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.
2. Sore throat solutions
3. Credit card reward worries
4. Leaving a loyal employer
5. Investing big inheritance
6. Re-reading old books
7. Self-publishing an e-book
8. Energy bill reduction
9. First investing steps
10. Giving up
Each day, I have some success in getting several things crossed off of my ongoing list of steps to take on my personal projects. That’s good.
The problem is that the list of personal projects I have that need attention are many and I have a difficult time cutting them down to size.
This needs attention, that needs attention. I do make forward progress on everything, but it often feels like I could make much more progress if I could eliminate some of the projects.
Just been using the Razorpit. WHAT A FIND! Easy, makes convenient stand for drying and really works. At the price of the expensive razor blades this is worth the investment. Thanks for the tip. Where did you ever find this?
For those uninitiated, the Razorpit is a wonderful little device that makes it very easily to manually hone disposable razor blades, giving them about five times as much life. The Razorpit doesn’t wear out, either – I’ve been using mine for several months and it basically looks new.
I find stuff like this by keeping my ears and eyes open for things that might be potential money savers, writing them down, and researching them a bit. If it seems plausible, then I give it a shot. Sometimes, they don’t work out. Sometimes, like with the Razorpit, they do.
I actually think I found this one thanks to a magazine of some sort at the dentist’s office based on my other notes and the date on which I ordered one. If I don’t have my Kindle or a book with me, I’ll just read whatever I find, so I’m pretty sure it was one of those dentist office magazines like GQ or Esquire or Men’s Health or something.
For me, the best thing to do is to drink some hot tea with honey in it. It soothes my sore throat about as well as anything else I’ve tried.
When I’m just first getting a hint of a sore throat, I take some very warm water, add a few pinches of cayenne pepper, and gargle with it for thirty seconds. This often heads off a serious sore throat.
When I really need to talk, I’ll drink tea with lemon and ginger in it. That seems to keep my voice healthy.
Q3: Credit card reward worries
My question for you is about credit cards. Here is a little bit of possibly relevant background about me: I’m 26 and a doctoral student with a relatively low income. I basically live paycheck to paycheck, but I usually have a little bit left over that I split between savings and leisure activities. Also, I recently took out a very small part time job just to give myself a more comfortable cushion every month. I have a small emergency fund with about 2-3 months of living expenses socked away in a savings account. I do have educational debt from my Master’s degree, but it will not accrue interest until six months after I finish my doctorate (which should be in about 3 years). I have zero consumer debt. So, unless I’m doing something really wrong with managing what little I’ve got right now, my query is about how to best use my credit cards given my situation.
Growing up, my parents encouraged me to get a credit card as soon as I possibly could to help start building credit. However, they insisted that I never, ever carry a balance. So, I’ve had a credit card since the age of 18. I don’t like using a debit card so I use credit like I would a debit card. I pay the balance off in full every month. I hardly ever use my first credit card — it doesn’t offer me any rewards or anything useful except for when places don’t accept my main card (AmEx). My second credit card I used only for a couple months when my cat got very ill and needed surgery a few years ago. I took out a line of credit through a company offered by my veterinarian’s office that let me make payments in installments with no interest so long as it was paid off in a certain amount of time. I emptied my emergency fund and paid off the balance well before the promotional period ended. I haven’t used the card since. Finally, I have my “main” card I use for most of my spending. It has a rewards system that gives me roughly a point for every dollar I spend. Over the years I’ve had it, I’ve figured out that 2,500 points will get me a reward (in the form of gift cards) that is worth about $25. It doesn’t seem like much per year, but since I never pay interest, I figured it’s an overall win.
The other day, my friend was talking to me about her own credit card habits and she seems to get much better rewards than I do. She gets cash back on a number of different purchases of the sort that I make (basics like gas, food, drugstores, etc) and a very small amount of cash back on all other purchases. I researched her particular card and found out that it had an annual fee which seemed like a big drawback. But now I’m starting to wonder if I should get a new “everyday” credit card that has better rewards than my current one. Growing up, my parents always stressed that one shouldn’t have more than one or two cards and I should really avoid retail cards like the plague. Yet, the grass looks greener on the other card so to speak! So my question is: what should I do? Should I go for another card with rewards? Should I take out a retail card with my main grocery store? And, if you think that any of this is a good idea, what should I do about the other cards? Should I just leave them alone or close the accounts? I’ve heard that closing accounts is bad news for your credit score.
Regardless of what you do with new cards, leave your oldest card open. That’s the most important one, because it often establishes the length of your credit history.
As for the best reward card, it really pays to shop around. It’s often hard to tell which card will actually be the “best” one for you because everyone has different habits and the offers change all the time. At the end of the day, it’s all about maximizing credit card rewards points to compensate for any annual fees. Better yet, find a card with no annual fee.
For me, the best card is one associated with the retailer I use the most. For my wife, it’s one associated with the gas station she uses the most. So, between us, we have two cards – one we use at retail and one we use at gas stations. We use the retail one for other opportunities because it’s a cash back credit card that scoops up 1-2% elsewhere.
I’d probably start with the one from your grocery store, especially if it’s a Mastercard or Visa you can use elsewhere. Figure out how much you’d get in rewards on that card in a given month and see how that compares to what you already have.
I’m not a big believer in cards with annual fees. Unless there was something mind-blowingly exceptional about it, it’s probably not worth it.
Q4: Leaving a loyal employer
I have worked for the same employer for twelve years. This employer has never laid anyone off unless they were an extremely negligent employee, has constantly created a very fun work environment where everyone feels like family, and has put money into the business out of his own pocket during lean times so no one has to lose their job.
It sounds great, but the pay is really low. I have a job offer on the table that bumps my pay by 60% and I could probably top that with some negotiation and job searching.
I feel like quitting on this guy is pretty scummy. He is the kind of employer that everyone wants to have. But I need that extra income. What do you suggest I do?
Talk to him. Have a conversation with him and tell him where you’re at.
An employer would have to be pretty manipulative to not understand your situation. If he can and if he values your work, he’ll probably try to retain you, and that’s a decision you’ve got to make.
I’ve seen what it can be like for workers in places where the employer views them as nothing more than cogs. It’s really not a pleasant situation.
Q5: Investing big inheritance
I’m a female in my mid-twenties, unmarried with no children. After years of being involved in a lengthy legal battle, I’m now the recipient of roughly $600,000 in personal injury awards. Currently I am unemployed and a student. I don’t have too much debt, about 5k in credit card and student loans. I own my car, which is older and will need replacement soon. I want to relocate to the BC area in the near future (right now I’m in southern Ontario.) My question is; how should I invest this money? I’m starting to learn more about GIC’s and mutual funds (I had a consultation with a financial adviser and he explained his opinion, which sounds logical but I’d like another opinion as well.) My plan so far is to put $25k in a chequeing account to live off of until I find work in BC, and if I put $200,000 in the mutual fund it would acquire interest; and put the rest in GIC’s. I’m not ready to start playing around with the stock market yet until I learn more about it – I’m very low-risk with money at the moment, and also very new to learning about finance.
For our American readers, the GIC that Susan is referring to almost assuredly refers to a Guaranteed Investment Certificate, which is fairly similar to a CD and is an investment product issued by Canadian banks.
The first thing I’d do is get rid of the debt. That should be gone right away. After that, your plan makes a lot of sense. You’re spreading out the risk between a mutual fund (higher risk) and a GIC (very low risk), meaning a stock market plunge wouldn’t be devastating to you.
I’d spend some time thinking about your goals. What do you want to be doing in five or ten years? Are you going to buy a house? Are you thinking of starting a business? Do you want to just live off this money for a while?
If you don’t have any goals that require a specific dollar amount on a certain date, then I would certainly balance between stocks and GICs as you’re suggesting. It’s a completely reasonable plan.
Take your time with it, learn about what you’re doing as you take each step, and you’ll be fine.
Q6: Re-reading old books
Rather than selling or trading books that I get, I keep the ones I like because in a few years I will reread them. I have a shelf full of books that I reread all the time. You can’t get much cheaper than that for entertainment!
I have a small roster of books that I read and re-read. I’ve read Kim Stanley Robinson’s Mars trilogy more times than I can count, for example.
Most of the time, though, I enjoy reading new things. I often hit the local library for new books rather than buying them. If your library has a “wait list” feature online, use it. I’ve used it many times to get on the wait list for new releases and read them pretty quickly after release.
Reading can be a very, very inexpensive hobby.
Q7: Self-publishing an e-book
I’m considering publishing an e-book myself for some passive income. If my book became successful, would there still be potential for a publisher to pick it up and help with distribution, or do they not want to touch a book that’s already been self e-published? What’s your experience been here?
Publishers will certainly pick up e-books for print publishing if they’re successful. It’s incredibly easy profit for them, as they mostly can take a popular e-book and send it straight to the presses.
The challenge is for you, as an independent author, to make the e-book successful. You have to promote it heavily yourself and get it in front of readers. You don’t just stick books on the Kindle Store and wait for them to become successful. It won’t happen.
The best thing you can do is to write. Write as much as you can, edit what you’ve written, and publish them, even if they’re not successful. Wait until you have three or four things up to start heavily promoting, so if people find you, they have multiple things to read.
There are a lot of things you can do.
Turn down your water heater until the hot water is at 120 F (49 C or so). Set up your entertainment center so that it can be turned on and off with a light switch. Install LED or CFL bulbs in as many light sockets as possible (I prefer LEDs, but they have a higher up-front cost). Turn down your thermostat in the winter and turn it up in the summer. When you rotate appliances, buy energy efficient ones.
Those are just the big steps. Even little ones, like turning off the light switches when you leave a room, seriously add up over time.
Q9: First investing steps
I’m just starting to learn about financial matters and your blog was recommended to me by a trusted friend. Thanks so much for writing. I’m just getting started reading, so it’s possible I haven’t searched thoroughly enough and you’ve addressed this topic already – if so, I apologize (I also have a 1 year old, so my attention is a little scattered). Here’s my question. I have $450 in an IRA with Chase that is earning .01% and is subject to annual fees. So, basically I’m slowly losing money. I’d like to eventually get $1,000 to invest in something like Vanguard’s target IRA fund. But, with a 1 year old and only one salary supporting our family of 3, we don’t have much disposable income and what we do have we’re using to pay off some low-interest debts. That said, I have $100 to play with and I’d like to find a way to invest it so that I can grow my retirement savings to $1,000 and invest it wisely before it slowly widdles away in corporate america. Do you have any suggestions? I’m pretty risk open with the $100 and if I lose it, I’m okay with the learning experience, but obviously I’d like to grow it as quickly as possible and then reinvest. Do you have any suggestions? I read about DRIPs online, which sound like an option, but I don’t know much about them.
$100 is such a relatively small amount that it’s going to be hard to invest it in anything that doesn’t immediately eat 10% or more of the money in fees right off the bat.
Your best bet, honestly, is to stick it in a savings account and keep adding to it whenever you find a few spare bucks. A savings account will earn you a 1% return or so, which is far better than that disastrous IRA. Wait until you have at least $1,000 before you start investing it in other things, because if you don’t, the fees will just devour your gains.
As for the IRA, I’d suggest transferring it elsewere, but it’s going to be hard to find a decent investment that you can get into with that relatively small balance. Many good investments have a $1,000 minimum – quite a few have a $3,000 minimum.
There are lots of possibilities here. One is that you’re truly not making any progress by being careful with your money, which would indicate that you need to make a significant move to improve your finances, such as moving elsewhere or trading down on your automobile.
A second possibility is that you are actually in a better spot, but it’s hard to see it because long-term progress can feel very slow. The best solution for that is to keep track of your net worth over time so you can actually see the gains, even if they’re hard to make out in your day to day life.
A third possibility is that you’re not really scrimping and saving much at all. You’re doing one or two things that seem very obvious to you, but they happen to be things that you attach deep personal value to. The small amount you’re saving each month because of that isn’t really making a change because you’re not really changing anything.
The value of frugality comes from whittling down the things you don’t care about.
In either case, giving up and gorging on debt is just going to put you in a hole that’s going to take an incredibly long time to get out of.
Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.