Updated on 05.10.10

Reader Mailbag: Travel

Trent Hamm

Did you know that ten hours of road travel with a four year old, a two year old, and a newborn is a really bad idea?

I have just signed a loan modification for my (large) mortgage. They fortunately gave me a starting payment at 2% for the first 5 years. I have been able to pay up ALL of my bills (no credit cards or outstanding debt) and have $2000.00 in savings. I would like to make my payment each month and add $1000.00 more against the principal as the mortgage is a large one. I would also open a Vanguard 500 with a $1000.00 per month savings goal and let this accrue towards paying off more of the principal in 5 – 6 years. Which of these – payning against the 2% interest rate and/or compounding of the money with Vanguard benefits my goal of keeping my finances safe while I own this house? Can you recommend a type of financial advisor who I could seek a session with for further info? I love your column and appreciate any help that you can send my way.
– Jill

It depends on what happens at the end of the period with the 2% interest. This sounds like some form of adjustable rate mortgage, so what happens at the end when you come to your first adjustment? If it adjusts to a very high percentage rate, then you’re going to be facing the costs of refinancing or dealing with a much higher rate.

If it does adjust to a very high rate, I would put aside some very liquid cash (in a savings account) to help pay for the refinancing you’ll have to do. If it doesn’t readjust too much, I’d just make the minimum payments on it.

If you have a five year savings goal, the Vanguard 500 is not a great place to put your money. The stock market is a good place to put your money if you’re looking at a very long term horizon (more than ten years), but if you do a short period, you have a good likelihood of not gaining a dime or even losing money. Short term mutual fund investing is akin to gambling. I would put it in savings instead if your horizon is five years. Buy some CDs at the highest rates you can get.

As for the need to hire a financial advisor, with the amounts you’re discussing here, you’re better off misfiring quite a bit with your investments and handling them yourself than paying high fees and commissions to have an advisor do the same thing. You can sign up for the accounts you need on your home computer in just half an hour.

We bought a 2010 Hyundai Elantra GLS (we get 26 mpg city/34 mpg highway just like the book says), and it came with 3 free months of XM radio. I love XM radio, but not enough to pay the normal (I think) price of $14/month or even the $10/month discounted price. However, a friend who bought a new car also got 3 free months of XM, and when he called to cancel after 3 months, he was offered the price of $5/month and took it. I think $5 a month is worth it; my husband does not. What are your thoughts? We have Netflix and think it’s worth it, but he’s the movie and TV freak; I’m the book freak and could go without TV or movies. I drive the car to and from work, and I’m currently listening to R&B and jazz stations I cannot get in our area. He loves country music (as do I), which you can get almost anywhere for free on the radio.
– Karen

$5 a month is a small amount and well within most people’s entertainment budget for the month. If you get significant entertainment value out of it, why not?

Do you have a good grip on how much you spend (and your husband spends) on entertainment expenses each month? Ideally, you should be spending roughly equal amounts on the things that you value. I would reasonably think that if he values what he gets from Netflix much more than you do and you value XM much more than he does, the costs of the two would roughly balance out.

In short, if you get lots of personal value from it and use it frequently, I think $5 a month is perfectly fine.

I’m not sure you’ve talked about this, but it’s about health. We spend a lot on high quality supplements and feel it’s worth it. I’m in my early 50s and she’s in her mid 60s, and we feel great (no prescription drugs). But how much is too much? I’ve started buying from vitacost.com (great flat shipping rate), but I’m not sure how much to budget for our health (outside of our insurance premiums). Now our strider elliptical exerciser is on its last legs, and I’m wondering what we should get to replace it.
– Timothy

This is more of a health-related question than a personal finance one. I’m under the belief that a daily multivitamin is fine (and perhaps a vitamin D supplement) and this idea is backed up by Harvard, but I think the most important things are eating a well-balanced diet, getting at least some exercise, getting adequate sleep, keeping your mind engaged, interacting with positive people, and keeping a positive frame of mind.

Once you get much beyond those things, the evidence starts becoming vague and you hear lots of claims and counter-claims about “megavitamins” and “super foods” and high intensity exercise and the like.

I think the real question is whether or not you genuinely use this stuff and whether you truly believe it improves your quality of life (whether it actually does or it’s a placebo effect doesn’t really matter). You could always do a trial run without them, sticking to a well-rounded diet and a simple multi-vitamin.

We are nearing retirement (8 years) and moved to our current home 1.5 years ago because of my husband’s job. It’s not where we’d like to live when we retire, however. We found a condo in the area we love, with a view of water. It needs cosmetic work, but we could do that over 8 years. We’d rent it to our son’s girlfriend, but she can only afford enough rent to meet our principal and interest payment now–probably more when she gets out of grad school next year. Our goal is to have the loan paid off in 8 years, which is doable. However, renting to her has its good points (she’d help with painting and the work, we’d remodel when she went away, we’d be helping a person we love like a daughter), but we’d be out about $5,000 every year while she’s living there. If we wait until retiring to buy a place in this area, I’m fairly sure we couldn’t afford to buy one outright even if we save the $5,000 each year, and I don’t want a mortgage when we retire. I also don’t want to have to buy a condo and fix it up after we retire (a turnkey condo in this area would definitely be beyond what I want to pay). We don’t know what makes sense financially. What do you think?
– Sheila

As much as you like the place, it sounds as though it’s financially out of your reach right now.

That’s just part of life. Not too long ago, I saw a notice in the newspaper about a large tract of mostly wooded land for sale about fifteen miles from where we lived. I drove out to look at it and it was perfect for what we want to do. We could (right now) swing enough of a down payment to buy the land and then also afford the payments on it.

But then we’d be walking a very scary financial tightrope and the domino effect if we fell off that tightrope would be awful. Plus, it would be very difficult for us to come up with the resources we would need to build there because we would be responsible for all of it, starting with just bare land with few services running out there.

So we passed, even though it was exactly what we wanted.

Part of financial success is knowing what you really can afford and what you really can’t and (more importantly) having the maturity and bearing to walk on by those things that don’t fit.

I stumbled upon one of your posts about a list of the top songs you’ve been listening to lately. You mentioned iTunes. I find it hard for me to break down and flat out purchase some singles or even the whole album as the costs and sharing ability on iPods are not really appealing to me. With that said, I do not regularly buy music from iTunes and I fear if I start with the one click shopping for songs, I will rack up an immense bill!

What is your stance of downloading illegally but is in most senses, free? How do you control your iTunes spending? Are there any deals, coupons, incentives or even benefits when purchasing songs from iTunes?
– Angie

Given the multitude of ways to listen to the music you want online for free (like Pandora, for example), I think that the need to pirate music files is pretty unnecessary. If you want the convenience of being able to listen to a particular song anywhere, then cough up the 99 cents for it.

If you’re happy to do without some of the convenience, then you can listen for free using services like Pandora.

If you just take it, the people who wrote the music get nothing for their efforts. The people who performed it get nothing for their efforts. The people who engineered it get nothing for their efforts. The people who found the music and delivered it get nothing for their efforts. At least with Pandora, they get some royalties out of it.

Sometimes, artists choose to give it away anyway. But that’s not a good reason to take what you like.

Yesterday, I received an e-mail offer from AT&T/Citi Bank. They say that I can transfer balances from other credit card accounts to my AT&T credit card account. I would not have to pay interest on the transferred money for approximately 18 months. The cost to me appears to be just 3% of the amount transferred.

It seems to be too good to be true. Do you know of any traps regarding deals like this?
– Bob

Such “zero balance transfer” offers are fairly common. They’re just an enticement to acquire a new customer.

The only “catch” is that, usually, if you haven’t paid off your balance transfer by the end of the period, you’re charged all of the interest on the entire amount for the entire period.

Read the fine print on the deal and don’t transfer more than you think you can pay off by the end of the deal.

I am a 37 year old man who owns 2 homes and lives essentially paycheck to paycheck even though I make around $210,000 per year. The problems began when the housing market went down the toilet and my wife became pregnant. We own a small 3 bedroom house and were living quite nicely even though the value of the house we were living in was falling rapidly. Once the baby came along my wife stopped working and we realized that our small 3 bedroom was not really big enough for us, but we could not sell it because it was over 100k upside down. We had some savings so we decided to buy another house and try to rent our smaller house until it could be sold at a later date. Of course, the rental market has also suffered and we are losing about $800 a month by renting our old house and now have a new mortgage which costs about $2700 a month. The bottom line is that even though we have severely cut back our expenses, we are living dangerously close to the edge right now. We have drained our savings accounts and we have about 20k in credit card debt, 2 newer cars with car payments, etc. Are there no options for people who make more than average but who are still saddled with a mortgage that is so upside down? In retrospect I see a lot of mistakes that we have made, but I’m kind of stuck with them and need to find a way out. Do you have any advice for a poor rich guy?
– Justin

Sell one of the houses. That’s pretty much your only option here. Two big mortgages are untenable (it looks like each of your mortgages are bigger than my single one!).

Decide which house you’re going to stick with and live in yourself. Then contact the mortgage holder on the other house and suggest short selling it to them. They may or may not budge (depending on how they view your local market right now).

If you can’t short sell, you can either try to string things along until you’re to the “break even” point on the house you want to sell or simply walk away, allow the foreclosure, and deal with awful credit and higher insurance rates for the next several years.

Do you have a basic rule of thumb regarding how much to pay towards loans vs. a an investment portfolio and/or retirement accounts? I could probably beat my 6% loan interest rate in the stock market so, if I have the extra money, should I make double/triple payments on my student loan debt or put the extra towards my portfolio? Assume I’ve already make a risk assessment in favor of investing and that I will maximally fund my IRA and 401k. Would I be better off clearing the debt and then investing full bore or do you think I would make more (on balance) if I started investing all my extra money now (with a longer term for growth) and just making minimum payments on my loans?
– Jeremy

“I could probably beat my 6% loan interest rate in the stock market” is a questionable statement. It’s basically gambling.

Over the last ten years, the S&P 500 has dropped an average of 0.71% per year. Yes, that includes two bear markets and only one bull market. But no one has a crystal ball to say which is which.

If you put $100,000 into the stock market ten years ago, you’d have $93,122.60 today. If you put $100,000 into paying down that mortgage ten years ago, you’d have $179,084.80 in saved interest and equity today.

Now, of course, you can also find ten year periods that beat that 6% annual return, but they’re far from a guarantee.

The problem is that the future can’t be predicted. Personally, right now, I’d take a guaranteed 6% any day of the week over a stock market investment.

I’ve been an avid reader for several years but have not seen any information about WHEN to start thinking about a replacement vehicle.

I currently own (i.e. No payments) a 7 year old car with 140,000 miles. It runs well but does have some minor issues. The car could run another 100,000 miles or it could it could die tomorrow. I need a reliable but I don’t want to buy just to ease my worries.

How did you make the decision to start looking?
– Chad

For us, a big part of the decision rested on how vital that vehicle was to our daily lives.

My wife needed a car for commuting, period. I had some need for a vehicle on weekdays, but the need was much lower.

Thus, we were quick to replace her car when it started having several minor issues. We took it to a local mechanic that we trusted and he more or less suggested we’d be better off getting rid of it than repairing it, so we did just that. She needed a vehicle to commute in, after all.

With my truck, we were in a similar situation, but we kept the truck for two more years after that point. I didn’t need it on a daily basis (though it was very useful). In fact, we kept driving it until, over the course of the last year we owned it, it only ran about 60% of the time thanks to several different issues.

It all comes down to how vital that vehicle is in your day-to-day life. What would happen if that car blew up? If it is a major crisis, then you need to replace it a bit sooner. If you could get around it, then it’s less of a crisis.

Anyway I’m writing because as I was in the shower this morning, I had an idea (most ideas happen in the shower, right?). I had read your article on how to make your own laundry detergent, and I intend to start doing this myself once I run out of my current bottle. But the thought occurred to me: Shouldn’t making one’s own body wash be a similar process? Wouldn’t that, too, be cheaper?

I searched your blog to see if such a post existed, and upon finding none, googled it. I found some recipes, but they seem low-yield and expensive in that they include essential oils that may cost a bit. You might say I could just use bar soap, but I prefer the use of a loofah as it helps exfoliate my acne-prone skin in the process. In an effort to save money, I’ve been buying my bodywash from the dollar store recently anyway.

Anyway if you could provide any insight into whether it is cheaper and realistic to make one’s own body wash, I’d appreciate it – I’m sure other readers might too!
– Melissa

Body wash is something that I’ve tried in various homemade versions, but I’ve yet to find a version I’m happy with that I think matches the stuff that we buy in bulk.

The only recipes I’ve found that work well at all start off with a liquid soap base anyway, so you don’t wind up saving very much at all. The other recipes that don’t cost much to make just don’t work very well.

If I come across something that works, I’ll unquestionably share it on The Simple Dollar.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

Loading Disqus Comments ...
Loading Facebook Comments ...
  1. Tatiana says:

    “Did you know that ten hours of road travel with a four year old, a two year old, and a newborn is a really bad idea?” — Trent, I don’t even have children and I knew this is a really bad idea!

  2. Diane says:

    How is a 3 bedroom house too small for 3 people? My husband and I raised 3 kids to adulthood in a 3 bedroom/ 1 bath home of 900sq feet. Why can’t kids share a room anymore? Questions like Justin’s, make me feel old and grumbly.

  3. Chapeau says:

    @Jill — if you really want to talk this over with a pro, you want a fee only financial planner. He or she will charge you a set hourly fee for a few hours of work to review what you have and then make recommendations/suggestions based on where you want to be. There is a national group that certifies fee-only planners, and I believe you can find a link to them on the msn money website. Bankrate may also have a link. It could cost a gulp-inducing amount, but I’d rather spend it that way than screw up and lose that kind of cash.

  4. Crystal says:

    Justin, sell a house even if it means taking a big hit. You are living beyond your very nice means…I’d relook at your whole budget and start cutting back.

    If you do walk away, I’d keep the cheaper home and deal with the fact that $210,000 a year does not necessarily equate with a trumped up lifestyle. I’d suggest creating a budget that allows you to live on half, save 25%, and pay off the debt with the other 25%.

    Our budget has us living on about 55% and we make a joint $78k a year. We budget for annual vacations and fun money as well (you can see our actual budget on my site…obviously, you’ll have more to work with, but it may give you a starting point). Living below your means is very helpful to your mental well-being.

    Good luck!

  5. TK says:


    The loofah is not helping your skin. Loofahs grow bacteria like crazy, which perpetuates skin conditions like acne. Use a washcloth- get the multi-pack of cheap ones, b/c they’re rougher and exfoliate better. You can use a new one every day if you want, and just throw them in the washing machine. Then you can use bar soap if you want to, which is cheaper, and your skin will be better off.

    Diane- Justin’s question also makes me feel old and grumbly.

  6. AmandaLP says:

    One of the items not mentioned in the “should we short sale the house” is that late payments affect credit scores almost as much, if not more, than short sales and foreclosures. Such as, allowing credit card payments to fall behind while the home loan is being paid will affect one’s credit score much more than short selling the house.

  7. Jenna says:

    Melissa – if you don’t find a homemade bodywash recipe, you may want to consider bulk. Walmart makes a nice generic version of Softsoap varieties. Comes in a 64 fl. oz. size for about $5.50. I saved a shower size container and just refill as needed. I also use this same soap in soap dispensers in bathrooms/kitchen. I may buy 2 Lg. Refills per year. About $11.00 for 2 person home for all body/hand wash – not bad!Works great, is cheap and less plastic containers nto landfills :) Good luck on your search!

  8. Johanna says:

    I don’t understand the answer to Sheila. What part of her letter made Trent think that the condo is “financially out of (her) reach right now”? If she and her husband can afford to pay enough extra on the condo’s mortgage to pay it off in 8 years, even after renting it out at a loss, then it sounds like they can afford it just fine – they’re just wondering if it’s the best financial choice.

    But I have two questions for Sheila:

    1. What happens if your son and his girlfriend split up? Even if you think they’re not going to, anything can happen in eight years. Will you still love her like a daughter? Will you still want to continue the landlord-tenant relationship? If not, what will you do?

    2. What makes you think that you will not be able to afford to buy a condo when you retire? Are you assuming that prices will go back up to 2007 levels? Because they’re probably not going to. They may even go down some more. And in the absence of a 2007-style overheated market, I don’t see how buying a condo now and renting it at a loss can possibly beat saving up your money and buying one later.

    If it’s important to you to have someone you know and trust living in and maintaining the condo before you move in, you could wait until 1-2 years before you retire, and buy one then. Less can go wrong in one year than in eight years.

  9. Shawn says:

    Many of the songs on iTunes are now available in the DRM-free iTunes Plus format. This means that they can be played on other devices other than iPods and burned to CD as often as you want.

  10. kristine says:

    Ditto, Diane. Assuming the husband and wife share a room- does the baby need two? OK, hubby snores, so they each need their own room…that still equals 3 rooms. Perhaps it is a clutter of consumer goods that is the problem, or exercise equipment, or what have you. But I think more rooms than the number of people is symptomatic of inflated standards of living. If you think about it globally- it actually seems a bit crazy.

    As a person who decided not to buy, as I knew it too risky to assume increased pay, etc., I have a real problem advising people to walk away from a mortgage because it is what is best for them personally. The financial fallout of defaulted loans affects us all, and is basically asking others to bear the burden via higher rates, lower housing markets, local downturns, and so on. Foreclosures will further lower the value of his neighborhood- not a neighborly thing to do.

    Suck it up, sell the larger house, and move back into the 3 bedroom, and get over the unrealistic expectations. You can afford what you can afford. The thing to do is bear the consequences, and the unpleasantness of your circumstance like an adult. Make the best of it, instead of walking away. And if it seems too awful, go stay a week in a poor neghborhood or country for a week or so, and your small 3 bedroom will seem like a palace! Focus on what matters: character, not acommodation. What values do you want to pass on to your new child- personal responsibility, or self-interest? As a teacher- I see the tendency toward excusal, non-consequence, and me-centric exceptions as undermining to our entire social structure.

    Unless you were bamboozled, then you took on a debt. and must pay it back. You took a risk, and it did not work out as you had planned. It was your risk to take, just as it is your repsonsibility to pay the piper.

  11. Julia says:

    I had the same concerns you have about racking up a big bill on Itunes. I manage it with gift cards.
    I have never, ever supplied a credit card number to Itunes. Occasionally, I buy a gift card at the grocery store. It might be $10 or $50, whatever fits into my entertainment budget for that month (based on what I’ve already spent).
    When I redeem the card, the balance shows up on the Itunes store. It’s there at the top of the page glaring at me, saying “only have $7.49 left, is this song really worth it?”
    Once I run out, it’s gone until I buy another gift card.

  12. J says:

    @Karen — in our house, we have the concept of “blow money”. She has hers, I have mine. We can’t criticize how it’s spent, saved or otherwise used. Perhaps you and your husband should have a similar discretionary amount. My wife and I have different opinions on what we consider “valuable” for some things, and this allows us to agree to disagree, and concentrate on the much larger budget items where $5 is a rounding error.

    @Angie — I really like the Amazon MP3 store. It’s cheaper than iTunes, faster, and the MP3’s are DRM-free. Pandora, last.fm, youtube, blip.fm and Internet streaming radio are all other options to get music. I also feel that you should pay for what you listen to. Plus, there is a concerted effort by the RIAA/MPAA to catch illegal downloaders and fine them huge amounts of money. Although I know there’s a lot of illegal downloading going on and would likely not be caught, I certainly don’t want to end up in court being served with a huge fine that would actually stick. There is a big difference between being thrifty/frugal and stealing. I’ve heard all the elaborate justifications as to why downloading is not stealing (I read slashdot regularly) and they are all pretty lame.

    @Justin — you need a game plan and need to stop digging a hole. I concur that you need to get out of one of the houses, but you should likely look at somehow dropping the cars, too — one or both, and replacing them with something you can pay cash for. You might find Dave Ramsey’s Total Money Makeover interesting reading. The big plus is that you have a $210K income and can likely dig yourself out of the hole in a few years if you put together a decent plan and stick to it.

  13. Lise says:

    @Melissa: I use soap, but I use one of those “soap sock” type things that I got at Big Lots for a dollar. It is made of the mesh-like material that loofahs are; you stick the bar of soap in it and then rub it directly on your body.

    I use it with the kind of soaps that don’t lather particularly well on their own (soaps from Lush, for example – and yeah, that’s not frugal in the least, but I Have a Problem ;) Basically it gives me the same effect as using a more expensive body wash.

    I’ve heard you could use pantyhose for the same purpose, but I haven’t tried it…

  14. Lynn says:

    There are coupon blogs out there that track both coupons (printable off manufacturer websites) and chain store sales, so that you can combine the two and get an incredible amount of stuff free. Many of these folks never pay a cent for toiletries. I’m only on the outside looking in because of some allergies, but it’s very impressive and totally legit.

  15. jgonzales says:

    Diane & Karen, I’m young and agree. We currently have 4 people (2 of whom are under age 5) living in a 2 bedroom apartment. While our plan is to eventually buy a home with 3 bedrooms, but the 3rd bedroom will be used as my office since I freelance.

    Justin, you need to sell one of those homes however you can. I would go with the smaller one, but if you absolutely must have the larger home, then so be it. Use the extra you’re not paying into a mortgage to pay off other debt, like the cars or credit cards.

  16. Thea says:

    Sheila- I say, if you can afford the condo and the extra 5K per year, buy it. You’ll get your interest payments back in taxes. Chances are your son’s girlfriend won’t live there for 8 years and then you can find a property management company to it for you and get the appropriate rent for it. (I HIGHLY recommend getting a manager. They only take ~10% of the rent they collect; if the house is empty they don’t get paid. Believe me, houses don’t stay empty for long. Plus, they handle EVERYTHING!!)

    I would buy it even if you have to pay 5K for 8 years, you’ve gotten a retirement home in an area you love paid off and for only 40K of your own money. You’ve paid for it with someone else’s money. If you wait until retirement you’ll be paying the whole price yourself, which is not financially smart.

  17. Erin says:

    I too am having a hard time not being judgmental about Justin, even though he says he realizes now they made mistakes. It’s tough to get past a statement that a 3-bedroom house is too small for 2 adults and an infant. We live in a 1,600 sq ft 3-bedroom house and while sure, I would like a little more space, it is plenty big enough for us. That said, my advice would be to sell the larger house. Cut the price more and short-sell it if you possibly can. Sell your cars and buy cheaper ones. Pay off the credit card debt. I believe a short-sale or foreclosure affects your credit enough to prevent you from buying a house for several years. During that time you could pile up cash for a down-payment for a bigger house where you can hopefully afford the mortgage payment even if something disastrous happens.

    @Sheila – I don’t see why you think you won’t be able to afford a condo when you retire. Presumably you will get raises, and each month you can put into savings the amount you would be paying for a mortgage payment if you buy it now. That would just add to the amount of a down-payment you can make in 8 years. I don’t see how it makes sense to plan to lose $40,000 on this deal over the next 8 years. If you can afford to lose $5,000 a year, isn’t that $5,000 a year you could put into savings to add to your down-payment? A lot of things could happen in 8 years that could make doing this now a very bad decision. Also, nobody can predict what the real estate market will do but I haven’t seen any studies or predictions that think the market will go up anywhere close to as fast as it did before the bubble burst.

  18. Erin says:

    @#13 Thea – your statement to Sheila that “you’ll get your interest payments back in taxes” is incorrect. You can deduct mortgage interest on your tax return, but that means you don’t pay taxes on the amount of interest, not that you get the interest you paid back. In other, words, say you paid $10,000 in interest in one year. That means you get to deduct $10,000 from the amount of your income you pay taxes on. Say you pay a 25% tax rate, that means you saved $2500 in taxes. But you still paid $7500 ($10,000 – $2,500) in interest.

  19. triLcat says:

    My husband and I live in a a three bedroom apartment (less than 1000 sq feet including our parking space and storeroom, which are not attached and cannot be used for living space) with 2 kids (1.5 and almost 3), and even when my stepson (14) comes to visit, it doesn’t feel terribly tight. Our little kids share a room, and the third room is for my husband’s juggling, and his older son sleeps there when he visits. I work from home, but I use the dining room table. If we can’t afford more space by the time the kids are 5-6, we’ll probably opt to put our kids in loft beds, b/c it gives more floor space for a lot less money than buying more square footage.

  20. Jon says:

    “Did you know that ten hours of road travel with a four year old, a two year old, and a newborn is a really bad idea?”
    Big surprise there.
    At least your kids have all those awesome memories right?

  21. triLcat says:

    And Trent – if you really thought a 10-hour road trip with kids that age was going to be anything other than pure, unmitigated torture, you’re quite the optimist. :)

  22. jim says:

    Justin: Sounds to me like you need to get your spending under control. You’re making $210k a year. After taxes you should be taking home around $150k. Your mortgage and rental are costing you about $42k. So after your housing expenses you should have around $100k a year to live on. There should be *NO* problem living on $100k. Where is all your money going? You mention car payments for 2 new cars. I’m guessing those are expensive cars. I wonder what else you’re spending money on. Sorry but you really need to control your spending.

  23. Maya says:

    @ Angie,

    I agree with one of the previous comments that the Amazon Mp3 store is a great way to get free new music and great deals on music in general.

    If you go to Amazon’s Mp3 section and click on “Special Deals”, you will see a new free song of the day and a “Deal of the Day” where you can purchase an Mp3 for $3 to $5. This has allowed me to discover new bands for free while expanding my mp3 collection.

    For example, I’m a big punk/alternative rock fan. I’ve bought mp3s for a Ramones collection, a Beastie Boys collection and Stone Temple Pilots among other artists for less than $5 each.

    Amazon offers free music and daily deals for all types of music, not just rock. I limit myself to just one “Deal of the Day” per week and there are quite a few weeks when I don’t buy anything, so I only spend about $10 or less per month on mp3s. I also load up on as many of Amazon’s free songs as I like.

    Also, iTunes offers free music and one free video. The free music and the free video choice changes every Tuesday. iTunes’ free music selection isn’t as good as Amazon’s free stuff, but you can sometimes find some nice free surprises at iTunes as well.

    Hope this helps you, Angie, and any other would-be music pirates out there. Remember, it’s ok to support talented musicians and buy quality music that you actually enjoy. And there’s really no need to pirate music, now that there are free and legal ways to discover great music.

  24. Nicole says:

    Justin: Read The Millionaire Next Door. Based on what you’ve written, you will probably find yourself described in it as a UAW. But it isn’t too late to become wealthy instead of just high income.

  25. Dee says:

    Re: Bob’s question on credit card balance transfers

    “The only “catch” is that, usually, if you haven’t paid off your balance transfer by the end of the period, you’re charged all of the interest on the entire amount for the entire period.”

    Trent, that is not true at all. That tends to be the case when it’s a 0% offer for furniture, large appliances, etc. but for credit cards you just start accruing interest on whatever balance remains when the 0% is up.

    I say this as someone who has used 0% offers from both BofA and Citi.

  26. Dee says:

    One more thing on balance transfers:

    Bob, the catches are that if you are late or miss one payment, the 0% will end and the rate becomes something ridiculous, like 29,99% (called a default rate).

    At the end of the 18 months, the rate will jump to the rate at the time, which could be pretty much anything.

    Example: I had about $5,000 on a BofA 0% card and it ended Jan. 1 of that year. I didn’t pay off the card for a week or two after the end of the promo period, and had to pay interest for those days in between. It ended up being $8 or $9 (I think the interest rate became 16.99%).

  27. Jackie says:

    I had a little itunes binge when I first got my iphone. I controlled it by buying one $10 gift card and telling myself that it was my itunes budget for the month and that I could get one gift card per month. After 2 months of that enforced self-control I regained my senses and am back down to reasonable spending without the need for that external control.

  28. John says:

    What’s the best book on interpersonal relationships you’ve read?

  29. Nathan says:

    Re: Balance Transfers

    There is another catch with Balance Transfers. Your credit card contract will usually state that lower interest rates are paid off before higher.

    Example: If you already have a balance on the card from purchases at 10% interest and then do a balance transfer at 0%, any money you pay will go towards that 0% balance first, and you will continue to accrue interest on the full original balance.

  30. Sheila says:

    Re: buying the condo, we’d still have a year’s worth of emergency fund plus we’re funding our retirement accounts to the max and are making more than double payments on our current home. We’d quit paying extra on our current mortgage, obviously, and that money would go toward the new place plus the rent. After I wrote that question, we found out the price dropped, and the loan we would get is even cheaper so we’d be out less than the estimated $5K a year. The renter would be paying the payment and HOA, and we’d pay the taxes, insurance and some utilities, which all come to less than the extra payment on our current house. If the girlfriend decides to move, we could get more $ for the place–a similar condo just rented for double what she can pay. Comps on similar condos are about $20,000 more than this one (it’s an estate sale), and updated condos go for $80K to $100K more. I guess I was thinking they’d go for even more in 8 years, and even saving the $5000 a year wouldn’t be enough. Plus I could make the home what I want, which is something that’s important to me.

    Things to think about, for sure. Thanks, everyone.

  31. Laurie says:


    While I agree that Justin needs to get his financial house in order (and quickly!), I can personally attest to the fact that people that make $210k, (exactly what we made last year) do not typically bring home $150k. With FOUR dependents we brought home just under $130k after insurance, state taxes, 401k etc are taken into account. $150k makes sense only if you assume no 401k deductions and that health insurance is free!

    Many people in this tax bracket are also socked with Alternative Minimum Tax (we were two years ago) and we paid through the nose that year!

    But I do agree – where is rest of the money going? I’d say Dave Ramsey would be a good place for Justin and his wife to start!

  32. Nicole says:

    @25 Laurie I assume that Jim is including the 401(k) in with the take-home pay (which makes sense because it substitutes for other long-term savings and you can choose to put money in there or not), and the health insurance is something you choose to purchase with take-home pay if your employer provides it, it isn’t just taxed away. State taxes will also vary– some states have no income tax. So I think you’re both right.

  33. KC says:

    I love my XM radio. I have a portable device I can load to a dock in my home and load into a dock in my car. I love it, love it, love it! I should preface this with I love baseball, too, and XM is a dream come true for a baseball fan. Chances are XM is giving you something you dearly love that old-fashioned radio can’t (CNBC, talk radio, etc). That’s probably well worth the cost you will pay (and I pay full price – but may try to negotiate that).

    Also I moved from Memphis where they have a great variety of music stations (as you can imagine from the most musical city north of New Orleans) to a place where it’s very vanilla and old. So now I won’t cancel my XM because it’s the only way to get decent music where I live. If you really enjoy it $5/month is a small price to pay. You can always re-evaluate your feelings in a year and then decide to cancel or not.

    Does your husband have anything he enjoys and pays for that you don’t think is worth the money? Perhaps you should suggest he cancel those.

  34. KC says:

    I usually decide to replace my car at 12 years or 150k miles. But that doesn’t necessarily mean I’ll replace it at that point. My last car I was 16 years old (and 150k miles). It just ceased to be comfortable for me and I felt the safety in newer cars was too good to pass up since I was driving on highways and interstates a lot more.

    That leads me to the second reason you should consider replacing a car…need. As I stated above my needs changed and I needed something safer. My husband and I are considering having a child. We also have a 100 lb dog. IF the 4 of use went anywhere together…we’d need a minivan. So I’d be trading in a 10 year old sedan (110k mi) for something else due to need.

  35. Kerry D. says:

    For Melissa on body wash–I’ve known people who preferred to use only olive oil and water to bathe. (They were very tidy people–no bad smells.) But, I’m not sure if olive oil is less expensive than a good buy on liquid soap.

  36. brooklyn money says:

    Not a body wash, but as an intense body moisturizer Crisco can’t be beat. And it’s super cheap.

  37. Andi says:

    A ten hour road trip is hard with a 9 year-old a 5 year-old and a 2 year-old. Not really easy for me at 37, either. Driving when they normally sleep is helpful but there’s nothing easy about driving that much at any age. It’s our preferred mode and our kids travel fairly well – we pack toys and food (no DVD’s or game boys here) but it still doesn’t make it easy.

  38. jim says:

    True, if he’s maxing the 401k and paying health insurance then that could cut out $20k. But I was also assuming worst case fed. tax bill and high state income taxes, so I could have easily over estimated the taxes. Either way we’re both just assuming and guessing so nobody should expect very high accuracy. But lets say that he has the same take home as you at $130k. That should still leave him with over $88k a year to spend after paying the mortgages.

    Point remains the same : he needs to cut his spending.

  39. jim says:

    And to be fair to Justin, I don’t know what he’s spending his money on. He could have some legitimate expenses we just don’t know about. Maybe he’s a doctor with a giant student loan debt or child support/alimony from a previous marriage. But given the information we have all I saw is that he has 2 houses, 2 new cars, he takes in $210k and can’t make ends meet.

  40. Laurie says:

    Yes, I totally agree that there should be plenty of money to make ends meet once Justin & co. buckle down and work to get themselves out of this mess.

    Just wanted to point out that there is typically a bias wrt how much people think high income earners actually bring home. (i.e. in their own lives they subtract out the taxes and expenses to figure out take home, but for someone earning a high income they don’t subtract out things like 401k and insurance nor do they increase the %’s appropriately when calculating taxes).

    I have never had anyone add retirement and healthcare costs back IN when talking about take home – but that is exactly the calculation we all done when thinking about high income earners.

    I see it all the time. My own sister did not believe me at first when I told her what we pay in federal taxes – and she is plenty financially savvy.

  41. Laurie says:

    That should have been “do.”


  42. Re: Lynn’s comment # 11. Couponing (unfortnately) has become a way of life for me. As a single professional making my living off the net, it’s tough to make ends meet but I save about $1000-1200 per month with coupons. Takes me about 5-8 hours per month to keep up with them. Do the math..that’s a pretty good return on time I’d waste anyway.

  43. JuliB says:

    I take a couple supplements (beyond a multi) based on my needs (and documented deficiencies!). However, I would recommend fish oil! My overall cholesterol dropped from 231 to 197, with the individual numbers improving (but triglycerides still a little high) in only a year.

  44. Phil says:

    Did you know that ten hours of road travel with a four year old, a two year old, and a newborn is a really bad idea?

    I did wonder when you mentioned it previously….someone could have told you but you needed to try it for yourself to truly understand. Let them come and see you for the next two years or so. Two kids to three is the big jump. No more man to man marking.

    Stick with it.

  45. beth says:

    There is no reason on earth a couple with a baby can’t live VERY comfortably in a 3-BEDROOM house. Sell the bigger house.

  46. GayleRN says:

    Did we not warn you that it would be the road trip from hell? As I said previously, the third child adds enough critical mass to put everybody over the edge, the stress factor increases exponentially. Easier to let people come to you for a while. Been there done that got the stained and ripped t shirt.

  47. Matt says:

    Regarding acquiring music on the cheap: I buy *used* CDs, typically from Amazon. If you only want one song, this isn’t the best value. But, depending on the price and how many songs you want, you can easily beat per-song MP3 purchases. Not only that, but you get the album art and better sound quality (two things that are important to me).

    After I buy a used CD, I rip it to my computer (not for distribution, of course, just for my own personal use). There are plenty of free software tools for doing this quickly and easily. In the end, I have better-sounding digital music, and a backup (the actual CD) in case of hardware failure or accidental deletion.

  48. Silva says:

    A question for a future reader mailbag:

    Hi there Trent (and everyone else)! I hope my question doesn’t get lost in all these comments! :)

    I’ll be moving to the USA (I’m from Portugal) during the next Summer (probably around the middle of August), since I will start my PhD in September.

    I’ll be moving to the DC Metro Area, since my University (GMU) will be located in Arlington.

    Can you give me any advice on looking for small apartments?! Any there any websites specifically designed for students (especially foreign ones)?

    If I can afford it, I’ll try to live without roommates, do you think that this is achievable with a scholarship of around 2000 USD per month? (the euro has been dropping lately so I guess by summer this is the amount it will be worth…)

    Besides that, can you give me advices (financial or otherwise) regarding living in the USA for someone who has never even visited it?!


  49. Angie says:

    What about your poor wife? She just had a baby! If my husband suggested such a thing so close after birth…

  50. Claudia says:

    #15 Erin-good post on tax write offs. So many people think tax write offs and tax credits are the same.
    #33-Laurie- I think you are mistaken. People don’t consider your 401K “expense”? That makes no sense to some people who can’t afford to put even $10 a week into a retirement fund. Even though someone making a high wage pays more in taxes, they still have considerably more take home pay than someone making a much smaller wage.
    Until just recently, I did payroll for 175 employees, the majority made $10 an hour or less. Many were extremely frugal, but they still could barely survive. They are the people who I think would be confused by your post.

    Pandora radio is great, only the first 40 hours each month are free. I pay $36 a year for unlimited, which I consider pretty cheap too.

  51. reulte says:

    Melissa — If your skin is acne-prone, you might want to see if it’s any better or worse after the dollar store shower soap. I don’t trust the bargain brands for my skin. You might try a week of a little — just a capful for your entire body — bit of olive oil mixed with a bit of baking soda or with a tiny bit of shower gel (for bubbles, I love bubbles!) and see how that works for you.

    Chad – I start looking for another vehicle when I start losing trust in my current one or it reaches 200K miles or someone buys me a new one. So far, my vehicles usually reach 180-200K miles. Recently, with vehicle advances, I’m considering changing my criteria to 300K.

  52. deRuiter says:

    #17 John, No, the four year old, the two year old and the newborn DON”T have any awsome memories, they will have no memories at all unless the four year old remembers being trapped in a car for ten hours. Memories are what older children acumulate.
    Justin, You need to stop digging this home! $210,000 per year income and you”re living paycheck to paychedk? You need Dave Ramsey”s total money make over, sell one house, scale back the extravagant lifestyle. Most american families get by with around $55,000. per year. You”re earning almost four times that and about to go broke because of bad financial decisions, a feeling of entitlement (a three bedroom house is too small for a three person family?) and buying too much stuff. You folks OUGHT to have a ton of money in the bank, be prepaying on one house, and have zero debt! Go read Dave Ramsey on cutting back!

  53. jim says:

    I have to agree with Claudia. It doesn’t make sense to act as if your retirement savings isn’t money you get. Subtracting your retirement savings or any other kind of investment/savings from ‘take home’ is a little disengenous. The money you put in the bank does count even if its retirement. What if I were to save 50% of my income into retirement then act as if I were poor? Thats not realistic.

  54. Jon says:

    #41 deRuiter – I know. I guess I wasn’t sarcastic enough. Trent was talking about all the memories the kids were going to have about all the trips they were taking this year.

  55. J says:

    I’m with Angie. Didn’t she just give birth literally weeks ago?

    I can’t remember if this is the “camping” trip. If it isn’t (and they are sleeping on real beds), I’m suspecting some of the camping trips are getting the kibosh soon.

    My kids are 2 and 5 and I’m not exactly looking forward to their first camping trip … especially the sleeping part.

  56. alilz says:

    Chalk me up as another no kid adult who knew that 10 hours + 4yr + 2 yr + newborn =NO FUN!

    also I think the guy with the guy with the two houses needs to sell one. And cut his expenses.

    You make 210k.yr! Granted that doesn’t go far in some places, but serously that’s like I dunno 6 times what I make. Or something like that. And I know people who have 2 kids and a 1000 sq ft home and a little more than I do — so like 5 times what you make and make it work.


    When to replace the car — When it gets old in terms of safety features. Nowadays it’s time to have side air bags, antilock brakes, stability control, etc.

  58. Dawn says:

    Trent – Yes, I knew that. My kids are 5 and 9; a 3 hour ride is pretty excruciating – very optimistic of you to try though.

  59. Pattie, RN says:

    Well, I thought I would be the only grumpy voice reacting to Justin’s post, but clearly a large chorus of us think that he and his wife have made some terribly foolish choices.

    Like many other folks, the idea that a 3 BR house is “too small” for an infant and his parents is silly…but not as silly as buying house #2 before selling house #1! Obviously house #2 needs to be sold and quickly, as well as one of the “newer” cars. Then the credit card mess needs to be addressed to keep their credit ratings from falling into the toilet.

    It is just frustrating that a family with this level of income, who are clearly NOT stupid folks, made this foolish choices based on what they “wanted”. And also…..they need to make sure they don’t have child #2 until this money mess is solved.

  60. Evita says:

    Trent, this travel experience is just a taste of what your planned inter-state trip & camping will be this summer! But you knew that, didn’t you?

    I am wonder if your folks ould come and visit YOU and your babies this time?

  61. prodgod says:

    When I buy a CD from a used record store or a garage sale, or when I borrow one from the library, “the people who wrote the music get nothing for their efforts. The people who performed it get nothing for their efforts. The people who engineered it get nothing for their efforts. The people who found the music and delivered it get nothing for their efforts.”

    Same as if I download it for free online. Somebody made an initial investment at one time and that’s when all the people involved got paid.

    Really, what’s the difference?

Leave a Reply

Your email address will not be published. Required fields are marked *