Reader Mailbag: When Do I Write Mailbags?

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. Netflix for family bonding
2. Guilt over income
3. Dishwasher versus hand washing
4. Cancelling a new card
5. Pushy parents and hotel rooms
6. Trust money for college
7. Getting “wants” under control
8. Used deep freezers
9. Apply now or later?
10. Blogging and personal information

A couple people asked me recently about my posting habits. When do I actually write my mailbags?

I usually try to keep a few mailbags ahead, simply because they consume a ton of time to produce and if something is happening in my life, I don’t want to miss a posting.

I usually write two or three of them a week, all roughly at the same time. I go through my reader mailbag email folder, pull out thirty or so questions, and make up columns out of them.

stop me if you have heard this–netflix–but wait. I pay for my 85 year old grandmothers subscription. Giving netflix is not unsual but I think a group that could actual benefit from it most are left out of the loop–the elderly or non-internet friendly. I rejected the idea several times thinking “she isn’t really comfortable with the actual internet”. She uses a dial up AOL account for some limited email but the internet as a whole is just a little too much. But then I had a revelation. Why can’t I just mange her account. It works wonderfully. She writes down whenever she gets a recommend from a friend or sees a preview on tv and then every couple of weeks via phone we update her queue (I live far away thus the phone). Now she gets to avoid doing things she doesn’t like (driving, wandering around the blockbuster, using the internet) and replaces them with things she does (watching movies, talking to her granddaughter, getting the mail like she does anyway, watching old movies or series that are hard to come by in the local store). It does cost me the regular subscription fee but I get use of the on-demand (which enabled me to get rid of my own subscription) and she gets all the movies and shows she wants without any hassle.Her house has become the place to be on Saturday night “for movies that katie sent me from the internet” with all her friends. It also has opened a new area of discussion with us about old movies and how she saw them the first time. It has become one of my crowning gift achievements because I know how much she likes it because she knows if she ever doesn’t want it anymore I can cancel the subscription anytime (also she tells me every time we talk about how much she loved the movie she got yesterday/ last week).
– Katie

Given that Netflix costs $9 a month for this service, this is an absolutely great way to bond with a family member, particularly one with limited mobility.

Think of it this way. She’s giving her grandmother a yearlong Netflix subscription for Christmas – $100. Or, alternately, six months for Christmas and six months for her grandmother’s birthday – $50 a pop. That gift, because of its nature, keeps a relationship going between Katie and her grandmother.

This gift isn’t about Netflix. It’s about maintaining a very valuable relationship – and building on it. That’s well worth the price of the gift, in my opinion.

I am a 23 years old and my salary is $70k. My boyfriend and I live in a condo I purchased last year, and he makes $50k a year (he’s 23 as well). To get the basic money stats out of the way I have a $12,000 car loan, $15,000 student loan and mortgage of $160,000. Weirdly, all these loans have the exact same interest rate at 5%. I have no other consumer debt and my bf has no debt at all. I contribute 10% to a Roth and my employer contributes 10% to my 401k. My bf saves 3/4 of his income.

My problem is, I just have so much guilt about the money we make, I don’t know what to do about it and feel sort of depressed. We both worked hard at state schools to get technical degrees and make connections, but I just feel almost like I didn’t pay my dues or that my life is going too easy. We have so many hard-working and creative friends who can’t find work through absolutly no fault of their own. I’m under no illusions that I somehow “deserve” my job and someone else doesn’t. Sometimes I literally feel sick to my stomach knowing we make more than the average 4 person family. Our parents are quick to remind us that they raised us on less then we’re making now.

Even with our income, I worry about money a lot. I feel like I’m not spending it in the right ways, or that I don’t have enough saved, or I’m not paying debt down enough. Even though rationally I know we’re pretty ok with where we stand. Sometimes I get motivated and for a few months I’ll chuck some extra money towards my car loan, but that just isn’t satisfying. I have an emergency fund of $8000, and contribute $500 to it monthly, but I’m having a hard time saving more beyond that. It seems kind of pointless so we end up going out to eat a lot, buying items for the condo, better clothes, etc. (all with cash) There a some things I know we should be saving for (probable wedding, a larger place for kids) but those feel pretty far away, and anyways, if they come to fruition, that would be the purpose of my bf’s savings.

How do I reign in my spending when I can’t find a reason to save even more? How do I find satisfaction? How do I stop feeling guilty about the things I do choose to buy? How do I formulate a 5 year plan without feeling like I’m tempting fate to come spite me? I track my net worth and budget, but what are better tools I can use to project my total debt repayment/ future earnings? How do I know if I am in a good place financially? I know it could be better, but I also know it could be way worse. Some blogs will tell me I’m diving too far into the consumer culture and I should pinch my pennies and run as fast as I can the other direction, while some blogs (and friends and family) seem to say I’m being too conservative and need to live a little. Help!
– Amy

If you feel guilty about what you’re making, give that money to someone or something else. If you feel guilty about what you’re spending your money on, spend it on something else.

There are no rules about what you have to do with the money you earn. Channel it towards charities. Channel it towards a 529 for your nieces and nephews. Channel it towards making sure you have enough to live on for the rest of your life so you can quit your job when you’re 40 and do volunteer work for the rest of your life.

It’s your life. You make the rules. If something makes you feel guilty, do it differently.

I’d love to see a comparison between handwashing dishes and using a dishwasher. I know some of it depends on your brand/model but it would be an interesting read.
– Mavis

This is another comparison that’s very difficult to do because there is no consistent standard for handwashing dishes. We all do it differently. In general, methods of handwashing that conserve resources tend to eat more time.

That’s generally the case with comparing handwashing to dishwashers. Handwashing is significantly less expensive per load, but has a significantly higher time investment per load. In short, when you buy a dishwasher, what you’re paying for is time.

Based on the Consumer Reports articles I’ve read about dishwashers, you’re better off in terms of total cost over the life of the dishwasher to buy a high-end one rather than a cheap one. The high-end ones last longer than two or three low-end ones, plus they use less resources per load and often get the dishes cleaner as well, reducing the need for re-washing.

Today my wife informed me that she applied for a store credit card in a panic for the immediate $20 discount. She was buying something for her mother at a store that we’ve never been to before and we don’t have any plans to return. She just got freaked out when she saw the total balance. We have a few CCs already between us, but the only one I’ve ever applied for in the past is the one I have from my bank, which I asked for while in a Wells Fargo branch. So my question is this, Is there another step beyond the initial application before we find ourselves with a new credit card we will never use? And if we do end up with it, what should we do with it? I’m a university student and my wife teaches at a high school so we’re still pretty young in our financial life and aren’t making much. How will affect our credit (which is currently good) if we have to cancel it? The card doesn’t carry any annual fees, so what would happen if we just cut it up?
– Mike

I wouldn’t worry at all about cancelling the new card since you already have a few credit cards. Cancelling the card will only have a minor and very short-term impact on your credit rating, one that I would deem to be of less concern than having an unused credit card just sitting there.

It’s important to remember what actually makes up your credit score. From an earlier article:

Components of the FICO score
Payment history – 35%
Amounts owed – 30%
Length of credit history – 15%
New credit – 10%
Types of credit used – 10%

You’re not altering your credit history length, your payment history, or your amounts owed by cancelling the card, and the effect on the “new credit” part will likely be positive. I simply wouldn’t worry about it.

My parents recently called up and told me they would like to take a weekend trip to visit me. They have not visited me since I moved to this new city. I am living with my wife in a cramped 1 bedroom apartment, so they agreed it would be better for them to stay at a hotel. But then they said that they expect for me to pay for the hotel. I was appalled and declined, but they kept pressing the issue so I just reluctantly agreed. So…

(1) Were they out of line for basically demanding that I pay for their hotel room, or was I out of line for not agreeing or offering in the first place?

and

(2) I am a bit confused as to what kind of hotel I should book for them. It is just one night, so I could technically “afford” to have them stay anywhere from the Bates Motel to the Four Seasons. But I do not know what would be appropriate in this situation.
– Bruce

You’re seeing a culture clash more than anything else here.

Your parents likely think it’s completely reasonable that their child would put them up when they come to visit. Since you don’t have adequate living space, a hotel is the next reasonable option. I think that’s reasonable logic, with one exception: it sounds like they’ve invited themselves. If that’s the case, you shouldn’t feel required to host them.

You’re going to have to sit down and talk this whole thing through with them. You’re in an area where hard feelings are obviously at work on both sides of the coin and if you don’t deal with it now, it’ll just fester and put poison in the relationship. Settle this together in a reasonable way. I can’t tell you what that reasonable way is because I don’t know the ins and outs of your relationship with your parents. I can say that I can see situations where very different options are appropriate.

My grandfather is fairly wealthy, with an approximate net worth now of about $12 million at age 92. (He still works at the financial corporation he started in the ’70s, so he hasn’t touched his retirement accounts at all, and lives on his income.) The way his estate is set up, his Roth IRA will be split between his 4 grandchildren (including myself) in such a way that when he dies, we will each be required to withdraw a certain percentage of the IRA each year based on our ages. He has business partnerships in various high-end agricultural commodities, and my mother and uncle, and then my cousin and siblings and I, will inherit the partnerships. All of this, to me, is highly speculative, since none of this money has ever equaled cash flow to me. It’s just hypothetical to me right now, and I have no real sense of what this will mean in future dollar amounts to me.

He also has four separate trusts for each of the four grandchildren, each of which currently has about $115,000 in it. Those trusts had always been explained to me as being educational trusts, intended to support our educational endeavors. I didn’t use mine for undergrad, since I won tuition scholarships. Now, I will be entering graduate school in the fall — a 2-year master’s program in anthropology. My tuition will be $12,000 per year, and my living expenses (I live in San Francisco) will be around $2,000/month, including rent, health insurance, expenses, groceries, cost of public transportation and owning a bike (I don’t own a car), books, and various incidental household expenses. I am reluctant to commit to a job that will support me that much since my degree program is full-time and has a reputation for being very demanding. I hope to get a part-time job after a few months of being in school to see what’s actually manageable for me.

So, here’s the clincher. My grandfather informed me a few months ago that what I had originally thought was an educational trust is actually just a general-purpose trust, and he doesn’t want me to take money from it for living expenses. So, my tuition can come out of the trust, but not my living expenses during graduate school. So, panicked, I applied for financial aid. (Since I am not the trustee of my educational trust, it doesn’t count as one of my assets.) I was offered $16,000 in federal unsubsidized loans at a 6% interest rate. Having never had loans for anything (not even consumer debt!), I only have a very foggy idea of what this means and how much it would cost me to take out these loans. And I’m not fundamentally opposed to taking out student loans.

But here’s the thing: I was raised (though it might not sound it) solidly middle class — my mother is a teacher, and my father was a stay-at-home dad. They never had any debt aside from the mortgage, and raised me and my siblings with solid financial principles. Pay cash when you have it. Don’t go into debt. Save 30%. Don’t borrow from your future. So even though there’s always been this promise of money from my grandfather, since it’s never turned into cash flow, we’ve always acted financially as if he were your average middle-class Joe. So it feels really, really counter-intuitive to me to take out student loans when there is $115,000 in cash in a trust in my name — what I thought was an educational trust to boot. And when he dies, that money will become mine anyway. It could be a down payment on a house (in SF, it could really only be a down payment on a 1-bedroom apartment, though I know in some parts of the country it could buy an entire house), it could go into college savings accounts for my future (hypothetical) children, it could be used for a wedding, for retirement… The trust is currently invested in various things, and I’m not sure what its annual returns are, but I think right now probably not much more than 8%?

So what should I do? Should I take out student loans at 6% interest rate? Or does it make more sense to try to convince my grandpa that it’s not wise to borrow money when I can pay cash?
– Eva

When you can pay cash?

This is your grandfather’s money, not your money. He worked to earn it and he has the full right to choose how to spend it. If he wants to give it to you with stipulations, that’s his choice, and it’s your choice whether to accept it. After all, many people survive without a millionaire grandfather as a benefactor.

Most people go into debt for their education. How did your parents pay for it? Unless they were very lucky with scholarships, they either took out loans or someone wrote a check for them.

The biggest financial mistake people make is counting their chickens before they’ve hatched, and that’s exactly what you’re doing. Plan as if there is no money coming from your grandfather at all. When it does arrive, use it as best you can.

I am deep in credit card debt & digging my way out. However, I have been doing a lot of thinking & reading about WHY people get into debt. I will stay on track for approx 3 mos with paying down debt. Then, I will get something in my head that I want to do or buy. I cannot stop thinking about. I think about getting the cards out and using them, or how can I scrounge up enough to buy that shirt, movie, etc. How can I figure out WHY I get that way? Often, I don’t act on it but it does consume my brain for a few days.

I realized that part of the reason I got into debt was a)never learning how to manage money at a young age b)growing up in a modest home but yearning for a more expensive lifestyle that included new clothes, stuff, and vacations.

I am worried that if I pay off my cards, I will get myself right back into debt because of this mentality of wanting things. How do I address this & find the root of the problem so that I can start to work on a solution? Its exhausting to always be thinking about this. I wish I could get everything on an automatic path & forget it about it, while my debt is paid down.
– Becky

You have a choice: do I buy or do I not buy? If you make the right choice on that question, it doesn’t matter how much you want something. You’ll always end up in the right place.

I can name a lot of things I want to have. Do I own them? No. Will I own them? For the most part, no, and the ones I do own were likely saved and planned for.

There’s nothing wrong with wanting things, nor is there anything wrong with buying them sometimes. The key things to remember is that you need to make sure you can fully afford it and you also need to make sure that when you buy something, you aren’t just going to want something else tomorrow. Be patient with wht you do buy.

What make and model is an efficient and economical deep freezer? Or do you recommend purchasing a used one in good condition?
– Missy

Whenever you’re asking a question like that, the best place to go is to your local library. Visit the magazine room and start leafing through recent issues of Consumer Reports until you find their most recent freezer roundup. You’ll rarely go wrong with their “best buy” option.

I never recommend buying a used freezer unless you’re getting an incredibly steep discount or getting it for free. The cost of a repair bill on a freezer often adds up to a large chunk of the cost of the unit itself and a used unit is much closer to needing a repair than a new unit is. It’s just not worth the risk to all of the contents you’re going to have in the freezer.

That being said, a deep freezer will save you money because it allows so much more economy with one’s food purchases.

I am currently working on a masters degree where I will finish in December 2011, and be finished with course work and any research obligations in August of the same year. My wife recently got accepted to Duke to work on her masters starting in August of 2011. Therefore, we will be moving to the area at that time and I need a job. If there is a job posted now that is perfect for me should I apply for it now knowing I will not be able to start for a year?
– Jacob

Absolutely.

Most academic jobs – and if you’re headed to the Research Triangle with a degree, you’re probably looking at them – will stay open for a while if the right candidate comes along. In my previous work, I saw it happen many, many times.

Even more important, interviewing now allows you to start meeting and connecting with and building positive impressions with people in that area who might not hire you now, but might hire you down the road. These relationships are invaluable.

I’ve become a recent follower of quite a few PF blogs, including yours, and they inspire me to want to create my own. Not just on personal finance, but the topics that interest me, of course.

1. I notice some blogs have quite a bit of personal info out there, sometimes including pictures of children, the house, etc etc. How do you know what personal information or how much of it to put out, beyond what is common sense (e.g. SSN, home address, and all that)?

2. What kind of website/software would you recommend starting out with and/or would be useful in blogging? I’m not looking to host my own site, or have my site with an independent domain (sitehere.com). I have some experience with WordPress, having had to use it for a school assigned blog project, but if there’s something else I don’t know about that you would recommend, that’d be great.
– Huan

There’s no exact art on how much information to put out there. It’s more about your own comfort level than anything else. I usually solve this dilemma by altering enough little details about personal information that people who might try to use it maliciously will end up with a big pile of confusion. Almost always, the personal specifics don’t make the story, so changing those specifics only serves to protect you and doesn’t alter what you’re saying.

If you’re just starting out, you have to make sure that you’re going to be able to produce the content. Content is king – everything else is secondary. I would suggest starting with a free host, like Blogger, and making sure that you can actually write enough stuff consistently to build any sort of audience.

If you can, there are a lot of options out there. I would probably move to a shared hosting service from there and host things yourself with WordPress, but then you start introducing monthly costs to the equation – which is why I usually tell people to figure out if you can blog before investing money.

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.

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