Reader Mailbag: Rainy Season

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. Check expiration dates
2. Handling salary bump
3. Cash stash
4. “Umbrella” insurance policies?
5. Why bother?
6. Is this frugal tactic safe?
7. Comparing cell phone plans
8. Missing a 1099
9. How is tax return bad?
10. RPG expenses

April showers bring May flowers in theory, right? Does that mean that lots of April showers bring lots of May flowers?

Or, in the words of a friend living in Colorado, “April blizzards bring May confusion.”

Q1: Check expiration dates
I wrote a $5000 paper check to Investment Firm A to contribute to my IRA for tax year 2012. Problem is I wrote it on Dec 1 2012 and as of today the check has not cleared. Investment Firm A told me that they through their internal bank, Bank C, has already gotten funds and has already invested my $5000. Investment Firm A electronically deposited that check to Bank C. I have reached out to both Investment Firm A and my local Bank B teller and no one has helped me other than to say do not close the bank account and give it 90days. Well March 1st would be that 90days mark. The reason why I wanted to close out this checking account was because there were issues with those who had bank accounts opened in SC and there was a hack into the Bank B systems recently. Bank B rep who called me back after talking to my local teller, also told me that because they are a third party, they cannot call Bank C bank on my behalf and that I would have to do the work to get this internal issue resolved. What other means can I get this resolved? I feel like somewhere along the line, $5000 was taken out of somebody’s account, but it was not mine. If you could shed some light, that would be wonderful. Are there such a thing as expiration date on a check, even though it was claimed that it was already deposited? Investment Firm A still has a copy of my paper check in their file. I was told by Bank B to contact Bank C’s small claims domestic dispute department, but of course they failed to give me that number despite promising it to me on the phone.

– Lily

I replaced the names of the businesses Lily mentioned so that this note couldn’t be easily traced to her.

If I were you, I’d go to your bank and request a written policy on how they handle situations like this. Speak to a manager if you have to and get the exact policy in writing. Then, make the sensible move based on that policy.

Another step I would take is to open an account at another bank, attach your investment account to that new account, then close the old bank account and transfer the balance. If the check ends up being found as uncleared, then they can pull that money from your new account. I’d check with your investment firm and make sure that’s what would happen in this case.

If you want to contact the bank’s small claims domestic dispute department, call their main customer service number and ask to be connected to them.

Q2: Handling salary bump
I’m about to take a new job that will roughly double my salary. My plan is to do as you suggest and live on what I was earning before, but I have several costs before I make that switch such as a serious wardrobe upgrade as I’m switching from t-shirts and jeans to business casual (for which I have no clothes). Got any suggestions for a game plan?

– Mark

Figure out exactly how much you’re going to spend on your new wardrobe and other new job-related expenses and take exactly that much out of your first paycheck or two – no more, no less.

Aside from that, do exactly as you planned and continue to live on half of your income.

You’ll find that in a few years you will be incredibly glad you did things this way. Your banking and investment accounts will have very nice balances.

Q3: Cash stash
My personal finance is a disaster but I’m finally heading in the right direction. The first thing I started doing was to store a $20 bill a week in a coffee jug under the sink and after about six months there’s a lot of cash in there. I’ve been using it as an emergency fund and replacing any money I take out along with the new $20 each week but what else should I be doing with it?

– Donald

Most people keep an emergency fund in a savings account or checking account at a local bank. There, at least, it’s FDIC insured and it will earn you at least a bit of interest.

If you have any debts, I’d keep building the emergency fund until you have $1,000 in there (about eleven and a half months of total savings at your current rate), then I’d start applying that $20 per week toward an extra debt payment.

If you don’t have any debts, keep saving and building so that you’re prepared for whatever the future may hold.

You’re headed down the right path. The act of putting aside money for tomorrow is the hardest part of personal finance.

Q4: “Umbrella” insurance policies?
Can you please address these type of policies that include cancer, disability, nursing home, etc. and if you don’t need them, upon your death, they are used as life ins. ?

– Gwen

There are a lot of these types of policies floating around that combine long-term care policies with life insurance policies. In almost every case, they’re just a specialized form of a universal life policy. An example of this is Lincoln National Life’s MoneyGuard universal life plan.

I’ve looked at a few of them and in virtually every case, it’s cheaper to buy separate long-term care insurance and term life insurance than it is to buy this combined policy.

It feels more secure to buy a combined policy like this because you can be confident that you’ll eventually cash in on some of it, but the amount you pay in each month is usually far more than separate policies. If I were you, I’d buy separate policies for the needs you’re concerned about – long-term care and life insurance – and invest the savings.

Q5: Why bother?
Some days well actually a lot of days I just don’t see the point in keeping up with my finances. I don’t feel free and I feel like I have to be careful with every tiny move I make. This isn’t fun.

– Mavis

If it’s not an enjoyable situation for you, then you’re approaching it in a way that doesn’t work with your life.

For me, saving money is very enjoyable. It makes me very happy to see my savings and investments go up. It made me happy to watch my debts go down until they disappeared. With every dollar of debt that vanished and every dollar that has built up in savings, I’ve felt more and more in control of my life.

Part of the challenge was figuring out what was worth giving up and what wasn’t worth it. There were a lot of things in my life that I realized I didn’t mind giving up. There were other things that I really didn’t enjoy giving up – some of my hobbies, for instance – so I tried to find ways to retain what I enjoyed about them without spending as much money.

It takes work to find the right balance, but if you go too extreme with it, the enjoyment of saving money and having financial security is eroded. It sounds like you’re out of balance, so spend some time figuring out what it is you’re missing out on and find a way to bring it back into your life.

Q6: Is this frugal tactic safe?
When the local grocery store in town has non-perishables that go past the date, they put them on deep discount. You can buy things like jars of pickles that are perfectly fine for a quarter. My girlfriend says this is disgusting and not safe but I’ve been doing it for fifteen years and haven’t ever been sick.

– Jim

Is this a “use by” date or an expiration date?

A “use by” date is put on a product by manufacturers as the final date at which they “guarantee” a quality product. That doesn’t mean the product has gone bad after that date. It just means there’s some chance it’ll be stale.

In other words, those items might have dodgy quality, but they’re as safe to eat as they were yesterday. If there was a contamination issue, it would have been discovered long before then.

Q7: Comparing cell phone plans
My husband and I have Android phones through Sprint. We pay $156 per month to cover both of our plans (joint plan). Each time we have to pay that bill, I get frustrated at how expensive it is. Maybe it just seems expensive to me because I remember the days when I paid $20 a month for that Nokia!

I’ve heard from a few friends that prepaid phones through Walmart are a cheaper way to go. Do you know if that is true? And would we have to drive to Walmart every month to purchase the next month’s minutes?

I’m having a difficult time finding comparisons on pricing and features of cheaper cell phone options. I am “old school” and would be perfectly happy with an old flip-phone that solely makes calls. My husband needs access to the internet at all times because of his job, so his story is a little different. Our Sprint bill is mostly a reflection of the charges on his phone, mine only costs about $30 of the $156. However, when I went to Sprint to try and downgrade my Android, they revealed to me that it would be more expensive for me to do so, since my rate was grandfathered in years ago. We are eligible to cancel our Sprint plans at any time as we have been customers well past the contract commitment time.
– Denise

It is expensive, but you’re paying for more services now. Texting and particularly mobile data usage add on to the cost of your phone.

It sounds like your husband needs those things. You can shop around a bit for a service that will give him what he needs at a cheaper monthly rate, but if your husband is constantly utilizing internet access through his phone for work, you may not be able to find a “pay as you go” service that matches what he needs as they’re often strictly capped on minutes, texts, and particularly data usage.

For you alone, a pay-as-you-go might be a perfect fit, but given what you’ve described of your husband’s usage, it might be trickier for him.

Q8: Missing a 1099
I filed my taxes last Tuesday. On Friday I found a 1099 that I didn’t include on my taxes for just $8.83 in interest. Should I file an amended return for this?

– Joe

If you can do it for free, it’s probably the best move.

The worst scenario out of this is that the IRS notices it and sends you a small bill for the taxes – on the order of $2 or so. It is extremely unlikely that a 1099 for $8.83 would trigger an audit.

You can file a 1040X yourself manually with ease if you don’t have the software for it.

Q9: How is tax return bad?
You’ve said before that getting a big tax return is kind of a bad idea. I don’t get how it’s bad to get a big check from the government.

– Andrew

You should strive to have an income tax refund as close to $0 as possible. Why? Your income tax refund is just made up of money that you overpaid to the government over the course of the year. It’s not a “check from the government” – it’s the remainder of an unpaid loan that you gave to the government.

Let’s say, over the course of the year, that you have $5,000 taken out of your check for taxes. That’s money out of your pocket. When you file your taxes, you only owe $3,500, so they issue you a check back for the difference – $1,500. That means you essentially loaned the goverment that $1,500 interest free.

A better way of doing it would be to only have $3,500 taken out of your check over the year. This means your paychecks get $1,500 bigger over the course of the year, but you don’t get a refund check.

Of course, if you’re not diligent with your money, you might just waste that $1,500 spread out over the year. If you are diligent with it, you can use it to make early payments on debt or save it, both of which will add up to more money for you over the long run than just lending it to the government interest free.

Q10: RPG expenses
I hear you often mention comics, board games, and electronics in your posts. I’ve been wondering for some time now, do you play DnD (pathfinder, etc)? I do, and I know that that hobby can chew up a budget quickly.

– Dave

I have dabbled in D&D in the past and I own a gifted Pathfinder Core Rulebook. It is definitely an expensive hobby to keep up with, particularly if you feel like you must have all of the supplements.

My suggestion is to just share a lot of the books within your group freely. Establish an “owner” of each book (in case they leave the group so they can take their books with them), but essentially make all books owned by everyone in your group borrowable by anyone at any time. That way, there’s no need for duplication.

If you’re lucky, you’ll find yourself in a group with someone who’s really obsessed and buys all the books (I have a friend that does this – being a DM is his primary hobby). That way, you can essentially just borrow from that person.

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.

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