Reader Mailbag: Scheduling Events

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. Student loan payoff or Roth?
2. Should we refinance?
3. Discrimination and temp rights
4. In college and in debt
5. Exhaustion
6. Debt and disability
7. Multi-level marketing
8. Fixing an iPod battery
9. CSA question
10. Favorite authors

I’m always amazed by the difficulty of scheduling things. For us, it seems like we’ll have long stretches without many irregular events to schedule, then we’ll suddenly have a period of a week or two with so many events that we have to synchronize our watches and even turn down some events.

Right now, we’re in one of those “heavy” periods. In a few weeks, we’ll wonder where all of the hustle and bustle went.

Q1: Student loan payoff or Roth?
My situation is that I’m a 3rd year graduate student getting a PhD in inorganic chemistry, I get paid a stipend of $25k a year and my tuition is paid for, allowing me to save roughly $400 a month. I have about $85k in student loans from my undergrad (nearly all of it subsidized while I’m in school with an interest rate of 6.8%). Because I have a stipend and not a true job, I have no option of contributing to a 401k. Should I start paying off my student loans with my extra $400 a month, invest in a Roth IRA, or a combination of the two? I already have a emergency fund of $1000 and I know that saving for retirement as early as possible is best for the long term, but I have tons of loans to pay off when I finish school. Any help would be greatly appreciated

– John

I would not worry about retirement savings until you’re out of school and have a job. Instead, I’d focus on doing what I could to make sure that I have minimal student loans as I came out of school.

The biggest reason for that is that you need to make sure your bills are minimized as you enter that period where you’re trying to establish a career foothold. This is a really challenging period and the last thing you need here is larger bills than necessary, because you may find yourself taking relatively low paying jobs at this point (like a post-doc).

Focus on retirement later on when you have a good career in place. Until then, focus on making it to that point.

Q2: Should we refinance?
My husband and I are both in our 30s, and have stable government jobs with good benefits. We bought a tiny (668sq ft) house 3 years ago for $122K and currenly owe $112K on our home loan. The loan is an FHA 30 year fixed. We’re paying 5.875%. The county assessor values the house at $92,700. We each have government retirement (TSP) with $11K in his and $7K in mine, plus I have $30K in an IRA. We have a combined total of $30K in our checking account. We have no debt other than the home loan, and no children. We live very frugally and don’t need to have that much cash in our checking for an emergency fund, and with the poor performance of the market right now it looks like we should use some of that money to refinance.

As we’ve started to look at refinancing, we’re finding that the FHA streamline is a desirable option because it doesn’t require an assessment. The 30 year is at 3.75% right now. If we do pay to have the house assessed, it would be a $300-$400 expense out of pocket, and we may find that the house is worth even less. The snag of the FHA streamline however is that the closing costs due at signing are around $5600, and we will have to pay mortgage insurance for a required 5 years before the bank will look at the loan to value ratio to determine whether we can stop paying it. We have already been paying PMI for 3 years and the 5 year “clock” will start over if we refi. We pay $52 a month for mortgage insurance now. The estimated lower payment with the 3.75% rate is $241 less/month, so it would take 23.6 months to recoup the out of pocket refi costs.

Also, my father is in a position to loan us money at a lower interest rate so that we can pay down the loan to value ratio and try to do away with the mortgage insurance sooner. He’s mentioned a $20K loan at 2%. (We would do the loan formally, with a written contract with him regarding the terms.) As we currently have an FHA loan, we can’t do away with the mortgage insurance for the next 2 years (at which time we will have carried the insurance for 5 years and can look into not paying it, if we have paid off 20% of the value.) Is this 20% rule considering the value of the loan? Or the value of the home?

If we look at a traditional refi, we will need to have an assessment done and the rate isn’t as low. I was quoted 3.99%. So, what should we do? And in what order? We could keep the loan we have to be done with PMI sooner and not pay out of pocket closing costs, while taking advantage of the loan from my father to pay $20K off. We could refi and use some of the $ from our checking to pay the $5600. We could pay for an assessment to find out if the value is higher than the county claims-but would it gain us anything? Would you be in a rush to be done with the PMI?
– Margaret

The 20% value you mention is typically the assessed value of the home. The mortgage holder and/or the insurance company will want to reassess your home before they relieve you of the insurance. They’ll use that assessed value to determine if you have to continue to pay. Typically, there’s a “grace period” of a year or two where you don’t have to have a reassessment and use the initial assessment as the value, but you’re probably out of that period.

If your goal is to get rid of the PMI as fast as possible, I would probably talk to the bank, request an assessment, then borrow enough to cover the difference between what you owe now and that 80% threshold. While I’m not usually a fan of borrowing from family, if you’re going to do it, the best way to do it is with a contract.

You will probably not be able to get a traditional refinancing unless the amount you owe is less than the assessed value of the home, which means that you’d want the balance of your home loan to be significantly lower than what it is now. Thus, I wouldn’t worry about the refinancing until I eliminated the PMI anyway.

Q3: Discrimination and temp rights
I am a 35-year-old woman who makes my living as a writer. I recently sold two books to Love Inspired Historical and had been working from home on freelance writing jobs. However, recently the pipeline of jobs began to dry up–the SEO conent companies I have written for have all vanished, and the small company I was writing web content for abruptly fired me when they had a “cash flow” problem–and I never got my last paycheck.

Two months ago, I found out I was pregnant with our second child. My plan was to work through the pregnancy and stay home with the baby, which is what I did with our first child. About a month ago, I was given a temp job as a proofreader for a marketing company. The hours were awful (1pm to 10pm Monday through Friday with expected overtime) and the commute was bad too (an hour roundtrip). But my husband and I agreed I would take the job so that the last six months of pregnancy, I wouldn’t have to work at all.

Three days into my new job, I found out I lost the baby. I stayed home 2 days that week without pay (and with my supervisor’s permission). I was scheduled for a D&C this past Monday but actually had the miscarriage Sunday afternoon through Tuesday, so I missed two additional days. These days were already excused as it was assumed I would be recovering from surgery. Yesterday before leavig for work, I was informed by my temp agency that my miscarriage was creating a “distraction” for the department and they were going to find a new temp. So essentially, I lost my second child on Monday, and lost my job Friday. Worst week ever doesn’t even begin to explain it.

Several friends have told me to sue the company for discrimination, but as a temp, I feel I have few rights. My question is, what should I do now? I had the next year mapped out, and now I have no job, no baby on the way–everything has changed and I am in complete shock. I don’t know if I should try for another temp job, stay home and write my second book and then write more books to self-pub, or what. We have our $1000 emergency fund, my husband has a steady job as an engineer that covers the essentials (but not the extras which is why I work). We had planned to save up that 3 months’ emergency fund and dump debt but now that feels completely derailed. Everything is derailed, and it’s so hard not to be furious at my ex-employer. I actually felt guilty for missing work for my miscarriage. Had I known I was going to be fired, I would just quit and save myself the trouble.
– Monica

Yes, you should absolutely contact a lawyer based on the information you’ve shared here. If this is truly the full picture of the situation, you likely have grounds for some sort of legal action against this company.

As for what you should do with your time now, I would involve your husband in that discussion. A key part of the discussion is what you want to do. Another key part is the expectations that you both have for the roles in your marriage.

If I were in your shoes, if I were passionate about the writing, I would push that for a while as legal processes moved forward with the employment situation.

Q4: In college and in debt
I am 21 years old, I have lost my scholarship and I am trying to get it back, I have lost help from my parents for paying for things I need and things I need for college, and I have a maxed out credit of 1000 with a maxed out L.O.C. of 500. I just recently lost my job at this restaurant, I was a server… I need things for my room before Winter hits, like a comforter, a lamp, and a shelf. I need some money to wash my clothes that have been piling up… I just feel so overwhelmed that I don’t know how to get myself out of this hole. I try and pray for God’s guidance but maybe I need to pray more. I also owe money to online store I ordered stuff from…

Can you give me some tips? I want to become a Zumba instructor but that costs 275 dollars for training…
– Rachel

The first thing you need to do is get another job. You need some income coming in, no matter what form it takes. Get out there, beat the pavement, and find something to occupy yourself and generate some revenue.

The next thing you need to do is whack away at those debts. If you owe thousands in consumer credit, you need to get rid of it as efficiently as you can. Don’t buy a single thing unless you absolutely need it.

Get those two things out of the way first and foremost. You’ll find that once you get through this difficult stretch, things will be a lot better on the other side.

Q5: Exhaustion
I spend almost every day feeling completely tired, except for the evenings. It’s so intense that it’s interfering with my work and my time with my family. What can I do to deal with this?

– Erin

The first thing I’d check is whether I was getting adequate sleep. If you’re getting less than seven hours on average, you need to sleep more, period. Some people require an average of eight or even nine hours of sleep to function well. Don’t squeeze in another half hour of household tasks or a half hour of a hobby in the evening if it means exhausted misery the next day. Go to sleep.

If you’re not getting good sleep, figure out why. There are lots of tactics for improving your sleep, from drinking warm milk to taking a warm shower before bed.

Another useful tactic for exhaustion is to exercise more. By getting your heart rate up and kicking your metabolism a bit, you can make yourself feel more energetic.

If none of that works, talk to a doctor. You might have a vitamin or mineral deficiency or there may be some other cause.

Q6: Debt and disability
Recently I went out on disability, and I have a lot of debt. I have $22k in credit card, and $65k in student loan. Right now I get $674, but in january I will get $1,250. i can’t afford my debts. What should i do? Should I file for bankruptcy? I have a muscular disorder, and I don’t know when I will be back to work again.

– Emma

The first thing you need to do is write to the people holding your student loans and request that they put your loans on forbearance. Generally, you don’t have to pay on your student loans if you’re disabled or not gainfully employed.

As for the credit cards, you may want to try a similar tactic. In this case, you’re more interested in finding a payment plan that will make it easier for you to pay the bills. Simply call up your credit card holders and discuss your situation with them.

I don’t think bankruptcy will be necessary if you take these steps and find success with them.

Q7: Multi-level marketing
I have been reading yours and several other personal finance blogs. As a part time sidejob, I want to get involved in financial education. I saw an ad for [a known MLM group], and at first the position seemed interesting.

However, after listening to their pitch, I realized it was more of a multi-market deal, where you own a business, ands sell their products. In fact, the whole meeting I had with them made me feel like I was being sold a used a car.

Have you heard of [this group]? Do you have any thoughts on them? Are there other companies that do something like they do, however, are more reputable?
– Ron

I chose to excise the specific name of this group from this email because often when you mention companies that use specific MLM tactics, you find yourself facing a lot of ardent defenders of that company.

In general, I encourage people to avoid such companies. Success with multi-level marketing requires a very specific skill set (including very good people persuasion skills) and, if you don’t have those skills, you’re going to be a very low earner. Beyond that, people who do have the skills to succeed at MLM can make a killing in other fields.

Not only that, MLM often requires people to sell to their friends, which puts a financial pressure on a friendship that often results in resentment. I’ve experienced this myself and witnessed it more times than I can count.

Q8: Fixing an iPod battery
I read recently in one of your posts that you learned how to fix your own iPod battery. Mine died awhile ago and I didn’t even know salvaging it was a possibility! I was wondering how you did this and/or if you could provide some links that might be helpful in this situation?

– Nicole

There are a lot of techniques out there for replacing iPod batteries. I was able to successfully do it myself. However, it’s important to note that such tactics will completely void your warranty and if you do it and mess up, you’re going to wind up with a non-functional iPod.

This site offers a collection of videos on how to replace the batteries of some specific iPod models. Other models (particularly iPod Touch models) are much more tricky. For example, here’s how to replace iPod Touch batteries.

If it’s just sitting in a drawer, it probably makes no difference to you if you accidentally damage it and you might end up with a functional iPod again. In that case, it’s probably worth it.

Q9: CSA question
I buy a Community Supported Agriculture share, or CSA. I pay about $30/wk for a box of 30 lbs of organic local produce. It runs for 6 months from June-December. But, when we are on vacation for a week we end up giving it away, if the weather is bad we get less or odd items, plus we have to pay for it way in advance and all at once (over $700 in the January prior). We also eat a lot of kale. We get the fruit share which is $15/wk for about 2 bags of organic local fruit- not as great of a bargain but it is really tasty. Same risks as the vegetable share though. What are your thoughts about this from a financial perspective? We do eat every bite, or freeze it to eat in the spring when the share’s not in season (kale soup year round!).

– Mary

My experience has been that they’re well worth it if you commit to using everything that you get and if you don’t travel much (meaning few “vacation” weeks where you miss a week’s share).

However, as you mention, there is the issue of having weeks where the selection is a bit odd. You have to more or less live with what you get. However, you’re getting 30 pounds of vegetables for $30, which is almost always a bargain.

Our philosophy is that you simply plan your meals around what you get. Pick up your pack, figure out what you have, plan out some meals, then do your grocery shopping based on what’s in the pack. If you can’t use everything, freeze the rest and use it later.

Q10: Favorite authors
Like you, I’m a voracious reader. One thing I like to do is to really dig into an author when I’m reading. I’ll often ask friends who their favorite authors are, then dig into those authors.

Which brings me to a fairly obvious question. Who are your favorite authors?
– James

I’ll make this really easy. Here are my ten favorite authors. Each of them is linked to their author page at Amazon so you can find out more about them and see all the books they’ve written.

Haruki Murakami. Michael Chabon. Brandon Sanderson. George R. R. Martin. Neal Stephenson. Dan Simmons. Jon Ronson. Malcolm Gladwell. Edmund Morris. Michael Lewis.

If you can’t find something to read in there, I’m not sure I can help you.

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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