Updated on 03.22.12

Reader Mailbag: Seedlings

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. Renting or selling land
2. My religion
3. College cash and investing
4. Transportation dilemma
5. Drawbacks of ebooks
6. Retirement and student loans
7. Walking away?
8. Garden vegetable choices
9. Roth 401(k) and Roth IRA?
10. Alternate oil choices in playdough

The main floor of our home has a large number of trays spread about, each full of seedlings.

Little green tips are just starting to peek through the surface here and there. Before too long, they’ll be ready to transplant outside.

These are the first steps toward a bountiful harvest later this summer.

Q1: Renting or selling land
My parents recently inherited 137 acres (total) of farmland from their parents, who died this past year. 100 of that 137 is tied up in a trust with other siblings, so I’m going to focus on the 37 here. My mother wants to sell her 37 acres so she can pay off her debt and finally be debt-free. I definitely support her desire to be debt-free. However, I feel that it is going to be financially more beneficial for her to keep ownership of the land and rent it out via cash rent.

In Iowa right now, land is renting for between $300-400/acre per month and selling at a minimum of $6,000/acre. I’m not exactly sure how the income tax works on rented vs. sold land, but here is the way I’m calculating the profits:

Renting 37 acres every year: 37 x 300 (monthly rent) = 11,100 x 12 (per year) = $133, 200 per year of income on the owned land, before income and property taxes

Selling 37 acres of land: 37 x 6000 (assuming the lowest value) = $222,000 total before income taxes

Now, after doing the math, the right path seems obvious to me. In two years, my mother would earn in cash rent what she had made if she sold the land. Is there anything I’m missing? I want to be able to show her this so she understands that it is much more beneficial to her in the long run to keep renting the land. But I want to make sure I’m understanding this correctly before I go to her with any of this information. Would you consult a lawyer and accountant in this case as well to determine what is the most financially beneficial route? My gut instinct is to never sell the land as the income will not only benefit my mother for the rest of her life, but then benefit me and my children for years to come.
– Linda

Since I live in Iowa and am friends with and related to quite a few farmers, I will say that the value of farmland is mostly pegged to the value of a bushel of corn and/or a bushel of soybeans – or at least the expected value of a bushel over the next year or two. Land values are also being buoyed by very low interest rates, meaning farmers can borrow money to pay for the land with very little interest attached.

I will certainly say that if a bushel of corn drops by 50%, you’ll not be able to find a farmer willing to rent land at $300 per acre, and the price for selling that acre will drop significantly, too. The same is true if interest rates start to rise.

The real question here is what will grain prices do and what will interest rates do? If grain prices stay high and interest rates stay low, the best thing to do is to rent, as you’ll make more money that way. If grain prices drop and/or interest rates rise, then you would have been better off selling and locking in those high values, as farmers will be unable to pay very much per month per acre to rent.

My personal gut feeling is that your mother should sell the land and eliminate her debts. A lot of factors are working against her if she holds onto the land – the interest rate on her debts, the future of corn and soybean prices, and the future of bank interest rates.

If you need some further guidance, I’d suggest talking to a lawyer in Iowa that specializes in farmland and farm inheritance, as that person should be able to guide you.

Q2: My religion
I’m curious what’s your take on religion. Do you believe in god? Do you teach your kids about this? How do you handle this?

– Kevin

Religion is something I enjoy studying and find deeply fascinating. My personal spirituality is something I struggle with greatly. I am constantly asking questions and trying to dig down and find answers, and often that just ends up being a cycle.

I call myself a Christian. I participate in a Lutheran (ELCA) church that’s pretty friendly and open. My wife often jokes that our church is mostly a big collection of Americans of Scandinavian descent who like to have potlucks (the NPR show A Prairie Home Companion can be eerily accurate at times). My children go to the Sunday school there, which is mostly a telling of a Bible story, followed by an art project and cookies. I’d pull my kids out of there immediately if I felt like they were being indoctrinated or forced into anything. My children ask a lot of questions and I answer them as best I can, but if they don’t end up being Christians, I don’t feel as though I failed them as long as they’ve followed their own spiritual journey and thought about the issues at hand.

While I have some things I hold to be true for myself, I don’t feel the need to evangelize to others because I feel that people are best served coming to their own answers about issues of faith, even if those answers end up being different than mine. If someone asks me privately about specific issues, I’ll answer, but I don’t think there’s anything wrong at all about having a different perspective than I have.

One of my greatest wishes for the world would be that everyone in it would wake up tomorrow and think, “It’s fine that other people think differently about God and about faith than I do. Let’s sit down over dinner and have a nice non-confrontational chat about it. At the very least, I’ll learn something new.”

Q3: College cash and investing
I am senior in college and in need of some suggestions. I am not sure what I should do with additional cash that I have from working at during my studies at college. Should I open up a high yield savings account or CD’s, or traditional or Roth IRA? I will not need the money for a few years.

– Ronald

If you’re going to use that money before retirement and want to have access to the money you’ve earned while it was saved or invested, then I wouldn’t consider a Roth IRA or a traditional IRA. Those both work best when you’re saving specifically for retirement.

Right now, a CD won’t earn you significantly more than you’d earn in a savings account due to the depressed interest rates. Of course, a savings account won’t earn you much, either. The advantage both have is that they’re insured by the FDIC, which means you’re not going to lose money on them. If you were to choose to invest your money in stocks or something via a brokerage account, you’re going to take on risk and a decent chance of loss, especially over a short period like a few years.

What this really comes down to is goals. What do you hope to do with that money? Are you going to graduate in May? Do you have a job? If you’re about to graduate and don’t have a job, I’d keep the money in a savings account because you may really need it soon. If you have a job locked up and are looking further down the road at things like a house or a car, I would consider putting some of it in a shorter term CD, but I wouldn’t lock up all of it (you still need an emergency fund, after all). If it’s truly for retirement, I’d probably put it in a Roth IRA. If it’s for starting your own business in fifteen years, I’d look at a brokerage account of some kind and invest it in stocks outside of an IRA.

It’s all about your goals, because your goals tell you how much risk you can tolerate and how liquid you need that money to be.

Q4: Transportation dilemma
I’m 27, have no cc debt, own a car that is fully paid off, and have about 50k in student loans (10k of which is at 6.55%, the rest is around 3%). I have about 10k in savings and 30k split between a Roth IRA and 401k. I currently live in southern CA, but my boyfriend and I are moving to DC (where I grew up) to be with family and friends. My parents have generously offered to let me live rent-free with them in order to expedite paying off my student loans, which is my biggest priority right now. My bf is going to rent an apartment nearby.

My boyfriend and I plan to drive his car across county to DC. The question is what to do with my car. I own a 2006 Mitsubishi eclipse. It has about 70,000 miles on it and needs a new timing belt, but other than that is in great condition. Its blue book value is around 9k (assuming I put in a new timing belt). I do not anticipate finding a job that will pay my relocation expenses and have estimated that it will cost $1,500 to have my car transported back home. I don’t think I could make the drive back in my car to DC on my own, so that is not an option.

I find myself torn on what to do! In scenario 1) I keep my car, pay $1,500 to transport it and run the car into the ground, as it is fully paid off. I hesitate about this decision as I feel like I’m outgrowing this car and am looking to have a car that has more space and could possible carry children in the not too distant future. Plus does it make sense to pay that much money to transport a car with a low value to it already?

In scenario 2) I sell the car and then buy another used car in DC. I’d want something reliable as the weather and traffic in DC isn’t easy to navigate and am thinking of using some of my savings to purchase something used around 12k or so. But then I also feel like this is delaying me from reaching my main object – paying off my student loans!

In scenario 3) I sell the car and then use public transportation. DC has a pretty good public transportation system so I was leaning toward option #3. My parents home (where I will be living) is about a mile from the metro and is fairly near bus stops. I was considering selling my car and attempting to see if I could just take the metro to work. When I mentioned this to my parents, they seemed to think I was absolutely nuts. They have never not had a car and my mom gets lost easily on the metro – so I think that could be part of their bias. But with that said, if I do sell my car and attempt to use the metro, I could very easily see them offering to drive me places rather than let me use the metro. They can be very giving and I don’t want to burden them, just because I am being frugal.

So any thoughts on my current predicament?
– Leona

If you have a strong sense of the availability of public transportation, I would lean toward option #3 as well. DC does have great public transportation (I’ve used it myself during an earlier stage in my career) and if there’s an easy way to get from your place of residence to the public transportation system, that’s pretty close to a dealmaker.

If you’re making the case to your parents, suggest that by selling the car you could immediately pay off the higher interest loan (or close to it), plus you’d no longer be paying insurance or fuel for upkeep so you’d have more to channel toward your debts.

If your mother is stressed about using the metro, I would show her exactly how you get to and from work when you have employment secured. Turn it from navigating a bunch of routes to a simple matter of “go to the bus stop, wait for bus X, ride bus X to the train station, get on train Y, get off at this stop, and you’re right by my work!”

Q5: Drawbacks of ebooks
What are the bad aspects of having a Kindle? I know you and Sarah each have one and I’ve read so many positives. What are the negatives?

– Alan

There are simply some physical features of a book that a Kindle (or other e-reader) makes very difficult.

For example, if I’m using a book for reference, I often litter it with bookmarks. While bookmarking does exist on a Kindle, it’s not nearly as intuitive as it is for a paper book.

Another issue is when a book is trying to teach a technique. The layout of a printed page has a lot of flexibility when it comes to picture arrangement, for example, and an e-reader just doesn’t have that.

Of course, you could get many of these features on a tablet, but the actual experience of reading on a tablet is pretty hard on the eyes after a while. My eyes get blurry pretty quickly if I read a significant amount on a backlit screen.

My solution is to use a Kindle for a lot of my reading, but stick with real books for things like cookbooks and other reference books.

Q6: Retirement and student loans
My wife and I will be starting our medical residencies starting in July. We will be earning about $100,000 combined for the next three years. This will be both of our first jobs, and we have no credit card or vehicle debt, but about $300,000 in student loans combined (most at 6.8%, a much smaller amount at 3.6% and 8.0%). We would like to contribute about $5000 per year each to our retirement funds. Our hospitals offer 403(b) accounts without any matching. We are wondering whether we should (1) put our retirement savings in the 403(b) and use the savings from the deferred taxes towards our school loans or (2) put the retirement savings in a Roth IRA for the tax advantage when we are retired.

– Randall

If I were in your shoes, I would make absolutely sure that I was hitting my retirement targets before worrying about extra payments on those student loans.

Sit down with a good retirement calculator, like this one, and put in some numbers. Talk with your wife as you’re doing this and make sure you’re on the same page when it comes to your retirement goals. Eventually, you should be able to come up with an idea of what you ought to be saving each year.

So, what should you use? The usual recommended method is to invest in a 401(k)/403(b) up to the employer match limit (which for you is $0), then max out a Roth IRA, then put the rest into the 401(k)/403(b). This accomplishes a lot of good things – diversification for tax purposes and maximization of “free” matching money chief among them. You’ll need to keep an eye on income limitations on the Roth if you do this, because the income limitations are lower if you’re using your plan at work.

Once you’re saving properly for retirement, see what you have left over for paying off those student loans.

By saving for retirement now, you’re significantly reducing the amount you’ll have to save for retirement each month throughout your career. If you wait ten years, the amount you’ll need to save each month to reach your goals will skyrocket.

The only time you should cut back on the retirement savings is if it begins to look like you’re not going to be able to make minimum payments on your student loans or collateralized debts. Given your income, this shouldn’t be a problem.

Q7: Walking away?
Got myself into a little bit of a pickle during the housing boom/crash. Bought a newly built house for $145,000 in 2004. Then over the course of the next 2.5 years, I refinanced 3 times, taking advantage of some “pocket cash” opportunities. My employer filed for bankruptcy in June 2010 and cut my pay by 22%, none of which has yet been restored. I’m using maxxed out credit cards to help make ends meet for now. So I’m stuck in a home I for which I owe $192,000 and which has a value (according to zillow.com) of $71,400. I have a first and second mortgage, with payments adding up to $1,557 monthly. So, basically, I’m a prisoner in this home. It’s close to my work, and it’s big enough for my needs. I have a 15-yr-old and a 13-yr-old living at home with me as a 48-yr-old single dad. I live in AZ, meaning I can “strategically default” and only be held accountable for the total of the second mortgage, which is around $16K. I’d walk away in a heartbeat if not for the damage to my credit score. My question is this: would I be smarter to just stop paying the 1st and apply the whole $1557/month toward the second, and plan to do a short sale later in the process when I’ve paid a big chunk on the second? I know my credit score would dip into the 400s, but can I realistically expect to come out ahead on this mortgage by riding out the insanely huge underwater amount? I’m torn and conflicted. Any advice would be appreciated.

– Lonnie

The first thing I’d do is understand fully how the Arizona “strategic default” rules work. The right step here is to contact an Arizona property lawyer, since it seems as though the specifics of the laws regarding this have been changing steadily over the last few years due to court decisions.

What I’d suggest you think about in the interim is how important your credit rating is to you over the next several years. Are you going to need to make a major purchase that involves debt? If your plan to rent your home over the next several years and don’t anticipate needing a car loan, I wouldn’t worry too much about my credit and I’d focus on making moves that preserve the most money in your pocket.

Again, I think the best step for you is to talk this over with an Arizona property lawyer who specializes in such things.

Q8: Garden vegetable choices
What vegetables do you and Sarah plant in your garden? I have a patch of land where I could start a garden and am thinking about what to grow. I’m mostly interested in things that are easy to grow but produce veggies I can easily eat!

– Conrad

We plant mostly beans, tomatoes, and cucumbers each year. We eat these three vegetables by the pound in August and September and often end up freezing some for later in the fall and winter. The rest of our garden is perennial herbs and asparagus that are really low maintenance.

Honestly, part of the reason we grow these three vegetables is that they’re pretty hard to mess up. While I like to garden, I don’t exactly have the greenest thumb in the world, and the same is true with Sarah. Through all of our efforts to kill the plants in our garden due to our mistakes, we have the most luck not killing beans, tomatoes, and cucumbers.

I’d suggest visiting your local garden center and asking them for some very hardy and disease-resistant and pest-resistant examples of tomatoes, beans, and cucumbers, and plant those.

Q9: Roth 401(k) and Roth IRA?
I have a 401k with my company and if I contribute 9% they will match up to 8%. They also offer a Roth 401k version and the 8% is matched whether one is contributing to traditional or Roth 401k. I contribute 10% to traditional and 4% to Roth. The company 401k is setup through T Rowe Price. I also have a Roth IRA setup through Vanguard and I contribute $300 a month to it.

My question, does it make sense to contribute money to a Roth 401k and Roth IRA instead of just contributing to one, specifically my regular Roth IRA? If both Roths were equal in maintenance fees would the only benefit of the Roth 401k be that the money is taken out before I receive a paycheck? I am trying to maximize my take home pay now while still contributing the same level of money to retirement whether its through payroll deductions or after the fact. Thanks for your time and great work on the blog, I read it everyday.
– Patrick

The money that you put into a Roth IRA or a Roth 401(k) is post-tax money. In terms of contributions, they’re pretty similar.

If you’re contributing less than $5,000 per year and your income is significantly below $100,000 per year, the only difference between the two with respect to contributions is whether it comes home to you or not. The difference is, as you mention, maintenance fees and investment options.

This of course hints at some of the differences between the two. The Roth IRA has an income cap – if you earn much above $100,000 per year, you’re going to find yourself unable to contribute the full amount to a Roth IRA. There’s also an annual contribution limit for a Roth IRA, which is $5,000 a year if you’re under the age of 50. There are other differences, too, such as the investment offerings.

Q10: Alternate oil choices in playdough
When making homemade playdough, can you use other oils besides soy? We have a soy allergy in our home.

– Amanda

The basic recipe for homemade playdough is 2 cups flour, 2 cups warm water, 1 cup salt, 2 tablespoons vegetable oil, and 1 tablespoon cream of tartar.

You can use almost any kind of vegetable oil for the oil, so soy is not a requirement. I generally use whatever we have on hand.

The real key to making playdough is storing it in a sealed container so that it doesn’t dry out after the first use. If you let it dry out, you might as well just toss 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. Sassy says:

    RE: Q1. I am not a tax lawyer but my understanding has always been that when you inherit property, you get it at the value on the date of death, so if land values have not risen dramatically since then, your mother would get that money tax free when she sells. The rental income would be taxable income to her. Definitely check with someone knowledgeable about the probate/tax implications, whichever direction she chooses.

  2. Kevin says:

    @Q1: Will farmers actually rent the land year-round? What farmer will pay $11,000/month for 37 acres of frozen, snow-covered dirt from November to March? Should you really be counting on those months of income? And how much will your parents have to pay in property tax each year on the land?

  3. MP says:

    Re Q4- Ilivein the DC area,and although on paper the Metro looks convenient, perhaps the mom understands the reality that we see so many times on the news that stations are closed and you have to get bused between stations, or that a trainfull of people sat in a tunnel for a long time.

  4. Tom says:

    Q9: To me the two big difference between the Roth IRA and Rothe 401k is that the IRA has more investment choices (usually) and will also will be 100% tax free withdrawls of any gains you make, as tax laws are currently written.

    I believe that if you receive a match on your Roth 401k from your employer, that match is pre-tax (“traditional” if you will), and at least where I work, a portion of your withdrawls will include your company’s matching amount and must be taxed. If your plan operates the same way, then the Roth 401k isn’t totally tax free at withdrawl (of course, it’s free money to you anyway, but we usually don’t treat it that way cognitively). The big benefit to the 401k is either easy access to some tax free gains for high income earners, and a higher contribution limit.
    You likely could set up your payroll to automatically go to the IRA, either through work or through your brokerage.

  5. Josh says:

    Q1: That is not monthly rent for the land, it is yearly. You will get around $300/acre annually, not monthly. The exact price will vary by location and the quality of the farmland.

  6. Kevin says:

    Q5: About the backlit screen, I actually prefer it. I hear your complaint, Trent, and my wife has the same complaint (vastly preferring her Kobo over my iPad). I don’t get it – I look at backlit screens all day. My eyes are used to it. Reading on an iPad doesn’t bother my eyes at all.

    Add to that the numerous benefits that the backlit screen brings (colour display, being able to read in dim light such as a plane/car/bus at night, or in a movie theater while waiting for the movie to start) and it seems like a no-brainer to me. But to each their own, I guess.

  7. Patty says:

    @Q1- We inherited several hundred acres of farmland in So. Dakota last year, which we’re receiving cash rent on. Our contract is set up to pay $125/acre per year (not per month). I would suggest talking to a lawyer knowledgeable with these kind of contracts. And, as Kevin mentioned, you have to factor in property taxes. Wish we could get $300/acre!

  8. JL says:

    #7 – Is your 15 year old going to be going to college? If so, will he need you to cosign student loans in order to complete a degree? You mention that the house is underwater, what you don’t mention is whether you can still afford the payment. If the answer to all these things is yes, then I would just stay put in the home.

  9. BirdDog says:

    Q4 – I’m a bit confused. The car only has 70,000 miles on it. Unless it has been driven hard (aka into the ground) and not maintained, there’s no reason why the car shouldn’t make the cross country trip. I’d drive it for the cross country trip rather than paying to have it shipped. I drove 2000 miles in two weeks a few weeks ago and the gasoline was only in the $300 to $350 range and I drive a pick-up. Unless it is mechanically falling apart, I’d keep the car.

  10. JS says:

    #1 – if the rent is truly $300/month, I think Trent definitely gave a bad advice when he said, “My personal gut feeling is that your mother should sell the land and eliminate her debts. A lot of factors are working against her if she holds onto the land – the interest rate on her debts, the future of corn and soybean prices, and the future of bank interest rates.” It’s a very paralyzing statement for that matter. There are lots of things you cannot control the future, etc. The basic math says (even if the commodity bubble crash… oh, wait there is no commodity bubble yet) it’s better to hold and rent – again if $300/month is a correct assumption (I am thinking it’s $300/year).

    #6 – it seems as though Trent has reversed what he practiced. He decided to pay off the extra debt earlier of his blog days, now he wants them to focus on “expected” return on the stock market for their retirement instead of focusing on “ACTUAL” return of 8%, 6.8%, and 3% on extra student loan payments? Heck, I know a bunch of people who ask me if I can get them 8% virtually risk free, they will invest (and I can almost get them 8% with virtually risk-free, well at least low enough risks for them to take). When is paying off (student loan) debts not a prepration for the future (or retirement)?

  11. Johanna says:

    Q4: @MP, it sounds like you don’t take the Metro yourself, and your understanding of it is based on what you see on the news. If that’s the case, then maybe your sense of “reality” is a little bit skewed, don’t you think?

    Leona, I’ve lived in the DC suburbs for five years now and have never owned a car. It works well for me. But here are some things worth thinking about:

    How would you plan to get between your parents’ place and the Metro station: walk, bike, or bus? If walking or biking, make sure that there’s a safe and convenient route for that (it may be a mile as the crow flies, but the shortest walking route may be much longer, or there might be no sidewalks, etc. – many of the suburban Metro stations are designed for people to drive to, not to walk to). If you want to take the bus, check the schedules for the routes you’d want to take – many routes run infrequently or not at all in the evenings and on weekends, or else they take such roundabout routes that they’re not much faster than walking anyway.

    Check the Metro website to see how long your commute would be and how much it would cost. Fares are not cheap, especially if you’re commuting at peak rush hour. Annoyingly, there’s no pass you can buy for unlimited travel on both trains and buses.

    If you think there’s a chance you’d want to get by without a car, I’d encourage you to give it a try. You can always buy a car later if you decide you want one.

  12. Sam says:

    #7 – First, definitely check with a real estate attorney regarding default judgments (ie: can the lender sue you for the difference forgiven in a short sale). That said, if you cannot comfortably afford the payments – and it sounds like you can’t if you’re using maxed out credit cards – short sale, short sale, short sale. Your credit will take a hit with a short sale, but in the long run, you’ll still come out ahead financially.

    We just completed a short sale, and while our credit dropped a ton, there was absolutely no other way out of a disastrous housing situation (paid – and still owed – $735,000; house worth $290,000. Gotta love the CA housing prices!)We can rebuild our credit and I have no regrets on short selling the property.

  13. dogatemyfinances says:

    Terrible advice to the doctors. Seriously, that is awful. Those looming student loans will haunt them, or they wouldn’t be writing you!

    They need to max out the Roths and then just forget about retirement. Assuming they don’t plan on working at the free clinic, this will be easy when they are making 500K, and THEN they can use the tax deduction, which they don’t need yet.

    I had those kind of loans, and I could never be free until they were gone. These people will have plenty of retirement in a few years, whether taxable or not.

  14. valleycat1 says:

    Q5 – I disagree with Trent as to what the shortcomings of ereaders are. The issues for me are mintor; the main problem I’ve found is that on a regular ereader, heavily formatted books rarely work well. (Charts, pictures, illustrations, etc.) If you load a lot of PDFs on it, sometimes they’re barely legible because it scales the page to the small screen. Also, all books display in the same font.

    I love to use cookbooks on mine, and use highlighting & bookmarking all the time. I have a couple of huge cookbooks on mine, with specific recipes bookmarked, and the table of contents links to jump to the page.

    One can easily bookmark a specific spot on a page – just arrow down and then doubleclick the five-way button. It’s then easy to view all your bookmarks and highlighted sections, and it gives you the first sentence or so, instead of having to page through a hard copy book & read every bookmarked page to find the phrase you’re wanting.

  15. dogatemyfinances says:

    Oh, and obviously the doctors should use the Roth now, they will be in a higher bracket for the rest of their lives, even assuming taxes don’t rise.

    Seriously Trent? Why on earth would someone in the 33% bracket the second they leave, where they will stay, use a 28% deduction now?

    Either max out the Roth, or just try try try on those massive loans. It’s not a good feeling, I know.

  16. valleycat1 says:

    Q5 – My first comment lost to moderation! So there may eventually be a double post on this.

    Contrary to the answer the blogger posted, I love having several large cookbooks on mine, and can email specific recipes to the ereader. The only issue is that it can time out while I’m in the middle of preparing a dish, but it’s easy to power back up.

    I also use bookmarking and highlighting a lot on my ereader and find it very easy to use. I use the comment feature occasionally and find it relatively easy too.

    Shortomings to a regular ereader I’ve found are minor: heavily formatted books (ones with a lot of charts, tables, pictures, or nontraditional formatting), & obviously books that rely on a lot of color, don’t translate well to the e-ink format. Also, if you will be using it to read pdfs, you’ll want one with a larger screen since the ereader scales the document pages to fit the screen.

  17. Petra says:

    @Q4: sell that car. Try public transport for at least a month (the last mile can be biked, or walked). If it doesn’t work out in the end, you can always buy a new car.

    I’m spoiled with good public transport in the Netherlands, but I think you will be spoiled too, in DC. Try it!

  18. lifeinalaska says:

    Good comments on Q2 about religion, Trent. It would make the world a much better place if people of all religious persuasions (including those with none at all) could sit down and have a rational discussion.

  19. Elysian says:

    Q4 –
    I would take the car and then sell it in DC if you find you don’t need it. Drive it across “caravan” style with your boyfriend rather than taking just his car.

    #3 MP is right about the quality of DC transportation – it’s been spotty since they started an accelerated maintenance schedule. And if you don’t have a job yet, there’s not telling if your new place of employment will be near a metro stop. My husband has to take 2 trains and a bus to get to his job, and it takes him over an hour and half each way (to be fair, driving is just as long based on where he works). Is that something you’d be cool with?

    You can always sell the car later. I would bring it now.

  20. jackie says:

    The think I dislike most about the kindle is that it is less social than book reading. When you see a kindle on a friend’s coffee table, you’d never invade thier privacy by looking through it (at least I wouldn’t and my friends have never done that to mine, although I don’t think I’d really mind) but when you see a book on someone’s shelf, it can spark a discussion. Also the possibilities for lending books are near zero. Also while some libraries do offer kindle books, the selection is low and the wait times are high.

  21. NickyT says:

    Q5: As someone who regularly travels for work (2 – 3 weeks per month) having to turn off my Kindle at the start and end of every flight is annoying. That is 30 minutes of good reading time I am losing out on on each flight I take. I have not yet figured out if it outweighs not having to figure out how many books to take with me since I can have multiple books to read on the Kindle and it doesn’t change the size, shape or weight. (I always purchased books from a used bookstore instead of the pricey airport newsstands.)

    I will be trying my first textbook on the Kindle this session. I am looking forward to not having to lug large textbooks with me when I travel. I am hoping it turns out as convenient as I think it can be.

  22. valleycat1 says:

    jackie #20 – I’ve had the opposite experience, at least in public. Almost every time I’m reading my ereader in public, someone starts up a conversation about ereaders. And my friends & I have no problem just talking about what we’re reading lately.

    NickyT #21 – Airlines are beginning to re-think the whole ‘turn off your ereader’ thing, since there’s no issue as long as you don’t have the wireless turned on. Alternatively, I know several people who stash their ereader in the seat pocket during the attendants’ check, then pull it out & read anyway (the attendants are strapped in too & have no way of knowing you’re being subversive).

  23. Andrew says:

    Q4–If the reason you can’t drive the car cross-country is you rather than the car (ie you have physical limitations or you just would rather not drive 3000 miles without companionship) you should try to find someone to drive it for you. College students and job-changers do this all the time, and it won’t cost anywhere near $1500. Put an ad on Craigslst and on college bulletin boards. Just be sure to get references and purchase whatever supplemental short-term insurance you need.

  24. rebecca says:

    loved Trent’s answer to the religion question… for some reason I always thought he would be more Jesus-y, but his answer was pretty exactly what mine would be! coincidentally I was also raised in a very Scandinavian ELCA church in Minnesota :)

  25. jim says:

    Q1 : As others have pointed out, the rent is undoubtedly annually and not monthly. $300 annual rent on land worth $6000 is only 5% return. Renting isn’t a great return. It would seem to make sense to me for her to sell the land and pay off her debts if thats what she wants.

    Q4 : I would sell the car before you move. $1500 is too expensive to trans port a $9000 car you don’t necessarily need. Then try mass transit in DC. If mass transit works well enough then use that, if it doesn’t work well enough then you can always buy a car there later. IF you do decide to ship the car then shop around for rates. You should be able to find shipping for closer to $1000.

    Q6 : In your case I would do the Roth IRA now. You’re both doctors and soon to make very large incomes easily putting you in the top tax bracket. Today you should be in the 25% bracket. So if you use a Roth IRA now you lock in that 25% tax rate. Soon you’ll be in the 35% bracket and likely to stay at that tax rate (or higher) the rest of your working lives. So I’d take advantage of the Roth and lock in that 25% rate today as its likely the lowest taxes you’ll ever see given your future income levels.

    Q7 Lonnie: It could easily take 15-20 years for you just to get back to even on that mortgage. You might be a candidate for bankruptcy. We don’t know much about your financial situation so its hard to say. We do know you are significantly underwater on your home and using credit cards to make ends meet. Defaulting on your loan and doing a short sale will trash your credit anyway, so why not just declare bankruptcy and give yourself a clean slate? If your income is high enough or you have other assets then maybe bankruptcy may not be a good choice, as I said we don’t know enough details.

  26. valleycat1 says:

    Q2 – Trent’s answer seems to contain a curious disconnect — his family’s actual practice and the way he describes his religious beliefs are very lukewarm, yet he professes to be deeply interested in spiritual development.

  27. cv says:

    @Q4: Is there anywhere to park at or near your parents’ house? In a lot DC, it’s a pretty big hassle to find street parking, or a big expense. I live just over the line into Maryland, but near a Metro station, and we rarely drive except on trips out of the city. Metro’s track work on the weekends has been a real issue, but during regular commuting hours I’d say it’s probably more reliable than driving, given how bad DC traffic is.

    Also, look into whether there are Capital Bikeshare stations near your parents’ house and the Metro station.

  28. David says:

    It may be that the lukewarmth (there is no such noun, but there should be) of Trent’s descriptions is a consequence of his lack of desire to evangelize. This, far from exhibiting a disconnect (there is such a noun, but there should not be) shows commendable restraint and sensitivity.

  29. SA says:

    I totally disagree with the answer to Q3. He should definitely put it in a Roth IRA. First, he is probably paying next to no federal income tax right now, due to his student status and low income, so this is the best time ever to put it away. Second, he can always withdraw the contribution with no penalty if he needs it later. He can also withdraw the contribution and gains if he wants to use it to buy his first house (and possibly to start a small business, but I’m not 100% certain on that). He doesn’t mention any specific goals for it anyway, so this is a no-brainer to me. I wish I had made a contribution to my Roth IRA while I was still in college. You can’t go back and make contributions for past years!

    Just don’t forget that you can only contribute a maximum per year of what you earned for that year – so if you earned less than $5000 in 2011, you can only contribute a total of what you earned that year for that year and no more.

  30. PawPrint says:

    Q7: I’ve heard that if you decide to short sale or walk away, you should make sure you have rental housing lined up prior to getting that credit hit. Some landlords will be okay with a low credit score, particularly if you have a long employment history, but most larger complexes go strictly on the score with no exceptions. Know that your insurance rates may go up because of a bad credit score, but that’s a drop in the bucket compared with paying a mortgage that’s beyond your means. Good luck with whatever you decide.

  31. Steve says:

    Regarding the doctors: Don’t forget, in Trent’s world, you should never ever count on your future self to make more money than your current self. In fact, future you is probably such a lazy bum that s/he probably won’t have a job at all.

    Even in light of that, though, I’m still not sure the advice is correct. Since student loans are not dischargeable in bankruptcy, they’ll always be a weight around the financial necks of the question asker and his spouse, regardless of whether or not future question asker and his spouse are lazy bums as expected.

  32. chris says:

    Q5 – one huge drawback is that you can’t sell the book once you are done with it, when you have an ereader. If you want to pick up a book that you can’t get at a library and you read it and then want to move forward, with an ereader, you stil have it, but with a physical book, you can sell it again on amazon and get most of your money back (providing it is a fairly current title).

  33. Brianne says:

    I love my Kindle, but I’ve had problems with it not showing photos and other images from books. Perhaps with a Kindle Fire that’s not an issue but you can’t zoom in on images on the Kindle Touch.

    What’s great about the Kindle is the ability to download books from our local library. I’ve been reading much more than I used to since getting the Kindle due to the ease of checking out books. You can put books on a waiting list online and then it e-mails you when the book is available. You can also get one free rental book from Amazon per calendar month if you have Amazon Prime.

  34. Anna says:

    Q6. I’m a medical resident myself and the assumption that with a salary of $100K a year, the minimum student loan payments on $300K of debt ‘shouldn’t be a problem’ is erroneous. Most of that debt is at 6.8%. The monthly minimum payment on a 30 year loan of $300K at that interest rate is about $2K. Or 25% of their gross income (not net!) That’s a lot. I was lucky enough to get scholarships so my total loans are ~ $50K, which I’m paying over 10 years, and those payments at about 15% of take-home pay, are tough. I’m trying to decide if I should extend my payment term so I can maximize my Roth.

    Maximize the Roth while you can still contribute – once one of you becomes an attending, even if the other is unemployed, you’ll probably be past the income limit. Your tax bracket will only go up. And while Trent’s usual advice is not to trust your future self, etc., there aren’t many unemployed physicians out there. Odds are on their side.

  35. Riki says:


    I agree with Anna and generally Trent’s answer was out-to-lunch. $100K isn’t a ton of money for a professional couple to make jointly and payments on that kind of debt are going to be challenging. My partner and I make more than that combined and I know for sure that the minimum payments on that amount of debt would put a strain on our budget.

    For 3 years, you’ll be busy and tired and studying for boards and trying to live a life on the side. If I were in your shoes, I would start making nominal retirement contributions and pay as much as is comfortable on the student loans. And I would hire a cleaner!

    Once your residencies are complete, your salaries will make it possible to catch up on any retirement savings you think were lacking.

  36. Nancy says:

    #1- Farm ground is rented by the year NOT month. If one were to rent 37 acres at $300 per acre the total will be $11,100 of income. Other elements to think about are improvements to be paid by the owner (such as fence line tree removal, lime application, tiling & waterway repair, and other necessary improvements) Right now, land values in Iowa have increased dramatically in the past few years. Your mother MUST discuss ANY financial dealings with an attorney. Based on your post, your understanding of the financial aspects of farm land ownership and rental agreements are limited. Talk to an attorney or a qualified farm manager.

  37. Katie says:

    #26, I was going to say – no matter how bad public transportation is to your office, if that office is in the district proper, parking is likely to be worse.

    Though if you end up working for one of the increasing numbers of employers in further out NoVa or Maryland, things would be different.

    Anyway, I moved to Washington with a car and sold it off quickly, and haven’t regretted it for a minute. And I think a mile off a metro line is doable anywhere in the area. (Seriously, it’s not THAT annoying on weekends with the track maintenance, though it is fairly annoying.) However, the factors Johanna is talking about are really important and my friends who live in the suburbs and don’t have a walkable Metro line have found their life miserable without a car; a lot of the suburban bus lines don’t run – or barely run – on weekends.

  38. Linda says:

    I grew up on a farm and cash rent is per acre/per year, not per month (though wouldn’t that be great?) Plus there are real estate taxes to pay. Unless they want to live on the land they would probably be better off selling it and getting out of debt.

    I more or less agree with your feelings on religion. I don’t care much for organized religion. Being a Christian is about more than going to church. I was never indoctrinated and neither were my kids. My daughter is fairly active in a church (ELCA also) and my son always says he’d be struck by lightning if he entered a church, but he was married in one and survived to tell about it. :)

  39. Brent says:

    Q1: As others have correctly pointed out, the cash rent is PER YEAR, not per month. Also, Iowa farmland, along with many other states, has been hitting record sale prices recently (http://bit.ly/GSps0h). Prices could rise more or the bubble could burst – hard to say what will happen. However, selling now seems to be the better option as your mother would (1) be selling at historically high prices and would (2) be addressing her personal financial situation by eliminating debt.
    For further reference on Iowa agriculture, land prices and rents, I’d check out http://www.extension.iastate.edu/agdm/

  40. JS says:

    I have a Sony Reader with a touchscreen, and I don’t have many problems with PDFs. I use it to read work materials on the bus to and from work.

    I think everyone covered the downsides. I don’t know if I would have bought one for myself, but it was an great gift and I love it. I do want to add that Project Gutenberg is awesome if you have a e-reader- they have books and documents that are no longer under copyright free to download. I just downloaded their entire collection of Mark Twain works.

  41. SG says:

    Q7, given your situation, it sounds like it’s probably the right decision. However, I second Pawprint/#30’s suggestion that you line up a rental before defaulting. Trent, I think you missed something very important in this reply: Bad credit can have a detrimental effect on your ability to rent. It might be different in other parts of the country, but in Northern and Southern California, landlords always run credit checks, and they are very hesitant to rent to people with major defaults. It’s not impossible to get a rental with bad credit, but you have to be able to convince an owner who manages his/her own property that you are a worthwhile risk.

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