Reader Mailbag: World Building

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. Home upgrade concerns
2. Choosing a major
3. Hedging bets on interest rates
4. The cost of sleep
5. Best use for savings?
6. Disgusted by product images
7. Transitioning to one income
8. Upgrading a computer cheaply
9. How much for a car?
10. Library worries

One of the biggest challenges I have when writing fiction is building the world that the writing takes place in. I actually think it’s much easier to write contemporary fiction because you can take so much of that for granted. In speculative fiction, you can’t do that. You have to create a logical and sensible world for the characters to exist in.

Whenever I try to write speculative fiction, I tend to get lost in the details of the worldbuilding. When I see myself doing that, I have to make myself step back and think about the story I want to tell. Inevitably, though, I get lost in the worldbuilding again.

Someday I will finish this novel in a way that pleases me – and you’ll be the first to know about it.

Q1: Home upgrade concerns
I very loosely follow Dave Ramsey’s baby steps. We have our debts paid off, are saving for college, and are saving for retirement. The next step would be to pay off our mortgage, but I am wondering if that is always a good idea. We just had a baby and live in a 1,000 square foot, 2 bedroom condo. Eventually, we plan on moving into a bigger home, but are very happy to stay where we are for the time being (maybe up to 5 years or more). I gather it would take about 10 years to pay off our mortgage, and I know if we don’t end up staying for ten years to live mortgage free we would at least have the extra equity to put towards our next home. Here is my hesitation: we live in a condo and I feel uncomfortable putting so much of our money towards an investment I don’t have a lot of control over (the HOA makes decisions in regards to upkeep, etc). Also, our next home is likely to cost around 350,000 and our condo is roughly worth 200,000 (our mortgage is currently at 140,000). So even if we paid down our mortgage quite a bit, we would still have to take out a considerable mortgage for our next home which, psychologically, is just not very rewarding. Another thing to consider: I would rather have a large cash savings to pay cash for our next vehicles and if we throw all of that extra money towards our mortgage we’ll have to take out a loan for a car. I’ve sort of concluded that aggressively paying down our mortgage isn’t the best option but, perhaps, I am not seeing it from every angle. What do you think?

– Mindy

If you’re above water in your mortgage and it’s fairly low interest (below 5% or so), I don’t think it’s unreasonable to just make minimum payments on it at this point and instead sock away cash for those big expenses that you know are coming down the road.

It might not be the best purely financial choice, but it does give you easy liquidity and flexibility, which will be important in the years ahead.

If you decide that you’re best served by staying in your condo, you can always roll the cash savings into your mortgage at a later date.

Q2: Choosing a major
I’ve been saving for several years and I’ve decided finally at age 32 to enter university. I was accepted and I’m starting in the fall. I’m now struggling with what I should major in. I have a lot of areas that interest me base don the community college classes I’ve been taking but I want to choose something that will serve me well in the job market. How does an older student break down this decision?

– Geoff

As an older student, you should have a better grasp on what your actual skills and talents are. What things are you naturally good at compared to others? What things do you find yourself filling your spare time with?

For an older student, college isn’t so much a time to discover yourself, but a time to really hone those things you already know about yourself. I’d pick a major that complements those natural skills and interests.

Don’t worry that much about average incomes in a field. A person who comes into a field with natural skills and passion is always going to trump someone who doesn’t have those things. The challenge for younger people entering college is that they don’t really know what their skills and passions are, while an older student has the advantage of already having figured that out for the most part.

Q3: Hedging bets on interest rates
We have 28 yr mortgage left on a 325,000 at 4% on a condo that is worth around 550,000. We want to refinance to a 15 yr that will cut the payments by 13 yrs. Currently our mortgage is 1,950$/month and our condo fee at $350 which makes our monthly rent $2300.

My husband makes 65,000 a year and I switched to fulltime freelance in 2012 but only made about 20,000, which I will not be claiming at a loss. I did some freelance in 2010 & 2011 at a loss on top of my 100,000/yr fulltime salary. It’s been hard to he approved for a loan because of my switch in career/income but recently found a bank that will lend us the money at 3.875%. That will make the monthly mortgage to 2,500 plus the condo fee totaling in 2,850/month rent.

Although in the long run we will be paying off the condo at much faster rate and paying lower overall interest, I feel as though 2,850 is a little high of a rent for us now. It’s doable, but we will be mainly putting in all out money into monthly payment of the condo. I was hoping for a rate in the low 3%, makin the payment total around $2500. I know it’s only really $350 more but that makes a huge difference.

We do have 70,000 in liquid, 25,000 in stocks, and 50,000 in retirement. Should we pay the principle/mortgage down by 15,000 to get a smaller loan? Or do you think it is wiser to keep our 30yr mortgage for another year, paying down the loan and pay off the only debt of 3,000 CC (at 0apr till June) while I get another year of freelance income recorded into my tax for 2013, hoping the mortgage rates stay in the low rates as now?
– Mae

If you have $70,000 in cash versus a household income of $85,000, you have a very healthy emergency fund. I think it’s completely reasonable to pull $15,000 out of that liquid amount to pay down your mortgage (or make a down payment of sorts on the new mortgage) to lower the monthly payments to something reasonable.

According to my quick math, this amount should lower your monthly payment by about $150 per month, dropping it down to about $2,350. If that’s a more comfortable amount for you, then this is a good move.

In fact, you may want to consider pulling out more of your liquid funds than just $15,000 for this. I would assess how much you actually need in an emergency fund (generally, I figure a month of living expenses per dependent, plus 1% of home value. Assuming it’s just the two of you, that’s around $20,000 in emergency fund and you currently have $70,000. I would feel fine using more than just $15,000 of that amount to pay down the mortgage.

Q4: The cost of sleep
My job allows me to work from home and as long as I hit milestones and make two weekly meetings via Skype they really don’t care about my schedule. This allows me to be a stay-at-home dad to my two year old. My challenge is balancing the parental responsibilities with the work requirements and sleep. A lot of time, sleep seems to lose out and then I’ll find myself napping when I should be doing household chores or playing with my boy. Do you have any suggestions on rebalancing things?

– Dave

The way I’ve managed this in the past is to have an uninterrupted block each day where I did my “heavy lifting” for my job. I would do other parts during the day, like email, when I had free moments when my children were focused on other things.

I’m not sure whether you have a spouse in this picture. If you do, I would pencil in a two or three hour uninterrupted block in the evenings for the heavy lifting while your spouse handles child care or other house responsibilities. I’d also pencil in one big block on the weekends. Do your less intense work during the spare moments when you can.

If you don’t make sleep a high priority, you won’t perform well for either your employer or for your child. You’re better off spending a little less time with your children and getting more sleep, because if you’re spending more time with your children and getting less sleep, you’re not on your game with them.

Q5: Best use for savings?
I am a 31-year old recently graduated and employed PhD; my husband will finish his program in another two years or so. Our financial situation is ok, but not great. Assets: 10K emergency fund, 16K savings, 33K IRA. Debt: 59K student loans (ugh). With my salary bump, we’re now saving about $1200/month (roughly 25% of our take-home pay). Our dilemma is that we’d like to pay the student loans off ASAP, but we also have other pressing needs.

The most urgent is a new-to-us vehicle (which we would pay cash for), as we currently drive a 20yr old toyota nearing the end of its life. We’d also like to start a family soon given my age, so we’re saving up for those expenses, especially childcare. We’re currently in a 1 bedroom apartment; eventually, we will need to rent or buy a slightly bigger apartment or townhome, so we need to be saving for that. We also need to start contributing to retirement again. My main question is should we put our savings towards paying the student loans off more quickly (which would still take us several years), or should we focus on saving towards these other goals for now, while still making the regular loan payments? If we do both (extra loan payments and savings), what’s the best way to allocate the money?
– Tessa

This is extremely similar to the situation Sarah and I were in circa 2004.

The best thing you can do is sit down together and come up with your timeline for the things you want to do. Set an approximate date for having a baby. Set an approximate date for buying a house and how expensive your house is going to be. Set a date for buying a car and how much you’ll spend. This doesn’t have to be set in stone, but it does need to be a pretty firm goal that you can base your plans on. Without that, it’s really hard to say what you should be allocating.

Once you’ve got those goals figured out, determine how much you’ll have to save each month to make those goals a reality. If you’re going to buy a $5,000 car in a year, you’ll need to save $425 a month, for example, to get to that goal. If you’re going to buy a $100,000 house with a 20% down payment in four years, you’ll need to save about $500 a month to reach that goal.

Start saving for those goals, then put the rest of that income toward paying down your loans. Stick to that plan and you’ll find that when the time arrives for you to have a baby or to buy a car or to move, you’ve got the money you need right in hand.

Q6: Disgusted by product images
A friend of mine recently sent me a picture of [a well-known product]. I was disgusted by this image and I can’t believe the company would allow such things to be sold. You should inform your readers about [this company]’s practices.

– Denise

I edited Denise’s note quite a bit so that I’m not slandering a company.

I generally don’t believe horrible stories about products on the internet unless there’s a ton of additional evidence. Let’s say you see a picture of a food item with a bug in it. That bug could have been added later by a hoaxer, it might not even be the product that’s being claimed, or it might be Photoshopped.

Why would someone do this? They’re a hoaxer. They’re a competitor hoping to slander a product. They’re crazy. There are a lot of reasons. I want to see more evidence than a grainy cell phone shot before I’ll believe that a product is tainted.

If you have a tainted food product, your best responses are either customer service or a lawyer. A grainy cell phone picture helps no one – it doesn’t provide any real evidence of anything and it just gets mixed in with a lot of online hoaxes.

Q7: Transitioning to one income
I have a question about transitioning from a two-income household down to one income. My husband and I both work full time and are working toward having me stay home with our child (who will be two this spring) but we differ in our view on when the timing is right.

We have a robust 6-month emergency savings based on our current expenses–which includes plenty of flexibility. Factoring in two major expenses that we foresee this year, we will have a large cushion beyond our emergency fund by this September. My husband’s view is that we simply keep saving until his income covers our budget completely. He’s very careful and likes to be prepared for anything that might come our way, which is a large reason why we’ve been able to save well and stay financially healthy. My view is that the cushion can finance the projected monthly loss of having only one income for at least two years with 9k left as a buffer (all without touching the emergency fund). That’s taking away my income, paying extra for healthcare, but also taking away the expense of childcare…etc.

My question is: how common are each of these approaches? I of course feel from a very emotional side that I want to be there for our child (and subsequent kid(s)) as much as I can when they’re very young, and that this is the exact situation for which we can use this “cushion” savings. My husband is very rational and risk-averse and would feel safest if I worked through my second pregnancy–whenever that may be. Beyond student loans and mortgage we have no debt. We’ve done very well so far, and have frequent check-ins on our budget and plans–all good things! It’s still a very tough determination to make, and we want to give it the attention it deserves. We both understand where the other is coming from, but we struggle to come to an agreement.
– Lois

I don’t think either plan is “right” or “wrong.” You have a good likelihood of skating right through this time on both plans, though your husband’s plan is more secure.

It all comes down to how much security you feel that you need to get through this time, and that comes down to personal risk aversion. Clearly, you have a difference of opinion on this subject.

If you are very drawn to start staying at home now, start looking for ways to seriously cut expenses. Do you need cable? Will you need a cell phone when you switch to staying at home? Do you need internet at home? Could you make do with a smaller home? Do you need the vehicles that you have?

The more big (and little) expenses you cut, the closer you get to your husband’s desired level of security.

Q8: Upgrading a computer cheaply
I just bought a new computer. How do I go about moving over all of my settings and other stuff from the old one? I don’t want to pay someone to do something that seems like it should just be copying files.

– Eric

It’s actually pretty easy. Microsoft has a great help document for this process.

The easiest way to do it overall is to just create a backup of your files to a USB hard drive. Windows includes some solid backup tools that makes this pretty easy if you’re moving from, say, Windows 7 to Windows 8. Create the backup on the USB hard drive, then attach the USB hard drive to the new computer and restore from that backup.

Before you do this, make sure the new computer has all necessary antivirus, spyware removal, and firewall software already set up.

Q9: How much for a car?
So to get to my question: I’m 23 years old. I bring home roughly 950 every month. My lovely girlfriend brings home about 1400 every month. After all bills are said and done, we can put away 4-500$ a month if we live well within our means.

My car is going berserk and I’ve had more than one mechanic tell me that I need to start looking at a new car and that was over a year ago.

Income tax is coming back in and I’m betting we get three thousand back on and I’m betting on the safe side.

How much money should I invest in a car right now given my situation? What moves would you suggest making (investments, cutbacks, etc.) to improve our financial situation.
– Mike

Given your household income and the rate at which you can save, I would definitely stick with a used car, probably one that’s between seven and ten years old.

I would probably just buy the best car you can with cash in hand when your current car gives out. Keep saving your cash and keep driving your current car until it reaches a point where it needs to go, then assess what you can buy with all of your savings. Your income tax return should go into this savings.

I would not get a car loan in your current situation, as you really don’t need to add another monthly bill to your situation.

Q10: Library worries
I want to use my local library more but the place scares me. All of the chairs are filled up with people sleeping that look like they haven’t bathed in a long time. There are usually a couple of people sitting on the floor somewhere who are having loud and inappropriate conversations that I really wouldn’t want my kids hearing. I get books from the bookstore just to avoid this.

– Margaret

If you’re uncomfortable using the library, don’t use it. However, there are quite a few things you can do. One path is to simply use an online reservation system (many libraries now have this) to put books you want on reserve, then just stop in to drop off what you need to return and pick up your holds at the front desk.

If you want to be more direct, get involved with the library’s board and work toward drafting a clear code of conduct for library patrons so that the library staff have clear policies to base their actions on.

Often, there’s more going on than meets the eye. Denying library access can often turn into a slippery slope of having some arbiter determine who’s acceptable and who isn’t. Do you deny people who have mental or physical handicaps from using the library? That seems to go against the spirit of what a library is.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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 many, many questions per week, so I may not necessarily be able to answer yours.

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