Updated on 08.09.11

Reader Mailbag: Podcasts and Writing

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. Handling expensive schooling
2. Handling a closed credit account
3. Lowering high housing costs
4. Investing while in college
5. Solid credit, no credit cards
6. Planning for after debt elimination
7. Jealousy of the rich
8. Executor advice
9. Investing now or later?
10. Planning ahead for side business

When I get myself in the flow of writing, I usually lock myself in my office (or go somewhere else where I’m completely alone), turn on some podcasts (think of it as talk radio that I control), surround myself with the needed research materials, and just start writing. I try as hard as I can to stay in that state until the words just don’t come any more.

Sometimes, I never quite get there. At other times, I can get in there all day, completely lose track of time, and be interrupted by my wife wanting me to help with supper when it’s not even lunch time yet. Those days enable me to have lots of other days where I can just spend time with my wife and kids.

Q1: Handling expensive schooling
I am nearing the completion of my bachelors degree and am looking into continuing straight into a masters. I am 27, work in the public safety sector and need to go to a school that offers an online experience due to my work schedule. I believe I have found the perfect school with the exact degree I want, but of course there is a major road block. Money. The school costs a significant amount of money, more than a lot of other masters programs out there, but it is a well known school and this particular program is highly regarded. In addition, it is one of the only schools that offers this degree online.

My employer has a reimbursement program, but it is capped at a level that will just cover 40% of my tuition costs, which leaves me with around $18,000 to find somewhere. Scholarships are nearly nonexistent in the area I wish to study, and I already have $9,000 in student loans from a failed experience at college during my youth. Needless to say, I am reluctant to take out more loans and am having a hard time deciding if I should still go for it. This degree will help my career, but it will not pay off for me for years to come, and will never pay off like other graduate degrees due to the nature of my career field. It is more about maximizing my potential and educating myself to benefit my employer, fellow employees and my profession as a whole. There is a possibility I could leverage the degree into a consulting gig, or public speaking, but those aren’t rock solid.

So now to my question, should I pursue the dream school and dream degree, risking debt/not being able to pay. Or should I choose a less fulfilling program because I can get scholarships and save a dime? I have been excited about the prospects of this program for a year now, and the hard reality of the money situation is bearing on me now. I am having a difficult time deciding the correct course of action.
– Trey

Education is one thing in life that I don’t begrudge going into debt over. The investment almost always pays for itself over time.

It seems as though you’re pretty confident as to what field you should be going into. If you know that, then you should do everything you can to prepare for entry into that field, even if it costs you money in the short term. You are going to be far better off with an education and a degree in a field you’re passionate about, even with a little debt, than you are with an education and a degree in a field you don’t care about.

Go to school in the field of your choice. You’re going to get more value out of it, even considering the debt.

Q2: Handling a closed credit account
I last wrote to you inquiring about debt management organizations and I have decided not to go that route. However, when I called one of my credit card companies and asked them to lower my interest rate (they said no, and were actually the ones to suggest a debt management organization to me) said that they could “work with me” and lower my rate/monthly payment but part of the deal would be that they would close my account.

This is actually fine with me – I don’t want to pay it down and charge it up again (hopefully, I won’t!!!). I want it to be gone for good, but I don’t want to hurt my credit score (which is good).

So, do I suck it up and keep plugging away at this card with an over 20% interest rate (not the first debt I am attacking – but maybe it should be??) OR take their offer, get my interest rate lowered and close the account?
– Kay

Lowering the interest rate and closing the account will have a slight negative impact on your credit score (at first), but the impact of that will most likely be overcome by the reduced interest rates on that debt.

How big is the negative impact? It depends on the balances on your other cards and their credit limits. One significant part of your credit score is your debt-to-credit ratio, which is the sum total of your credit card debts (and certain other types of debts) compared to the sum total of your credit limits. The closer your debt total is to your credit total, the worse it is.

If you have all of your other cards maxed out while this card had a low balance compared to the limit, closing the account will have a fairly bad impact. If that’s not the case, I’d close it and enjoy the lower interest rate.

Q3: Lowering high housing costs
I see stories all the time about people who paid off their mortgages in 10 years, 5 years, even 2 years, which is a fantastic achievement. But I also noticed that a lot of them were able to do that because they purchased the property for $200K, $100K, or maybe even $80K. In the Los Angeles area, you couldn’t find a decent property for less than $300K. (I’m talking about apartments/condos only, since the threshold for a house is even higher at $400K.) Sure, there are cheaper properties in gang-infested neighborhoods, but most people there are trying to get out, so why would you want to buy in? The other option is to buy something way out in the boonies, but then you’ll have to deal with a 2-hour daily commute (yes, each way).

For people like me who make less than $100K per year, it would be very tough to make the monthly payments on a $300K loan if the term were only 15 years. Yet the prospect of paying a mortgage for 30 years is rather daunting (and depressing).

Renting is an option, but the $1200 monthly rent on a 2-bedroom apartment is almost the same as the $1300 monthly mortgage payment for an equivalent property. We would move to a cheaper area, but my husband works in the entertainment industry, so the only other place for us would be New York, which is even more expensive.

What can people do if they live in an area with high housing costs?
– Kathryn

Usually, they rent until they have either a large down payment or they have an opportunity to move to a lower-cost area in the United States.

If they don’t take one of those two options, they often end up in foreclosure. An awful lot of the people who took on adjustable rate mortgages during the housing bubble watched them adjust, found they couldn’t make the new payments, and watched the bank take their house from them.

Don’t fall into that trap. Rent and save as much as you can, then see where your path leads. It might lead right out of your expensive housing area.

Q4: Investing while in college
I currently hold $12,500 in student debt, with another year, and that much to go before I’m finished. So, at the time I graduate, I will have about $25,000 in student debt at about 6.8% interest. I am still undecided about going to graduate school. My financial situation is fairly stable, with a steady income leaving me with about $400/month which I currently place in a 1.4% savings account which has a balance of about $10K at the moment. My dilemma is whether I should keep saving, invest, begin paying off the loan early, or I have the option of paying off the interest early. If I do invest, I’ll need to keep in mind that some of my savings are my emergency fund. What do you think, Trent?

– Darin

I would figure out how much you need for an emergency fund and then apply the rest to knocking down that debt.

So, how much of an emergency fund should you have? If I were you, I’d keep two months worth of living expenses of a level you would reasonably expect to have once you leave school. What is rent like in the area where you’re at? What about transportation and food? Make some estimates for a month, add them up, double it, and that’s how big my emergency fund would be.

I would apply the remaining savings toward that student loan and channel the income toward the loan, too. If an emergency does come up, I’d focus on rebuilding the emergency fund, then re-focus on the loan.

Q5: Solid credit, no credit cards
The Situation: I find myself in a strange situation. I have good credit scores (762-789 in Experian, Equifax and TransUnion). My credit reports say my credit score is affected negatively because I only have 1 credit card (limit $3,500, use 30% or less, paid off every single cycle). I applied for a standard card and was denied…because I have only 1 credit card and have not exhibited that I can carry more. Hello, Catch 22! I live in NYC so I don’t have a mortgage or car payment or even student loans that create other credit avenues to be listed on my credit reports.

The Background: I have $0 debt for 3-4 years now, have an emergency fund for 5 months worth of expenses and am currently employed at a decent salary (have been steadily employed for life, save one 2-week stint in 2001). Back in 2001 I had $14k of debt (which I paid off) and *no* credit score to speak of since all my cards had been withdrawn by the lenders and thusly I had no credit scores since I had no active credit. When I had credit scores show up most of them were awful because of so many past late payments. They are all past statute of limitations now and no longer appear on my reports. 3 years ago I started with a $250 secured card, after 1 year was offered an unsecured $900 limit card and the limit’s been raised a few times. I don’t really think I *need* the extra credit but I’m trying to raise my credit scores in the event I want to buy an apartment one day, so they can see that I can hold multiple lines of credit (and higher limits of credit) responsibly.

The Question: Do I get a secondary secured credit card since I can’t seem to get an unsecured card? If so, should I put a few thousand in so I am working with a card that’s immediately got a higher limit (easier to use it for the 30% or under costs and will show I can be responsible with higher credit limits)? Any other ideas? I applied for a fairly reasonable card so I’m not sure I want to apply for others as I’m assuming I’ll get turned down again and I will have that many more hard inquiries on my credit report.
– John

A secured credit card should be a last resort in your situation. You should be able to get some sort of unsecured card.

If I were you, I’d apply for a card from a different card issuer than the one that denied you. Your situation as described seems like a situation that a credit card issuer would be happy to issue a card to.

If you can’t get such a card, I really wouldn’t worry about it. Your credit scores are very strong and I don’t think you have a strong need to reinforce it – at least not one strong enough to pay the cost of a secured card.

Q6: Planning for after debt elimination
I do have a specific question for you. The background info: I’m 25 and single. I earn $3,000 per month (net). I have one student loan ($11,000 remaining principal balance, at 6.75% interest) and $1,000 in an emergency fund. I also contribute 5% of my gross pay to a 401(k), which my employer matches.

Currently, I take 30% of my take-home pay and use it to pay off my student loan. I try to make a payment of $1,000 per month.

First question: am I saving enough money? I agonize over my budget, and I suppose I’m looking for assurance from you that I’m being aggressive enough about becoming debt-free (major goal #1).

Second question: once my loan is paid off (goal date: next June), what do I do with the money that I was formally using to pay off my debt? My ultimate dream is home ownership (major goal #2).
– Rebekah

For your age and financial state, your money choices are strong. You’re contributing a total of 10% to your retirement and you’re hammering away hard at your student loans, both of which are going to set you up with a brighter future.

When your loan is eliminated, I would start socking that $1,000 per month into a savings account. At that rate, you’ll have a down payment on a modest home in a couple of years, so I would not put that money into other forms of investment that may carry some risk to the balance. Keep an eye on properties in your area and when you start to get close to a 20% down payment, start looking.

I think you’re in great shape. Keep it up!

Q7: Jealousy of the rich
You’ve written many times about abundance versus scarcity. I understand that, but I still feel very jealous of people who have more money than sense. How can it possibly be fair that idiots have so much money?

– Connie

For one, the people you decry as “idiots” are often putting on a public act, one that their audience will consume. The audience will watch their “stupid” television specials and other media appearances to laugh at their idiocy, not realizing that these “idiots” are laughing their way to the bank. Most public figures that you perceive as “dumb” are often at least somewhat smart – they’re smart enough, at the very least, to find skilled promoters and backers.

The real crux of your question boils down to a desire for wealth. For me, eliminating the desire for excess riches came about from thinking about what I would have to give up to have that kind of wealth. The last thing I want is paparazzi – in fact, I’ve turned down some great opportunities related to The Simple Dollar out of fear that it would bring a level of fame that I do not want. I also don’t want friends and family turning to me as their financial spigot.

Sure, I’d have lots of material things, but without a happy life with lots of great relationships, it’d be a stretch for me to enjoy them.

Q8: Executor advice
My mother in law wants my husband (and I) to be the executors of her estate. We have politely refused, saying we simply can’t handle the responsibility and workload of such a task (or the emotional toll, since my husband’s siblings are being cut out of the will). Unfortunately, each time we see her she broaches the subject again, as if we haven’t already refused, stating that she’s counting on us to take care of things and pretending not to hear our concerns.

My question is, if she were to die suddenly and we found that my husband was named executor, what are the implications if he then refused the job? I think the court appoints someone to do it, but I don’t know what that entails–or how much it would cost her modest estate. Any thoughts?
– Kelly

Typically, the courts do appoint someone as executor. That person (or the state, depending on the arrangement) takes the executor’s fee and attempts to execute the will to the best of their ability.

An executor’s fee is usually around 3% of the total value of the estate. This fee can vary in some situations. It’s often larger in the case of small estates, and it’s often a bit larger when someone needs to be cajoled into being executor. This is all at the discretion of the judge, but the judge is usually following some strict guidelines from the state.

If you refuse to be executor, someone else will be. The executor fee that would have gone to you will instead go to this other executor and it may be enlarged a bit. For the most part, the actual work of an executor is really straightforward, so they most likely wouldn’t do much differently than you would do as executor. That’s really all that would happen.

Q9: Investing now or later?
The recent post regarding paying off low interest loans has got me rethinking some things. Currently the only debt I have is a signature loan with a current balance of $1629.71 at a 5.9% interest rate. I’ve been saving as much as I can to put towards investing and currently have a balance of $1659.23. As you can see, I could pay off the loan today but then I’d have to start over saving for investments. My job situation is fairly stable, I believe. I work for a retailer/restaurant that has been been in business for over 30 years, has over 600 stores and I believe is fiscally conservative no matter what the current economy. Plus, I have been with them ten years now. I don’t have any real concern about losing my job. I would like to acquire disability insurance – not offered by my employer – and paying off the loan will allow me to do that without undoing all the bill reductions I’ve achieved in the last few months (replaced the land line with a pre-paid cell phone, for example). However, it will put back my plans for having enough investment income to quit working for money in five years. I originally planned to go on making monthly payments, figuring that it was better to invest ASAP and start making returns than to wait, if I indeed wanted to make this five year goal. So, which takes priority? Smaller investments sooner or larger amounts available (the money previously going to the debt payment) for investing later?

– Monica

It depends on how you invest. If we assume that you’re five years from retirement (as you mention), your retirement investing should be fairly conservative. Thus, over that five year period, the return on your money will most likely be less than 5.9% – but it will be a stable return.

My view is that if you’re saving for retirement aggressively at this point (meaning you’re heavily into stocks and the like), you’re committing a big investment mistake with consequences that will trump all of these decisions. You should be pretty conservative this close to retirement, with the largest portion of your retirement savings in bonds and cash.

Given that, the best return on your money is paying down that debt. As you mentioned, it frees up your cash flow so that you can make bigger retirement investments later.

Monica had another question as well

Q10: Planning ahead for side business
I’m forty-six years old, unmarried, no children. I live with my mother, so I don’t pay rent, a mortgage or utilities and I have access to a car. I can also use the city bus to get around. This year I went back and restarted the “Your Money or Life” FI program. So far so good. I got out of debt management 12 months ago. My monthly bills were never very big, aside from debt payments, but now I can easily live on as little as 25% of my income from an $8.06 an hour job of 25 to 30 hours a week. I also am an artist and plan on expanding my artwork considerably and making it into a true side business, before and after I quit my ‘day job’. That being the case, I do want to quit as soon as I have enough investment income to cover the basics – health insurance, disability insurance and regular monthly bills – as well as an emergency fund. As I said above, I’m currently aiming for that to be five years from now. I’m told my employer only offers 5 cents on the dollar for a Roth 401k and I don’t want to wait until I’m 59.5 anyway, so I’m currently reading “Bogleheads Guide to Investing” and looking really seriously at index funds. What do you think? Is it feasible? The five year goal is pretty arbitrary but fifteen years is enough to give any employer and it’s a nice round number.

– Monica

As I mentioned above, if your goal is to effectively retire in five years, it’s not a wise move to put your money heavily into stocks. The value of stock investments is pretty volatile over a five year period – you might gain 40% or lose 30%, it’s hard to tell.

If I were you, I would probably buy either a mix of index funds (with a bond fund being the biggest one) or I would just put it all into a target retirement account that’s just a few years out, like a Target Retirement 2015 or 2020 fund. This will keep you in a pretty safe place with regards to your investment.

I’d also try very hard to expand that artistic side business now. Try to build it while you still have a steady income so that when the time comes to make that leap, you can easily make it. Give as much of your spare time as possible to your art and to the business behind selling 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 (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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  1. Jonathan says:

    Q3 – As with most things in life, its all about priorities. Those people who buy a house for %100k and pay it off in a few years have likely opted to live in a lower cost area. Either they already lived in a low cost area and decided to stay rather than move, they lived in a higher cost area and decided to move into a lower cost area, or they live in a higher cost area but decided to buy in a lower cost neighborhood. If you choose to stay in LA, then it sounds like your only options are to rent, go into debt for a longer term (more than 15 years), move into one of those gang-infested area you mentioned, or find a way to increase your income.

    Houses are more expensive in LA because there is a demand for them. If people refused to pay $400k for a house, then eventually prices would have to fall. As long as there are people who value living in a certain area enough to pay more for housing, then there will be a shortage of affordable housing.

  2. Jayme says:

    I disagree with Trent. I haven’t seen education always return its investment over time. A $100K debt for an art history PhD probably won’t return it’s investment. (I say probably because someone on here will know the exception to the rule.)

    Can you make the program take longer? Meaning, if you spread it out over 4 years instead of 2, does that mean your employer will pay more? My employer will pay a flat amount every year, so if I make a degree program last more years, they’ll pay more. Yes, its slower, but then it’s cheaper too!

    Will you regret having $18K in debt for this? Will you then have to work more hours or longer in a job you don’t really want in order to pay this off? Will you feel enslaved to this debt?

  3. Katie says:

    Usually, they rent until they have either a large down payment or they have an opportunity to move to a lower-cost area in the United States.

    If they don’t take one of those two options, they often end up in foreclosure. An awful lot of the people who took on adjustable rate mortgages during the housing bubble watched them adjust, found they couldn’t make the new payments, and watched the bank take their house from them.

    This isn't true at all! The places where foreclosures were highest at the height of the real estate crisis (and probably still are) were not the places with the highest income. Yes, California was on the list, but not because the LA and SF Bay areas and the other three states with rates drastically higher than the national average were Arizona, New Mexico and Florida. By and large the people at the highest risk of foreclosure weren’t people in urban areas that had always been expensive; they were people buying homes in rapidly expanding, suburban sprawl areas. It’s just fallacious to assume that people were foreclosed upon because they were living in a metro area they couldn’t afford; it was because they bought properties they couldn’t afford (with poor mortgage terms) in whatever area they happened to be in.

    Anyway, I live in DC, which I believe now has the second highest property costs in the country. People do rent more than in other places, which is fine because there are great places available for rental. If they buy and stay in the city, they sacrifice having a big place for the joy of the awesome location. Which is not as terrible a trade-off as it may seem – plenty of people in, say, Europe don’t feel they need the amount of space in their homes that most Americans do. Or they move further out and resign themselves to a long commute.

    And overall, one thing to keep in mind – the odds are you make more money than you would someplace with a lower cost of living. For instance, for a long time the place with the least affordable housing being built in the country was Portland, Oregon, not because the housing was so expensive (far cheaper than DC, alas), but because salaries simply weren’t that high. A $150k mortgage is as hard to afford on a $50k salary as a $300k mortgage is on a $100k salary, and a lot of times those are the trade-offs you’ll be looking at. (This isn’t true for everyone – and it’s clearly not true for self-employed Trent, but it is for an awful lot of people with jobs tied to a particular area, such as the entertainment industry).

  4. Jayme says:

    Q5: What’s the goal here? You already have a great credit score and shouldn’t have a problem applying for a mortgage if that’s what you want. Do you just want access to more money? If you’re not worried about applying for a mortgage soon, then your credit score will probably go up in time as you the card you have, pay it off, etc. You could also ask the card you currently have for an increase.

  5. Johanna says:

    Q1: I’m pretty uneasy about Trent’s blanket recommendation to take on as much debt as you need for whatever educational degree strikes your fancy. At least this case isn’t as egregious as one of the previous reader mailbag questions where he gave this same advice (he told some poor woman to take on $100K in debt for an MFA in design writing, or something like that), and it *may* still be the right choice for Trey to go for this degree, but he needs to do it with his eyes open. Because student loans are a big deal.

    For example, how much money does Trey make in his field? What are his expenses, and how much cash does he have left over every month? If he can comfortably make the payments on the $18K loan without sacrificing anything else he values, then getting the degree might be a good idea (but he still needs to decide whether it’s worth it). If he can’t, then that’s a different story.

    It sounds like Trey is saying he already knows that the degree won’t net him any extra money, at least for a long time. So he’d be doing this for personal fulfillment alone (the fulfillment of learning the material for the degree, and possibly a more fulfilling career afterward). Is that fulfillment worth $18K (or $200/month for the next ten years, or whatever the payments work out to be)? That’s something only Trey can answer. Maybe the answer is yes, or maybe it’s no. But that’s how he needs to be looking at this.

  6. Adam P says:

    @Monica #9 and #10…you want to retire at 51, because “15 years is enough to give any employer and it’s a nice round number”; yet from what I can see you haven’t started investing yet beyond the $1,659 (except you have $1,628 in debt?).

    Is this a prank post, or am I missing something?

    Your expenses are very very low right now because you live rent free with your mother and also pay no utilities or property tax or maintenance (and I’m guessing, groceries, insurance, maintenance, etc). Is it fair on your mother what you are doing? As an adult, I’d me mortified to leech on my family this way in my 20s, nevermind my 40s. If you quit working, would your mother still be happy with you living with her? Maybe you are giving her assistance as in attendant care or caregiver which would be okay but it’s not mentioned.

    I think you need to be more realistic, retirement at 51 IS possible with low expenses and healthy passive income flow but you’ve got artificially low expenses and no passive income *yet*. Even building a $10,000 a year flow of passive income at today’s interest rates requires huge money ($666,666 at 1.5% ING rate = $10,000).

  7. Jon says:


    Ugh. No. College debt is not always worth it. We don’t need more adults telling kids to not worry about the debt incurred during education and just “follow what you love and the money will figure itself out”. That’s why things are the way the are now. One of the next big bubbles is going to be the cost of college tuition and student loans (backed by the fed. government) that kids will never be able to afford to pay back.

    You should be asking questions like:
    What is the difference in cost vs. earnings compared to the same degree from a cheaper school? If the benefits don’t kick in for “years to come”, will the school you got the degree from really matter?

    How much will this extra degree increase my income?

    Do you have solid proof of this increased income?

    How much will my income improve naturally just by working in the field?

    How long will it take me to pay back this loan? And at what monthly cost?

  8. Kerry D. says:

    Q3: I disagree too with Trent’s advice… living in Silicon Valley, in an absurdly expensive modest home, we first bought a condo and then several years later bought this home. While people all over the country are having foreclosure problems, we have avoided such issues, by buying WHAT WE CAN AFFORD and having a fixed rate loan. We know what our overhead is and will be.

    Waiting would have been foolhardy–the value of this home has more than doubled while we’re in it. And so have rents. I’d say look for a home you can afford, in the best neighborhood you can afford. Then improve the home over time.

    30 years stinks, but then imagine 30 years of rent!

  9. Johanna says:

    Q7: “How can it possibly be fair that idiots have so much money?”

    The obvious answer is: It’s not. Life is not fair. You can go through mental gymnastics to try to imagine that anyone with a lot of money must be secretly deserving of it (in a way that you can’t see) or secretly miserable (also in a way that you can’t see), but it doesn’t make it true. Sometimes an idiot with a lot of money is just an idiot with a lot of money.

    If that really bothers you, you can also take a look at the other side of the equation: all the good, worthy people in the world who do everything right and still have much less than you have. You can be glad you’re not one of them.

  10. Riki says:

    Trent’s answer to the housing question (#3) is really strange.

    There are lots of options for reducing housing costs and here’s a little tidbit: unless they make a ton of money, people in high-housing-cost areas probably don’t have 15 year mortgages. There is nothing wrong with a 20 or 25 year mortgage and there are certainly options besides a 15 year mortgage.

    Kathryn, you don’t mention anything about a down payment in your answer. The first step is certainly to save one if you haven’t already. A larger downpayment certainly makes a more expensive home more manageable in terms of monthly cashflow. But ultimately Kerry D is right — if you’re not paying a mortgage for 30 years, then you’ll be paying rent for 30 years. There are significant pros AND cons to home ownership so you have to decide what works for you and your family. But don’t think you MUST take out a 15 year mortgage and you MUST pay it off early.

  11. Brianne says:

    #3 – I highly disagree that you can only afford something in a “gang-infested” area in Los Angeles. Yes, the neighborhood may not be Hancock Park, but there are plenty of fixer-uppers in the Mid-Wilshire to Adams districts that are totally affordable. I’ve had friends buy 3-bedroom homes for less than $350K; it’s just that they were within a mile of the 10.

    Personally, we just purchased a beautiful brand-new 3-bedroom home for $340K in Bellflower, so it’s possible to find a great affordable house if you just look a little bit further south. And no, we don’t have any bars on our windows.

    Just keep looking and keep your mind open. There are great pockets of houses south of the 10. Not such a bad commute to “Hollywood” and you don’t have to live in the Valley.

  12. BirdDog says:

    I found both of Monica’s questions strange and frankly, depressing. With $1659 saved, how could she possibly think she would be ready for retirement in five years? Something must be missing from this post. Unless she has plans to live in her Mother’s home (presumably paid for) for the rest of her life, there is no way this is possible. I agree with Adam P., this almost seems like a prank post.

  13. Kevin says:

    @Monica (Q9):

    “I could pay off the loan today but then I’d have to start over saving for investments.”

    Monica, if you had no debt, but no investments, would you borrow $1,600 at 5.9% and invest it?

    Of course not. Then why would you keep a $1,600 debt at 5.9% if you’re sitting on precisely enough cash to wipe it out?

    It’s exactly the same thing. Pay off the loan. Yes, you’ll be starting from scratch, but you’ll sleep better and you’ll be caught back up in no time.

  14. Kevin says:

    Wow. I wrote too soon. I just read Monica’s other question (#10), and I agree with the other posters. She’s living a life that is heavily subsidized by her mother. How can she possibly think she deserves to retire early? She has nothing saved, and the only reason she’s able to exist currently is because of the misguided generosity of her mother.

    “The Millionaire Next Door” calls this “Economic Outpatient Care.” When Monica’s mother passes, Monica is going to be in a lot of trouble. Likewise if she experiences any major medical complications or large, unexpected expenses. By quitting work so early with absolutely nothing to support herself, Monica is putting herself in a very vulnerable economic position. She appears to be capable of working, yet has arbitrarily decided that “15 years is enough,” and is going to kick up her feet and live off her mother and society, whether she can afford to or not. I worry that by the time she realizes she cannot afford to retire so early, it’ll be too late for her to rejoin the workforce, and she’ll be stuck eating catfood in the dark in her mother’s empty, deteriorating house 20 years from now.

  15. Sonja says:

    Q9 & 10 Monica: Seriously?! Wake up and do some math!!!

    She makes $8.06 an hour after working at this job for 10 years (sad and unlikely). She works 25-30 hours a week = $200-240 a week before taxes. And she can live on 25% of this? AND she wants to retire in 5 years?!! If she can live on $50-$60 a week and invest the remaining $150-180 a week for the next five years that means she can invest a max of about $9500 a year assuming she pays no taxes. If she can find a return that will allow her enough to retire on in 5 years I need to start reading HER blog.

    Trent, you say you get tons of emails every week. Why would you pick this question to answer? I agree with Adam P. and BirdDog – this seems bogus.

  16. Andrea says:

    Q1: $18,000 to complete your master’s degree is actually pretty cheap – although I know it doesn’t seem that way. Your employer’s match is great, I am starting grad school this fall and I would love to have 40% covered. Although all the above comments are completely correct and you should make sure that the degree will make you a more valuable employee and not just be a pointless endeavor, I would say go for it as long as you know you can reasonably cover the loan payments after the fact. As was already suggested, you could take longer to complete the program. Even if your employer won’t put any more towards a match, you could try to save up as much as possible during each semester to pay some of the tuition in cash. If you could even put $1000 cash toward tuition each semester, that could save you a lot of money in interest. As long as you know you will be able to handle the loan payments after the fact, I would say go for it, you aren’t going to find a (viable) graduate degree for much less than $18,000.

  17. valleycat1 says:

    Q3 – The way people pay off mortgages early, assuming they don’t have a windfall of some kind (like an inheritance) is to either buy less than what they can afford, find a way to increase their income, and/or live very frugally for the duration with a single-minded focus on getting it paid off.

    Trent failed to mention that you can’t just compare monthly rent to monthly house payments. Even if your property tax and/or insurance is escrowed & included in the house payment you quote, you still have repairs (which can be costly & usually happen at the worst time), utilities that may currently be included in your rent, home improvements, & furnishings/decor. Plus the responsibility & time involved in handling repairs yourself. Be sure you’re comparing the TOTAL monthly cost of owning a home to your rent. And if you buy, you must have an emergency fund in place to cover unanticipated expenses and the mortgage payment in the event a job goes away.

  18. mary w says:

    Q3. They way people in high cost areas buy a house is to get one they can afford with a fixed interest rate for 30 years. No fancy/tricky mortgages and probably not less than 30 years.

    In a couple of year your mortgage will still be $1300 but that $1200 rent will likely be more. With inflation and a bit of luck you’ll then be able to pay more than $1300. At that point you can ratchet up payments or refi to a 15 (or 10) year mortgage

  19. Gretchen says:

    I’m shocked at the answer to #1, as while I personally don’t belive in going into massive amounts of debt for school, I thought Trent didn’t either.

    (I wouldn’t call $27,000 “little” debt, but I suppose that depends.)

  20. Dee says:

    Q1: You should save up the money to pay for the degree without taking out loans, otherwise you can’t afford it. You should not take out that much in loans for something that you already don’t expect to pay for itself anytime soon.

  21. Gretchen says:

    Re retiring at 51 with not even $2k in the bank?

    I *hope* Trent’s being punked on that one.

    Who knows- I’ve also never heard of people paying off mortgages in 2 years.

  22. jim says:

    Q1 Jonathan : If you can afford the student loan bill and want to do it then I’d say go for it. If you would struggle at all to pay that student loan bill then do not take on the debt.

    re : Q10 Monica Pleease take note that Monica did NOT use the word “retire” at all. She asked about quitting her day job to pursue her side/hobby business of art. Thats not the same as retirement any more than Trent is retired. While it is possible Monica meant she wanted to retire early, that is not what she said exactly so lets not all beat her to death about wanting to do something she didn’t say.
    Also we don’t know why she is living with her mother. Maybe Monica is helping to care for a sick parent. Everyone who lives with a parent’ isn’t automatically a deadbeat.

    Monica did express interest in having a passive income large enough to cover health insurance, disability and regular monthly bills. We don’t know how much those things would cost her. But I’d estimate minimum costs would be $250 a month for that assuming skimpy health insurance. To generate just $250 a month you’d need around $75000 in investments. Its not very likely at all to accumulate $75k in 5 years if you’re working part time making $8/hr. You’d be lucky to pile up $25,000 to $50,000. And this is assuming very cheap health insurance.

    To Monica : Figure out what your annual costs will be. Then multiply that number by 25 to get an estimate of how much money you should have saved. You should also be aware that with your current income level your social security benefit may only be a few hundred dollars a month. So you also need to think ahead towards eventual retirement. If you stop working now then that will reduce your social security benefits since you will contribute less.

    If you want to quit your job and do the art stuff full time then I’d recommend focusing on the art and do what you can to make money with that. If you get to the point that the art gives you a good enough income to pay your bills for a year then you would be safer quitting hthe day job to focus on the art instead.

    ps. Lots of people would be trilled to have the job security of 15 years of employment.

  23. jim says:

    Additional, that $250/month figure I cited above is a bare minimum, very low estimate and its more likely she’d need more than that. But you can find low end health insurance for $75-100 /month in many places. Course if you have a major medical bill or a chronic condition then that won’t work well for long. More realistic health insurance cost for a single person would be closer to $250-$500 range.

  24. jim says:

    Oops, sorry, I mistakenly addressed my Q1 response to Jonathan. I should have addressed it to Trey. I guess I read comment #1 from Johanathan then got myself confused.

  25. Kevin says:


    “Everyone who lives with a parent isn’t automatically a deadbeat.”

    They are if they’re not contributing anything financially.

    Monica said she’s living rent-free, and not even contributing to the utilities. That’s being a “deadbeat.” At 46 years old, she should be ashamed.

  26. Brittany says:


    If her parent is sick/handicapped/otherwise unable to live alone and she is providing a substantial amount of support (“in return for” free room and board), she is not a deadbeat. I believe this was Jim’s point.

    There are other ways to substantially contribute to a household besides financially.

  27. deRuiter says:

    Kelly, Why don’t you want your husband to be the executor of his Mother’s will? It’s the last act of kindness that he can do for her, and agreeing to be executor will set her mind at rest. Do you dislike her so much that you want to frustrate her last wishes? What if the court appoints one of the sibblings who is to be cut out of the will to be executor? You’ll be the first one moaning that he isn’t doing an honest job and that you’re not getting your “share.” Being executor of a will isn’t a full time job, it’s minor. A lawyer handles most of the process for a payment, you hire a person to run the estate sale (30% commission) to sell off the things in the apartment or house, hire a real estate agent to sell the house or flat, sign some papers, and that is that. The lawyer guides you using the legal steps which must be taken.

  28. Dee says:

    Brianne is correct. Try Northeast Los Angeles.

  29. Brittany says:

    It’s understandable that if the division of the estate is likely to be incredibly messy from a relationship standpoint (i.e. all the legal matters are taken care of, but very unpopular decisions, like cutting of your siblings out of the will), a family member may not be the best choice of executor. If you don’t want the responsibility, but it seems your mom doesn’t have a lot of other options (the reason she’s ragging on you for it), find her an option. Find a trust-worthy, impartial third party, like a local attorney. Offer to pay for that person’s services, if that’s and issue and you really, really don’t want the responsibility.

  30. valleycat1 says:

    I’m with Brittan #29. I was honored to be asked by a family member (an in-law) to be the first alternate on a medical power of attorney, but there’s no way I would come between that person & the other (direct) family members to make end of life decisions, no matter how well expressed in writing or verbally before the fact. There are some situations one just doesn’t have to or want to be inserted into the middle of.

  31. Annie says:

    Q7. Who are you to judge someone with money as being an idiot. Maybe you are an idiot because you have no money. If you are jealous of someone who has money why don’t you figure out a way to make it yourself. They might think you are an idiot without money. I really think you should be careful judging others this way. This is a land of opportunity, just because you don’t agree to their lifestyle doesn’t mean you are correct. The other person might be content with themselves. I notice Trent was quick to say that they are faking it or just putting on a public act, how do you know that for a fact? It’s really none of your business. They probably see you the same way.

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