What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Money market versus savings account
2. Birthday cake as frugality lesson
3. Big 401(k) contributions, then stop?
4. Glass or plastic food containers?
5. Happier before financial improvements
6. Basic homeowner tool kit
7. Why not choose lowest payment?
8. True “everyday carry” question
9. Capital One credit card concerns
10. National health care question
11. Yard sale find dilemma
12. Cheaper alternative to Field Notes?
In last week’s mailbag, I asked for book suggestions on the topics of personal finance, personal development, careers, productivity, and overall life philosophy from readers and … let’s just say the response was impressive.
I kept jotting down the suggestions in a list that just included reader suggestions, (along with + signs in front of ones that were suggested by multiple readers) and the list is currently over 200 books long, with about 80 suggested by multiple readers. Thankfully, quite a few of them overlapped with ones already on my to-be-read list and my to-be-reread list, so I know that my ideas of impactful books tend to line up with yours.
The one surprise was the number of rather philosophical books that readers suggested to me. I sometimes don’t know what topics and items I write about have the most impact on readers (I can tell which ones are popular, but not the ones that really have a thoughtful impact on people, and those are definitely not necessarily the same articles), but quite a few people told me that they really appreciated articles about general philosophies of living and how they interacted with financial practices, especially when I can relate that to practical strategies people can implement. I suppose a request for book suggestions would draw out people who think about such things, though.
Anyway, you can definitely expect the Books with Impact series to continue irregularly for as long as I write this site. I hope to do them once every month or every other month as long as I have books to write about that I’ve read at least twice and have had real impact on my life or my thinking.
On with this week’s questions.
I keep about six months of living expenses in savings as emergency fund. My bank just introduced a “money market” account which offers over 2% interest while my savings account earns about 0.3% interest. How does a money market account work? Should I switch?
In general, a money market account is an account offered by a bank that has a fairly high minimum balance but comes with a significantly higher interest rate than their normal savings account offerings. The interest rates on money markets do tend to vary more than savings accounts, and banks will adjust the interest rates on money markets more frequently than savings account rates. However, money market rates are almost always notably higher than savings account rates.
Assuming that your emergency fund is well above the balance requirement for a money market, it probably makes sense to make the switch. You’ll earn a much nicer return if you do.
However, if you find yourself seriously tapping your emergency fund, you’ll want to keep an eye on the minimum balance and perhaps close out the money market account and move it back to a savings account rather than going below the minimum balance, which will often incur fees that you definitely won’t want in that situation.
When my kids were littler I used to buy cakes at the bakery for their birthday and they cost $30-40 or more. Around when my son was 6 I decided it was silly to keep buying expensive cakes when they were made up of $5-10 in ingredients. I started making my own. The first few didn’t look all that great but now seven years later or so I can turn out a pretty good looking cake in a couple of hours. I made a beautiful cake with purple fondant for my daughter’s eleventh birthday and one of the guests took a picture and sent it to her mom and her mom asked me where I bought it. It cost about $12 all told and something similar would have been $50 or more at the bakery.
Moral of the story is that learning how to do stuff like this on your own saves a lot of money and it feels really good to be able to just make something well.
I cannot possibly agree with this post more. When you take on doing things for yourself, not only do you typically save money, you usually end up doing it pretty well (after several tries and some skill building along the way) and you take a ton of pride in it.
This applies to so much stuff. Cooking at home. Doing little car maintenance and repairs. Baking a cake at home. Making pickles at home. Fixing a broken toilet. Replacing a faucet. The more things you just take on yourself because it’ll save money, the more you realize you can easily do and the more pride you take in it.
If you think you’re too busy to do things for yourself… what is it that you’re too busy doing?
I graduated in May and am starting a job in September. I want to run my financial plan by you. I was thinking of making really big 401(k) contributions at first until I am married and having kids, then cutting it down to nothing so I have more money for my family and to buy a house and stuff. What do you think?
It depends a lot on how big the 401(k) contributions are as well as how long you’re going to be in that “big contribution” phase, but the basic structure makes sense.
Basically, the bigger the contribution, the fewer years you would need to contribute to make it work. If you want to compress it into the smallest number of years you would need to save to be prepared for retirement, you’ll want to contribute enough to hit up against the 401(k) contribution limit and also contribute to a Roth IRA on your own beyond that, provided you’re eligible. 7-10 years of that at the start of your career will likely set you up with a wonderful retirement, especially if you return to contributing later. Obviously, if you keep that up for 15-20 years, you’ll probably be able to retire immediately, depending on whether you’ve eliminated debts and the comfort level you want in retirement.
If you’re wanting to be less intense with your contributions, the number of years you need to contribute will grow.
I can’t give you a more firm answer without some number related to your salary and your actual cost of living.
Are glass or plastic food containers better? I see both kinds for sale. Glass ones seem to cost more but do they have benefits?
It really depends on what you value.
Glass containers are better environmentally and are easier to clean in my experience. However, the reality is that glass is also more brittle and much more likely to break if you drop it.
Plastic is sturdier but is a bit harder to clean (and gets stained) and is much worse environmentally.
In general, if something’s not leaving the house, I’d prefer to store it in glass. If something is going out and about, I prefer to store it in plastic. Are you highly likely to take food containers with you to all kinds of places? Choose plastic. Are you mostly using them at home? Choose glass.
I spent the last five years getting my financial life straight, paying off all my credit cards, paying off all student loans except for last one at 3.5%, building an emergency fund of 3 months of living expenses. I think I was happier before I started. Along the way I said no to so many things and now my social life is just quiet. My friends are all either wasting their lives or have become parents or have moved away. I just come home most nights. Life was a lot better before but I don’t want to let go of the financial change either.
I think that many of the changes you’ve noticed in your social life isn’t due to your financial changes, but due to the changes in the lives of others. You’re growing older. Some of your friends have become parents and thus have family-centered lives now – that’s normal. Other friends have followed their careers and lives to other places. That’s normal, too. You’ve matured and noticed that a few of your friends haven’t grown up yet. That’s also normal.
If I compare my social life to what it was like before I started being financially responsible, it’s changed a lot. Most of the people who I hung out with back then are out of my life. I spend my free time in very different ways than I did back then.
Do I miss some aspects of my life back then? A few, I suppose. I miss some of the people in my life at that time that have drifted away since. The thing is, undoing my better financial habits won’t bring those people back into my life. It won’t bring back the person I was back then. All I can do right now is look forward, and I can look into a bright future because of the financial moves I’ve made.
I will say this: it’s harder to make new friends as an adult than it was in college or in high school or in elementary school. You have to put in a lot more effort to build the relationships. There is no magic trick to this other than getting out there, getting involved in things that interest you, and meeting people. That, in my opinion, is the route you should take. Look for things to do in the community that seem interesting to you, or overlap with your existing interests. Get to know the people there. That’s going to be a great source of new friends.
Just bought a new home, moving in September. What kind of tools do I need for basic homeowner stuff? Is there a good central guide for homeowner maintenance?
There are a lot of great home maintenance checklists out there and you’ll find that they actually have a lot of overlap because there’s just a pretty standard list of things you should do to maintain your home and major appliances. Here’s my own list, organized by monthly, quarterly, and annual tasks, with some auto maintenance tasks mixed in. I keep these tasks in my to-do list program on my phone and computer, where they automatically repeat every one, three, or twelve months.
A long time ago, before the heyday of Youtube, I used to recommend a number of home improvement reference books, but honestly, Youtube is the best place to go for such information these days. If there’s a task on a checklist and you’re not sure how to do it, look up a how-to video on Youtube and it’ll walk you through it better than a book ever would.
If I had to still recommend a single volume for such tasks, I’d probably recommend the Family Handyman Complete Do-It-Yourself Manual, which is the updated version of the exact book we used for years when we first got our home and were learning how to do lots of home maintenance tasks.
As for a basic list of tools, I’d encourage you to buy tools based on need rather than just buying a big list of stuff right off the bat. Figure out your home maintenance checklist and make sure you have high quality versions of the tools you need for those tasks. In general, you’ll never regret having a well-made claw hammer, a good tape measure, a good level, a good crescent wrench, and several different sized regular and Philips head screwdrivers. I think those are a given. As for power tools, the only thing I’d say that has been essential for us has been a corded drill with a variety of bits.
I was listening to a personal finance radio show the other day and he said that if you’re getting a car loan and they give you options you generally shouldn’t get the one with the lowest payment. Didn’t get the rest, but this seemed weird. Can you explain it?
I haven’t actually heard the segment you’re talking about, but if I were to wager a guess, I’d guess that the host was advising people to go for the loan option with the lowest total of all payments, not the lowest monthly payment. That’s usually the option with the lowest interest rate, but not always.
So, if you’re offered a loan for $200 a month for 60 months versus $240 a month for 48 months, the $240 a month plan is cheaper because the payments add up to $11,520, whereas with the other plan, the payments add up to $12,000. That’s because on the 60 month plan, you’re making twelve more payments, and even though they’re smaller ones, they end up adding up to more money overall.
Usually, the plan with the lowest interest rate is the same as the plan with the lowest total payments. The only time that wouldn’t be true is if the one with the lowest interest rate stuck around for a lot longer, and that’s very rarely the case. Almost always, the longer loan is the one with the higher interest rate, and you should generally avoid that one if possible.
What items do you carry with you every single day unless there’s a really exceptional reason not to do so? Trying to figure out how to become more organized.
I carry a very small wallet with just a few cards in it, my keys (about four keys and a bottle opener), my cell phone, a pocket notebook and a pen, my Pokemon Go Plus (a small item about the size of a quarter that enables easy play of the Pokemon Go cell phone game, gifted to me a couple of years ago), a little bit of cash and change, a few ibuprofen caplets in a very small plastic container, and (unless I’m going to a place where it’s not allowed) a small utility pocketknife with a few tools on it, usually a Leatherman Juice these days. I carried a small pocket flashlight for years but found myself using it infrequently enough that I stopped carrying it.
These all easily fit in my hip pockets with room to spare. My keychain is minimal, with four keys and a single fob and a small bottle opener. My wallet is tiny, with enough space for about six cards. My pocket notebook varies, but is usually Field Notes; the pen varies, too, and is currently a Parker Jotter.
I have a lot of other items I want to have frequently, but they reside in my backpack that goes with me most of the time when I leave the house for more than a few minutes. Here’s a semi-recent list of what I keep in that bag, though it has changed significantly enough in the few years since I wrote that article that I should probably update it at some point. I’d estimate it’s about… 70% accurate at this point.
What should I do if I have a Capital One credit card? I think my data was stolen but Capital One hasn’t been clear on what to do.
This is in reference to the recent Capital One data breach, affecting millions of customers.
Frankly, there isn’t much you can do. The best thing you can do is monitor your credit card for unwanted charges, look at your credit report regularly to see if there are any new lines of credit that you didn’t authorize (you can do this from the FTC’s website for free once a year), and cancel any credit cards you’re not actively using (assuming that none of them are your oldest card – keep that one).
Thankfully, the vast majority of the data is just credit card numbers and names, so all that can really be done for most customers is to have some unauthorized charges hit their card. The number of customers that actually had their Social Security number stolen is pretty small and consists of people who applied for business credit cards from Capital One recently. If that might be you, Capital One is offering much more support.
This is just part of the reality of having companies accumulate so much data on customers. If they’re not perfectly vigilant with your data – if even one thing slips up – there’s going to be someone who gains access to that data and potentially uses it in a nefarious fashion. So much of our personal data is only as secure as the least responsible person in the IT departments at these large companies, and that’s frankly worrisome. This is why I personally minimize the number of credit cards I have and try to keep an eye on my accounts as much as I can.
Do you think it is easier to retire early in countries with a national health care system instead of having to have private insurance? If so, is it worth moving to a country with national health care if you are considering retiring early>
I absolutely think it is easier to retire early in a country where you don’t have to worry about the costs of health care as you age. Even if you are paying a somewhat higher tax rate, the personal financial benefits of having “free” health care are a game changer for retiring early. It simply reduces your cost of living by so much that the numbers become much, much easier. The specific calculations would vary from country to country, but the enormous reduction in individual cost of living means that the tax difference would have to be enormous in order to make such a move not worthwhile.
Is it worth it to make that move? Financially, it is. However, there is a cost to be paid in terms of family and personal relationships. If most of your family and friends are in one country and you move far enough away that it’s no longer convenient to see them with any regularity, there’s a quality of life cost to be paid. For some, that might not be a big cost, but for others who have a lot of family and friends in a particular area and very positive relationships with them, moving to another nation would likely cause a pretty notable reduction in quality of life that wouldn’t make the choice worth it. I would rather keep working and be near my loved ones and friends than to quit working and rarely be able to see them.
I do not believe the United States will ever have true national health care. The number of large corporate interests who would oppose it and the lobbying efforts they put to bear ensures that it’s almost impossible to secure enough votes for such an initiative. I would not make any financial plans for the future that rely upon the United States having national health care.
Recently bought a really beautiful side table at a big yard sale / estate sale event. Took it home and put it in the spare bedroom. Went in there a few days ago to give it a thorough cleaning and pulled out one of the drawers. There was an envelope stapled to the bottom of one of the drawers. Said “Congratulations, love Ernie and Rebecca” on it and it had $300 cash in it. I think this must have been a gift for a wedding or something. I think I can track down who it belonged to but I also feel like the person has passed and whoever had the end table didn’t care enough to look. What should I do?
My general belief is that anything put out for sale in a yard sale is “finders keepers.” It’s sold as-is. They wouldn’t give you a refund on it if there was a problem, so you shouldn’t give them a refund if it’s more valuable.
That being said, it is a classy move to at least contact the person and return the envelope and perhaps some portion of the money at your discretion. You don’t have to do that – I don’t consider it “wrong” to keep the money at all – but the envelope and the idea that it was a “forgotten” gift might have familial importance to the person you bought it from.
Several years ago, I purchased a box of trading cards essentially without looking at them at a yard sale and found that there was a ton of value in the box. I sold off some of the cards and actually returned a small portion of the proceeds to the people that sold it, as they clearly didn’t know what it was worth and likely had no real way of figuring it out.
If nothing else, you could simply contact them and say you found a note stuck inside the table that said “Congratulations, love Ernie and Rebecca” on it. I think at the very least that would be a nice move.
Last year I tried to build up a habit of taking lots of notes during the day and it has mostly stuck. At first I used scrap paper and index cards but then I got a bunch of Field Notes notebooks for Christmas. I just now finished up using all of them and looked into buying more and wow they’re expensive. Is there a cheaper alternative?
The cheapest option are Mead (or store brand version, if you can find them) top spiral notebooks, but they have a huge problem and that’s the wire binding along the top. I used to use these and they would constantly snag on things, including occasionally the skin on my upper leg. I basically moved away from them because of that.
Basically, I learned that anything that isn’t at least side or top stapled for binding will eventually fall to pieces or will have issues with the wire or glue binding at some point. So, I only really use pocket notebooks that are staple bound or sewn. They just don’t hold up (or else jab into your leg).
The problem is that there just isn’t a cheap source for pocket notebooks that aren’t either spiral bound or glue bound. Probably the cheapest option I’ve found for staple bound pocket notebooks is to buy Scout Books in bulk. They’re pretty similar to Field Notes and are sold in 10 packs, bringing the price per book down to about half of the cost of a Field Notes notebook. On occasion, you’ll find these ten packs on sale, but it’s pretty rare.
Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. 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.