes for challenges.
If the one year old is nowhere close to a nap time, we’ll often just choose a shorter program for our “movie night.” We’ll watch an episode of Sesame Street or something like that. If he is napping, we’ll try to get him to nap during a lot of the movie.
Mostly, it’s just an excuse for all of us to cuddle together in the basement.
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.