Updated on 11.30.11

Reader Mailbag: Winter Hands

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. Splitting up retirement contributions
2. Surveys at retail shops
3. Investment or debt?
4. Gum as impulse buy
5. Outsized medical bill
6. Breadmaking tip
7. Avoiding Christmas
8. Savings bonds and student loans
9. Mortgage ballon payment difficulty
10. Investing in class

I get what I call “winter hands” when the temperatures during the day drop into the thirties or below. Basically, my fingertips and palms get a bit puffy and raw simply because of the weather. I know I’m not alone in this.

If I don’t nip this in the bud, my hands are in bad shape by February or so, so I splurge on something each December: hand cream. I’ve tried tons of different things, but this is the only thing that does anything to stop my “winter hands.”

Just thought I’d share for the sake of others who find their hands getting raw in the winter.

Q1: Splitting up retirement contributions
Let me start by saying I started at an engineering job coming right out of school 3 years ago, I was used to living on almost nothing as I did in college so I kept it that way when I started my job and put a large chuck of my salary towards retirement. I recently received a promotion and put it all towards my retirement so now I am to the limit of what the government allows you to contribute to a 401k (I put it all towards a Roth 401k if that makes a difference). Also, because of some other circumstances I cannot currently contribute to a Roth IRA.

So my question: Is it smart to put all 16,500 in my company 401k plan or would I be better off only putting only part of it in my company plan and investing part of it myself where I could pick individual stocks etc. My company matches 75 cents of each dollar up to 6% (basically 4%). I am 25 years old and don’t have any future need for the money (until retirement) that i know of and have a good emergency fund already. Thanks for your help!!
– Mark

You should put enough into the 401(k) to get the match, then after that you should contribute to a Roth IRA up to the contribution limit.

Why? Having money in both a 401(k) and a Roth IRA hedges your bets when it comes to taxes in retirement, plus a Roth gives you far more investment freedom (as you get to choose your investment house and your specific investments).

If you still have money to save, go back and contribute more to your 401(k). It should be noted, though, that you’re almost assuredly in splendid shape for retirement, so if you have other life priorities that come up in the future, don’t be afraid to cut back a little on the retirement savings.

Q2: Surveys at retail shops
I have noticed that many of the fast-food restaurants, office supply stores, and other businesses are urging the consumer to go to their website and fill out surveys. Some of them promise the customer a rebate or a coupon or an entry into a drawing for some cash as a reward for doing the survey. What do you think about these surveys? Are they just a means to getting your email address or do they really ever award those cash prizes? Are they worth bothering about? Have you ever heard about anyone actually benefitting from completing these surveys?

– Jennifer

They’re probably not worth the time invested in filling out the survey. Let’s say that the company is giving out one $5,000 gift card a month. During that month, 50,000 people fill out that survey that takes 5 minutes to fill out. You’re essentially burning 5 minutes in exchange for a 1 in 50,000 shot at a $5,000 gift card. There really are better uses of your time.

If you read the fine print of those offers, they usually have a method by which you can contact the company and receive a list of the winners of the survey contest. Such contests are pretty heavily regulated and it would not be worth it for the company to commit fraud.

In the end, I think they’re legit, but they’re just not a good use of one’s time.

Q3: Investment or debt?
A little over a year ago I got married (we’re in our mid-20s) with my wife’s graduate school student loans just coming out of deferment. We have been making the full payments for the past year, and have thrown several thousand extra when we’ve had the chance, like my annual bonus and our tax return. She had been working full-time though quit her job 4 months ago due to the terrible working conditions…14-16 hour days, spending additional time working on the weekends from home, etc. She has since been seeking out new employment, but with obvious obstacles at this time.

Our balances on the 10-year plan are: Stafford $20,470 @ 6.05% ($245 per month) / Stafford $19,804 @ 6.55% ($245 per month) / PLUS $34,800 @ 7.75% ($446 per month) / PLUS $30,900 @ 8.25% ($457 per month)…for a grand total of $1,393 per month. I make $70,000 per year, we completely own our apartment and our monthly expenses for maintenance, utilites and the like are around $1,000. We have $85,000 in cash/savings in the bank and my wife also has $35,000 in stock that she inherited from a relative. I currently contribute 7% – my company matches a full 6% – to my 401k which is worth around $30,000; I also have a small pension worth around $20,000.

I want to use the $35,000 in stock to knock off one of the large PLUS loans. We’re paying over $200 a month in interest per PLUS loan, so at 12 months x 9 more years, it seems like there is a significant amount of real savings to be had by doing this. My wife strongly believes that we’re better off having that stock available in case we ever have a serious need for it, but with how much we already have in the bank, it seems ridiculous to me that we also need the stocks at this time in our life. Is there really any good reason not to use the stock money and get rid of a big chunk of loan? I think we’re better off putting that money towards retirement, starting a 529 for a future child, and getting to enjoy ourselves more (we haven’t taken a real vacation besides visiting family in over 2 years). If you don’t recommend using that stock money, is there anything else you would suggest to help make our loan payment more bearable?
– Sam

I think that your savings (both stock and cash) are outsized when compared to the debts you’re holding.

If I were in your shoes, I would calculate your shared cost of living for four months, keep that much in savings, and put the rest – both saved cash and stocks – toward getting rid of as much of that debt as possible. I’d hit the highest interest debts first (the one above 8%, for starters).

There are almost no emergencies in life that will be helped by having more than four months of living expenses in an emergency fund. If one of those extremely unlikely emergencies did come along, the cost would likely be far more than what you have in the fund right now anyway. You’re better off putting that money to better use. Remember, you’re getting an 8.25% return paying off that largest debt early versus a 1% return in your savings account.

Q4: Gum as impulse buy
I like to keep gum in my car as a breath freshener, as I’m often worried that my breath smells badly. Thus, whenever I’m in the checkout, I tend to pick up a pack of gum. I’m trying to figure out how much this adds up to and whether there’s a cheaper way to go about it.

– Evan

If you chew gum on a daily basis, a bulk purchase is probably the best option for you.

I would figure out which brand you like the best, then buy it at a warehouse club in bulk (or have a friend buy it for you there). That’s probably the least expensive way to get the gum in significant quantities.

Then, just leave a few packs in your car at all times. If you know the gum is in your car, you won’t need to buy it at the checkout. You’ll save money just from the cheaper gum, but don’t be surprised if you’re actually chewing less, too.

Q5: Outsized medical bill
For the past 3 years, my husband and I have been working very hard to be financially responsible. We have paid off 39k in student loan debt (12k to go), put a good down payment on a modest house, drive paid-for cars, taken extra jobs and never incurred any other debt.

Last month my husband ended up in the ER with a partially collapsed lung. A month later it relapsed, and he had to have surgery. We went to our in-network hospital which was supposed to be covered 100% by insurance (except for our 75$ deductible). We tried to asked if the surgeon was in-network and found out he wasn’t, but the doctors assured us that in emergencies our insurance pays 100% of usual and customary. It turns out that there is a very large difference between what our insurance deems usual and customary and what the surgeon billed.

We now owe the surgeon $14,000. There were a few charges the insurance denied that we are appealing, but even if those are approved our bill will still be over $10,000. I was tempted to be mad at the insurance company, but when I looked up the procedure codes on the American Medical Association’s web site, it turns out they have already paid 4-5x the medicare reimbursement rate for these procedures. I feel like we are being extorted by the surgeon. Basically, he could bill ANY amount he wanted!

What kind of recourse do I have? Should I go to the insurance company? The provider? The state health insurance regulator? My employer (self-insured large company)? Do you think I could settle this with the provider for a couple thousand dollars (we have our first child on the way, so we can’t afford to empty our emergency fund)?
– Linda

Your best bet is probably to negotiate with the provider for a settlement.

You can try to appeal through other means, but you’ve likely hit a limit on what your insurance will provide for this. If the insurance is going far above and beyond Medicare, your state health insurance regulator probably won’t be much help, either.

I would suggest trying to negotiate yourself. If you find that you make no headway, you can attempt to use a lawyer to help, but you’ll likely end up with legal fees that exceed the cost.

Q6: Breadmaking tip
I’ve been baking my own bread for the last few months thanks to your extremely helpful blog post. However, I’m having an issue and hope you might be able to help. When I follow your directions to use 1/4 c. milk, I find my dough doesn’t bind together and I need to add more. For example, today I added 3/4 c. of milk. Am I doing something wrong to have to add more liquid?

– Candace

My guess would be that it has to do with the humidity in your kitchen. I’ve noticed that when the air is damp in my area, I don’t need as much liquid for any dough I make. When things are dry, I need significantly more liquid (and the dough tends to dry out more).

Another factor might be your brand and type of flour. Some flours make a dough with relatively little liquid, while other flours require a lot of liquid.

I don’t think you’re doing anything wrong here, as you’re not using what I would consider to be extraordinary amounts of milk. Just remember variations like these can cause things to work out in unexpected ways.

Q7: Avoiding Christmas
Early this year, I hit my financial bottom and since then I have paid off a lot of my debt. I’ve also moved on to a lifestyle where I don’t buy many things that I don’t need and I find this lifestyle really fulfilling.

My family, though, is moving forward with the same consumerist Christmas they’ve always had and it just doesn’t appeal to me at all. I’m trying to avoid it altogether, but it’s pretty tough to do when it’s your family. Any suggestions?
– Nelson

Remember why you’re getting together with them at Christmas. The real reason for the season has nothing to do with the stuff at all. It has to do with the people.

Many people express how they feel about each other during this season through buying gifts. It’s a convenient way to say “I care” to others without having to let your emotional guard down too much.

You can do much the same thing with a handmade gift. Make a soup mix with a handwritten note attached to it. Bake everyone something delicious, like a Dutch letter. These things won’t cost you much in ingredients, but they do require time and are made better with a bit of love for the recipient. That last ingredient is really what it’s all about.

Q8: Savings bonds and student loans
My husband and I have about $74,000 in student loan debt combined ($8,000 from my undergrad and $66,000 from his undergrad.) We make about $75,000 combined and try to save the equivalent of his income every month which is about $2000. We own a home (a duplex) with a mortgage of 76,000, about half of the assessed value and two thirds of the appraised value. We have about $12,000 in an emergency fund. The $2,000/month in saving that we try to pit aside each month first went to buy two new furnaces and water heaters for the house, the we used it to build up our emergency fund, now we are thinking of splitting it and using 3/4 of the money to snowball our student loans and the other 1/4 to build our seam vacation fund. I also have about $3500 in a mutual fund that I have had since I was a kid and pretty much forget about it as its value jump around with the market. We also have about $3,000 combined from Savings Bonds. We would like to start snow balling the student loan debt but also want to start saving about $6000 to fund a european adventure next september before we start trying to have a baby. The interest rates on the student loan’s are $8,001.49 @ 4.00%, $30,490.56 @ 4.88%, $6,144.89 @ 4.19% and $29,659.26 @ 4.86%. We haven’t really done anything with the Savings Bonds before because they had a good interest rate at 4% and we liked the idea of having that money liquid. But now that we have a health emergency fund and realizing that three of our loans are incurring more interest that we are earning on the bonds, do you think we should just go ahead and cash them in to make a dent on the loans, or would the debt be miniscule enough not to really matter? Or alternatively, should we use them to put a big dent (half of our goal) in our European adventure fund?

– Sheila

If I were you, I’d consider the bonds to be part of your emergency fund. I would use them last, meaning I’d zero out the emergency fund before using the bonds, because they’re earning such a nice rate compared to the savings account.

Then, I’d make sure that I had the right amount in an emergency fund. I would try to target four months of living expenses across all of the emergency fund money. I don’t know what your total monthly budget looks like, but it may be that the cash you have right now (the $12,000) is pretty close to that.

Once you know how much four months of living expenses actually is, I’d add together the $12,000 in savings and the $3,000 in bonds, then subtract the living expense estimate from that. I’d then withdraw that calculated amount from the savings account and throw it at the debt. Leave the bonds where they’re at, earning 4%.

Q9: Mortgage balloon payment difficulty
My wife and I purchased a home in 2010. We were able to avoid having to pay PMI each month by putting a 10% down payment and taking out two mortgages, one main mortage that is a 30-year fixed at 4.75% and a second that has 15 year term at a 6% rate but is a balloon payment of $60,000. Yes, you read that correctly. It is a 15-year balloon payment with a maturity date of 15 years, making the lump sum balance due in 2025, which by my math (and if I just pay the amounts due each month would be a total of $20,500).

My question to you is how to appropriately factor for the lump sum balloon payment. The easy answer is to say that we’d be selling the place before then at a price that will cover the balance and no need to worry about it (which was the lender’s line of thinking). We do live in a great location (suburb of D.C.) and comparable properties have retained, if not increased their value since we purchased. However, I come from a more conservative mindset and am looking at this from a long-term standpoint so I want to make the assumption that we will stay at the place for the long-haul (which would make refinancing the balloon payment an option when we become eligible in about 5 years when we’ll have 20% in equity).

The balloon payment has a daily interest rate where the amount of interest owed is the daily rate times the days that have passed since last payment. Any amount paid in excess goes towards principal. Our current method is that we pay $100 extra a month to go towards principal, plus I save $350 in an combination of Roth IRA and ING Savings accounts so that by the 2024 date, we will have enough liquid cash to pay the lump-sum payment due. Is this the right approach?. One thought I have is to pay the $350 immediately each month to lower the principal (and thus decrease the overall interest paid throughout the lifetime of the loan) but we currently keep the savings in the Roth & ING account in the event of a financial emergency and need access to that cash (even though we do have a 3 month emergency fund so I don’t know if this is overly conservative). We also keep it in the Roth because then the earnings can grow/compound year over year and I can withdraw the contributions later. Right now we have about $5k in the Roth (contributions that can be deducted) and $1500 in the ‘Balloon Payment’ ING account.

Should I continue to pay an additional $100 in principal every month and save/accrue $350 in savings accounts, or should we just put all of the $450 into the balloon payment each month to reduce our future liability? Our current method will mean we’ll have enough cash to pay off the balloon payment by 2020, making a lump sum payment of $40,000.
– Ronald

If I were in your shoes, I’d probably make sure the Roth was fully funded for the year (meaning that you’re putting in about $420 a month) and then put the rest toward additional principal on the balloon payment. This will maximize the value of your Roth, which will return better for you over the long run than a savings account.

If things go well, your income will go up as time moves forward, which means you can slowly contribute more to the balloon payment. This is the best outcome, of course.

If things do not go well, you can use your Roth contributions when the time for the balloon payment arrives. You’re still in good shape and you’ll retain the Roth earnings.

Q10: Investing in class
I am a high school accounting teacher and want to teach my students about the how the stock market works and how to invest wisely (and cautiously). I thought about having them (with their parents approval, of course) set up an account at Sharebuilders because you can invest for as low as $25 a month. The downside is four dollars each monthly contribution goes towards commissions (almost 20%). Are there any other investment options (with low entry and monthly fees) that I should consider?

– Margie

If I were you, I’d have them all sign up for and play The Stock Market Game or something similar. This is essentially a stock market simulation that enables students to invest virtual money in stocks.

In order to build interest, I would make the thing laden with extra credit for your class. If they manage to beat the S&P 500, they get some bonus points, for example.

At the end of the year, I’d have each student (or team of students) present their investment strategy and how it did to the class.

I wouldn’t mix real money into this. You want to teach them how to do this, not have them start taking on real financial losses. The students that are interested will likely move into some level of investing on their own, and it’s probably a good idea for those not interested to not have actual money involved at this point.

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.

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


    RE: question #1. He CAN’T contributed to a ROTH IRA…

    To the submitter, I’d suggest seeing if your employer has a ROTH 401k option, you can contribute to that no matter what your income level is. If they don’t have it, seek out an HR person who can perhaps get it added to the plan. It is not a cost prohibitive option for employers.

  2. Grace L says:

    I work at a Subway Restaurant Part time. We ask customers to fill out a survey online and the results are used for us to improve performance. Each week, we get updates from the manager on what we need to improve on. And, the customer gets a free cookie. I appreciate the quick feedback and the kiddos enjoy the free cookie. Win-win.

  3. Misha says:

    ckstevenson, Q1 already IS putting it all into a Roth 401k.

  4. Tom says:

    RE: commenter 1. he said he is using a Roth 401k already
    But seriously Trent, how did you spit out that advice based on his fairly clear email?

  5. chuck says:

    Q1: It sez very clearly he puts all his 401k money into a Roth 401k. And then he sez very clearly he is ineligible for a Roth IRA. How did you miss BOTH of these points? Wow.

  6. Wes says:


    I remember playing the stock market game in HS, and then looking back and thinking how silly it was as a teaching method when I was majoring in Finance at college. My teacher did what Trent suggested, basically giving extra credit for those who did well. Of course, we might as well have been monkeys throwing darts at the financial page in our stock selections, so who did well and who did poorly was purely random, and not based on any kind of investing strategy. In this sense, the exercise may have been good at teaching the most rudementary mechanics of how trading works (you buy things, you sell things, and the price of stock goes up and down). But giving students the impression that they should try to beat the market in the short run (a semester, I assume) is not good investing advice for most students. Rather, teachers should drive home principles of long term investing and implicaitons of the Efficient Market Hypothesis instead of encouraging a belief that short-term strategies are good for investors (as opposed to traders).

    To illustrate the problem with short term trading models, consider my experience with simulated trading in my Capital Markets course: prof. randomly selected some stocks, and gave extra credit to whoever beat his portfolio. He was fully invested on margin, and most of us ignored the exercise and held cash. The market tanked, his portfolio went negative, and 95% of the students got extra credit for having the same $1M we started with. Lesson learned: active trading isn’t always a winner.

  7. EngineerMom says:

    Q7: No one outside of Iowa (or Holland) is going to know what a Dutch letter is without a Google search! A bit of clarification or suggestion for a slightly less labor-intensive baked good (like chocolate chip cookies or brownies!) would have been nice.

    Q10: I like that solution, may have to try it with my kids when they’re a little older.

  8. Maureen says:

    I agree with EngineerMom. I had no idea what a Dutch letter was. I gather it is a cookie shaped like a letter.

  9. Kerry D. says:

    And WHAT is in that hand cream? Although our CA winter is mild, my daughter and I have very dry skins and are alway keeping our eyes open for good products…

    The product website had about 3 lines about the stuff… so just wondering if you know what is actually is…?

    This year, we’re trying our own concoction of coconut oil, cocoa butter, etc… We’ll see how it goes…

  10. Kerry D. says:

    Q7: One of our favorite hand made gifts (sort of hand made) is when one of our clever relatives does some sort of archiving of family memorabilia that we don’t have the time or vision to create.

    We’ve been given CD mixes of video and/or audio clips, Dad singing around the house (who passed away years ago)… Photo montage of photos or including historical documents (same Dad’s passport and photos of the ship he came in to Ellis Island.) These are incredibly precious.

    You get the idea… even if your family is on the materialistic side, gifts like this are very hard to resist. :)

  11. David says:

    Like Wes, I don’t like the idea of extra credit for students who do well in the Stock Market Game, but for a different reason.

    One of the Occupy Wall Street gripes is that CEOs are given bonuses for taking risks and yet they have no downside risk. That’s what would be going on with your extra credit idea.

    If a student started doing poorly at picking stocks, they’d begin picking riskier and riskier options to try to recoup their losses. Many would fail, but some would win…but this is exactly opposite of what you want to reward them for.

    I’m not sure I have a solution though. Rewarding thoughtful investing in the game sounds like a good idea, but how to do it, considering my criticism and Wes’ above? I suppose the way to do it is to simulate long-term investments. Maybe this could be done by using real stocks’ history, but change the names/symbols so the kids can’t just look up how the stocks are doing today.

  12. valleycat1 says:

    Q2 – I complete surveys from sandwich shops/burger chains that offer a deal that I will use. If I know I won’t use the deal, I don’t do the survey.

    For example, the nearest burger chain to my office has a very brief survey, and if you complete it within 48 hours of buying the first meal, you get the next meal for less than half price, plus you get another opportunity to complete the survey when you buy the next meal, and so on. So if I’ve got a week or two coming up where I know I’ll be eating fast food a few times, it’s a great deal for me. You can opt out of email marketing.

  13. myelgs says:

    On the medical bill issue, if your plan is truly self funded by your employer, you need to talk with them. Get a copy of the master policy, appeal the decisions within the time frames provided by the policy, and aggressively fight for this. The insurer’s not going to do it for you. Unfortunately, if yours is an ERISA self-funded plan, a state insurance regulator is not going to be a lot of help. But you could try the DOL.

  14. Tom says:

    I’d like to comment on Q9; If I think I’m reading her letter correctly, it sounds like she pays interest only, approx. $114 a month for 15 years, then a $60,000 balloon payment, all to avoid PMI? Was the loan non-conforming, as in PMI was not an option?
    PMI is tax deductible now, and generally speaking, can go away after 5 to 7 years. I think taking on this extra loan (at 1.25% higher than the going interest rate to boot) is probably effectively the same or worse as just taking PMI anyway.
    I have PMI on my mortgage, and I don’t like it. However, it isn’t inherently bad, and people looking at houses should spend as much time or more looking at mortgage products too. I don’t know for sure, but maybe you were pitched a worse product with the spin that “Hey, you don’t have to pay PMI this way!” I found a site via internet search that says with a 90% L-T-V ratio, you pay about 0.52% of your loan balance a year in PMI. YMMV.
    Trent’s advice is fine, in that he means on average it’s more effective to save for a long time using investments than savings accounts. To me, a 6% rate is high enough to start paying it off early. I use 30-year mortgage rates as my benchmark for what I consider high-interest debt. Furthermore, the long-term average return of the stock market is 6-7%, and it’s not a “guaranteed return” like paying off debt early is “guaranteed.”

  15. Riki says:

    I would say that buying a good-quality hand cream to deal with dry, chapped skin falls under “necessary” rather than a “splurge.”

  16. Becca says:

    Q7. It is completely appropriate to “put out the word” that you are low on cash this year, and that you will not buy expensive gifts to give. And it is completely appropriate to suggest that people give you less, or give you very practical gifts to help you dig out. If knowing you will not be spending on them, they still chose to buy you expensive gifts, so be it. Stand your ground and don’t let relatives guilt you into spending in a way that feels inappropriate for your situation.

    My sister had a bad combination of financial events this year, and is fairly broke. Through various means, she has asked that family members give her family only nutritious staple food items so she can rebuild her pantry. When asked about gifts for her toddler son, she said he likes canned fruit (she has a stash if yard-sale toys to give him this year). This year family members would be doing her a disservice in buying her unnecessary gift items. We all understand she will come up with some modest homemade gift, which is the best she can do this year.

    I have often thought about gift-giving as a fairly silly tradition. You know, I try to guess want you want and you try to guess what I want, and really often we waste a lot of money. Or everyone exchanges lists, and we buy for each other off the lists, but there are few surprises. Doesn’t it just make sense for us all just to buy for ourselves?

    That said, I have rethought this in cases where there is some financial or skill/resource inequity. If we accept that we will not all spend the same amount on each other, it is an occasion we can help a family member who is poor this year, without treating him as a charity case. It also makes sense when people trade resources they have in excess. My brother, who is single, has gobs of money but misses home cooking. So it is easy for him to spend money on a gift, and in exchange get a batch of homemade cookies. Someone with woodworking skills can exchange gifts with someone with sewing skills.

  17. lurker carl says:

    Q8 – Reality check. A bank owns your home until that mortgage is gone and a bank owns your husband until all the student loans are gone, this debt load is double your combined salaries. You can’t afford European vacations at this point in your life.

  18. Roberta says:

    Q7 – To add to Kerry’s suggestions at #8, here are two other ideas for more personal and less consumerist Christmas gifts.

    My eldest sister bought a small calendar and wrote in all the family dates – birthdays, anniversaries, etc. With four siblings and 10 grandkids among us at that point, it was a godsend for me. She had beautiful handwriting, almost like calligraphy, so it was lovely to look at as well. Even though she died 10 years ago, it’s still hanging in my kitchen so I don’t miss important dates, as well as providing a daily reminder of her thoughtfulness.

    The second is a family cookbook. When my oldest son left for college, he would frequently call and ask me how to make the things he likes to eat. I started emailing him recipes to use. This past summer I started typing them out. I worked on just a few a week, making copies and putting them into page protectors in a 3 ring binder. This year he and his brothers will each get a unique and very personal gift – a starter cookbook of family recipes they have grown up on. I plan to add to it as I have time, for future birthdays etc.

  19. Kevin says:

    I strongly disagree with Q10’s suggestion to tie students’ marks to fictional stock performance. It perpetuates the myth that skill is a factor in portfolio performance.

    Of course, in reality, nobody can consistently beat the index. Thus not only is this an unfair way of grading students, it does them an enormous disservice by teaching them something that is not only provably false, but has the potential to cost them enormous amounts of real money down the road, in a futile attempt to reproduce what in reality was nothing more than a “lucky streak” in their high-school Accounting class.

  20. lurker carl says:

    Trent’s “winter hands” sounds like a chronic infection. A trip to the doctor might cure the problem.

  21. K says:

    #8 – you can’t afford KIDS either right now. ( As an addition to Lurker Carl in #13.)

  22. Riki says:

    Tying grades to stock market performance does seem a little unfair for all the reasons Kevin suggests. In Trent’s defence, though, he does suggest making it worth bonus marks.

    I would tie marks to a final report in which students have to analyze the decisions they made and the overall impact on their portfolio. As a teacher, I would try to foster an understanding of cause and effect on the market and an investment.

    The grade twelve economics classes at my local high schools all participate in a stock market game and it’s a very popular project.

  23. CNP76 says:

    #11 I would say that buying a good-quality hand cream to deal with dry, chapped skin falls under “necessary” rather than a “splurge.”…

    Nope, I would say if you spend more than the absolute minimum of 3$ needed to cover your hands, you are being wasteful and
    need to rethink your strategy (haha).

  24. Sun says:

    Q1: You should find out what the admin fees are for the Roth 401k. Perhaps you can enroll in your own personal IRA that has lower fees than the company run one. Take the company match, then find one with a better admin fee structure.

    Q5: Worse case, you can try to settle for a lower total like $5,000 using a full cash settlement with the surgeon. Otherwise, you can give a story about financial difficulty and that although you’d like to pay the bill, it will not be possible.

  25. kristine says:

    #17 We all understand she will come up with some modest homemade gift, which is the best she can do this year.”

    Modest handmade gifts are a refreshing respite from consumerism this time of year. I prefer them, and the givers need not be apologetic, nor self-conscious. But Baileys is always welcome too!

  26. EGD says:

    Sorry, all – Dutch letters are a distinctly Southern Iowan fascination and they’re actually very expensive to make – almond paste can be $5-$8 for only four ounces or so. A dozen Dutch letters at a farmers’ market can cost more than $20.

  27. kristine says:

    #23- people who are very dry normally can have seriously dry skin in the winter months, to the point of fingertips splitting. Normal moisturizer will not cut it, even preemptively.

    I have no natural oils in the top of one hand due to a skin graft. Without intense moisturizer, it gets about 50 cross hatched splits, and bleeds constantly (I know- ick. But I can’t feel it either, so I consider it merely an inconvenience).

    I have found Aquaphor to be an answer to my prayers- I’ve tried so many things. CVS has a generic version. The original formula was developed to lubricate cow udders when milking. Aquaphor works to prevent chapped lips as well.

  28. Johanna says:

    @lurker carl: Reality check – thanks to the 13th amendment, banks cannot actually own people. I know you were speaking metaphorically, but if they can service their debts and have plenty of money left over (which they can – they’re saving 1/3 of their income), there’s absolutely nothing wrong with spending some of the leftover money on non-necessities.

    $6000 sounds like a lot for a vacation for two people. I’d seriously think about trying to reduce the cost of the “adventure.” But that’s because I like cheap travel, and I know that not everyone shares my tastes.

  29. Karen says:


    You’re saving the max allowed by law at your employer–this is great! Keep doing it. How you split it up between the employer 401k and Roth 401k doesn’t really matter except in relation to the rest of your portfolio. Now that you’ve maxed out the workplace-retirement amount, open an account at a brokerage firm (e.g. Vanguard) and start putting post-tax dollars there. You can invest in individual stocks there if you choose.

    The balance question will have to be looked at as you go forward, but as your different accounts grow (and as the balance of tax-free vs. tax-deferred investments changes) you can use your post-tax brokerage investing to balance it.

    And eventually you’ll probably leave this employer, and can roll your 401k accounts into IRAs that you can manage more how you like.

  30. valleycat1 says:

    Q6 – we make a lot of our own bread, and have found that even week to week the amount of liquid we need to use can vary a great deal. One way we minimize variation is to use a recipe that measures the flour by weight instead of by the number of cups, and we buy the same brand of flour instead of buying whatever’s on sale.

  31. Karen says:

    Q5: did you get to select the surgeon? Seriously, if the hospital–well aware of your insurance plan–knowingly assigned an out of network surgeon, I would beat them over the head and tell them you’re only paying in-network amounts. And use phrases like ‘bait and switch’ and ‘not operating in good faith’. I’ve seen this doctor situation happen before, usually with ‘anesthesiologist-du-jour’ and it really ticks me off.

    Q6: The moisture content of flour is incredibly varied, and depends on the humidity when it was milled, where it was packaged, the distribution route, and the local humidity on the day you’re using it. Liquid measurements in breadmaking are always just estimates. As bakers gain experience, they get good at determining how much liquid a particular batch needs.

  32. Daria says:


    My husband teaches basic Financial Accounting at the local community college. He teaches his students how to analyze a company’s financial prospectus and then they have to pick a company of their choosing and analyze the report themselves. This is a project he assigns every semester. You might want to consider teaching your students how to analyze a company first before asking them to pick stocks in a stock market game. This will be a great basic skill to have. I sat in on one of his classes one semester and I chose Talbots as my project because I like to buy their clothes. It felt really good to know that I could evaluate the company outside of buying their clothes. The year I analyzed them, I realized I wouldn’t buy their stock.

  33. Andrew says:

    So, for Christmas if you ask for a Dutch letter and instead receive a French letter, what happens next?

  34. Tom says:

    Johanna beat me to the response to Lurker Carl et al. 2x your income is hardly debt slavery to the point of not being able to vacation or have children

    And $6000 total, for an international trip sounds like a decent ballpark number to me. It could certainly be done cheaper, but the flights alone will run close to $2000. Food, accomodations, tours and so on add up quickly

  35. jim says:

    Q1 Mark :
    Is ALL of your retirement in Roth post tax savings accounts? If so then it would be a good idea for you to put some of your savings in pre-tax non-Roth savings. Reason being that when you retire you will have some tax free income due to the standard deduction and exemption. A retired couple can have $500k in a 401k and draw out 4% and end up with no tax liability due to deduction and exemption. It makes sense to have a fair amount of retirement income taxable due to the deductions.

    Personally I don’t see a strong reason to save with a Roth paying taxes today if you’re in a relatively high bracket. You’re voluntarily locking in relatively high marginal rates today. Most people face lower tax rates in retirement than during their working years.

    Q3 Sam : You and your wife disagree. Theres pros and cons to either way.
    She seems to want the extra security of the pile of assets and you want to save some interest. Its reasonable to expect that your stocks should grow faster than 8% in the long run. SO maybe you pay 8% on the loan but hopefully the stocks grow faster. It doesn’t hurt to have a big pile of cash and stock. Now I tend to agree with your preference to just pay off the loan and lock in that guaranteed 8% savings. But I don’t deny her side. She feels safer with that money on hand and probably expects the stocks to grow well and outpace savings from paying the debt down.

  36. Jane says:

    We just paid off a balloon second mortgage in five years, and we did it by rounding up the mortgage payment every month. Then we would apply all bonuses and excess money at the end of the year to the principle. If you start pre-paying the amount, you will be amazed at how much more quickly the amounts that goes to principle increases. Of course, it sounds like we had a much smaller second mortgage ($15,000). I wouldn’t bank on the fact that you will move in less than 15 years, although if you don’t have a lump sum that high, you might have to.

    After we payed off the second mortgage, we were able to refinance the first one, which we just did this week. That’s one down side to a second mortgage – no bank will touch a re-finance, especially not right now. No one wants to be second lien.

    We tried our darndest not to get PMI on this refinance, mainly because I’ve read that it’s often hard to get rid of, since the bank has very little incentive to do so.

  37. jim says:

    Q5 : Was this an emergency surgery? Or did you have time to shop around at all? If it was an emergency and they shoved a doctor at you insisting it would be covered then it would seem there should be some recourse. If this wasn’t an emergency and you agreed to the doctor in question then I’m afraid you should have checked and shopped around. In any case if you do end up paying out of pocket then you should tell teh doctor in question that you’re having to pay cash and can’t really afford it so request they adjust the bill. The doctor may also agree for you to make payments or offer financing of some sort.

  38. jim says:

    Trent said : “There are almost no emergencies in life that will be helped by having more than four months of living expenses in an emergency fund.”

    Don’t you consider long term unemployment or serious illness or disability to be emergencies? Those are not too uncommon. Just ask 6+ million Americans who are currently unemployed for over 6 months. Median duration of unemployment is currently 5 months. Other not uncommon things can happen to warrant a large emergency fund. When I was growing up my dad broke his foot and couldn’t work for several months … stuff happens.

    There are various good reasons to have large emergency funds.

  39. Johanna says:

    @Tom: For a point of reference, my most recent European adventure was well under $2000. (That’s just for one person, but a room for two is less than twice the cost of a room for one.) I stayed in budget hotels and B&Bs, didn’t eat every meal in a restaurant (there’s plenty of stuff you can buy in a grocery store and eat without having to cook it), sought out great deals on train tickets, and designed my own tours instead of paying for them.

    As I said, not everybody shares my tastes, and that’s fine. But if you have other compelling uses for your money, I think there’s a case to be made for economizing on travel.

  40. Tracy says:

    @Tom & Johanna

    Well, and really, it’s impossible to determine if 6000 is for an expensive or a budget vacation since we don’t know how long they plan to be there!

    Having said that, I absolutely agree that #13 makes absolutely no sense by saying that a couple who is living on one person’s salary, saving $24,000 a year, and has no high-interest debt can’t afford their 6,000 vacation. At most, that extends their pay-off of student loans from 3 years to 3 years, 3 months … well worth it for the memories.

    Plus, if they’re snowballing the loans, they’ll be paying it off even faster than that.

  41. lurker carl says:

    Johanna and Tom – They are planning to have children after the European adventures, yet can’t make ends meet on one income and just barely on two after baby is born. Memories won’t pay for day care no matter how little they spend on vacation.

  42. Telephus44 says:

    Q1 – Trent’s advise makes no sense here. I just want to agree with other commenters that you might want to consider putting something aside pre-tax. No one knows what the tax laws will be in the future, and having some retirement savings pre-tax is a hedge against that. Also, yes, feel free to add some individual stocks in a taxable account. Also part of diversifying your tax burden.

    Q2 – I do surveys that offer a tangible items – a discount off your next purchase or free donut. I think it’s a waste of time for a $5000 drawing.

  43. Tracy says:

    @Lurker Carl

    What are you talking about? They’re currently making ends meet entirely on one salary and saving the total amount of the second.

  44. kristine says:

    Q8- you can send a very polite letter to the surgeon explaining exactly what you did here, but in a more concerned rather than accusatory tone (which is fine in a blog context) . Ask for a price reduction. Gently say that you are planning to make an entry on ratemydoctordotcom about how well the operation went, but also warning about the sticker shock and erroneous info and lack of communication between doctor/hospital/patient regarding end costs. Also mention you will be letting your friends know how it all turned out on Facebook. It will encourage a reasonable response, as good behavior is not afraid of transparency or publicity. Just make you get to the actual doctor, and not the billing company.

  45. Tracy says:

    I have to say, it is kind of surreal for Trent to have in the same mailbag Q5 with their $14,000 doctor’s bill (and that’s WITH health care) and the statement “There are almost no emergencies in life that will be helped by having more than four months of living expenses in an emergency fund” just TWO letters prior as the answer to Q3.

  46. Johanna says:

    @Tracy: “Well, and really, it’s impossible to determine if 6000 is for an expensive or a budget vacation since we don’t know how long they plan to be there!”

    True, but another way to make a vacation more affordable is to make it shorter. A two-week vacation is not twice as memorable as a one-week vacation. I think Trent actually wrote something about this, a long while ago.

  47. Johanna says:

    @lurker carl: What’s the relevance of making ends meet on one income? They have two incomes. And if they do go down to one income, they won’t have to pay for daycare.

  48. Tracy says:


    Heh, I am more like you in the cheap vacation route – when I visit Europe I’ve always stayed with friends and/or family – but I am the opposite on the length. If it’s abroad, if I can’t go for at least two (and preferably 3-4 weeks,) I don’t enjoy it as much. The longer I go, the more enjoyment I get out of each successive week.

    I’m guessing there’s a threshold somewhere, although I never reached it!

  49. lurker carl says:

    “The $2,000/month in saving that we try to pit aside each month first went to buy two new furnaces and water heaters for the house”

    “want to start saving about $6000 to fund a european adventure next september before we start trying to have a baby”

    These folks can’t afford a $6k vacation today if they are going to have children tomorrow.

    They TRY to put $2k in savings each month, ABOUT what hubby brings home. Either someone quits to take care of the baby or thye spend at least $1k per month for newborn daycare. On one salary, there is no $2k per month going into savings. On two salaries, the comfortable savings cushion vanishes with baby expenses. The house will always need repairs, people get sick, cars break down. The budget is too tight with the student loans and house payment.

    Get rid of the debt, Europe will still be there.

  50. Katie says:

    Carl, you realize that $2k wasn’t last month, right? They also have a $12k emergency fund. And she isn’t even pregnant yet. I mean, I’m all for cheap vacations for the reasons stated, but good lord.

  51. jim says:

    #45 Tracy, good point, we only had to look down 2 questions to see a perfect example of an emergency that could easily eat up 4 months expenses. And thats for a family WITH health insurance. Tens of Millions of Americans don’t even have insurance.

  52. Tracy says:

    lurker carl, I think you’re misreading their timeline.

    They got married, bought a house. Started putting 2k into savings every month. Bought the new water heaters/furnaces. Continued putting 2k into savings every month for 6 months. They now have 12k emergency fund and the question is now:

    Now that they have greater than a 6 months emergency fund (they’re spending between 1500-2k a month on actual expenses MAX based on their incomes) they’re contemplating what to do with the 2,000 a month they were putting into the emergency fund.

    They’re not planning on dipping into current savings for the vacation, they’re not even planning on funneling that saving entirely into vacation savings. They’re planning on doing a 3/4 to debt, 1/4 to short-term goal savings (vacation) which is entirely reasonable.

    And they’re not going to have children tomorrow, they’re not even planning to *start* trying for a child until after the proposed vacation next fall.

  53. valleycat1 says:

    A side note on Q5 – Using Medicare reimbursement rates to figure out what your doctor ‘should’ have charged you is meaningless unless you are covered by Medicare. Medicare pays a hugely discounted rate to doctors, and the rates lag real life by at least 2 years, because they’re determined based on analysis of data from a variety of sources. And doctors, hospitals and othe providers actually bill Medicare at much higher rates than they are reimbursed.

  54. lurker carl says:

    Sheila’s question – “do you think we should just go ahead and cash them in to make a dent on the loans, or would the debt be miniscule enough not to really matter? Or alternatively, should we use them to put a big dent (half of our goal) in our European adventure fund?”

    My answer: The debt really matters. The European adventure is a luxury you can not afford based upon your stated goal of starting a family next fall. Until you pay off some of the education loans, monthly cash flow will be tight after the baby arrives. Have the mutual fund and bond perform the greatest good and used the full $6500 to pay off one of the student loans, start the snowball effect to pay the rest off quicker. Then take that vacation.

  55. Katie says:

    First of all, they’re talking about starting a family a minimum of 9 months from next Fall. Second, I still don’t see any math on why they “can’t afford” it except that, apparently, you think any level of debt ever is enough to nix any vacations for anyone. That’s ridiculous.

  56. jim says:

    Q10 Margie: You might also look at Updown. Its a website where you can trade in stocks for free. You can sign up for account and get $1 million of pretend money to invest and it tracks your performance.

    As others have said you’ll have to consider the lesson kids might learn from short term trading. You might illustrate that by picking some random stocks in a blind portfolio that the kids are required to compete against. You could have a couple blind portfolios like one is random stocks and the other is actually just the Vanguard STAR fund. Then not tell the kids what the portfolios are until the end.

  57. AnnJo says:

    Q4, re: gum purchases. Yes, buy in bulk at a warehouse store, but if you have bad breath on a regular basis, make sure you are not suffering from untreated periodontal disease.

  58. Tracy says:

    They have 2k of income over expenses every month. A child does not cost 2k a month! That’s more than many families make TOTAL.

  59. Tom says:

    Carl, I see your point. From a strictly financial standpoint of cash flow and net worth, you’d be better off paying debt than spending money on something as fleeting as vacation. I just disagree about them not being able to afford it. It sounds to me like over the next 12 months, they can meet all their obligations, pay for a $6000 vacation, and then decide what to do with another $18,000 while currently having close to $20,000 in liquid assets. I think a lot of people would love to have problems affording a life like that.

  60. Robin S says:

    Please please don’t make your students invest real money. Even that you’ve considered it makes me cringe. I’m sure that (even if your school is an affluent one) there is at least one student in your class whose parents have better things to do with their money than throw it into the stock market so that their student can learn that the stock market loses money. They could spend it on food instead. Or rent. Or credit card debt. Those are better lessons.

  61. joan says:

    One thing about savings bonds is they mature and after that they do not earn anymore interest.

  62. gail says:

    Neutrogena Norwegian formula hand cream for dry, chapped hands…works wonderfully!

  63. Mary Kay says:

    Last year we started using a product called Working Hands. You can buy it in the paint department at Lowe’s as well as a few other places (check their web site). My father lives in Iowa and has always had terrible trouble with his hands in winter. For many years he used Aquaphilic but he swithced to Working Hands last year when i had some sent to him. He was pleased with the results.

  64. Sara says:

    Q1: You didn’t say what circumstances are preventing you from contributing to a Roth IRA, but I’m guessing you are over the income limit. I don’t know how much you make, but if you are close to the income limit, you might consider switching from a Roth 401(k) to a pre-tax 401(k) to reduce your MAGI so that you are eligible to contribute to a Roth IRA. For example, if your current MAGI is $122,000, you can’t contribute to a Roth IRA, but if you contribute $16,500 to a pre-tax 401(k), that would reduce your MAGI to $105,500, and you would be eligible to contribute $5,000 to a Roth IRA.

    The advantage to having your money in a 401(k) rather than a non-retirement brokerage account is that you are not taxed on the gains. As long as your 401(k) plan has decent investment options and the fees aren’t outrageous, you’re better off keeping as much money as possible in the tax-advantaged retirement accounts.

  65. Saskia says:

    #Engineer mum. Although being Dutch, even I didn’t know what a Dutch letter is, but it’s a treat we have every year around Sinterklaas (Dutch Santa Claus) and we celebrate his birthday on December 5th. That’s the day the children receive the presents and we have the Dutch letter (and in the weeks before ;-)) I’ve never made it, it’s not so expensive to buy. In Holland we call it banketletter.

Leave a Reply

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