Questions About Extreme Altruism, Upfront LED Costs, Scheduled Reading, Expensive Hobbies and More!

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. 529s, savings, or mutual funds
2. Hospital indemnity plans
3. Discussing financial goals before marriage
4. Scheduling reading
5. Friendships and money
6. Extreme altruism
7. Store-to-store variance
8. Upfront cost of LEDs
9. Time sheet dishonesty
10. Does FoodSaver actually save money?
11. Most important factor?
12. Managing a money-hungry hobby

After my recent mentions of a hospital visit in posts late last week, a bunch of readers contacted me expressing concern and sympathy about whatever was going on in our lives.

Here’s the scoop. My daughter had a medical procedure last week that required a two day hospital stay and about two weeks of recuperation at home. It was to (hopefully) take care of a nagging medical issue that has bothered her for years. We are hopeful that this just fixes the problem completely.

Our medical insurance covered the procedure, leaving us with just a bill for the deductible which we can easily afford.

She is recovering well at home. Her brother is bringing homework home for her from school and her spirits are definitely improved after a difficult day or two right after the surgery. We hope she’ll be able to return to school in about a week.

Q1: 529s, savings, or mutual funds

Hi Trent…I’ve been following The Simple Dollar for about 2-3 years now and it has helped me focus on my finances. One item I can’t lock down is college savings. My wife and I disagree. She thinks since we’re unsure, we just leave it in savings. I think anything is better than savings and want to move to a College 529 or mutual funds. We’re unsure what our kids will do, even though we are both college graduates and will advocate for that. She asked that I show her the “numbers” but I can’t find a calculator that compares multiple options with all the different variables…help!

Just some background info. We have 2 kids that are 6 and 3 and each have a few thousand saved up already. We contribute a small amount monthly and add any large sums from relatives.
– Dan

I would say that in this day and age, your children will probably at some point have some kind of postsecondary education, whether it’s college or trade school or something else. A 529 provides tax advantages for all of that. It won’t just help with college straight after high school – it helps with trade school or college when they’re in their thirties or community college classes or anything else.

The number of children that won’t end up being able to take advantage of that is pretty small. I think it is a really safe bet. The “penalty” for not being able to take advantage of it is that if you withdraw the gains for other purposes, you’re subject to an additional 10% tax penalty on those gains. It doesn’t affect the money you deposited.

Sure, there’s a little bit of a “bet” involved when you put money into a 529. You’re betting that, at some point in their life after high school, they’ll have educational expenses of some kind. I consider that to be a very safe bet, and 529s offer great tax advantages.

Q2: Hospital indemnity plans

I have had a hospital indemnity plan through my auto insurance company for awhile now. I pay $15 a month for it and I believe it pays out $250/day for 365 days if I am confined to a hospital. Is this supplemental insurance worth it, or is it just a scam?
– Donald

For $15 a month, it’s not too bad, but it’s not a spectacular bargain, either. If you are confined to a hospital, $250 a day will not be covering your expenses. In most situations where you’re in a hospital, it will barely scratch the surface of the cost.

What it does do is reduce the costs a little bit. Let’s say it reduces the cost of this hypothetical visit by 20%. That’s not going to make your hospital visit free, but it will take care of some of the cost.

Now, the real question is how it works with your health insurance. If both plans kick in, then you might actually get through a hospital visit without any out-of-pocket expenses. That could be quite good.

Another question is whether this insurance kicks in for any hospital visit, or just ones triggered by a car accident. If it’s any hospital visit, it’s probably a worthwhile deal. If it’s just from car accidents, your odds of triggering it go down significantly.

Q3: Discussing financial goals before marriage

I am a 29 year old woman who recently became engaged to a 28 year old. I did not plan to ever become married so this is a sudden and fairly unexpected change. Since college I have been working toward financial independence as my main goal as I would like to spend some years working for charities without feeling as though I’m sinking my financial future so my plan was to work a soul-crushing IT job until age 36 (the age that I calculated that I would reach financial independence).

I am having a very hard time explaining this to my wife. She basically doesn’t believe that I could have ever “retired” at age 36. She wants me to manage our finances but she definitely doesn’t have the same “intensity” about spending and saving that I have. Obviously I am willing to change things a little but I do not want to be in the rat race when I am 50.

She is aware that I have significant savings at this point. I have almost $400,000 in a set of Vanguard index funds that I contribute a total of $1,200 to each week and roll dividends back into. However she seems to think that these savings are for a house (we live in a really expensive area for housing). I have no interest in ever buying a house here and I plan on moving to the upper Midwest when I reach financial independence.

How can I explain these goals to her?
– Kelly

You need to simply tell her your plans. Your goal with all of this savings isn’t to buy a house. It’s so that, in a few years, you can move to the Midwest and do X with your life, where X is your plan after financial independence.

Having said that, you can’t expect to be able to just continue to follow that plan. You are getting married and thus you are intentionally tying your lives together. You need to have a life plan that you’re both on board with.

It sounds to me like you have a different life plan than your future spouse does and you have drastically different visions about what the next several years hold. You have to sit down and talk about this before you get married or you’re going to have constant arguments and difficulties in your marriage.

You can’t expect that your wife will completely commit to the exact plan you have. If that’s your vision, then you probably shouldn’t get married.

Q4: Scheduling reading

I love to read and want to make it a daily habit. One thing I struggle with is putting the book down and going to bed. I hate ending in the middle of a chapter or paragraph, but a lot of books I’m interested in keep me wanting to start the next chapter – even if it’s after bedtime. You’ve mentioned in the past that you read daily – how do you stop on time?
– Sara

I plan on reading at least one hour each day. I actually block off time for this. In addition, I also read just before bed, usually laying in bed with minimal lighting as I tend to get tired after a bit of reading and just go to sleep.

For my hour of scheduled reading (which is usually more challenging reading, whereas my reading before bed falls more into the “page-turner” category), I usually plan it without a hard end on the time. I then set a timer and read for the full hour.

When the timer goes off, I continue until I reach the next natural stopping point, put the book down, and walk away. There’s always something else I should be doing, after all.

In bed, I read using a Kindle Paperwhite with backlighting. I turn all the lights off and use the lowest possible level of backlight that my eyes can handle, which really doesn’t add much light to the room. Unless I’m not really tired, I fall asleep quite fast.

Q5: Friendships and money

When my roommate and I graduated from college we both launched a number of startup companies, some funded out of pocket and some by family members. We were still roommates and would eat lunch together each day to talk about ideas which we still do.

The problem is envy. One of his startups took off like a rocket ship and he eventually sold it to Microsoft for a lot of money.

The thing is he still lives in a little apartment and we still have lunch together each day and now he’s trying to launch more startups (though now he gets easy media attention for the stuff he’s doing). He drives the same old junk car even, an old Honda Civic.

I am having a hard time dealing with knowing how wealthy he actually is. We have never paid for each other’s lunch, but I sometimes have to scramble together the cash and I know that he will never have to do that again. Then I wonder why he can’t just pay and then I feel guilty about it and then I feel mad about it.

Do you have any friends with which you have a big income gap? How do you deal with it?
– Sam

To me, this sounds like a friend who wants to have the same life he’s always had – or at least as close as possible – and that you are envious of the success he’s had. The solution is simple: you’ve got to drop the envy.

It sounds like your friend is trying really hard to make his success a non-issue in your friendship. He still meets you all the time for lunch at what sounds like the usual places you met before wealth happened. He doesn’t seem to be doing anything whatsoever to flaunt his wealth. It sounds like he is really trying to make it a non-factor and have at least one friend who is a friend because of who he is, not because of his wealth or his perceived influence or his public persona.

It’s up to you to decide whether you can put your envy aside and meet him in the middle… or you’re going to give in and look at nothing but his wealth and perceived influence. That’s a call you have to make.

Just remember, your old friend needs you and he’s trying to make his wealth as much of a non-issue as possible (that’s how this story sounds, anyway).

Q6: Extreme altruism

I really wanted to hear your thoughts on this article: Extreme altruism: should you care for strangers at the expense of your family?

I think there is an interesting argument here but it really seems to run counter to many of the ideas you share.
– Alex

This article brought lots of thoughts to my mind and it is really worth reading if you’re interested in the balance between personal finance goals and altruism and charity.

I think that there are always people that are worse off than you are. There is no one reading this website that isn’t already in the top half (at least) of people in the world in terms of opportunity and resources. Every single person reading this site is making constant choices that elevate their standard of living substantially above the standard of living of many other people in the world.

The question comes down to what this article describes: a deep uncertainty of how we are supposed to live. I’m going to quote the rest of that paragraph: “Is it good to try to live as moral a life as possible – a saintly life? Or does a life like that lack some crucial human quality? Is it right to care for strangers at the expense of your own people? Is it good to bind yourself to a severe morality that constricts spontaneity and freedom? Is it possible for a person to hold himself to unforgiving standards without becoming unforgiving? Is it presumptuous, even blasphemous, for a person to imagine that he can transfigure the world – or to believe that what he does in his life really matters when he is only a tiny, flickering speck in a vast universe? There are powerful forces that push against do-gooders that are among the most fundamental, vital and honourable urges of human life.”

The thing is, there aren’t any easy answers to those questions. Lately, I’ve found some personal comfort in philosophy, as questions like these have fallen heavily on my mind, but that creates its own problems.

Almost every choice we make each day has moral complications if you start looking very closely and, at some point, you simply have to shut off that voice and do things or else you find yourself in complete lockdown, unable to act.

In other words, I don’t really have any answers to the questions this article asks. I certainly don’t have any answers that make any sense outside of my own head, and things barely make any sense in there anyway.

Q7: Store-to-store variance

For Christmas, my wife bought me two pairs of Levis jeans. I have never owned a pair of them and I was thrilled with the quality. So in August I decided to buy a couple more pairs of them. I went to TJ Maxx and bought two pairs of the same model (505). They were junk. They seemed fine at first but after like the third washing they seemed to basically come completely unraveled. FYI Levis is junk these days.
– Dave

Levis, like some other companies, engage in the somewhat sketchy practice of selling their brand to other manufacturers in order to be sold at lower-end retailers (like TJ Maxx). In other words, a pair of Levis 501s bought at, say, TJ Maxx, will not be the same as a pair of 501s bought from, say, Levis, in other words, sells their name in order to make more profit, at least in the short term.

This kind of practice throws a real monkey wrench into spending decisions, especially for people who like to seek out discounts. You have to really examine the jeans before buying them because you can’t trust the brand.

When I find out that brands have done this, I tend to trust that brand very little in the future. I know I can’t rely on their name any more. When that happens, I tend to look much more favorably at store brands and generics. I also value examination of those kinds of products, meaning I look really carefully at jeans when I buy them.

Q8: Upfront cost of LEDs

I think you’re crazy on the LED bulbs. I did some calculations around the house and it is going to cost about $500 to replace all of the bulbs with LEDs. I counted 44 bulbs and I can’t get them below $10 a bulb and some will be more. I’m not paying $500 for light bulbs!
– Connie

OK, don’t pay $500 for light bulbs, but it’s a very shortsighted view.

Let’s say you pay $10 for a single LED versus, say, $1 for a normal incandescent. That LED is going to last for 20,000 hours, whereas the incandescent will last for about 1,000 hours. So, you’ll have to buy 20 incandescents to match the lifespan of one LED, so the incandescents will actually cost you $20 versus buying one LED for $10.

Now, let’s look at the energy over that 20,000 hour lifespan. Let’s say the incandescent is a 60 watt bulb and the LED produces about the same amount of light for 12 watts. Let’s also say you’re paying $0.15 per kilowatt hour. To power the incandescent bulb, you’ll need 120 kWh of energy, which will cost you $180, but with the LED bulb, you’ll only need 24 kWh of energy, which will only cost you $36 and thus save you $144 over the course of the bulb’s life.

So, that single $10 bulb purchase ends up saving you $154 versus the cost of buying and powering 20 incandescent bulbs over that time frame – and that doesn’t even include the time of buying and replacing bulbs.

So, sure, you save $9 by buying the incandescent bulb right now, but you end up with a huge expense over the long term.

Q9: Time sheet dishonesty

Even though I’m a salaried employee, I am required to fill in a timesheet. There is a mandate at my job that I cannot work more than 45 hours per week and we have to account for time.

Now I have a great boss who rewards most of his workers for good performance with “free” time off. He’ll tell us to get out of here on Friday afternoons and have us fill in our timesheets as though we left at 4 PM.

I am wondering if that can ever legally get me in trouble since I am submitting fraudulent timesheets.
– Shawn

This sounds a lot like the system that many salaried federal employees find themselves under. They’re required to not work overtime and essentially function as hourly employees with timesheets and no overtime work offered or allowed.

In this situation, I’d just follow your boss’s instructions. View it as a reward or as a team-building exercise or as a multi-hour paid break. In essence, your boss is giving you a perk for good performance, so just accept it for what it is.

I previously had a boss that had very much the same approach. He was far more interested in performance and deliverables than anything else and considered timesheets and hours a joke, provided you were present at key times.

Q10: Does FoodSaver actually save money?

Have you ever used a FoodSaver? Does it work well? Does it save money?
– Bill

I have used a FoodSaver in the past, but I never found the additional time and materials to be worth it versus using other freezer containers.

The advantage of a FoodSaver over resealable freezer containers is that food will last longer if it is stored in a FoodSaver. The disadvantages are that it takes longer and that you can’t reuse the package, meaning that it costs more.

At our home, we use the stuff we freeze pretty frequently so it rarely has time to get any freezer burn at all. If we freeze a meal, it’s usually used within a month. So, there is no advantage from using a FoodSaver system.

Q11: Most important factor?

What do you think is the most important factor in determining someone’s financial health?
– Alex

That’s easy – the percentage of their income that they spend each month. The lower that percentage is, the better your financial state is going to be moving forward.

If a person is spending 110% of their income, they are headed for disaster. If they spend 100% of their income, they’re living paycheck to paycheck and will probably see a disaster soon. If they’re spending 90% of their income, they’re saving for the future at least a little. If it’s more like 40% or 50% of their income, they’re going to be financially independent in a very small number of years.

That one number – the percentage of your income that you spend – tells a lot about where you’re at right now financially and, even more than that, what your financial state is going to look like going forward from here.

Q12: Managing a money-hungry hobby

Recently, I joined a model railroading club. I have an empty room in my basement that I use for hobbies and I have always wanted to dabble in this. I thought that it wouldn’t be that expensive and I would learn tips from the other members on keeping costs low but I was wrong. It turns out that most of the club members spend huge amounts on their own model railroads as well as a big model railroad that the club maintains in a display case at city hall. We’re talking more than $100 per train car and tons of expense on rails, landscape, switches, and so on.

So why not just back out? I started off buying a lot of stuff and setting it up in my basement – like $2,000 worth of stuff. I can sell some of it and could recoup some of the cost, but I actually enjoy it. It’s kind of Zen actually when I change around the landscaping and work on the tunnels and such. So I am going to keep it.

My challenge is always wanting more stuff like more beautiful cars for the train or more track… always more track. I will get these visions of having tracks that can run three trains at once that extend around the whole edge of my hobby room.

How do I keep this under control? It seems like a huge money sink.
– Darwin

Almost every hobby has some aspect that involves accumulation of stuff and some aspect that involves participation.

For example, with model railroading, the participation aspect involves actually constructing things, often out of found materials or out of stuff you already have on hand. It involves painting landscapes. It involves actually running the trains on their tracks. It involves hanging out with other model railroaders and talking shop.

The accumulation aspect comes from buying trains and train cars and new tracks and materials for landscaping. It takes up physical room, whereas the experience factors do not.

You have a choice as to whether to focus on experience or on accumulating stuff. You can search for materials for natural landscapes. You can change around the train layouts that you do have. You can use the paints and other materials you already have to make new layouts and experiences. You can hang out with others who have the same interests.

Or you can buy lots of stuff and hopefully have time for it later.

I used to find a lot of appeal in the latter option, but I’ve come to realize that the former option is really the better one. That’s why I’m in the process of roughly halving the size of my board game collection, for example, and I have a practically nonexistent book collection at this point.

Experiences trump stuff.

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.

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