Questions About Goodwill, Emergency Funds, Library Openings, Cheese, 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. Roth IRA withdrawal question
2. Buy it for life: Goodwill
3. Year away from down payment
4. Retirement and disability
5. Having “a life”?
6. Making cheese at home
7. Can I afford this house?
8. Ames Public Library opening?
9. How to keep leftovers?
10. Unnecessarily large emergency fund
11. Donating time instead of money
12. Cheap video games
13. Home loan balance challenges
14. SNAP reality
15. Financial independence inspirational fiction

For the past four days, we’ve had guests staying at our home.

I love having houseguests, though I find it really exhausting. Spending quality time with people that I don’t get to see as often as I’d like is just wonderful and we often end up spending time doing things that we don’t usually do, like visit things in Des Moines that we often take for granted.

Still, when Monday morning rolls around, I can really feel the sleep I’ve missed. We usually “catch up” on sleep on the weekends, as Sarah and I average about five and a half hours of sleep during the week and about eight or so on the weekends. When we have guests, that extra weekend rest tends to get significantly reduced.

A nap might be in order today. I usually don’t take them, but when I can actually feel my wheels turning slowly due to inadequate sleep, a nap can really help.

Q1: Roth IRA withdrawal question

We have always been a two-income family. I lost my job over two years ago and emergency savings and unemployment benefits have all been used. We don’t use our credit cards but still have approximately 12K in credit card debt and we pay above the required minimum payment toward it each month. For many months now, thinking about the length of time (plus the amount of interest) it will take to pay this off in full is driving me crazy. I had hoped, of course, to find new employment and get rid of this debt with earned income but that has so far not happened. Would you advise using funds from a Roth IRA to pay this credit card debt off all at once and be done with it? I am over the required age for withdrawal without penalty now and as much as it upsets me to withdraw from the Roth, it bothers me more that we have lingering debt that is costing us money.
– Marvin

So, if I understand correctly, you’re over 59 1/2 and thus could withdraw from your Roth IRA without penalty. You’re wondering if it makes sense to use that money to pay off your credit card debts.

My biggest worry would be your other sources of retirement income. What does your retirement look like if your Roth IRA disappears? Do you have other sources of retirement income besides Social Security? Are you going to be reliant on working for some kind of wage at that point?

If you have a pretty well stocked 401(k), I’d pay off the debt. If you have nothing else, I’d strongly encourage you to seek out any kind of work right now and use every dime you can to pay down the debt without touching the Roth so that you have at least some kind of nest egg for the later years.

If I were in your shoes, after two years of not being able to find work in my field, I would be seeking any work I could find.

Q2: Buy it for life: Goodwill

You’ve mentioned before that there are some items you would buy from Goodwill and treat them as “buy it for life” because older models were well constructed. What is your list of those items?
– Jerry

Given the very low prices at thrift stores, I’d buy almost anything that’s on the shelf that doesn’t involve heavy electronics. Older models of blenders, microwaves, toasters, and so on – particularly anything that uses analog buttons and still works – are items I’d be happy to buy.

Most of those devices have extremely simple components inside of them. Prior to the advent of electronics in almost everything, those devices were straightforward and really well made.
Besides, even if something were to fail along those lines, you’re not out very much money.

The big thing I’d avoid is anything with significant electronics in it. A simple button pad isn’t too bad, but I’d almost never buy electronics there. (I say almost because there’s probably a situation where I would make such a purchase, but none immediately come to mind.)

Q3: Year away from down payment

My wife and I have been saving for a down payment for the last six years. When we first started we didn’t know the first thing about personal finance and saved our money in a savings account. Over the last year I have been reading your site and studying personal finance. We are now about a year from buying a home as we should have a 20% down payment for our price range then. But it is only earning 0.8% in this savings account. Should we put the money somewhere else where it might earn more?
– David

I wouldn’t.

Right now, you’re on pace to have enough for your down payment in a year, right? Let’s say you put all of it in the stock market and you had a good year – you might increase your balance by 20% (of which a quarter of it would go away in taxes). That’s good, right? But let’s say next year became another 2008 and you lost 40% of your balance. Suddenly, your home purchase is a lot further off.

This is true for almost any investment with risk at this point. If you put it in something with risk, you might be able to move your purchase date a few months closer – but you run the risk of delaying it for years, too.

I don’t see a huge benefit for you in terms of putting that money into something risky. The upside is pretty small but the downside is pretty awful.

Q4: Retirement and disability

I’m 53, separated and on disability. My problem is I want to save some for retirement. However, I don’t work so no 401K and I can’t contribute to Roth IRA any longer because I don’t have any earned income. I have a small mortgage of $42,000 of which I put as much as I can toward it each month. I have no other debt. I have some investments with Edward Jones – a $10,000.00 municipal bond that pays 4.5% and have invested $ 50,000 in municipal funds in the American Funds (what Dave Ramsey buys) which are now worth over $66,000. However, after your story today about expenses, I’m worried about these municipal funds fees. I am currently saving $500.00 per month and just putting it in Money Market account for now. However, I know I should be investing it in some low cost index funds thru Vanguard. Can you make some recommendations for me? I do have a roth IRA with about $13000 in it.
– Jill

If you have a permanent income stream that’s greater than your expenses, you’re in pretty good shape no matter what you do. There is no “best” move here, though – it depends on your goal. The safest move would be to pay off that mortgage as rapidly as possible. After that, you’d probably want to save for the future, particularly if there are potential health concerns.

However, I can’t fully back that advice because I don’t know your full situation. It’s apparent from your story that you make enough off of disability that you are able to put $500 a month aside for the future. Is that disability going to last forever? If not, then I’d put a greater focus on shoring up your retirement savings so that you can survive when the disability money disappears.

It really depends on the state of your disability, your benefits from that disability, and what your future goals are.

Q5: Having “a life”?

I am 36 and single after having been married for ten years during my teens and twenties. Since then I earned a degree and have a job as a lab technician.

I am really careful with my money. When my marriage ended I didn’t have anything at all in the bank so I was in a pretty hard spot for about two years. My parents helped co-sign some loans or else I would have never been able to go back to school.

So I save every dime I can and live really cheap. I take leftovers to work every day and when I go out with coworkers I usually just drink sodas. I have a “dumb” cell phone and I don’t have cable at home – I just watch Netflix.

My coworkers chide me for being cheap and that I should “get a life.” When I hear that, I honestly don’t know what they mean. There is nothing in life that I really want more than what I already have. To have other things, I would have to give up some things. I remember how my life felt when I came home and found my apartment empty and how the next few years went. What makes me feel good is knowing that could basically never happen again.
– Sam

If there’s nothing you would want more than the things you already have, then you’re on the right path for you. People are chiding you because they see you on a path that isn’t right for them (or at least that’s how they see it).

In other words, don’t worry about what they say. Sometimes, people feel uncomfortable when they see others on a life path that’s very different than their own even though their situations are similar. You’re of similar age and work a similar job – why are you valuing things so differently? For some, it can feel like their own values and choices are being questioned just because you’re doing things differently.

Don’t let it bother you in the least. Focus on what brings you joy, not what brings them happiness by proxy.

Q6: Making cheese at home

Have you ever tried making mozzarella cheese at home? I thought it sounded crazy too but then I tried it. This is what we did. It made a huge amount of mozzarella cheese from a gallon of milk, some citric acid, a bit of rennet and some salt – way more than we could use on two pizzas. If you wanted to make a few pizzas and maybe also make a tomato and basil and mozzarella salad you could use this recipe and have way better cheese for cheaper than buying chunks of it at the store. Plus it’s fun.
– Carly

I’ve actually done this and I was also surprised at how much cheese it made. I used a gallon of milk from our local dairy (Picket Fences) and it made enough for a few pizzas and a lasagna recipe.

I’m not sure if this is something you’d do purely to save money as compared to buying cheese at the store, but it is a pretty easy way to make some very good ultra-fresh mozzarella at home. It is cheaper than buying fresh mozzarella, but it does take some time.

I actually made this cheese out of a home cheesemaking kit I received as a Christmas gift two years ago that contained the rennet tablets and citric acid along with step-by-step directions. I think it was this one.

Q7: Can I afford this house?

A few years ago I asked you a question about quitting a stable part-time job to take a full tuition scholarship plus stipend for graduate school. My decision to do so was definitely based on enhancing my future rather than protecting my present. It worked out well. I graduated with honors and the award for outstanding grad student in my department. I found a full time job after about three months, a year later got a promotion to Director of Operations and have a new career in personal finance. The job is definitely stable and the career prospects are good. I received a small inheritance this year and I paid off a used car and the student loans I had left. So I have a stable job (doesn’t pay great, but has good prospects), no debt, and a dependable used car with only 30000 miles on it (which for a Corolla should mean a very long run). I generally max out my Roth IRA every year and there is some other money put aside for retirement and since I live a quite frugal lifestyle all retirement calculations put me in good shape for retirement at age 67. I also have disability insurance that would provide enough to pay the mortgage and to eat in case of full disability. I am a single woman and head of household with two kids.

My question is this: I am buying a house with a USDA loan; the interest rate is excellent – 3.75%. The taxes are quite reasonable and are capped at an increase of no more than 2 percent a year (State law); Home prices in the area I am buying in have apparently bottomed out in the last 6 months and are now projected to rise at 1.5% for the coming year. The house I am buying is quite a reasonable size for me and my two kids at 1300 square feet. Very small lot so not much maintenance; a community I love; house is in very good shape according to one inspection and two contractors. My monthly payment will be about 26% of my current income. The house is very well insulated so the gas heat should be reasonable. I know the electric will go up because I only pay about $50 a month for a house half the size. The house is slightly closer to my job and much closer to my kids school (they have scholarships to an excellent private school) – I drive them now to school but in my new location there will be a district bus (included in the taxes) so I will have significant gas savings as well as convenience (school is currently a 40 minute drive each way). The monthly cost for the house is about $200 more than I am paying now in rent; I can’t stay here any longer becasue there are some serious safety and structural issues with the rental. Last year there were many days we were without heat and this area was crazy cold.

I can’t really see any downside to the purchase; however, I am a bit worried about the money pit stories of houses and worry a bit about gigantic repair costs. I am a deeply frugal person – I will buy most of our furniture at yard sales, cook virtually all meals at home. The house is a simple one and has been well maintained. The house already has significant raised bed gardens and I am an experienced vegetable gardener so we should be able to grow some of our own food. I can also fix many household items myself. I will put aside about $5000 a year for house repair/replacement and I know how to find used items easily. There is no present need for any renovation projects, except painting two rooms. I am already anticipating replacing the furnace in the next five years and have an estimate for the replacement (and half of the money set aside for it already). I already have a car fund set up so should be able to purchase my next used car in 5 years with cash.

Is there anything I am missing? I read another personal finance blog and the commenters were having fits because a writer “only” had a $10000 emergency fund and that wouldn’t be enough for a house. I anticipate being able to pay off this house in 15 years, perhaps sooner as I believe in 6 months to a year I will be getting significant salary increase (I know there are no guarantees) AND I will have the space in the new house to launch a side business which I am already starting on. I am only putting about 5% down on the house rather than 20%, but the PMI is much less than normal PMI with this program, only about $50 a month. If I wait another two or three years to save up 20%, the price of the house is expected to increase 3 to 4% AND interest rates will rise, perhaps significantly. We would also end up paying more in rent as we can’t stay here and 3 bedroom rentals are running at least $400 more than I will pay for the mortgage/tax/insurance payment.

I see this as an investment in my future and my kids. The house is perfect for retiring into (16 years for me until retirement), quite comfortable for my kids to live in while they get out on their own – but not so comfortable and spacious that they won’t want to leave, lol. Why are some people so incredibly rigid about the 20% down and absolutely no debt before a person moves into a decent living situation? It makes me wonder if I am making a crazy decision. What do you think?
– Kelly

First of all, people are “rigid” about the 20% down issue because that $50 per month is $50 that’s just disappearing into the bank’s coffers. That $50 per month wouldn’t have to disappear if you had a 20% down payment.

Given the amount you’re budgeting for home repair and maintenance, plus your willingness to try to do things yourself, plus a solid home inspection up front adds up to a reasonable solution to the home repair and maintenance question.

As for whether you should do this, your overall situation isn’t perfect for this purchase and there are some gaps in the story you’re sharing here (like the size of your emergency fund, closeness of relatives and/or strongly supporting friends, your location and the state of the surrounding housing market, etc.). Given the information you are choosing to share – which is all in favor of the purchase – you’ve probably already decided to do it and just want my confirmation.

My thought is that there are people in far, far worse financial situations that have successfully bought houses. Some of what you say does point positively toward buying, but it’s really impossible to say for certain without a full look at your finances.

Q8: Ames Public Library opening?

Were you able to attend the Ames Public Library reopening on Sunday? Since you are such a big fan of the library I expected to see you there but I didn’t spot you in the crowd.
– Jane

As I mentioned at the start, we had guests in our home all weekend. We actually talked about going anyway, but decided that the crowds would probably make this a poor choice.

Instead, I plan on doing of my usual “library sessions” there sometime this week. Once every week or two, I go to a local library and camp out with a pile of personal finance books, doing lots of reading and research for future posts.

While I’m there, I’m really looking forward to exploring all of the changes.

Q9: How to keep leftovers?

Here’s our problem. My husband and I are great about eating leftovers the next day for lunch no problem. Problem is that most of the time there’s still some food left but not enough for another meal. So we stick it in the fridge in a little container and two weeks later we find it and it’s scary. This seems wasteful and stupid. Any bright ideas?
– Tammy

We have had this exact same problem before, actually.

Our solution is to have a “leftover night” every Thursday evening and Sunday evening. We choose those nights so that leftovers never sit in our fridge for more than three days.

On those days, we just pull out all the leftovers, assemble plates off of those leftovers, and warm them up. It might not be the most incredible cuisine of all time, but it’s usually just fine for a family supper.

If there’s still anything left after that – which is rare – we just chuck it. After all, it’s been through three meals.

Q10: Unnecessarily large emergency fund

I have about 10k in an emergency fund right now that I have been assembling this year. I don’t make very much money, and have about an additional 10k in a 401k and Roth IRA. My bills are pretty barebones, as I live a fairly spartan lifestyle and live at home, so 6 months of living expenses and an emergency fund wouldn’t require 10k just sitting in my savings account. I’ve had a few setbacks in my life, so I’m gun shy of what to do next. At first I wanted to invest it in my Roth IRA, but now I see that I need to increase my wages instead of saving more. I do have a few “passive” income opportunities (oddjobs and volunteer tax rideoffs). The job I currently work has weird hours, and I can probably use it as a second job. Is it wiser to invest this large (for me) emergency fund in my education, or put it in my retirement (I’m relatively young; 28, so letting it grow will benefit me)?
– Jeffrey

If you are single and young, you probably don’t even need six months of living expenses as your emergency fund. Three or four months of living expenses is probably adequate. Just make sure you’re figuring that all up correctly.

I’d probably go the Roth IRA route with the extra money, honestly. You are going to be incredibly glad to have that money starting in about ten years (when it takes some stress out of retirement planning) on through the rest of your life.

Remember that “spending less” and “saving” and “earning more” are not either/or choices. You can and should do all of them if possible.

Q11: Donating time instead of money

I decided to start donating 6 hours a week (about 10% of the time I actually work and/or commute) to the local food pantry. I stock shelves for them and organize materials and sometimes make phone calls.

Anyway, I told my family this and they were really shocked. They told me that I should be donating money because the pantry needs it more.

Since then I have felt guilty. What do you think about donating time instead of money?
– Mary

Honestly, most charities need both. They need people to take care of tasks and they also need money in the coffers. If you weren’t doing the work, they’d either have to cut back on services or pay someone to do that work, so it would either cost the charity money or reduce the service they could offer. The same is true without a money donation.

In my eyes, time is money. If you devoted that six hours to other work and then donated the proceeds, the food pantry would probably only be better off if you could earn enough to blow away the value of your six hours of volunteering.

My feeling is that the gift of time is just as good as the gift of money.

Q12: Cheap video games

My nine year old son has been asking for a “Playstation” for Christmas. I am familiar with the prices – $400 for a console and $60 games – and we just can’t afford that.
– Karen

Karen didn’t really ask this as a question – the rest of her email wasn’t really an appropriate reader mailbag question – but I felt like she touched on a great mailbag topic. What does a parent do if their child wants an expensive game console and expensive games for Christmas?

Our approach with this was to check out every used video game store in our area. We’ve had great luck finding used game consoles and used games – games that were the hottest new releases a year or two ago but are now on sale at used stores because of the “cult of the new” crowd – for very cheap prices.

Gamestop is the large national chain store that serves this niche, but they also tend to have the highest prices. Our experience has been better with local stores, which you can probably find with a few Google searches.

Start there. See what you can find.

A final tip: you don’t have to buy your kid the latest console. Instead of a Playstation 4, get a much cheaper and still incredibly fun Playstation 3.

Q13: Home loan balance challenges

We sold a house in 2013 while extremely underwater. Due to not only the economy but the city we lived in, the house sold for nearly 50K less than we owed on it. My credit union helped us by rolling the balance over into a 10 year, 0% interest note.

My question: Is there any advantage to paying this off early relative to other expenses? Our plans include new housing in the next year and ongoing retirement savings. We have a $1K emergency fund and 1 month’s income set aside. No other debt right now.

2nd question: Do you know of any programs that might help with this debt? We can manage it for now, but if I lost my job or had some other emergency, this could quickly become a heavy burden.
– Jim

If you have a 0% interest loan, it should be the absolute last thing you pay off. Honestly, 0% interest loans are pretty rare. If I were you, I’d just make the minimum payments on it.

If you want some security against that loan, go to your credit union now and talk to them about it. Ask them if they have a system where a loan like that can be “paused” in the event of a job loss. They very well might be able to do this, since this basically amounts to a personal loan.

Honestly, though, I wouldn’t stress out about it too much. This is about the “best” debt you can have. You’re better off just saving up a bigger emergency fund to protect you if things go bad.

Q14: SNAP reality

I am a single mom with a six year old daughter. My husband died in a work related accident that’s still under litigation. Right now I am doing everything I can to make ends meet. We are on SNAP (food stamps) and we only get about $220 a month in those.

I am writing to you not for financial advice but because I am sick and tired of people saying bad things about SNAP and food stamps. People act as though I am scamming the system and eating lobster every day. $220 a month adds up to about $7 a day for the two of us. Without it, I don’t know what we would do.

I work three twelve hour shifts a week on Monday through Wednesday. My daughter stays at a friend’s house after school on those days. On Thursday and Friday I work six more hours during the school day as a clerk so I can be home when she gets home from school and I watch my friend’s daughter on those days to make up for the days she watches my baby. On weekends I try to find stuff for us to do that doesn’t cost anything like going to the park.

I am not a drug addict. I am not a leech. I am not a jobless scumbag eating your tax dollars. I just want to make sure my girl has food on the table.
– Dana

I really don’t have much to say here. Dana says it all.

I will say that, of the people I have known that have been on the SNAP program, the vast majority of them were on the system out of pure hardship and were genuinely trying to find work and improve their situation. And, yes, I’ve known a lot of SNAP recipients over the years.

I have no doubt that there are people who are on the program that abuse it, but there are people that abuse every government program, from businesses abusing loan programs to taxpayers abusing tax loopholes. Is it fair to judge all taxpayers by the scumbags who refuse to pay their fair share? Nope. Instead, we should think about fixing the loopholes they’re exploiting. Is it fair to judge all SNAP users by the people who refuse to play by the rules? Nope. Instead, we should think about fixing the loopholes those cheaters are exploiting.

If you’re in a situation where SNAP could help you, use it. It’s a tool to help you improve your situation.

Q15: Financial independence inspirational fiction

Do you know of any novels that can inspire people to pursue financial independence? It seems like a boring topic but there have to be some decent ones out there.
– Charity

The only writer that comes to mind that wrote about financially smart characters in a sensible way is Charles Dickens. His novel David Copperfield is, among other things, about people struggling with crushing debt.

I could write quite a lot about David Copperfield. It’s really a novel about how money affects people in different ways, from the struggles with debt and with spending less than you earn that Micawber goes through to the failure of greed as a personal motivation that eventually exposes Uriah Heep as a true villain.

I can’t really point to any modern novel that does this well. I will say that the book Titan by Ron Chernow – a biography of John D. Rockefeller – is told in a novel-like tone and a good part of the early book is about Rockefeller’s very careful nature in managing his personal finances. It’s one of my favorite books.

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.

Trent Hamm
Trent Hamm
Founder of The Simple Dollar

Trent Hamm founded The Simple Dollar in 2006 after developing innovative financial strategies to get out of debt. Since then, he’s written three books (published by Simon & Schuster and Financial Times Press), contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.

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