Updated on 03.29.10

Reader Mailbag: Planning Ahead

Trent Hamm

Right now, as my wife approaches the end of a challenging pregnancy, I’m doing a lot of planning for the next six weeks so that you’ll continue to have fresh posts to read while the baby arrives. This means a lot of extra writing right now to ensure this happens.

However, I still might miss a post or two if the baby arrives very quickly or something like that, so if you see a day without a post, you can be pretty sure that I’m holding a tiny baby instead of writing.

I am looking for a cost-effective data storage/back-up solution. Currently I have photos, music files, and financial docs on my laptop hard drive, and I back up periodically to an external hard drive. However as I get more and more financial information electronically now, I am considering whether I should have some off site back up solution. I’ve been looking at services like Carbonite that offer online data storage for ~ $50-$60 / yr. Any thoughts on whether or not to sign up for this?
– JT

I back up static information to DVD-Rs. Things like photos, music files, home movies, and so forth are static – they’re not going to change. I make an annual DVD-R set with all of these documents on it and I make monthly “additions” on CD-R. This costs me maybe $5 a year.

For data that changes a lot, I usually just keep it backed up on a flash drive. I back it up regularly, encrypt it, and keep it on my keychain.

As I’ve said many times on here, I don’t trust sharing lots of personal data with additional companies unless there’s a deep need for it. My financial information in particular is something I don’t like to share.

My father passed away in 2006. For many reasons, including being financial naive, I did not take inventory on what he left behind. He left my mother 4,000 shares of Hudson City stock (HCBK) and I want to help educate her so we can maximize its potential.

Right now she gets paid a dividend four times a year which she uses to help pay her home taxes. A third party administrator who worked with my dads company is advising my mother and wanted to reinvest in more HCBK stock. Here is where I get lost and have questions. Shouldn’t she diversify? Is that not the case because my mom is semi dependent on the dividend payments? My feeling and advice would be to hold with belief it will get back around the 19.15 price it held in Sept 08 and at that point sell half investing the earnings conservatively because my mom is 59. As my financial where-with-all has grown, I am far from an expert and don’t feel totally comfortable providing this advice. I guess I am looking for some reassurance before I suggest things to the professional. Ultimately I just want to do what is best for my mother and would appreciate any thoughts you had based on the information provided.
– Ed

I agree with you that diversity is good. If all of the money is in one particular stock, you’re completely out of luck if that company goes out of business.

However, I think you’re focusing on the sticker price of the stock way too much. It’s pretty clear that your mother isn’t going to sell the stock unless she’s desperate. Instead, she seems happy to be receiving the dividends from it.

Thus, if she’s going to invest more, I’d suggest identifying and then investing in a company that issues a healthy dividend like clockwork. Don’t worry about the stock price at all – just focus on finding a healthy company to invest in.

I’m a recent college grad who just started working and I’ve got about 20k in loans (6.8% interest rate) with no other significant debt. Using a debt snowball calculator I figured that I could pay it off in 30 months using about 15% of my gross salary. However, right now my parents are letting me stay at their home for free for the next five months. I figured I’m saving anywhere from 700-1100/month by living with them. I’ve already got about 1k in my emergency fund. Should I use my extra money I’m saving in rent to pay off my student loans faster or use it to build up a bigger emergency fund?
– Bryan

I’d probably put aside some amount for the expenses you’ll have starting out living on your own – a deposit on an apartment, for example, and a bus pass, and basic kitchen supplies and an initial food purchase to fill your cupboards. I’d put aside $1,000 for that outside of your emergency fund (and perhaps more, depending on where you live).

Since you have no assets, I’d probably put a bit more in the emergency fund, enough to cover at least a month of living expenses after you move out.

After that, I would pay down the debt. Debt freedom is definitely a worthwhile goal.

What do you think about life insurance and prices? Is it possible for me to buy life insurance through my business to insure my son because he completely refuses to buy it himself even though he has a family of 7. If something happened to him, we would feel responsible in caring for his family. Personally, I don’t think that is quite fair.
– Rosalie

I agree with you that he should take out some life insurance on himself. It is the responsible thing to do, especially with a number of children.

If he’s not going to do it, you absolutely can take out a life insurance policy on him with you as the beneficiary. This is to protect yourself in that situation. If he passes, you can then use the money in whatever way is needed to secure the situation for your grandchildren. I’m not sure this is an expense for your business. I’m pretty sure that this would be a personal expense.

As for what to buy, just buy a term policy. Don’t worry about any of those policies that have some sort of investment package tied in.

Recently I’ve been very focused on improving 2 aspects of my life – my physical fitness, and my career. I’ve made strides on both, having lost about 20 pounds and sitting about 10 pounds from my target weight, and I’ve done it by making what I hope are sustainable, gradual changes. This has GREATLY increased my energy level, and given the the confidence to tackle my career goals, as I’m actively looking for the right move for a new job.

Since you’ve written about your weight loss and work on your book, I thought you might have some thoughts for someone who’s managing multiple goals looking to take that next step. Ideally, by June I’ll have reached my weight goal for beach season, and by September I’ll be happily in a new job with a realistic chance at making six figures by the time I’m 30 (which would nicely dovetail with my goals of buying an engagement ring in 2010 and a house by 2012.)

In the past I have motivated myself with small rewards, ie, if I write 3 cover letters tonight, I’ll get myself a nice bottle of wine. It usually works great, but I’m running out of rewards that don’t directly conflict with my new lifestyle. Using food as a reward conflicts with my fitness goals, and probably isn’t a great idea anyways. Buying something I don’t need, likewise, doesn’t really fit my financial goals. On top of that, I’ve found solid, affordable replacements for so many of the things I *thought* I wanted that I can’t find the right things to motivate me to make the next level of effort.

As much as I’d love a PS3, my PS2 keeps me entertained just fine. As much as an expensive bottle of wine sounds nice, I’ve got a group of $10-12 bottles that I’m totally happy with. Even a nice, but healthy meal out isn’t really a big deal since I’ve gotten good enough in the kitchen that I can make most of the things I really love It seems like all I have left is literally taking things off the board so I can reward myself with them later (I’ll let myself do the Sunday crossword AFTER I run) but that doesn’t seem like the kind of self-deprivation I can maintain long-term.

All of the above are great, since they allow me to keep my spending down and really appreciate the value of the things I have. The problem is that for the last 2 years, I’ve had a checklist of things I wanted (cookware, books, clothes) that I’ve slowly accumulated as I’ve rewarded myself for various goals. Now I’m tackling two major goals, and I’m running out of short-term motivators to keep me from feeling too deprived. I just hit a major goal in my savings ($20K) and took a long-planned vacation in February. Now I’m looking at a spring and probably summer of job searching, exercise, and eating right. I need some form of reward to keep myself going on those slow days.

I’m on a great path, but I need a little motivation along the way. Any thoughts would be greatly appreciated.
– Matt

Honestly, I use time as a motivator. It really works well for me.

What do I mean by that? I promise myself blocks of time doing something that I deeply personally enjoy guilt free if I accomplish certain things. So, for example, if I get twenty articles finished this week, I’m going to spend half of Saturday doing something fun. If I keep on my weight loss pace, I’ll allow myself two hours one evening doing something purely fun instead of washing dishes or something.

If I waste time, I usually feel guilty about it. If I do this, however, the guilt is gone. I just get to enjoy myself because I know I worked for this free time.

This really works well as a motivator for me because I don’t want stuff. I want time.

I’ve gotten my credit card debt to $2,700 from $6,000 this February. I have $5,800 in a 401K, and about $1,500 in a checking account. I’m also going to need about $1,000 in repairs to my car soon. My credit card company (Citi Visa) mentioned the other day some program they have to help pay off the balance of the credit card. I don’t remember the specific details, but it was an incentive to pay more than the minimum payment. Their deal is that every time you pay more than the minimum payment, they would reduce the amount you owe by a certain percentage. They cap the incentive at 20% of the existing debt I believe. It sounds like this could save me up to $500 or so.

My question is if I do something like this, would it count as a settlement and affect my credit rating? Part of their program requires you to freeze your credit card usage until everything is paid off.
– Joe

It depends on the specifics of their offer. You need to ask them specifically how this is reported on your credit report.

They may view this as an internal program and will just report that your debt is being paid and the balance is going down rapidly. On the other hand, they might report it with some sort of notice that could result in a negative on your credit rating.

You have to read the terms of the offer. You should start by simply calling them up and asking specifically how this is reported on your credit report.

I’m 25 and live alone (well, with a roommate) in the Los Angeles area. I have a good job and make what was a good salary when I started, before three years of “cost-of-living” raises that didn’t live up to the name. I have no debt except for very easy informal school repayment to my parents, and I have a 3-month cushion saved (though I’ll feel much better when I get up to 6 months).

I have two major goals in life. The first is to own a house, which is something I have wanted intensely since I was about 10 years old – with or without a husband to help me buy it. I picture this as part of a larger financial independence. The second one is that, now that marriage really does seem unlikely, I want to develop friendships and a social life that can sustain me happily through middle age and beyond.

The problem is that I cannot keep within my “investing and entertaining” budget. (I call it that rather than the more conventional “entertainment” to remind myself that the purpose is outgoing, to develop relationships, not to selfishly amuse myself.) I am always overbudget, but even then, if I’m invited to do something, I never refuse, because I can’t bring myself to miss any opportunity of being with friends. It should be mentioned that none of these outings are particularly expensive – they average around $15 – and in general I hang out with people about once a week. My group of friends also entertain each other frequently in our homes, but I actually don’t find this to be much cheaper as either I have to take something to share, or if I’m hosting, have to fill in the gaps of what others have brought. The obvious solution is just to cut back and start refusing invitations, but so far I’ve been unwilling to do this because I value these events too highly.

To be clear, even if I’m over-budget, I still have the money, it just has to be re-allocated from somewhere else. Since I’ve trimmed everything as tightly as I can, that usually means savings. And then I feel horrible about that, because of my other goal of house/financial independence. I can only save about $100/month even if I don’t dip into it – which I feel bad enough about anyway.

So the question is – how do I reconcile the two goals and/or cut my entertaining expenses? Is there a solution I’m missing? Or is there nothing more I can do other than start making more money?
– Ashley

It sounds to me that the problem isn’t with you, it’s with your budget. You’re putting an unrealistic “cap” on your entertaining budget and feel disappointed whenever you exceed it.

Clearly, by the way you live your life, you value these entertaining experiences. They’re one of the key parts of your life. I’d encourage you to go ahead and spend roughly what you’re spending on it. What you need to guard against is escalation of that spending.

The warning bell for me is that you say you’ve “trimmed everything as tightly as I can.” This is very rarely true in anyone’s life. Are you buying generics? Do you have a programmable thermostat? Have you disconnected your cable television? Do you still have a landline phone? Are you making inexpensive meals at home (think vegetarian, particularly vegetables bought on sale)?

There are many, many ways to make cuts to your spending in other areas, the areas that aren’t important to you. Look deeper.

How do you steel yourself against all the unsolicited advice offered as comments to your posts? I recently read the frugal pet tips post and found myself getting increasingly irritated as people offered up advice you had in no way requested and that had nothing to do with frugal pet ownership, like don’t get one since you have a baby on the way and pleeeeeeease don’t tie up the dog all day in the yard.

Anyway, it’s really a question that needs answered since you have a billion subscribers and questions but just wanted to show some solidarity – maybe it doesn’t tick you off, but if it does, you’re not the only one!!!
– Kelli

When people read an article I’ve written, they filter it through their own experiences and then offer up a comment based on the mix of the article and their own experiences. Most of the time, it’s because they genuinely care (yes, there are some people out there just trolling, but most commenters care or they wouldn’t bother).

The person who writes in with concern about the baby has probably witnessed an aggressive dog biting a child. There are vast differences in dog breeds in terms of their behavior and I have no interest at all in getting any dog that’s aggressive at all. I have negative interest in a “guard dog.”

The person who writes in with concern about tying up a dog has seen a neglected dog tied up outside all day and felt a lot of sympathy for that dog and wants to make sure that I wouldn’t treat a dog like that (I won’t – the only time the dog will be tied up is when they’re on a leash for a walk.)

They’re seeing my situation, reflecting on their own experiences, and sharing their thoughts and concerns. Yes, sometimes they go off the train of thought. Yes, sometimes it can be frustrating (for me, too). Usually, though, they’re saying something of some degree of value and they obviously care about something. In short, I don’t mind them at all as long as they’re not attacking anyone.

Sometimes, such comments seem like an attack on me. They seem to be assuming that I would engage in the negative behavior they’re describing. That used to bother me a lot and I would respond pretty defensively. For example, I could easily see the above comments as saying “Trent, you’re so stupid you’d get a pit bull and put it by your baby” or “Trent, you’re so cruel that you’d get a dog and tie it up outside all day.”

But the more I thought about it, the more I realized that most of the time, people writing such things aren’t even thinking about that in that way. They’re expressing concern about something that bothers them and not even thinking that they’re implying that I would do such a thing. They’re just relating a concern they have that has little to do with me other than to just give me something to think about. And that’s cool with me.

I have a question about the relative benefits of moving. Here’s our situation: My fiance and I are 31 and 27, respectively, and live together in the Bay Area. He is an IT professional (he makes $65-70K) and I am a PhD student (I make $30-35K). I hope to finish my research and PhD thesis in late 2010 or early 2011. After that, I’ll look for a permanent research position in the Bay Area. Because the market has gone down so much, we want to buy a house, but we can’t yet afford the size of house or the neighborhood we desire. We rent currently (with a housemate) and have been saving as much as possible for a 20% down payment on a house we hope to purchase when I am permanently employed. We have $80K saved, but our target house price will be $500-600K, so we need $100-120K.

We seemed to be on track to saving enough money until our housemate indicated that he wanted to move out, to a place with cheaper rent. If he moves out, we’ll probably have to pay his portion of the rent (it’s a fancy place, our landlord prefers “established couples” and didn’t want us to have a housemate in the first place, and I don’t think he’d allow us to sublet or add a new person to the lease). This means that our rent as a couple would go from $1533 to $2295 per month, which directly impacts our ability to save for a down payment. We could move to a cheaper apartment, but it would only be for about a year, and the considerable expense of moving and hassle of changing our address several times in a short period of makes us hesitant. Do you think (if we can’t convince the landlord to let us get a new housemate) that we should stay put and pay more rent or make the effort to move, even if it’s just for a year?
– Ann

It depends on how much you save. If you’re willing to live in a tiny apartment for a year, you’ll be able to save quite a bit over the next year and probably buy sooner than you might otherwise be able to. If you’re not willing to do that, then you’ll live better for a while, but will be in financially worse shape over the longer haul.

Whenever I read a question like this, I always think of the old Dave Ramsey nugget, “Live like no one else so you can live like no one else.” If you want something exceptional in life, you have to make some sacrifices along the way.

If I were you, I’d get a tiny apartment for the next year. If you have too much stuff, rent a storage place for the extra stuff (or sell off a lot of it – even better). Handle as much of the move yourself as you can before hiring a moving service. Put some sweat equity into it.

My credit is apparently good enough now that a company called me this week wanting me to refinance my 30 year fixed mortgage (24 years to go) at 6.375% to a 15 year fixed mortgage with a rate much closer to 4%.

Problem is that I have about 23k in high interest credit card debt. I’ve called several times and asked for a lower rate and threatened to jump ship, but I get the same excuse that credit is very expensive right now and they can’t reduce my rate. More importantly, I got so mad after one of those calls, I took the card out of my wallet several months ago and haven’t used it (or any) since.

I don’t think refinancing the house is the best move until I eliminate or at least majorly reduce the interest rate on my credit card debt. I’m trying to figure out the best way to do that. Do I seek a low rate credit card with an attractive balance transfer? Do I look into a second mortgage/home equity loan with an eye to shift some of the credit card debt to a lower rate (i don’t have enough equity to get it all) and at the same time reduce the existing mortgage to eliminate PMI?

The other question I have is timing. I’m currently on leave from work with a 7 week old. I won’t have a full time pay stub for income verification until probably June. I’m eligible to pull my free annual credit report again in late April. Should I try applying for a low rate card now and transfer the high interest debt as soon as possible? Should I wait until I review my credit report? Should I wait until I’m back to work so that I can provide documentation of my income for credit applications?

For further background, I’m married, 2 kids, have about 2 months income in savings, both of us are in early 30s, we both have retirement savings through work though I’m not contributing while on leave, all of the debt is shared and my husband is finally committed to paying off the debt.

Your opinion? Do you have other suggestions for me?
– Joyce

This might be an opportunity to roll some of that credit card debt into the mortgage. Call the people who offered the refinance and ask if you can refinance for more so you can take the difference to pay off some or all of the credit card debt. It really depends heavily on what your home is worth whether this will work or not.

I’m fairly surprised that you can’t use an older stub for income verification in this situation. Have you checked to make sure that you can’t use an older stub?

If you have to wait until June until you can get the refinance, I would probably try to apply for the new card right now to minimize the impact it will have on your credit rating later. You can then transfer the balance to the card to eliminate interest for now, but I would still try to take out extra on the home mortgage to pay off that credit card debt.

Remember, your entire goal is to minimize the interest you’re paying each month. I think, given the information you provided, that this is the best route to take.

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. Amanda says:

    @ Ashley – It seems to me the best thing would be to find a better-paying job if you can. With more income you could up your ‘entertainment’ budget without touching your savings and you seem to be frustrated with your ‘cost-of-living’ increases there as well.

    @ Ann – Have you tried renegotiating with your roomate a lower rent cost? If you lower their contribution you won’t be able to save as much as you are now – but certainly more than if you didn’t have a roomate without having to worry about moving costs.

  2. J says:

    @JT — the most effective backup is the one that actually gets done. We use Mozy and the data on our machine (that we have chosen to back up) is done every day, so even if our house burned down the only thing we would be out in terms of data would be the last 24 hours (at most).

    We used the hard drive/CD process for a while, but they were inconsistently performed and we could have lost literally 6 months or more of data at some points.

    Read up on the security levels and encryption protocols that are in use at Mozy (or Carbonite). They can’t look at your data without your key, known only to you.

    You are absolutely right to worry about what can happen to your on-site backups, it might be a good idea to have another hard drive or set of CD’s you periodically send to a trusted friend or family member if you don’t go with an online solution.

    To sum up, if you are disciplined enough to keep up with backups, then you can likely do well with a local hard drive and perhaps a backup program. But if it’s something you routinely let slip, then the online solution can be a good one.

  3. matt says:

    I’m sold on windows home server for backup, look into it, you can build one cheap or if you are lazy/buzy go with a turnkey from HP, I’m so happy with it I dont know why i switch to it sooner.

  4. KC says:

    HCBK is a strong regional bank. They did not make many risky loans and have a solid balance sheet (I owned this stock last year). Their dividend is quite safe and reliable. Right now it is paying about 4%, likely your father bought it a few years ago and your mother is now receiving greater than 4% based on his original buy in price.

    Regional banks are poised to do well in the near future. The government has set it up so that rates are favorable to the banks. But most regional banks didn’t have nearly the problems the larger banks did so they are doing quite well in this environment.

    I’m not against diversity, but HCBK is a pretty solid bank and quite a safe investment if you go with only one stock. If you do sell – wait until the price is at least $14/share – don’t sell when it has dropped below that.

  5. Stephanie says:

    @Joyce…..never, ever, EVER take out money on your home to pay off credit card debt (via second mortgage, refinance or home equity loan….) I am surprised that Trent would give you this advice. You would be basically using your house as collateral for that credit card debt and if you couldn’t pay back the debt (for whatever reason) then the bank could foreclose on your house…not worth it imo…right now if can’t pay the cc debt the bank won’t repo the clothes that you charged at the mall (or whatever it was)….

  6. Adam says:

    At the letter writer who sees that Citi will discharge some of their debt (20% or whatever) you should be aware that this can trigger a taxable income and you may end up owing to the IRS on that. Still not as much as if you had to pay it all back to the cc company however. Just FYI.

  7. Nicole says:

    re: the bay area couple: Have you tried negotiating with your landlord? Times may have changed since you started renting and he may be more amenable, especially if you have been good tenants.

    Re: the constant complaining about people saying what they think even if it (OMG) differs from what Trent thinks… or even worse offering advice to Trent. Do you seriously want to silence all discussion on this blog? Is only one opinion ever allowed? Does Trent have to know everything about everything?

    These constant attacks on Johanna etc. are making me feel very uncomfortable and taking away the thing I like most about this blog, a good feeling of community (even if she doesn’t seem to mind). I keep getting flashbacks to middle school when you had to keep your mouth shut or face social condemnation. The only thing I can do to get away from it is vote with my feet (or my mouse), and that’s not really fair to TSD.

  8. Johanna says:

    @Ashley: Am I reading this right? Spending $15 a week on entertainment puts you over budget (so your budget is less than $60/month), and you’re saving $100/month (or less) toward your house down payment and your emergency fund combined? That’s not very much money to be putting toward your two biggest goals in life. Where’s the rest of it going?

    There’s no one-size-fits-all budget for everybody, but I think there’s a lot of wisdom in the 50/30/20 plan, where 50% of your (after-tax) income goes toward needs (rent, food, transportation, utilities, and insurance), 30% goes toward wants, and 20% goes toward savings and debt reduction. If your needs are eating up much more than 50% of your income, you’re going to have a hard time fitting everything else into what’s left.

    If that’s what’s going on here, and if you can’t cut your needs spending to fit within the 50% (say, by getting a cheaper apartment *or* by getting a slightly more expensive apartment that’s much closer to your workplace and the other places you need to go), then yes, the thing to do is to try to earn more money.

  9. Johanna says:

    I don’t think I commented at all on the pet thread Kelli’s talking about, but I do have some unsolicited advice for Trent regarding his answer to Matt:

    “If I keep on my weight loss pace, I’ll allow myself two hours one evening doing something purely fun instead of washing dishes or something.”

    That is a weird example. Who’s washing the dishes if you’re not? Is your wife on board with this reward system? What happens if both of you want to reward yourselves by not washing dishes on the same night?

  10. chacha1 says:

    Re: “Ashley,” why is someone who’s only 25 so sure she’s never going to get married? It sounds as though that’s something she wants, but has decided will never happen for her. A recent romantic disappointment, perhaps?

    My own piece of unsolicited advice … if she wants to get married, spending time with the same old group of people is not going to get her there. She’s already ruled all those people, and their acquaintances, out. Take up a new activity.

    As to the budget – if things are really that tight, then either the salary that seemed good three years ago (at age 22) really wasn’t, or her fixed expenses have gone up excessively. If Ashley’s rent has increased over the past three years (nearly everything in Los Angeles, by way of comparison, has gone down or at least held steady) then she may want to look at moving somewhere she can get additional roommates – especially since home society seems important.

    I mean, if you’re spending all your time/money socializing, why not live with some of those friends?

  11. Honey says:

    For the folks whose roommate is moving out, I’d just tell the current landlord that either they need the option to bring in a reliable 3rd person, or they have to move out. I also like the suggestion that they lower the rent for the person who wants to stay – they’d save less per month, but not having to move is a huge pro.

  12. Des says:

    My own unsolicited advice to Ashley: If, for whatever reason, you’ve determined that you are unlikely to marry even though you’re only 25, make sure that the friends you are investing in are older than you are, and similarly single. If you are investing in the friendships of other twenty-somethings, know that they will probably be getting married in the next decade and that will change the nature of your friendships.

    That is not to say you won’t still be friends, but what is important to them will change and you will live is two separate worlds. God forbid, they might even have kids and then you will practically be speaking different languages if you never intend to partner up and breed.

  13. Kat says:

    Most of the comment saying not to get a dog when you have a newborn had NOTHING to do with the dog biting the baby! It had to do with your time training a new dog while also dealing with 3 preschoolers at home, which will be stressful for you, for your wife, for your new dog, and probably for your kids.

  14. marta says:

    Exactly, Kat.

    I was one of the people who brought the baby up and the biting issue didn’t even occur to me. Come on! But the time issue is very real — I don’t have kids and yet adopting (and training) a new pet is a great time suck. Totally worth it, but it takes time nonetheless.

    Trent has got a knack for misrepresenting people’s comments, that for sure…

  15. Erin says:

    @JT- CD and DVD backups are good, but I’ve gone to look at old backups and the CD has just gone bad, so I think an online backup like Mozy is a good idea.

    @Ashley – It seems a bit premature at only age 25 to say that “marriage seems unlikely”. You have plenty of time! At 25 I was totally single, not dating anybody, and at 29 I was married. Also, while owning a house is a great goal for you and I don’t think you should wait till you’re married to do it if you’re single. But also don’t rush it. It ties you down in so many ways and costs so much more money than you ever think it will.

    Not knowing your salary and budget it’s hard to tell if your problem is that you don’t make enough money or that you’re being too strict with your budget, but it sounds to me like you probably need to cut yourself some slack and raise your entertaining budget a little. I’m not saying stop saving for your house but it may be worth it for you to get out and be social even if it slows down your savings rate just a little bit.

    @Joyce – I think I must be missing something because I don’t understand what the connection is between the interest rate on your credit card debt and refinancing your house? If anything, wouldn’t refinancing lower your payment and then you would have more money to put towards paying off the credit card debt? I think you are focused too much on the interest rate when you should be focused more on paying off the debt as quickly as possible.

    I also strongly agree with Stephanie who said do NOT roll your credit card debt into your house. To emphasize what she said, you don’t want to jeopardize the home you and your family live in by tying your credit card debt to it.

  16. Gretchen says:

    You talk in this thread about not having enough time (again) and rewarding yourself with time, but assume that the only reason people think you shouldn’t get a dog with 2 small children and an infant is because one might be bitten?

    Like Kat, I didn’t see biting at all mentioned in the other thread.

  17. Gretchen says:

    Also, 25 is a little young to be selling one’s self off as an old maid.

  18. Johanna says:

    @Erin: Joyce would be refinancing from a 30-year mortgage to a 15-year mortgage. So even though the interest rate would go down, the mortgage payment would go up, so she would have less money to pay down the credit card debt.

  19. bethany says:

    @matt Trent gave great advice, but I also wouldn’t dismiss the self-deprivation plan either. The only way I’ve gotten through grad school is dangling typical small pleasures as a reward. Write this section before you play video games or chat with a friend. I also associate things I like with things I need to do – I don’t have a lot of time to listen to podcasts, but when I go to the gym that’s productive time (working out) that I can hear podcasts I want to listen to anyway.

  20. jim says:

    Ed: I would diversify. That bank’s finances and dividend rate are not guaranteed in the least. It sounds like your mom is dependent on that money so I’d diversify it.

    Joyce: Please don’t roll unsecured credit card debt into a home loan.

    I would also be very cautious of a company that called you apparently out of the blue offering to refinance your mortgage. You might find they have very high closing cost fees or something else that explains why their interest % is low. That company probably doesn’t know your credit situation and they’re probably calling everyone they can find. I get solicitations by mail frequently offering to refinance my home and its just a come on salespitch. Shop around with reputable mortgage broker and see what kind of quotes you get. You should refinance your home, 6.3% is high compared to current rates. I would just go with a 30 year loan and then put the savings on your mortgage payment towards paying down the credit cards.

  21. Mol says:

    I am happy to see a reader like Ann mentioned in the mailbag. A 500k-600k house sounds like a mansion to me, but it affirms the point that being frugal is not the same as being cheap.

    My question is: me and my fiance have a great difference in age(He is 40, I am 22 — we did not plan or make a habbit of dating older or younger people, it just happened. We love each other.) Our number one long term priority is to provide the healthiest happiest childhood we can for our furture children.
    He is currently unemployed, I have 5 more years of schooling to do, and we have to sell his current house (terrible location, we do not like the house) and purchase a new one.
    He is working on getting a job and we are working on the house to get it in shape to sell. I am working on my schooling as well.
    My problem is that he wants to absolutely wait until I am finished with my schooling, and I cannot see a way around this, as the closest universities that offer an accredited program for my field are 4 hours away.
    I am just learning in my first personal nutrition class (nutrition is my major) that the optimal time physically for a woman to become pregnant is in her early twenties and that both a man and a womans fertility decrease after the age of 30. In 5 years I will be 27, not that big of a deal, but he is going to be 45.
    I am wondering if you had any advice on someway to make it work that we have our children (planning on 2, maybe 3 if we do not produce a boy and a girl the first 2 times around) as soon as we comfortably can financially, but during my schooling. Or is that 5 years probably not going to make as big of a difference as pausing my education would?

  22. JT says:

    Thanks for answering my question, Trent. And thanks to everyone else for their input.

    I’m pretty good about backing up myself (but not perfect) and I’m mostly concerned about what happens in case my place burns down, or if there is a break in and someone steals my computer & my external drive, etc etc etc. Lots to think about. Thanks again.

  23. Jerry A., Frederick MD says:

    @JT #22 (and to Trent):
    It does not much matter what method you use to back up your computer, as long as you DO it, and do it regularly. The storage location matters as well… There is no point to storing your backup hard drive or stack of CDs or DVDs right next to your computer, if the whole room burns down or everything is stolen. If you have a safe deposit box, use it for storing your backups. If not, then buy a fireproof waterproof MEDIA safe. Regular fire proof boxes do not keep the internal temperature low enough to protect computer media, since papers burn at a higher temperature that would kill most magnetic or plastic data storage.
    I agree with Trent that I prefer to keep control of my data. I’m not a cryptographer, so I am not qualified to tell if the encryption algorithm used to protect my data from prying eyes is adequate or junk, but I do know that there is a lot more snake oil with hyped up advertising than good crypto software with no overblown promises. I also know a big company with a lot of people’s data stored in their computers is a more attractive target for online data crooks than a box of random discs in my house. Given that most companies have no real protection guarantees, have no significant cost to them if they lose my data (if any), and may not even admit to having been broken into, they have no financial incentive to invest in more expensive effective security. I suspect most will put a junior IT kid put in charge of finding some software with great advertising that meets their arbitrary budget level. How will you -the customer- know if the program that sounds okay to the IT guru is really good enough until the system is broken? How will the IT guru, since IT knowledge is _not_ the same as security expertise. If the security program is bad enough, then even the IT guru may not know the system was compromised! (Sorry for the length- this is a pet peeve. Go buy a fireproof media box if you don’t already own one. Stuff in your important papers and computer discs. Sleep better at night.)

  24. GayleRN says:

    Ed: You should look into Dividend reinvestment plans (DRIPs) which are commonly offered by many dividend paying companies. There are also ways to buy just a few shares at a time regularly with sharebuilder type plans. I believe ING has just such an plan.

    Mol: This is going to sound cruel. He is 20 years older and unemployed. By the time your kids are ready for college he will be retired. Believe me, you will not be able to pay for college on social security. Now go out and look at the average 65 year old man. Do you really want to be married to that when you are 45? I am also guessing that the house needs to be sold because neither one of you has the money to make the payments. I would think long and hard about having children with this man. If you are the only one paying the bills now, you are being taken advantage of.

  25. Johanna says:

    @GayleRN re Mol: That was my first reaction too, but in this economy “unemployed” doesn’t always mean “lazy.”

    As for Mol’s actual question: I’d say that as a first step, if you can, you should talk to a doctor about his fertility. Plenty of men in their 40s are plenty fertile – I don’t think it’s a good idea to make major life decisions based on an average before you know how that average applies to your specific situation.

  26. Mel says:

    @Mol: Stop justifing the age difference! When I was 21, I started seeing a 37 year old man, and it took me a long time to stop caring what other people thought (and to stop hearing the “oh, I thought he was your father!” comments – yeah, I looked young). I didn’t care how old he was, why should anyone else?

    @GayleRN: Please, stay out of other people’s relationships. Some people are able to see behind the vital statistics to the actual person – and that’s what matters. So what if he’s retired when the kids are in college? My dad was retired before I was born (he was 60, mum 30). All that meant was that he had heaps of time for me and my sisters. We had a great childhood and I wouldn’t have swapped him for any great-looking 25-year-old workaholic father.

  27. Russ says:


    Your housemate appears to be paying $762/month. Lower the housemates payment to $562 or whatever you think the housemate would save by moving somewhere else. It would be cheaper for you to come up with an extra $200 vs. the full $762!

    Just my 2 cents…

  28. Brittany says:

    Oh, Trent, I’m excited for you! Forget about us for a bit and snuggle that baby when it comes!

    @Ashley– I’m in the same boat! (Except that my savings is going to student loans, which I’m determined to pay off in two years so I can take a year off to travel and volunteer in a few years.) I find Trent’s advice to be… well, if not insulting, at least incomplete. I have cut everything as tightly as I can. I’m basically a vegetarian unless meat in less than $1/pound, and then only rarely. I’ve tried to cut my food budget lower, but it starts to get unhealthy. I only buy generic. I live in an apartment building, like you, and CAN’T replace my thermostat with a programmable one. I live in a apartment with the lowest safety/cost ratio I’m comfortable with. My physical safety isn’t something I’m willing to sacrifice for a few bucks. I’m possibly getting a third roommate, but I love my current one dearly, so that’s not a decision only up to me. I can’t cut my medical spending any lower without adversely affecting my health. I don’t have cable, and my only “extras” are a cell phone with the smallest package I can get (no landline and am all but absolutely required to use a cell phone a work) and internet (cheapest I can get, necessary for working from home and communicating). My salary is very low, but I love my job (non-profit work) and have no plans to quit any time soon. You sound like you’re in the same place. And Trent’s only advice is cut more?

    You could find another job like others have suggested, but nothing in your e-mail sounds like you’re planning on it. But there’s another solution no one has mentioned–you could find a SECOND job. Mind you, I’m not suggesting you get a night job flipping burgers, but a couple hours of odd jobs a week could give you a little bit of flexibility in your budget so you could keep your savings high and not give up the social and professional benefits of your entertainment spending. A few hours tutoring, one afternoon a week baby-sitting, on-demand catering, a weekly or monthly cleaning of one family’s house–any ONE of these could give you enough money to up your entertainment spending every month, a the cost of giving up a few hours Sunday afternoon. This is what I do to help me balance it all.

  29. SLCCOM says:

    Ashley, I would strongly advise against getting rid of the landline in the L.A. area. Cell phones fail a lot more than landlines do in emergencies.

  30. Geoff Hart says:

    In the context of backups, Trent notes: <>

    Though I understand this attitude, I’d have to disagree with it because of the last clause: there’s a deep need for it. For any information that’s important to you, you really need some form of offsite backup. What would you do if your house burns down, or if a thief takes both your computer and the backup disks stored “safely” along with your jewelry in a fire-resistant strongbox “hidden” in the basement?

    I’ve long since stopped counting the number of friends or colleagues who have lost irreplaceable information because they didn’t have any backup or because their copies at home got trashed or stolen. Some form of offsite backup is a must for any information you couldn’t quickly and easily recreate from scratch. At a minimum, store your backup disks at a friend’s house; the odds of both places burning down or being burgled simultaneously are low. Or store them in your safe deposit box at a bank.

    Most things aren’t really as confidential as we think they are. For those that are, learn how to encrypt your data so that the people who run an online storage service can’t do anything with the files even if they do try to look at the contents. (Which is rare. Most storage companies screen their employees.) There are many utility programs that do this for you. For Word files, the latest versions allow the use of passwords up to 255 characters long (though apparently there’s a not-yet-fixed bug with Word 2007 that allows only a much shorter password). It’s the Tools–>Protect Document function (not sure where that is in Word 2007). Unlike other passwords, you can attach this one to your computer monitor with a PostIt note, since this password is only used to protect the file against *online* thieves, who won’t have physical access to your computer. Use a short, memorable sentence such as “My favorite TV show in 2010 is Lost” (don’t use that one!) that is easy to type.

  31. Lazo says:

    The only question I have is this: can Rosalie get life insurance on her non-dependent son with a family of 7?

    Rosalie would, AT LEAST, need the signature of her son to do so. He is not a minor, thus she has no authority to obtain the insurance on her own.

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