Reader Mailbag: Winter Recedes

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. Refinancing questions
2. Selling stuff
3. Market price for old collectibles
4. Paying off low interest cards
5. 53, single, and moving forward
6. On Wisconsin
7. Wedding registry questions
8. Parenting blogs
9. Trimming possessions
10. Short games

Over the last several days, winter has receded here in Iowa enough that I’ve been able to play outside with my kids for more than a few minutes without frozen cheeks. The best part is that after a winter spent almost entirely indoors, the fresh air is an amazingly powerful sleeping medicine. When you spend several hours outside in a single day after many weeks spent largely inside, you sleep like a rock.

As do the children, thankfully.

Q1: Refinancing questions
I’ve seen you post a couple of times recently about refinancing. The latest used 5% as a rule of thumb for being a good time to refinance. My question though, is whether or not one should do that if one has already refinanced recently. It seems from when we refinanced in 2009 (6.5% down to 5%), there was a time frame that would have to pass before the savings in interest caught up to the fees one had to pay for the refinance. What would you suggest in such a situation? How long should one wait after the first refinance before refinancing yet again? I do realize, of course, that it depends on the fees involved in each mortgage, but I was wondering on a more basic level.

Also, How does refinancing work if your home has decreased significantly in value? A recent check on Zillow (the only gauge I have on current value) shows a loss of about $30k (not accounting any upgrades/remodel work).
– Linda

I think it’s always a good idea to refinance if you can save money over the long run in comparison to your current mortgage after costs are accounted for. In other words, ignore the first refinance and calculate things based on your current mortgage and what you’d like to refinance to. If that refinance puts you money ahead, go for it. The savings from your first finance will carry forward right into the second one.

When you refinance, lenders will often want to reassess your home, as you’re essentially getting a new mortgage. If your home assesses at a much lower value, you might not be eligible for a refinance. For example, if the decrease in value of your home puts you underwater, a lender may not want to lend you money at that low rate with your devalued home as collateral.

I don’t necessarily trust Zillow for housing values, though. The realities of home sales within half a mile of me shows that they’re often way off base. I watched houses in my area sell at a good 20% above what Zillow was estimating within the last year.

Q2: Selling stuff
I’ve often read on your blog (and others) that you’ve sold stuff in order to make money to pay off debts, etc. What do you do when the stuff you have is not “current” or was used when you purchased it? How do you decide on pricing and/or method of sales?

The reason for the question – My husband and I try to live frugally but since he is a self-employed business man (sole proprietor) we haven’t had “spare” cash. I work a full time job but that income barely covers our health insurance premiums plus withholdings and extra Federal withholding to cover his self-employment tax at the end of the year. A few items we’ve purchased have been new but we bought them as investments and for repeated and necessary use. Most things we’ve purchased from used business sales, garage sales, consignment shops and the like. With the economy we’ve recently had several clients walk away from bills in the thousands of dollars. We no longer have any savings or “capital” and are not able to meet our bills and other financial obligations. We are re-evaluating all our spending and tightening wherever possible but were already on a shoestring.
– Peggy

What I usually do is I do my best to get an accurate market price for the item. I use tools like eBay and other online resale shops to determine what sort of price you might be able to realistically get for such an item.

If that doesn’t help but you’re still sure that an item has some significant value, I’d stop at a local consignment shop and discuss the matter with them. They’re often very good at helping people price certain items for sale.

You’ve got to understand, though, that your item is only worth what someone else is willing to pay for it. No more, no less. The real question is whether you’re willing to sell it for a low price. Many people overvalue the possessions that they currently have and, as a result, sit on items with little or no value, absorbing the costs of storing and maintaining those items. That’s a mistake – don’t let yourself fall into that trap if you’re looking at items you truly no longer want.

Q3: Market price for old collectibles
I really enjoy reading your emails and like the way you reinforce a lot of the ideas that I also believe in. Today, you mentioned that you sold off a vintage baseball card collection and a large collection of other trading cards. I have a good friend who is age 61 and has a similar collection that he gathered from the time he was a young child and since. He is having a difficult time trying to begin to sell it because he is afraid that, if he goes to a store, he will be taken to the cleaners. We have never sold anything on Ebay before, so it is a scary proposition to use Ebay for the first time. Can you please tell us how to go about getting a market price and unloading this valuable collection? Thank you very much for your response.

– Judy

He’s right in that he’ll probably be taken to the cleaners if he walks into a baseball card shop with a vintage collection and no grasp on what the collection is worth. My guess is that, based on his age, he has a lot of cards from the late 1950s and 1960s, which have actually retained their value quite well. Cards made after about 1970 haven’t retained their value nearly as well, unfortunately.

My first step would be to pull out individual cards from this collection that likely have some additional value. I would start by pulling out any and all cards that depict members of the Major League Baseball Hall of Fame. Take those cards, identify what year they are (take the last year of statistics on the back of the card and add a year) and who the manufacturer was, and search for those terms on eBay. So, for example, search for 1961 Topps Roger Maris, if you happen to have that card.

If you find any cards that seem to be worth more than $50, I would have them professionally graded and sealed using a service like PSA. This will greatly help you with maximizing the value of what you get from those cards. After this, I would attempt to sell them on eBay. For cards less than $50, I would probably attempt to sell them in lots on eBay.

Q4: Paying off low interest cards
I’m a US Army officer who is currently sitting on two credit cards that could be paid off. I say ‘could’ instead of ‘should’ because both of them only have a 6% APR interest rate on them. This comes from the SCRA, or Servicemembers Civil Relief Act. Any additional charges on my cards have been paid off the month I make them. My question is this…I’ve also got a military loan, currently at $11,000 owed, at a 2% rate. Between the two credit cards, which have $3,000 and $1500 on them respectively…which of the two would be better to pay off first? I know the higher interest rate is the 6%, but the amount there is so negligible to pay off each month that I easily pay off a bit more without stressing out over anything.

– Steve

If you’re choosing between two debts with the same interest rate, I would always pay off the one with the smaller balance first.

The reason for that is cash flow. The smaller balance card will be paid off much faster than the higher balance card. When the card is paid off, you’ll have more money in your checking account each month. Of course, you can apply that extra money to a larger payment against your other debts, but you also have the freedom to make other moves with it, such as handling personal emergencies.

With all else being equal, maximizing your cash flow by minimizing the number of monthly payments as soon as possible is the best option.

Q5: 53, single, and moving forward
I’m not in a crisis situation but I don’t know what I should be doing financially. I am a single 53 year old woman with no children. I work at a job I really like and make not quite $40,000 a year. I have very little debt and not more than about $700 in savings. The one thing I have going for me is that I have approximately $204,000 from a long ago insurance settlement. The money is with a broker I trust and has bounced back from the previous year’s financial losses.

So I’m in fairly good shape (I think).

But I feel like I need to be concentrating on something. I’ve been living in a condo for the past years and owe approximately $80,000 on it. My take home pay is approximately $2400 a month. I try not to dip into my insurance settlement so I should be able to live on what I bring home, which I do. But I would like to know what else I could be doing. I have not contributed to an IRA in years, so should I put some money there? Concentrate on paying down my mortgage? Save more?

Also, due to some health concerns I would not be surprised if I am not able to work past age 60 or so. I usually have about $4000 a year in various medical bills. I have not been very good with my money and I know it’s a little late in life to be asking these questions – but I just have to ask – what should I be doing with any spare money I might be able to save?
– Carol

Without that settlement, you would be in very bad shape. Given that you have the settlement, though, you’re not doing too terribly, and you made a very wise decision to not touch the balance.

When you state that you will be unable to work past age sixty, my big question would be whether or not you would be able to draw disability wages at that point. In other words, when you are unable to work, are you going to be able to draw some income due to the work you’ve already done in your life? Is there a pension? Are you going to be able to do any type of work when you reach this point, or is it just your current job?

My suggestion to you would be to create a roadmap with as much detail as you can into the future. What will you need per year, assuming (say) 5% inflation per year? When will you likely have to stop working? What will you be able to draw for income at that point? What’s your realistic life expectancy?

Once you have that, look at your extra money now and your (possible) shortfall in the future. At that point, I’d either call my broker and look for a way to add to that settlement or resume IRA contributions.

Q6: On Wisconsin
I’ve got to ask: how do you feel about the protests in Wisconsin? It certainly does have personal finance implications!

– Ron

In my opinion, the Wisconsin protests are happening because liberals and conservatives only talk to and listen to their vocal, extreme bases and don’t listen to or talk to each other. Because of that, there can be no negotiation and no compromise, lest one side or the other appear weak and a “sellout.”

Are the protesters well within their rights to protest? Absolutely. Are the legislators well within their rights to do whatever they can to push a vote forward? Absolutely. Could they find a reasonable compromise if they sat down at a table together and actually hashed things out? Absolutely. Will they actually do this? Absolutely not.

I understand why both sides are taking the stance that they do. The governor and legislators are striving to minimize costs over the long run for the state, and the way to do that is to eliminate the ability of their workforce to fight for wage increases. If they can’t collectively bargain, they can’t make large demands. On the other hand, the protesters absolutely should fight for the deal they have right now – why shouldn’t they? Wouldn’t you be bothered if your wages, benefits, and employee rights were cut?

I think there’s a point in the middle both sides can live with, but there’s too much politically at stake here for both sides to do the sensible thing.

Q7: Wedding registry questions
My fiance and I are getting married in October in Florida where we live. We will have family and friends coming in from Massachusetts, Michigan, and Washington state. We are in our early thirties and currently live together in a house I own. Because of this, we have most everything we need for our home. I was wondering what kind of gifts should we register for that we will get the most use from? I don’t want to ask for cash because I think that’s tacky. There are a few things I know I want to register for: extra sheets and towels, dinnerware and flatware, and some decorative pieces. My fiance doesn’t need any more tools he says. I was thinking abour registering at JC Penney and Target. That way, there will be a range of options. I’ve thought about registering for things that will add value to the house. We would like to buy a larger one after we have a child. I’m not sure what things that would be, though. Financially, we are good. We both work full time, contribute to our retirement accounts, and have an emergency fund.

– Evelyn

I understand your challenge. We had a similar issue before our own wedding, where family members were clamoring for items on a gift registry but we were unsure what to put on there.

I would suggest a couple of general themes. One, look for high-quality versions of items you use all the time. If you’re starting to cook at home a lot, for example, and are relying on a mediocre knife or two, request knives. If you use a blender a lot but are frustrated by the one you have, request one of those.

Two, request items that might replace the ones you currently have. For example, when we were about to get married, we were still using hand-me-down plates. While these plates were functional, they were also a bit brittle, so we asked for a set. We didn’t need to use them for a year or two, but when we needed them, they were right on hand.

If you stick to good versions of items you already use and replacements for items you know will wear out in the near future, you’ll be selecting good things.

Q8: Parenting blogs
I’m very excited to say that my wife and I are expecting our first child in June. Since your blog has been so helpful with helping sort out my financial life in so many ways, including giving me detail I wouldn’t have thought to ask for myself, broadening my horizons on other topics (sometimes only marginally financially related. Don’t think me a forum troll. I greatly enjoy those articles as well, as needled as they may sometimes be in the comments regarding their relationship to your primary topic. :-D ), delving into both the practical and the theoretical while remaining personal on all fronts…I digress. Look man, I need something like your stuff to tell me what I’m supposed to do with a kid! I have no idea! I’ve read “What to Expect” and several others recommended by the Dr and a few friends, but they’re almost all…well, they seem like troubleshooting books, and not much to do with experiences. They’re almost purely medical, if you know what I mean. Do you have any suggestions like thesimpledollar.com etc that could help me ease the tension as a waiting dad-to-be?

– Ron

Parenting blogs are a subgenre that I’m pretty familiar with – I once wrote one in late 2005 and early 2006 before some extremely creepy people convinced me to stop because of their disturbing comments about my infant that I had posted a few pictures of. (I’m now FAR more careful about what I post with regards to my kids.)

What I learned during those days – and since then, as I’m still a reader of many of those blogs – is that most of them strive to entertain, period. They’re trying to tell cute or funny stories about life as a parent, not to offer useful advice or thoughts to parents.

There are a few reasons for this, I think. The big one is that there is no one consistent set of principles for parenting as there is for personal finance. The core personal finance principles are constant. For parenting, it’s not so much, so if you try to write about tactics, you’re going to end up with many threads being combative.

The one standout blog that I’ve ever read that focuses on parental tactics is Parent Hacks, which has been churning out great content along those lines for years.

Q9: Trimming possessions
I have been struggling the last few months about all the “things” that I own and whether or not I should start selling or donating them. I feel like I want to simplify my life, but I don’t know where or how to start, or even if I have the courage. I feel attached to my computer, smartphone, television, the internet, email, my house, and other objects and I want to be set free. My wife and I are in decent financial shape, although we are at risk for losing %10-15 of our take home pay due to budget cuts, and possibly even losing our jobs. This has prompted me to move forward and ask your advice on any resources that you may have run across.

– Jeff

I’m not entirely clear on what you’re looking for. There are a lot of different degrees of doing what you’re trying to do, from just decluttering a bit to selling your home and living in an RV or a tent.

I think your thought process in these regards isn’t really complete yet, so I would suggest three books for you to read.

The first one is Your Money or Your Life by Joe Dominguez and Vicki Robin. It’s just a brilliant book that really helps a person to figure out the true relationship between money and how they want to live their life.

The second one is Voluntary Simplicity by Duane Elgin. It discusses how a modern person can actively make the choice to simplify their life by removing possessions and commitments in a sensible and reasonable way.

The final book is The Power of Less by Leo Babauta, which gives yet another strong perspective on minimalization from a modern perspective.

I believe these three books – which you can probably find at your local library – will guide you to the answers you’re looking for.

Q10: Short games
I looked at some of the board and card games you’ve listed and some of them seem really long. What suggestions do you have for shorter games?

– Megan

I often compare games to either movies or television shows. Some games are like movies – they are lengthy, epic experiences. I’ve played many games that I love that take three or four hours. On the other hand, some games are television shows – short bursts of great entertainment. I’m pretty sure Megan is looking for the latter ones.

So, what games are really fun (and also deep enough to warrant repeat play) that can be played in less than thirty minutes? Here are five quick picks.

7 Wonders is a card game where players are attempting to build the best civilization by selecting sets of cards. Dominion is another card game where players are assembling their own deck of cards from a shared pool. Space Alert is a rapid-fire board game that simulates space combat. Dixit is a game where players tell very brief descriptions or stories about intriguing art pieces. Forbidden Island is a cooperative game where players are attempting to escape a sinking island.

Better yet, just get an ordinary deck of playing cards and play one of the many great games people can play with playing cards.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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