Updated on 10.25.10

Reader Mailbag: Monday Morning

Trent Hamm

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Making good credit better
2. Dealing with hostile coworker
3. Roth switch after job move
4. Capturing and bipolarity
5. Waiting for a pension
6. Top five personal finance books
7. Deciding between goals
8. Making your own deodorant
9. FHA and non-FHA mortgages
10. Handling an inherited car

For me, Monday mornings aren’t bad at all. Both of our kids have preschool and they’re both incredibly excited about it – they love going. So, most Mondays, they’re up and really excited and running around the house looking for clothes.

It’s much more fun than a typical dreaded Monday.

Q1: Making good credit better
I am looking to raise my credit score (it’s 717.) The two negatives I have on there are lack of credit accounts (I have no credit cards and no mortgage) and length of credit history (really only three or four years.) My husband and I would like to buy a house in five years, and I need to raise my score to get the best loan we can. Will a credit card (used wisely, with no balance) help raise my score in the long term? I have excellent self-control and will pay off the card balance each month, if you recommend I get one. Any advice would be great. Thanks!

– Rachel

The biggest thing you need is time. A credit history covers the previous seven years of your credit, and if your credit history only extends three or four years (I’m guessing it’s due to a student loan or a car loan), more time spent keeping your bills perfectly paid will do nothing but cause your score to inch upwards. Since you’re targeting five years down the road, this shouldn’t be a problem.

Will a credit card improve your score? It might cause a small positive improvement, but a 717 with only three years of history is pretty solid.

If you wish to go the credit card route, I would recommend getting a card that you use only for a specific purpose that you’re already doing, like a card tied to the gas station you use or the grocery store you use. Use that card only for purchases at the specific location, then pay it off in full each month. Why do this? Such cards usually have tremendous rewards at that specific retailer.

Q2: Dealing with hostile coworker
I currently work at a job that’s purposeful but stresses me out. The source of the stress is from a co-worker that really does not like me. When I reported the person and they were apparently reprimanded the hostility from them increased in a subliminal way. It’s really affecting my work habits and I’ve just been there only a few weeks and I’m already job hunting again but with the economy the pickings are slim. I took a pay cut to take this job in the first place because my previous employer was laying everyone off in a few months. How can I stay sane and moving in a positive direction career wise when everyday I’m miserable because I have to work in direct contact with this person. Please advise

– Charlie

My first thought would be to ask whether you have a mentor that can help you through these tricky times. Do you have a supervisor that you trust deeply and respect the advice of? Is there an older coworker who might know the situation? You might even want to seek out a former coworker who can offer advice.

The reason it is tricky for me to suggest what to do is because I don’t know your personality and whether or not you’re doing something to trigger this situation. A mentor probably would and would be able to offer you specific suggestions on what to do.

If you don’t have a mentor (and I’m assuming, based on your email, that a direct conversation is out of the question), your best bet is probably to seek a path out of the current job situation.

Q3: Roth switch after job move
I’m the CFO of our household and I’m stuck on a new situation. My husband recently started a new job. His old job matched his 401K contributions up to 6%, so each paycheck we were putting away (with their contribution included) 12% or approx. $201. The new job is a lateral move with a nominal pay increase but more of the type of work my husband enjoys. It offers a 401K, but not matching benefits. We’ll be cutting how much we contribute in half for about 6 months to help pay off a small student loan with an annoyingly high monthly payment, but that’s beside the point!

After that 6 months is up, we plan to save $201 out of each (biweekly) paycheck for retirement. Would we be ahead to put his 401K savings into a Roth IRA instead? I’m having trouble figuring out the risks/benefits of this one!

Also, if it matters at all, that’s our entire retirement savings. I’m 32 and currently a stay at home with our two children with some freelance writing income here and there, and my husband is 33 and a product designer.
– Christi

I would recommend switching to a Roth IRA, for two specific reasons.

First, with a Roth, you’re paying income tax on the money now rather than later. Right now, income tax rates are very low compared to historical numbers, and every sign seems to indicate that they have nowhere to go but up in the future. They’re either going to go up, government is going to cut spending, or we’re going to be in a disastrous situation over the long term. I’m betting on higher taxes.

Second, with a Roth, you’re able to choose among many, many more investment options than with whatever offerings your 401(k) plan at work has. Very rarely are you getting the “best” investment options at work. Spend some time comparing the costs and returns of your investment choice at work with, say, some of the offerings at Vanguard, like their Target Retirement funds. I’m pretty confident the Vanguard funds will have much lower fees and possibly better returns.

Q4: Capturing and bipolarity
I have led a chaotic life since childhood, primarily because I have bipolar disorder (as well as other issues like OCD, perfectionist tendancies, and some Aspergers). Once I was diagnosed after a recent hospitalization, the rest of my family started taking a hard look at great-grandma’s “erratic” behaviors, and we all realized that mental illness abounds on both branches of our family tree. We are all working hard to seek treatment, and I personally am looking for systems to manage the mess of my life.

As GTD has helped so many, yourself included, I was and am excited to read both books by David Allen (and your review of MIAW. The GTD review was fabulous, by the way, and inspired me to first rent the book at the library and then purchase it). My problem is, I am stuck on the capture phase. As a rapid cycling bipolar with mixed states, it is very easy to enter into a manic phase, where I have little perspective and a great deal of hypographia, as well as a pressure to do everything perfectly, all at once. There’s just too much in my head due to the illness, and whenever I start even thinking about the capture phase, I become anxious and overwhelmed. The problem comes in that I do think this system would really help.

How would one such as myself maintain perspective so as to remove some of my anxiety surrounding the capture phase?
– Cass

My suggestion would be to not do all of the capturing at once, but to just do it a bit at a time as you go through your day.

Instead of just having a few days of trying to capture everything in your life, just start carrying a pocket notebook around and capturing whatever comes into your head wherever you are. At the end of the day, go through that notebook and do appropriate things with each item – add them to your calendar, add them to your to-do list, and so on.

The biggest thing you’re trying to do here is just make capturing seem normal to you and, more importantly, make it seem like a very simple thing to do. If you can show yourself that this small simple thing has a big net positive in your life, you’re going to have much more drive to want to do it.

Q5: Waiting for a pension
I have worked at my job for four years, and while it’s not always my favorite place to be, I don’t hate it either. I finished up a master’s degree in my field last December, but there weren’t many openings because of the bad economy, and I figured I should just stay put for the time being. Now the job market has started to turn around a little bit, and I’ve begun to see some openings that would use my degree. The extra pay wouldn’t hurt either. My current job, however, has an old fashioned pension program. To qualify for it, you have to work a minimum of five years (which I’ll reach next year). So my dilemma is, should I start looking for a new job now and forget about the pension or stay here in a position I’m overqualified for to get the pension. My husband thinks it’ll be worth it to stay for the pension, but I feel bad not using my degree. I don’t think what I’ll get from the pension will be much if I’m only here for five years, but it will be something I can count on and will go up for every year that I stay. Another thing to consider is that with my current job, I get discounted undergraduate classes for my husband and me. He’s hoping to start on a master’s degree and while this wouldn’t get him a free degree or anything, it could help with the prereqs. To throw another wrench into things, we’re planning to start having children in 2-3 years, and once that happens I’d like to be a stay-at-home mom. So I’m wondering if it’s even worth it to get a new job for a couple of years to just quit to stay home. I could always just stay with my current job and hope something opens higher up. I do like my coworkers and the work environment, and we have good benefits.

Some other finance things – my husband has a 401k and we each have a Roth IRA (although we don’t fully fund them every year). We have six months of emergency savings and the only debt we have is student loans and our mortgage. We are aggressively paying off our mortgage and plan to have it finished within three years (not bad considering we bought the house last winter). We plan to tackle the student loans when that is done. If my husband does go to graduate school, this would delay all the paying off of debt though, as we’re hoping to pay for his whole degree in cash.
– Dee

I’ll be flat-out honest with you: I don’t trust pensions. I’ve seen too many pensions ripped out from under people’s feet in lots of different ways, the biggest one being that the company offering the pension goes under.

The only form of retirement planning that I trust is the kind where you’re controlling the investing with real dollars, such as a Roth IRA or a 401(k). That’s your money, and if it’s invested with a group with SIPC protection, it’s going to stay your money (up to a pretty high cap), no matter what.

I would not make life choices based on getting a pension, particularly if you’re trying to get one at a young age, many years from retirement. I particularly wouldn’t do it if you can get a higher salary elsewhere.

Q6: Top five personal finance books
You review quite a few personal finance books. I was curious if you had a top 3 or top 5 list.

– Harry

If we’re looking strictly at personal finance books, four of them stand out from the pack for me (each one linked to my review of the book).

1. Your Money or Your Life by Joe Dominguez, Vicki Robin, and Monique Tilford changed my life when I read it. It caused me to completely re-evaluate my relationship with money and the role it played in my life. This book led me not only to get my money in shape, but to switch careers as well.

2. The Bogleheads’ Guide to Investing by Taylor Larimore, Mel Lindauer, Michael LeBoeuf, and John Bogle is simply my handbook for investing issues. They offer a consistent voice, sensible advice, and rich explanations for just about everything.

3. The Total Money Makeover by Dave Ramsey is the best book I’ve ever read – far and away – for the big problem that many people have with their money: recovering from debt. Dave’s stripped-down plan and coach/preacher attitude makes this work like nothing else.

4. The Complete Tightwad Gazette by Amy Dacyczyn can best be described as such. Imagine the best frugality blog you’ve ever read, and make it 50% better. Now, imagine that blog was never published online, but that a 900 page compendum of posts is available.

There’s a big pile of books that are very, very good, but fall just a bit behind these four in my eyes.

Q7: Deciding between goals
I am wondering about how to best manage my money once I get my student loan paid off. I am very proud that in four years of working life, on a fairly modest income, I have managed to pay off all but $5000 of a 15k loan AND put 6k into a retirement fund. I had to budget pretty frugally, but my parents co-signed that loan so I really wanted to pay it back as soon as possible, and now that I am nearly done, I am wondering what to do with all that money once the loan is paid off this March.

The problem is, it seems like there are a lot of important areas this extra money can go. I want to put more into my retirement account because I was late finishing my education and so did not start it until I was 30 (I am 33 now). I also want to start saving up for a down payment on a townhouse or condo. And finally I do want to have a little budget for fun since I feel like I have spent the last few years really depriving—it would be nice to go on vacation once in awhile, or fix up my apartment a little. I have also been really wanting to join a gym and take some fitness classes but hesitated to spend the money, until now…

So how do I distribute the money given these numerous, but to me equally important goals? I am currently spending about 55% on fixed expenses, and I can;t get it down any further—it’s rent, bus pass, cell phone, groceries and that is pretty much it. I also am spending 15% to retirement fund, 10% to emergency fund and the rest (which only amounts to about $200 once I subtract the extra loan payments) on ‘fun.’ However, once the loan is paid off (which will be in March) I will have an extra $500 a month to play with.

So, what to do? Should it all go into retirement? Or down payment fun? Half and half? Some mix? And if I did want to take a little for ‘fun’ since I have never been able to do it so far, then what is a reasonable amount to take for that given the priorities I already mention?
– Joanna

So, you’ve got one clear goal right now that you’re just about finished with. After that, you have several goals that seem important to you and you’re not sure how to prioritize.

Here’s the thing: if you split your efforts among a lot of goals, it becomes much, much harder to reach any one of them. Even more, you’re trying to decide between your short-term desires (your “fun” money), your medium-term needs (the down payment), and your long-term needs (retirement).

For me, a big part of this would come down to the question of whether or not you’re on a career path that will have salary escalation in the future. Based on your education, I’m guessing you either have a masters degree or a doctorate. What do your career options look like with that degree?

If you’re going to see a big salary jump in a few years, I’d hold off on the “fun” spending until then and keep it within the $200 a month you’re already spending. I would then start an adequate retirement savings – 10% of your salary. If there’s anything left, put it away for your housing.

If you’ve got a salary cap that’s not going to raise much, you need to choose between traveling and fitness classes or owning a town house. I don’t think ditching retirement is a good long-term option.

Q8: Making your own deodorant
I was recently inspired by making your own laundry detergent! I have purchased all of the “ingredients” but have yet to make it (waiting until I run out or get close to running out of my other detergent). In any case, it got me thinking about what else I could make on my own. I looked up deodorant and low and behold, it is quite easy to make. Here is my recipe:

8 T cornstarch
2 T baking soda
2 T Crisco

Mix well and shove into an old deodorant container. I tried it and it works wonderfully. I just did some serious gardening and I still smell fresh! In addition, it is healthier because it doesn’t have aluminum (aluminum is carcinogenic. This is especially a problem for women as many of us shave. The aluminum absorbs into the minor cuts.). The other bonus is that it doesn’t leave those ugly yellow stains on your clothing (or so I read).
– Mary

I have tried a lot of homemade items over the years and I’ve found that homemade deodorant is really tricky. The stuff you mentioned above is a mix I’ve tried – and, as you’ve mentioned, it’s aluminum free. It does certainly eliminate odor and it deals with a small amount of perspiration. The problem, however, is that if you sweat very much, this type of deodorant offers minimal protection against moisture and then, eventually, odor.

I think, if you are seeking a low-cost aluminum-free solution and you work in an environment where you don’t perspire significantly during the day (like an office), this stuff will work just fine. However, I wouldn’t expect it to hold up if you’re active and perspiring significantly.

There are some very good aluminum-free detergents out there… but they’re very expensive (on the order of $15-20 per container, seriously).

Q9: FHA and non-FHA mortgages
My wife and I are saving to buy our first home. We are saving about $3,600 a month towards the down payment and have $5,000 thus far in a separate account just for this.

I talked with our Credit Union (SAFEcu.org) and they do both FHA loans and regular fixed 30 yr loans which require 5% down. The loan agent said that she’d recommend the regular loan because the FHA loan would take longer to process and generally just be more “difficult”.

We want to purchase a home costing about $350k. 3.5% is $12,250 and 5% would be $17,500. Not a huge difference, but if we could use an FHA loan to get in sooner and lock in a lower APR maybe it would be a good thing.

Wondering if you have any opinions about an FHA versus the “regular” fixed variety. Wondering if she didnt recommend the FHA because she makes lower commissions?
– Jeremy

If you’re eligible for an FHA loan and you’re buying a home that costs less than the FHA lending limits in your area, then it seems to be an apples-and-oranges situation. I don’t think commissions really enter into this, because a FHA loan is just an ordinary loan that the FHA is insuring for the bank so that it’s easier for new homeowners to get a home loan.

FHAs do take longer to set up because of the paperwork involved. If you gave a strong impression of “we must get this done as soon as possible,” I understand where the bank was coming from on this one. The “difficult” part does give a bit of a sense of a lazy loan officer, though.

There’s also the situation of mortgage insurance. With your small down payment, you’re going to have to pay insurance anyway, but with the FHA loan, you’re locked into mortgage insurance for seven years.

If you’re feeling uncomfortable with the situation, shop around and look for another financial entity to handle your mortgage.

Q10: Handling an inherited car
My mom recently passed away unexpectedly. I have inherited her SUV (and some money). I’ve been driving the SUV ever since. My ’93 car had finally died after 175k miles, and I needed a reliable vehicle. It’s time I decide whether I’m keeping the SUV – which was brand new when I inherited it. It’s a 2009 Ford Escape Hybrid Limited SUV and has every possible option. The dealer fleeced her – she bought in April 2010, paying 40k for a 2009 model.

While I know it’s generally a poor decision to purchase a new vehicle, I have inherited it. I know it’s depreciated significantly due to no longer being new (and, it’s been driven 4k miles now). It’s worth about 30k. I was previously driving a $6200 car (paid for in cash), which I’d had for many years. I was planning to upgrade (with cash) to a late model used SUV, costing 15-20k, but that got put on hold after my mom died and I inherited the SUV. Now that I have this SUV, it feels very excessive “paying” 10-15k more than I was intending to for a vehicle by keeping it. I realise I’m not “paying” it because it’s inherited, but it’s mine now, along with my savings. However, there are some advantages to keeping it.

First off, I’m the sole driver of the vehicle, and I’m very easy on my vehicles. I am a cautious driver, and very good about maintenance, so it will last a LONG time. If I keep it, I’m planning to drive it for at least 10 years, hopefully 15 (I drive about 6k miles/year). I will also have the peace of mind knowing no previous driver has done anything questionable to it. Secondly, it’s a hybrid and very fuel efficient. This should save me on gas in the long run as I’m a 90% city driver and it uses very little gas at low speeds. Thirdly, it has every option available, which is quite nice for a vehicle I plan to drive into the ground, but not necessary. I do not really care about features besides Navigation, Air Conditioning, and overall safety in a vehicle. The navigation system in this vehicle helps me a huge amount. I have no sense of direction and get lost very easily. Finally, my insurance premiums are incredibly low due to safe driving, so there is quite a small difference ($200/yr) between insuring a brand new vehicle and my old clunker.

My question is, should I trade it in for the late model used SUV (2005-2007ish) I planned on and keep the 10-15k in cash, or keep the Escape and be happy to have such a nice vehicle for the next 10+ years I own it? Will that 10-15k be made up for in the extra years I can keep it and lack of maintenance when it’s still new?
– Ashley

If I were you, I’d keep the great SUV you have on hand. I’m going to guess that the Escape Hybrid will also have far better gas mileage than you would have had from a different SUV purchase, so that’s another savings. An additional cost not mentioned is the extra insurance cost, but compared to a “2005-2007ish” SUV, the fuel savings will make up the difference at first and more than make up the difference later (based on some reasonable assumptions and my envelope math).

Another concern: if you just directly trade the thing, you’re going to probably get fleeced on the trade, as the car has already lost a lot of value simply because it’s been driven off the lot. You’ll also have a difficult time selling it with so few miles on it for the value you should get from it.

You’re going to get a lot of driving out of this car. I’d stick with it.

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. Raghu Bilhana says:


    I had started reading “The complete Tightwad Gazette” since you say it is one of the best PF books out there. I did find out that this is a very good book. I also noticed that your way of writing and thinking about PF seem to have been very much influenced by this book.

    Is it a coincidence that you have the same goals in life as Amy Dacyzyn like having that barn in the country.

  2. Raghu Bilhana says:

    Ohh, forgot to add this.

    No I didnt buy it, I checked it out from my local library. :-)

  3. valleycat1 says:

    Q5 – Stay until you hit 5 years. When you leave, you should be able to roll over that $ into an IRA. From what you said, it sounds like if you leave before 5 years, you forfeit. I’ve done it both ways in the past & still regret the one time I left just before meeting the deadline, even though it seemed the right thing at the time.

    And Trent’s advice focused only on the pension- discounted tuition for your husband’s degree is a definite additional benefit – would a new job make up that difference? that would be a 2nd reason to hang around.

  4. Johanna says:

    @Rachel: Yes, getting a credit card will improve your credit score in the long term. One of the factors that’s used to figure your credit score is your mix of types of credit used. If all you’ve had so far are installment loans (like a student loan or a car loan), adding a credit card to the mix will help you.

    But there’s a weird rule that you need to keep in mind: Don’t charge more than 20-30% of your credit limit. Not even if you pay off the balance in full every month. If you can keep it below 10%, that’s even better. If your credit limit is too low for this to be convenient, ask for a higher limit. It can’t hurt.

  5. DivaJean says:

    Q2: Sounds a lot like a prior problem I had at another employer (not my current).

    It turns out it was more of a generational issue than anything else. This whippersnapper thought that everyone should be “friends” with friending all co-workers, hanging out after hours, and generally getting way more enmeshed than I’d ever be comfortable. When I pointed out to her that being buddies isn’t what work was about for me- it was my means to support my family and that my off hours were busier than the younger crew, things loosened up a bit between us. Ultimately, there were good conversations about respect and work relationships vs “being friends.”

    Most of my co-workers where I am now are younger than me and I notice similar qualities but not as pronounced as the prior problem situation. I just make it crystal clear that when working, I give 100%- but off hours, I am not likely to be the one going to movies with “the crew.” I don’t feel the pressures of “friending” everyone either, since everyone knows up front that I prefer to keep it professional at work rather than some ersatz hang out for friends.

  6. Johanna says:

    @Charlie: Wow, you’ve been at your job for a few whole weeks and you’re already reporting people for hostility? I can hardly imagine why your coworker doesn’t like you.

    Whenever you join a group (professionally, socially, whatever) that was interacting closely before you came along, there’s going to be some reshuffling of roles involved. Maybe you’re stepping on some people’s toes (inadvertently, I’m sure). Maybe there are some feelings of rivalry. It can take time for all these things to settle down and for people to adjust.

    Apart from giving it time, something that has worked for me to ease a strained work relationship is to get to know the other person as a person, apart from their role at work. Talk to them about music, movies, TV, sports, what they do on the weekends. Maybe you’ll find you have something in common.

  7. Johanna says:

    Q3: Trent, as I’ve said before, your answer to the “401(k) vs. Roth” question is wrong, for two reasons.

    First, tax rates for the middle class are not especially low compared to where they’ve been historically. The top tax rates are quite low right now, but that’s irrelevant to anyone who’s not in one of the top tax brackets.

    Second, even if tax rates go way up, you’re still better off having a good chunk of your retirement savings in pre-tax accounts because of how tax brackets work.

    Finally, I agree with you that it’s a good idea to look at the costs of the investment options in your 401(k). But comparing returns? You know that when they say that bit about past performance not being a guarantee of future results, they mean it, right?

  8. brad says:

    i thought you had three kids.

  9. valleycat1 says:

    Aluminum free DEODERANT, not DETERGENT (A to #8) – Isn’t it antiperspirants that use aluminum salts, not deoderants? I buy Tom’s of Maine natural deod. & it isn’t $12 & works fine, even on summer desert days. Might not work so well where it’s humid as well as hot.

  10. Beth says:

    @ Charlie: this sounds like workplace bullying (it’s a common problem — as many as 35% of people report being bullied at work). There are many good resources online on the topic that have advice for employees and their bosses.

  11. Gretchen says:

    How bad can a coworker be if it’s only been a few weeks and you have already complained?

    Every workplace has personalities. Learn to deal.

    Lay out the clothes the night before to ease morning stress.

  12. Gretchen says:

    Also, it’s the anti-persperiant part (spelled that wrong), not the deodorant that contains the aluminum.

    Not to mention there are no definitive links between said AP and cancer.

  13. kristine says:


    I would look for a very short term relationship with a behavioral cognition therapist (Psychologist- specialty behavior) to hold you accountable for implementing your plan for success, until it becomes automatic for you. They can offer great insight, technique, and encouragement. It’s a great non-partial party to touch base with. This is NOT someone who will prescribe drugs.

    I am also moderate bi-polar, and have used behavioral techniques to avoid any kind of medication. And I have learned to distract myself from starting immensely ambitious projects, only to be leave them incomplete when I swing the other way and become discouraged/depressed or overwhelmed, or no longer care. I think that is what you are trying to accomplish?

    I would also hesitate to put too much stock in the advice of those who are not professionals in treating the illness, or who have never experienced the illness firsthand.

  14. Des says:

    RE Q9: The “difficult” part of FHA has nothing to do with the loan officer (not sure where you pulled that out of). We are doing FHA for our “move-up” home right now and yes, they are a pain. It is not the LO, it is the underwriter that is picky.

    More importantly, FHA rates tend to be slightly higher than conventional, and the fees are higher as well. FHA charges a 1% upfront PMI (called MIP for FHA loans) IN ADDITION to the monthly PMI they charge. So, you’re putting 3.5% down, but then paying an extra 1% to get a loan with a higher interest rate.

    FHA is good for those with slightly iffy credit. But if your credit is good, you’d be better off putting 5% down for conventional then 4.5% for FHA (3.5% down + the 1% extra fee).

  15. Johanna says:

    @Joanna: How is your emergency fund doing? If you’ve been putting 10% of your income into it for four years and haven’t taken anything out, you’d have enough to cover your fixed expenses for about eight months. Is that a level you’re comfortable with? If it is, then you could start putting most or all of that money toward the house down payment instead. (If you’re not actually at the eight-month level yet, then keep adding to it until you get there, and then make the switch.)

    If you do that, and use the rest of your money for fun, then you’ll be at 55/20/25 (assuming that the percentages you’ve given are figured using your after-tax income), which is pretty close to the recommended 50/30/20.

  16. Marsha says:

    @#5 Valleycat
    I doubt Dee could roll over her “old fashion pension” into an IRA or 401k. My husband has two small pensions from previous jobs and there is no roll-over available. He has to wait until he retires and then he will get a lump-sum from each, assuming the pension funds still exist. If we move, we have to make sure that his former employers know our new address so they can contact him if there are any changes in the pension rules. We are not counting these old pensions in our retirement planning, although it will be nice to receive them if we ever do. The amounts are not large–about $30,000 from the oldest pension, which will have sat 35 years before he’s eligible to receive it.

    The 401k amounts can be rolled over, but not pensions in general.

  17. Michelle says:

    @ Charlie: I cannot think of a single time I started in a new job where someone didn’t feel threatened. Workplace dynamics are a tricky thing, and when someone new enters the mix, everyone gets shaken up. Sometimes people feel threatened and act out, especially when the new employee seems particularly competent or ambitious. Perhaps that is what is happeneing here?

    As others have stated, things often do settle down after while – one way or another. Either the coworker will realize you are not a threat, or they will spin themselves into self-destruction over the issue (someone filled with anger and hostility is indeed noticed by management, and not appreciated). Your aim should be to do your job beyond your boss’s expectations, act professionally and politely to all of your co-workers (even those who are working to undermine you), and look for ways to connect with those who aren’t hostile. It takes time to earn trust, add value and build bridges.

    Give it 6 months to a year. If there is still a problem then, then get HR involved. If that doesn’t work, then look for another job.

  18. Dave says:

    Ashley #10
    Also if you keep the SUV, every time you drive, you get to remember mom. I’m assuming this was willed, so she wanted you to have it.

  19. Riki says:

    Regarding Bipolarism and GTD . . .

    Trent missed the mark on this response. A lack of drive to make the system work isn’t the issue at all — you clearly believe in it and want it to work.

    Ultimately, for people struggling with bipolar disorder or other mental illnesses, the help of a trained expert is absolutely vital. Seeking out the help of a professional is the best way to find a system that works for you, whatever phase of your illness you might be in . . . that professional can also be there to help you get back on track if/when things start to come apart again. Cass, you need somebody to help you adapt the GTD system to your own very individual situation. A professional is your best bet.

    Please, Trent, your advice to anybody suffering from a significant and real mental illness is usually along the line of “work hard and it will go away.” Not only is that manner of thinking completely incorrect, but quite damaging to the very people you are trying to help. Setting up the idea that mental illness can be overcome by “trying hard” not only perpetuates misinformation, but it also shows that you lack any real understanding of the physiology behind these diseases. Somebody with biopolar disorder or severe social anxiety can’t wish away his disease any more than a diabetic person can. The only way to actively manage these problems is to acknowledge the challenges they present and work within that framework, rather than denying it exists.

  20. par717 says:

    Q5 – If it were me, I would stay until the baby is born, using the leave from that job to start the search for a new job. It is difficult to find work these days, having a job is nothing to take for granted. If you’re considering leaving but have all these reasons not to leave, just spend the time you are there doing what you need to do for your next step. Get your contacts and references squared away, take any classes or courses you can use for your desired position, get those undergrad credits while they are free. Once you have a baby and take off for however long you are going to take off – then you can either go back to the old job or go to a new job. I think this is one time where waiting it out might pay.

  21. valleycat1 says:

    Per comment #16 – if they can’t roll it over, in pensions I’ve had before I could take my money out once no longer employed, though there are tax implications – but then it could be invested in an IRA. Just wanted her to consider there might be other options than losing it or staying in the job.

    I’m pretty much with commenter #20 on this one though. Considering she’s only got a few more years, hanging in there seems to be her best option given the info Trent put up.

  22. Jackie says:

    I was able to roll over a pension into an IRA. It was only a few thousand dollars. Dee should try to find out how much that pension is worth. It’s not worth it to delay a job search in order to get $3000 when the new job could easily increase her income by more than that.

    On Q#3. Most employers these days offer Roth 401ks. Don’t know why Trent always assumes they don’t. All the benefits of the Roth, with the ease of the 401k being autodecuted from the paycheck. And if the employer ever does start matching (it’s been known to happen) then it’s already set up and ready to go without moving things again. Of course, Trent is right that you might find investments you like better in and IRA than in the company’s 401k.

  23. jim says:

    Q3 Christi: Yes go with the Roth IRA. I agree with Johanna that Roth versus traditional is not about the economy or government spending but more about each individuals current tax situation. In this case it sounds like Christi is in a lower tax bracket considering the $ figures mentioned. So for them a Roth certainly makes sense. I’m guessing your husbands salary is either $40k or $80k. Even at $80k your bracket is 15% range given you’re married with 2 kids. Thats a pretty low marginal tax bracket so a Roth IRA makes sense. If he’s actually making $40k then you’d have zero income tax liability and a Roth is your definite best choice no contest.

    Q5 Dee: It depends on the details of the pension. That pension could be worth a nice tidy amount at retirement. Its not uncommon for pensions to give you 1-2% of your pay per year worked. So 5 years could end up giving you 10% of your pay level at retirement. Thats significant. But again it really depends on the details of the pension. Maybe your pension isn’t very good and not worth waiting around for.

    I totally disagree with Trents distrust of pensions. Pensions are backed by the US government. Pension Benefit Guaranty Corporation backs pensions by law. So if a company goes under then PBGC steps in kinda like FDIC protects banks.

    Q10 Ashely: It depends on what you might need $10-$15k cash for. Do you really need money for something else? Are the other potential uses for $10k more or less beneficial to you compared to keeping the newer hybrid SUV? If you’re struggling financially or in credit card debt then maybe that $10k extra cash would help your life a lot more than the pleasure of a newer car. Or maybe your’e doing OK financially with no debts and a nice emergency fund and the newer car is a worthwhile expense.

  24. lurker carl says:

    Don’t hang high hopes onto a barely vested pension that won’t see any payout for decades.

    There are quite a few women who worked 5 – 10 years and vested into a pension. They quit 30 years ago to raise children. The pension checks now pay about $80 per month.

  25. Johanna says:

    A pension that pays $80 per month is the equivalent of having an extra $24K in retirement savings. Not something worth structuring your life around, but it’s not peanuts, either.

  26. jim says:

    Lurker is right that inflation will erode the value of a small pension over a long period of time like 30 years. But a $80/month pension is still worth about $12k in todays dollars if you bought it as an annuity. That would have been closer to $5k in 1980 dollars which is about 1/3 of median household income at the time.

  27. jim says:

    I think Johanna used the 4% rule to find the $24k amount. I found a price quote for a single life annuity. 4% rule means you keep the money and draw out 4% a year. That should hopefully last a lifetime. Buying an annuity is guaranteed to last a lifetime but you don’t retain any money after your life.

  28. Johanna says:

    @jim: That’s right. It didn’t occur to me to check annuity prices.

  29. Sarah says:

    I want to add that I was also able to roll over my pension into a traditional IRA. Like above, it was small, probably <$5k, which could be why they cashed it out and rolled it over.

    When next year will you be vested? january? December? that's a big difference, and the sooner, the better. I'm vested in mine in february, and I won't start looking for a new job until then. (for other reasons too, but that is big)

    Just because trent doesn't trust pensions doesn't mean you should take his response as your sole form of research.

  30. Interested Reader says:

    Cass — your story sounds similar to mine – chaotic childhood, then finding out as an adult I have had bipolar disorder all along.

    for me that was a decade ago and I’ve come along way since then, but sometimes it can take awhile for the pieces to fall into place (finding the right therapist, getting the medications sorted out) but even when it gets hard, stick it out, it does get better.

    One thing I do want to suggest is that you might want to hold off on trying to implement the system right now. You said that thinking about capturing gets you overwhelmed and triggers anxiety and if it’s adding extra stress you might want to put that on hold for a bit.

    Definitely talk to your therapist about it though.

  31. Sara says:

    @Charlie: You didn’t give much detail about the kind of “hostility” you are encountering from this coworker, but do you think it’s possible that maybe you are being overly sensitive? It’s one thing to be the victim of discriminatory harassment (which is illegal), but if it’s just a case of someone being unfriendly or unwelcoming, you may just have to suck it up and live with it. I’m not sure how someone could be subliminally hostile — frowning at you? Ignoring you? — but you can’t expect everyone to like you and be your friend. And I’m sorry to say, but reporting this coworker may have irreparably damaged your relationship with him or her, and possibly other coworkers as well. It’s probably not good to get a reputation as a complainer who is unwilling to work out his differences with coworkers before running to HR or the boss.

  32. Johanna says:

    @Sara (#31): Yes. This.

  33. KC says:

    Rachel #1 – Having a credit card and paying it on time, every time will certainly help your credit score. The only debt my husband and I have had in the past 10 years is a credit card (Which we pay the balance of every month) and a mortgage (which we pay on time – it’s bank draft). We both have credit scores over 800. WE;ve had nothing else – car loan, school loan…nothing.

    So I believe it’s important to have at least 2 types of credit, pay all your bills by their due date, and don’t let anything (not even a water bill) go unpaid. It should strengthen your score.

    If you are worried you’ll abuse the credit card you could only use it to buy gas. Who overbuys on gas? It’s not like you say – well I only need $20, but I’m filling it up! – you’ll use it anyway :) Don’t charge anything else but gas and pay the card in full every month.

  34. Amanda says:

    #10 you should be able to get lowerr insurance. My INS co has a 7000 mi limit INS for a lower price. Check w them!

    I don’t like fords. I think they break down sooner than Hondas. Even w reg maint.

  35. sewingirl says:

    As a back-side-of-forty worker, I have a life and family outside of the workplace. I go to work, take care of business, am friendly and cordial to everyone, and I go home. These people are not my buddies, I don’t call them on weekends or give them birthday cards. But I do LIKE most of them. Many of the twenty-somethings at my work, hang out together after work, go out on the weekends, this is their peer group. I don’t mind. But it can start to feel like a sort of “pack mentality” at times. Info flows around me, but not to me, and I have to pay attention and ask questions. Do I think that they are trying to cut me out, make me look bad? No, not really. They just forget I wasn’t at Joes place the other night when they hashed over the latest stuff, and when I gently remind them, they are very forthcoming. But this could easily go the other way. I have been in jobs where being part of the clique was mandatory, or you may as well start that resume moving again. You can work around that to a certain extent, but Charlie is right, it is very draining, mentally and physically. And its been my experience that HR will not help in the end. They most likely already know whats going on, and for whatever reason, productivity, nepotism, are ignoring it. I would give it a solid 6 months, and then start to look around seriously. In the end, life is too short for that kind of hoohaa.

  36. deRuiter says:

    “I’ve just been there only a few weeks” Let me get this straight, you’ve been in this job a few weeks and you’ve already whined to management that a worker who’s been on the job a long time is “mean” to you? It’s possible you’re overly sensitive and have imagined much of this, and now have poisoned relations at the company by your whining. WHAT MAKES YOU THINK IT’S THIS PERSON AND NOT YOU? You’re the new one, presumably thingsa were going smoothly before you arrived, it’s up to you to fit in to the job milieu.

  37. DivaJean says:

    #35 sewinggirl put into words exactly what I was trying to say. It seems we are in identical situations- I just don’t let it get to me and make sure to remind others to keep me in the loop. I have hear from the younger co-workers of mine that they feel I represent a level of professionalism they strive for now. It just takes a while for the alchemy to take effect and you have to ride it out.

  38. Matt says:

    @Charlie / hostile coworker – I’ll relate my wife’s story, and you can take it for what it’s worth.

    Of course I’m biased, but my wife is a very friendly person, and gets along with everyone. The place where she experienced hostility was the fourth post-college job she’d had. In every job, she consistently got excellent reviews from her management, and never had issues with her colleagues.

    When she did have problems, the antagonist, who we’ll call “L”, had a reputation in the office for being difficult. The harassment my wife received was extremely juvenile; it was exactly the kind of bullying that goes on in grade school. L would call my wife, and hang up; she would re-arrange my wife’s desk when she was out to lunch; she would lie and tell management that my wife was taking too long of lunch breaks; she’d pretend to talk to other employees, but actually be saying nasty things about my wife just loudly enough that my wife could hear it… remember these kinds of things from the jerks in your 3rd grade class?

    What can you do in a situation like this? It’s stupid stuff; it’s absurd to have this in what should be a “professional” setting. Any one of these things is insufficient to bring to management’s attention. So my wife tried to ignore it. (My wife was in a semi-unique position at this place, so she was really the only one that interacted with L on a regular basis, and therefore, was the only one who received her bullying.)

    Later my wife found out that the person she replaced left after her tires were slashed in the company parking lot. L actually told someone that *she* had slashed the tires!

    Trust me when I say my wife tried every rational tactic there is for dealing with this situation. But rational tactics don’t work when dealing with an irrational person; she was effectively dealing with a bratty child, who are anything but reasonable. She finally took it to management, and management basically said, “Yeah, we know how L is. Just try to deal with it.” In other words, management admitted that they were spineless and unwilling to deal with the situation.

    My wife was miserable at work, and after she couldn’t take it any more, finally went to the top person and said, “It’s me or L.” They actually moved my wife into another department so that she didn’t have to work with L any more. From there, she was much happier.

    I think my wife’s example is an extreme case. Hopefully Charlie isn’t in a similar situation. But, if it’s anything like what I’ve described (hopeless juvenile bullying and/or “look the other way” management), I’d say get out, or, if the company is big enough, transfer. When my wife was dealing with this, we thought and talked about it all the time, and asked everyone we knew for advice. We simply couldn’t come up with anything that didn’t involve sinking to L’s level.

    I’ll also add that in the place where I used to work, I never experience any hostile co-worker issues. However, it was a large company and I heard stories about other people having problems. Management had pretty much the same response that my wife saw at her company: “learn to deal with it”. I know it’s bad to make a generalization from just two data points, but sadly this seems to be the way that too many managers deal with these issues (i.e., they don’t). I don’t know if it’s the threat of a lawsuit, or the impossibility of fairly solving a he-said/she-said problem. In that light, all you can do is document profusely. Document everything: time, place, specifics, and most importantly, how it’s affecting your work. Once you have a nice collection of well-defined incidents, then you’re in a much stronger position when you talk to HR. It’s still he-said/she-said, but one of you will have a nice document that, if nothing else, shows just how much this is affecting your work.

  39. Shan says:

    Hi, Charlie! I think some other comments on your question have already added some great suggestions. I would add that asking someone else at work to mediate might be a step in the right direction. Someone with whom you have a solid working relationship, but are not involved with personally, is usually the best way to go. I would be super clear and direct – come with specific times or things that upset you, rather than general terms like “you’re rude to me”. Even if it was intentional, there’s a chance that when they realize how much it’s affecting you, they will be more aware of it in the future. This also looks good on your part, even if they continue to be a pain, because you made a positive effort to do something about the situation.

  40. Steve in W MA says:

    @ Amanda:

    I completely disagree with Trent’s advice in th9is case. You inherited a 30,000 dollar depreciating asset in this car. Ask yourself if you coould, or would, spend 30K of your own money on a car. If you would, fine. If you wouldn’t, then consider the following.

    A car isn’t really an asset, it’s more of an ongoing cost. It’s great that you love the hybrid SUV and the navigation system. But: It’s worth 30K. Who needs a 30K car? You can buy a Garmin Navigation system for like $400. You don’t need the one built into the SUV. (Actually, I normally just use a paper map but that’s another issue: if you want a navigation system they can be had for much less than 30,000 dollars is my point).

    You can buy a very reliable used car that’s about 5-7 years old for $5k on the private market and it will serve you extremely well. If you really want a new car, you can get a Honda Civic or something absolutely brand spanking new and it will only cost you about $16,000.

    I would consider selling the SUV on the private market for as close to 30K as I could get, then buy another 5K car (or if you love the new car smell, that new Civic for 16K) that gets much higher gas mileage, (so costs less to run), and put the rest in the bank.

    A slightly used Honda Civic, Accord, or Toyota Camry would be good choices. Maybe a Subaru. FYI my very reliable 92 Honda Accord gets 30 mpg and still runs like a champ. I don’t expect everyone to keep their car as long as I have kept mine, but know that the right car can be very reliable even as it approaches its 20 year mark (and 222,000 miles). Helps if you buy stick instead of automatic, too, because manual transmissions rarely fail and usually give better gas mileage.

  41. Steve in W MA says:

    Figure out what the pension is worth in annuity terms, then decide whether it’s psychologically and mentally worth sticking around one, two, or three more years (making a separate case for each time period) to get that amount of money.

  42. Steve in W MA says:

    Also @ Amanda:

    Since you are mainly a city driver, you may want to keep an eye out for the Chevy Volt plug in electric that is coming out in 2 months. You charge its battery up overnight at home, and the battery will run the car for about the first 40 miles of driving. For those first 40 miles it gets the equivalent of about 100 mpg (due to the high efficiencies of electric power generation at a power plant compared to those of a small gas engine such as power most conventional cars) After that, a gas powered generator, running at exactly the optimum rpms for efficient electricity generation (again, also different than in a normal car engine, which must operate at widely varying rpms and power outputs) provides electricity to run the electric motor, giving the car a 300 mile total range. Most drivers won’t even cause the gas generator to run during an average day.

    Not sure how much it costs, but worth looking into if you do want to consider swapping your current hybrid SUV for something different and the numbers work, which they may not since it’s a new technology and first of its kind on the market.

  43. Steve in W MA says:

    @ Q7, how to allocate your savings between retirement, home purchase, and fun:

    Try to get a reasonable figure for how much money you’ll need per month in retirement, then figure out how much money you’ll need invested/where that income could come from.

    Once you have that figure, see how much you’ll need to save between now and your retirement age. As a rule of thumb, divide your annual income need by .03 to .04 to give a ballpark figure of how much cash you’ll need in 2010 dollars to provide your needed/desired annual retirement income. Based on this estimate, If you can live on 20,000 dollars per year, you’ll want about 600,000- 800,000 dollars (2010 dollars) saved by retirement. In straight savings over 30 years (360 months), the 800K figure requires 2,222 dollars per month. If you want to count on investment compounding, then if you can grow your investment by a real rate of 4% per year, then you’ll need approximately 1,200 per month to get 800k in 30 years, which sounds a lot more doable but is certainly less conservative. Alternatively, an easier rule of thumb to get your entire retirement nut is to multiply your monthly needs by 300 or 350. Doing that gives you (20,000/12)*300 or 500,000 dollars or 583,000, respectively.

    this is important because it lets you see NOW, while you are still quite young and have the maximum leverage in terms of compounding and just plain time to save, whether you are savings enough for retirement. Waiting another 5 or 10 years makes it harder to come up with these figures without making severe lifestyle changes (read: living like a monk).

    If your retirement savings are in line, begin to consider the house purchase needs. The good thing about knowing yur retirement “nut” is that it helps you to see how much you can really afford in terms of other purchases such as a home purchase and can help you keep your housing expenses in line with reality.

    After considering your overall retirement needs, you may want to take some of that “retirement” money and use it for a downpayment on a home whose price fits into your comfortable range. You can always liquidate your home later if you need the money for day to day living (say, when you retire). Buying a home today in many markets will be a great deal if you are going to live in it for a long time because mortgage rates are VERY low now–not that much higher than historic inflation rates. So I’d definitely consider buying something modest as soon as it is reasonable for you to take advantage of these rates (all other factors being considered, of course).

    I recommend allowing yourself some fun money every month. I’d stick with $200 like you are spending now, even if your retirement and housing expense isn’t completely in line. It’s enough to have some fun but not so much that it’s spendthrift. And you need to have some fun while being responsible and realistic too!!!

  44. Steve in W MA says:

    @ Amanda, you are only going to drive this vehicle between 60,000 miles (6K per year for 10 years) or 90,000 miles (6k pe year for 15 years). Basically, your main concern is not going to be mechanical per se, but body and chassis rust that accumulates over 10 to 15 years. That’s what will make it necessary to get rid of the vehicle in the end, not mechanical problems.

    Most well selected vehicles vehicle will last that long in terms of mileage, both mechanically and rustwise, even one that you buy that is already 5 or 7 years old.

    Will you humor me?


    Close your eyes and imagine that your SUV were, instead of a 2010 hybrid SUV, a stack of twenties that is worth 30,000 dollars. That’s 60 $500 bundles of 20s, or enough to fill a small duffel bag.

    Now imagine that you didn’t have a way to get around. With that money, and the need for a car, would you go out and spend the whole stack of 60 bundles of 20s all ona 2010 hybrid SUV, or would you divide up the money and do something else, like buy something more reasonable with one part of the money (much like your former $6000 car purchase that probably lasted you 10 years) and put the rest in the bank or invest it?

    If you’re still having trouble breaking your attachment to this car, go to the bank and ask for about $5000 in twenties.

    Take it home, put it on your kitchen table, and look at it. Handle the money. Count it. Now, imagine that you have six piles of money each amounting to $5000.

    Now ask yourself what you would do with that money.

    I hope you give my mental experiment/exercise a serious try! Just because I think you’ll find that it will help you make a more satisfying financial decision for yourself with greater emotional clarity than you might be having now. (because the car was your mom’s (you are probably attached to it because it was hers and it’s comforting to have it because of that) and because it seems like it is a “free” car to you right now because you didn’t have to pay for it).

  45. Steve in W MA says:

    Update:I checked the Chevy Volt sale price and it’s 41,000 dollars before federal rebates, and in the low $30,000 range after a $7500-$8000 federal energy rebate. So, probably not a car for the budget minded at this point, even if it is a car that would be a great choice for the crowd can afford or wants to spend that kind of cash on a new car.

  46. Steve in W MA says:

    @ q3, Roth or 401K

    Here again, I diverge slightly from Trent’s perspective.

    At the figures you quote, with a biweekly paycheck, your husband is taking homw around $40,000 per year and you are saving about 450-$500 per month for your retirement. (On a side not, that is likely not enough starting from the age of 30. It might be enough starting from the age of 22. You might want to double or triple that contribution)

    Trent is saying that income taxes will probably go up. This is true, but they will go up primarily for higher income earners, those who earn six figures and above. You guys aren’t in that boat. Keep in mind that it is unlikely that during your retirement you are going to have enough money to pull enough out yearly to trigger higher income tax rates. Your main problem will be, not taxes during retirement, but getting enough cash to retire comfortably (and $400 a month is not going to do it, although it’s a start). I think you should consider that a traditional IRA that gives you a tax deduction at your current 30% marginal tax rate, allowing you to put more money to work sooner, may be a more valuable retirement option than the Roth. I haven’t run the numbers, but I think it’s likely.

    However, that being said, it is more important that you triple, or at the minimum double, your contribution rate. I don’t think your $400 per month is going to get you where you need to be, UNLESS you have another source of retirement income that you can count on. $1200 dollars a month will do it, $800 dollars a month won’t do it but is much more reasonable and realistic, and $400 will have you in a poverty-like condition in retirement in the absence of a significant second retirement income stream.

  47. littlepitcher says:

    @Charlie–I’ve had much experience with the “steal a job from a freak” types. First thing to do is be very sweet, openly sweet, to this person. This makes it obvious that the other person is the problem. Second–get information on turnover in that particular department. Often the hostile individual has a relative with an app in the front office, and the creep is churning jobs until the nepot gets hired. Third–little cheapskate advises purchase of Sutton’s “The No A**hole Rule” which lays out the actual business costs of hostile behavior. Then organize all of your ammunition and go to the person in charge. Like the place where one employee left from harassment and the second left from slashed tires, testimony from your predecessors–on paper and notarized if you can get that lucky–might help. Best of luck to you on this nasty situation.

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