Reader Mailbag: Packing Books for Trips

My wife and I recently had a long discussion about how many books we should pack for a trip. I usually tend to read more when traveling, so I usually pack one book for every two days’ worth of a trip.

So, let’s say we go on a ten day trip. That would mean five books. Does it make sense to tote that many books back and forth?

Our idea is this. We each take one book with us and look to borrow stuff when we’re there. If that doesn’t work, we hit the bookstore. If we finish a book and aren’t sure if we’ll read it again, we do the ol’ “put a read-me note inside the book and leave it on a park bench” technique that I often use to pass along books.

That way, we don’t weight our luggage down with books either coming or going.

I am 30 years old and have finally found my dream job at a non-profit after years of working in a very fast-paced, stressful environment. Of course, my dream job pays much, much less than my previous job. And the work is fairly easy for me, based on my previous experience, but is very fulfilling. I also have very reasonable, flexible hours. However, there is also not much room for me to grow beyond my current position at the non-profit.

My husband thinks I am being undervalued and not utilizing my hard-earned skills, and should be maximizing our earning power right now while we are young (we don’t have kids yet). Especially since, right now, we depend primarily on his income and would be in trouble if he lost his job. Theoretically, he is right, I am very capable of getting a much higher paying job and would probably be able to do so fairly easily, based on my past work experience. But would probably lose the stress-free, fulfilling environment I have grown to love.

What do you think I should do?
– Meg

You’re comparing two sets of values to each other, and that’s more of a question of what you personally feel is important. There is no black-and-white answer to a question like this.

How much, dollar-wise, are the positive attributes of your current position worth to you? For some, they might not be worth much at all – for others, they’re worth a lot. It all depends on your personal makeup.

It sounds like the positive attributes of your job are worth a lot to you. If they are, they should trump earning more money. Of course, they should also point you toward having more energy and initiative to take on endeavors in your personal life outside of the workplace.

I just looked at the anticipated tax brackets for 2010 from the link on your site. It’s anticipated that $34,000 is the cut-off between the 15% and 25% brackets. So I make $35,000 as a single person. 25% of my salary goes to taxes ($8750) but if I only made $34,000 then I’d be in the 15% bracket and 15% of my salary ($5100) would be going to taxes.

So, I am very new at all of this stuff but am I interpreting this correctly? If I made $1000 dollars less each year, I would actually pay $3650 less in taxes?

This can’t be true…can it? I either need to ask for a big raise to make the jump to the 25% bracket “worth it” or I need to ask for a small pay cut? Oh, and I always seem to take the standard deduction. I work for a non-profit (not sure what other info you need). How do I decrease my taxable income so that I am in the 15% bracket…I think that’s the place I need to be.
– Amitra

Amitra is referring to a link to my old pal Jim’s site that lays out the predicted tax brackets for 2010. This question also shows one of the biggest problems with our tax system – it’s just simply very confusing.

OK, let’s use your example. Let’s say you make $35,000 as a single person (after deductions and the like – $35K is your actual taxable income). The tax brackets on that link are:

10% Bracket: $0 – $8,375
15% Bracket: $8,375 – $34,000
25% Bracket: $34,000 – $82,400

Here’s how it works. Of the $35,000 you’re paying taxes on this year,
$8,375 of that income is in the 10% tax bracket.
$25,625 of that income is in the 15% tax bracket (the $34,000 maximum of the bracket minus the $8,375 minimum).
$1,000 of that income is in the 25% tax bracket (the remaining income).

Your total tax bill for the year would thus be the total of:
10% of $8,375, which is $837.50
15% of $25,625, which is $3,843.75
25% of $1,000, which is $250
which adds up to $4,931.25. That’s what you’d pay for the year.

Now, if you earned $1,000 less, you’d owe only $250 less in taxes. If you earned $1,000 more, you’d owe $250 more in taxes.

The paranoia about higher tax brackets is just that, paranoia. You’re always better off earning more money.

Do you ever get a question or request for advice that just makes you say “What were you THINKING?!” Do you ever find it hard to give the patient, thought-out answers you do?
– Jess

The only questions I get that make me really uncomfortable are the ones where people are basically asking me permission for them to do something unethical or illegal. I usually just delete those without any kind of response.

People will write to me about how to commit Social Security fraud in various ways. I get questions about how to avoid paying any and all taxes. I’ve had questions about money laundering schemes. That’s the kind of stuff I don’t like – breaking the law to take more than your fair share or pay less than your fair share.

I don’t really mind when people are struggling with the ins and outs of how a complicated situation works. For example, in a question below, I address a family trying to deal with a nanny employment and being unsure how to do it. In these situations, it’s clear to me that the person wants to do the right thing, but the right thing is made difficult by confusing and draconian laws and regulations. If a person’s heart is in the right place, then shaky legal standing doesn’t make me feel bad.

Jointly, my husband and I make a pretty good income. We have no debt, besides our mortgage, and we spend about 80% of our after-tax income, which does 401K contributions as they are taken out pre-taxes. Our savings equal about $2,000 a month.

We currently max out my husband’s 401K at $15,000 a year (my company does not offer a 401K program). We have one IRA with about $10,000 and one Roth IRA with about $21,000 (I don’t know the difference between Roth and non-Roth, whoops) but do not contribute to them regularly.

However, we still don’t know how to invest the rest of our savings and I am embarrassed to admit that we have about $20,000 in our checking account (no interest!), which serves partially as our emergency fund/save up for house purchases fund, although we do not need this much in checking. I thought about investing the extra cash in a CD, but the rates seem so low right now. I am not sure if we should add more $$ to our IRAs or invest is somehow else?

Any advice?
– Megan

Quickly, a Roth IRA is one that takes in after-tax money and pays out after-tax money in retirement. A normal IRA does the same with pre-tax money.

At the very least, you should have that extra cash in a savings account earning at least a little interest. Your own bank can be a start, but you’ll probably find a better rate and better service with an online bank like ING Direct or SmartyPig (I use both, actually). At least then, it’ll be earning 1-2% interest and can still easily be accessed pretty much whenever you want it.

Most of the time, CDs are a great way to get a little more guaranteed return for your dollar, but interest rates are in the basement right now and they don’t really return much better than a savings account. I wouldn’t worry too much about CDs for the time being.

Beyond that, you may want to consider investing it in something with a greater return but a bit of risk, like a very broad-based index fund through Vanguard. Yes, the investment will go up and down with the stock market, but you’ll be earning at a better rate than the 1-2% you’ll get in savings.

So here I am, 20 years young, without any form of aid from either my family or the state, with a credit history that prevents me from getting a ‘good’ or, perhaps ‘any’ loan and trying to pay out of pocket for my Gen Eds working night classes because my data-entry job is a 9-5 ordeal that precludes regular class hours. There are worse stories out there so I don’t want to sound like I’m something special. ‘Falling throught the cracks’ sounds about right.

How do I manage this? What is it going to take for me to get a degree?

I was wondering if you could cretique my current plan for me, hopefuly there is something I am missing, something that will makes this more affordable.

It is my goal to save 30% of my income (aprox: 7k yearly) into a savings account and pay for community college through my gen eds. Then transfer in 3 years when I can apply for an independant FAFSA praying to God in heaven that my credit will somehow be fixed by then. Hopefully my savings (which will be between 40-50% of the college costs depending on if I need car repairs, bail out someone in need or my expenses change between now and then) will be enough to get me through. Maybe I can get aid then and finish a degree without debt.

Is there some key I’m missing? I’m willing to take this route of frugality to do what I want to do but I’m nervous that I’m missing something that will make it a little easier. I guess I just want to know if there is a better way.
– Andrew

You’re not missing any key, except that you’re probably better off putting the money into a 529 plan. That way, you have at least the opportunity to earn better returns (though you can also treat it as a savings account with low guaranteed returns), plus the interest you earn is tax-free if you use it for educational purposes. We use the Iowa plan, which is open to everyone; other states, like Utah, have good plans as well.

Other than that, the best thing you can do is simply wait. Wait for your credit to recover. Do everything you can along the way to improve your credit so you can get good rates on your student loans. Save what you can.

You might also want to consider residency in a state with low-cost state schools that you might be able to afford out of pocket while also working.

We were married in October of 2009, and had lived together for 3 years prior to that. I’m 38 he’s 42. My husband makes about 20-25,000 per year as a self-employed carpenter (his bachelor’s degree in bronze sculpture hasn’t really been profitable) and pay can be sporadic depending on work he has at any given time. In addition, he has about 25,000 in consolidated debt. I on the other hand, work as a physician assistant and make about 125,000 per year – getting paid once per month. I have approximately 8,000 in credit card debt, 70,000 in student loan debt, and 42,000 line of equity against a rental property that I own. (I had owned the 2 rental properties before we married, and together we maintain both. Both have rents which cover their mortgage payments, but several needed renovations on the properties led to the line of equity. Sadly, the equity line was granted at the peak of the market and now the rental house is worth far less. About 42,000 to be exact.)

ok, onto the question. Since I make a substantially higher salary, and have more bills, we have kept our finances separate. I pay the mortgage, the cable/internet, and cell phone. He pays the electric, water, and alarm bill. Our house is modest, w/ a $160,000 fixed 30 year mortgage at 6.25%, but is 110 years old and the electric can be high. Should we combine our finances? Do we set budgets for ourselves once the bills are paid? We discuss our finances with each other, and I don’t feel like we have marital issues. What would you recommend?
– Kim

I would recommend combining them. It’s much, much easier to budget and plan for coming months if all of your money is in one pool.

My wife and I didn’t combine our finances at first in our marriage. We kept our money separate and were each responsible for certain bills. I paid the rent, she made the car payment, and so on.

Over time, we found that we were pretty much just paying each other’s expenses anyway and that with separate finances, it was very hard to plan ahead for mutual goals, like saving for a house. It was much easier instead to spend our money on individual things we wanted because we weren’t financially responsible to each other.

So we combined them, and it was one of the best things we’ve ever done.

We have a full-time nanny to watch our nine month old daughter. We spent roughly $2000 a month on her care (out-of-pocket and under-the-table). This is our first year employing our nanny, and I’m starting to question if we should be doing this in accordance with the law (i.e. the nanny tax). We’re both 29, have a mortgage with roughly $500k left (small house, high cost of living area, 30 year fixed mortgage with good interest rate), and have a combined income of around $200k per year. We have no debt (beside our mortgage), max out our 401ks, as well as save about 10% of our income per month.

How much “extra” will the nanny tax cost us? How much will our employee/nanny be taxed? Are there any tax benefits (e.g., write offs) to us by using the tax? How do I even go about setting this up?
– Erica

The Cradle offers a great summary of the ins and outs of employing a nanny. It certainly sounds like, in your case, the nanny falls under the umbrella of “employee” rather than “independent contractor,” which means that you are legally liable for taxes (and if you don’t pay them, you’re going to get hammered – * paying all back taxes, penalties, and interest, charges of perjury and tax fraud, up to $250,000 in fines and up to 5 years imprisonment, and possibly ruining your reputation and career).

The best thing you can do is contact a tax attorney who can help you set all of this up correctly and provide some guidance as to the cost. Once you get it set up, it’s actually pretty easy to keep the ball rolling – you just put money aside in a separate account and make regular tax payments.

An aside: I consider the laws for doing this to be ridiculous and the penalties for not doing it right to be utterly draconian. The government would save a lot of money and probably increase their revenue, too, if they made such arrangements blindingly easy. They could just say “if you’re going to pay your nanny or domestic employee $X per year, you simply need to place $Y per year in that person’s ‘taxes and domestic service’ account with the IRS.” That’s all, it’s done – incredibly easy for both sides to verify and complete. Instead, we’re talking about tax attorneys and complicated procedures.

I have recently been intrigued by the idea of raising rabbits as a way of…

A. Supplementing our grocery bill
B. A green way to dispose of edible waste
C. Supplementing income through the breeding of rabbits

I am hoping you might have some input as to the profitability of this idea….
– Sarah

When I was young, we raised rabbits for several years for just these reasons. However, the return on the time invested in rabbit farming is pretty small.

First, there’s a lot of time invested in rabbit care. From daily feedings to making sure they’re all healthy and maintaining cages and removing waste, it’s not just about tossing rabbits in a cage and waiting.

There’s also a lot of startup costs, as you need to build individual cages for the rabbits as well as make sure there’s an easy way to provide food and water to each one.

Once you’re past all of that, the actual cost (food, water, cage repair, startup costs) versus reward (income from sales, food, reduced groceries) isn’t all that great.

Rabbit farming is a great hobby if you love rabbits. It’s not a money maker unless you’re doing it at an industrial scale.

I just started a new job at a small company with about five people in my office, myself included. My coworkers go out for lunch everyday as a group. I’m eager to get to know them better and to be included in the work-related conversation that occurs during lunch, but I simply can’t afford to eat at restaurants everyday. You know better than I that $7-8 everyday for lunch adds up fast. I have decided to only join them for lunch twice a week, and bring my own lunch the other three days. What is the best way to politely decline lunch without highlighting the fact that it’s money-related?
– Anna

First of all, you have to state some sort of logical reason for not going or else your co-workers will believe you’re avoiding them, which can be very damaging in terms of workplace politics.

You have two choices. You can either be honest about it or you can come up with a good excuse – say, something dietary related, and use that.

I vote strongly for honesty. Simply tell them that you’re trying to cut back on personal spending and that you’re brown-bagging it a few days a week. Encourage them to do the same. In one workplace I’ve experienced, they had group “brown bag” days as well as days where one person would bring in materials for lunch for a group of twelve and they’d rotate the “host” on a regular basis. This would take up two days of their week for lunch, adding some variety and also cutting costs.

If I were you, I’d suggest those things. Why not have a group brown bag day once or twice a week? It saves you all money, adds some variety to the meals, and maintains the social aspect of lunch.

I unfortunately made a terrible decision to pursue a masters degree two years ago and rack up about 90k in student loan debt. The degree is in liberal arts and has been and most likely will be all but worthless insofar as raising my earning potential. I have not been able to find a job in my field (international relations) and stopped trying about a year ago. It has been a rough two years of unemployment but I finally acquired a decent job with a salary that is high enough to pay the monthly loan amount, save about 15% of my income in a retirement account (403b university account) and start creating an emergency fund. I have no credit card debt. I also own stock with BP totally roughly 90k.

My question is what should I do with the stock? I could sell it now, take a big capital gains tax hit and pay off most of the student loans. I could pay the regular monthly payment on the student loans and wait for the stock to (hopefully) regain some of its lost value over the next 5 years or so – perhaps the stock will increase at a value greater than the 7.25% interest rate of my student loans?. I am also not sure what to do about retirement savings….should i forgo saving for retirement in order to throw every additional dollar towards the student loans? Or will the compound interest of the retirement account outpace the interest that i am paying on the loans over the next 30 years?
– Chris

If I were you, I would sell the stocks, take the tax hit, and pay off your student loans. It’s a safer bet (given the 7.25% interest rate on your loans) than betting on a single undiversified stock to do better than that.

The reason for this is your monthly cash flow. Each month, you’re saddled with that loan bill. What happens when life inevitably comes along and you lose a job or get a pay cut? Or you fall in love and get married and switch jobs to something lower paying near her? Or your car breaks down and you have to start racking up credit card debt to deal with it because you don’t have enough monthly cash on hand to deal with it?

From a strict dollars-and-cents comparison, there are good arguments to be made both ways about the stock. When you include the realities of day-to-day life and the usefulness of having a low amount of required bills, the scale tips toward selling, in my opinion.

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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