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. Buying cheap or for life
2. Best financial decision?
3. Grocery store ethics
4. Stuck in a tough spot
5. Taxes and early retirement
6. Being “rich”
7. Organizational credit card
8. Trusting the bank
9. Buy it for life: skillet
10. Dollar Shave Club thoughts
11. Is a HSA useful?
12. Escaping past
13. Financial responsibility over time
14. Book suggestion
15. GTD today
This past weekend, we didn’t really do anything special at all. Sarah and I finished a few household projects. We had a family movie night, then had an old family friend over for dinner the following night. I got to spend a few lazy hours just reading, which was really enjoyable.
After a run of busy weekends, it’s really nice to simply have two days “off” to stay at home, catch up on household tasks, and work on personal projects. I feel so much more together at the end of a weekend like that.
One more thing to consider when buying cheap or lifelong – will you lose the item? I tend to lose umbrellas each 5 years or so. Buying an expensive one does not make sense for me. Same for pens, kid’s sunglasses, etc.
As well, for some of my clothing (I don’t grow out of clothes much), I know I’ll want to change style (I work in a school – our clothes are actually very important in the image we give our students) so buying clothing that will last 15 years makes no sense. Except for winter coat – I just bought a reasonable one in navy blue because I couldn’t trust myself to enjoy a more trendy color for more than 2-3 years. I’ve loved navy blue for decades now, so I’d rather change scarves every few years than a $200 down coat (we’re in Canada and I have recess duty outside).
I agree with you on many of those items.
I’ll take pens for an example. I used to swear by the Fisher Space Pen (for my pocket) and the Retro 51 (for my desk) in terms of a pen that will always work well. The problem is that they each cost more than $10 and, with kids and a wife who will often “borrow” my pens and forget where they put them… they’d go missing.
So I switched to using the best “cheap” pen I could find, which is the Uniball 207 Ultra Micro. I buy these by the box. They’re just tremendous pens and they cost about $0.70 each. Considering they never clog up and I don’t need to toss them until the ink runs out (I don’t think I’ve ever tossed one early), I love having them around and if I misplace one… it’s only $0.70, not $20.
I also agree with your suggestion of kid’s sunglasses – I wouldn’t spend very much at all on them. In fact, I’d never buy anything “for life” that was primarily used by my children.
I understand what you’re saying about clothing, but I’m not much of a fashion chaser, so I just buy clothes that will last a very, very long time.
You do a great job of relating your mistakes and how you overcame them, but what about the good moves you made? What is your best financial decision that wasn’t just fixing your own mistake?
The best financial decision we’ve made in a long time was our commitment to live off of Sarah’s salary alone once our house was paid off.
When we submitted that last payment to pay off our house, we sat down and talked about what to do next. It was at that point that we really decided to commit to early retirement and our method for doing that was to live off of Sarah’s salary alone.
Since the end of 2011, we’ve done just that and it actually hasn’t been hard at all. Sure, we could probably be driving nice cars and have amazing gadgets if we chose to do something different, but instead we have a very healthy start on our dream of retiring very early. I haven’t regretted it for a second.
How does this actually work? Whenever I’m paid for writing, we save a portion of it for taxes and put the rest of it directly into investments (this is actually done automatically). Sarah’s pay goes directly into our main account and we live as a family off of that money. Our budget doesn’t even mention my income.
When we reach a point where the investments are paying out dividends big enough for us to think about living off of, we’ll assess whether it’s time for us to change directions.
I had something strange happen at the grocery store and I wanted to know your thoughts on it.
I was looking at picking out a roast to cook in the slow cooker. My husband and I have roast and vegetables out of the slow cooker about once a week and it’s one of our favorite meals.
Anyway, I came across a roast that easily weighed two pounds, but the label on it indicated that it weighed 0.04 pounds and the price was $0.15.
Is it dishonest to buy it? I took it to the checkout and the checkout person didn’t notice, so I just took it home with me, but I felt guilty about it.
Personally, I’d tell them about it. The reason is that the label on the item was incorrect and didn’t represent what the item actually was.
Having said that, this is a minor enough issue that I really wouldn’t think any less of anyone who did this. After all, the store was the one that made the error here.
In fact, if I did report it, I would guess that, unless the person I interacted with was incredibly unfriendly to customers, they’d just let me have the roast for that price.
I agree with you about slow cooker pot roasts – they’re amazing. They used to be one of our routine meals before we switched to a primarily vegetarian diet (I’m vegetarian, but no one else is – however, most of our meals are vegetable-heavy).
I’m deeply in debt, have no savings, no assets, and am well behind where I should be compared to my peers. Im trying to correct my financial behaviors. So, I got a second job because the first one just pays the bills and little else and I cant get ahead- it seems like- ever. The problem is – it’s draining the life out of me and I don’t know if I should quit and go on scratching by, or if I should hang in there. If I stay I could be out of debt in two years- maybe less, but if I leave It would take five or more years and maybe never if something new were to pop up. If I stay I could have relief sooner and maybe some savings and finally reach some financial goals. If I leave I would enjoy my life a lot more. The second job is very physically demanding- I thought- cool- I lose some weight too- It pays very well and I like it, but I come home stiff and sore, feel ill the next day, and can’t sleep well- it could jeapordize my full time job- which I get paid a lot more at. I have the best jobs for the money that I can get and I’m very lucky.
If the second job is significantly reducing your quality of life, you shouldn’t continue to do it. I’d walk away.
That doesn’t mean that there isn’t a second job out there that would work well for you. There’s likely another job out there that would serve what you want – earning some extra income so that you can work toward debt freedom.
If you like the idea of a job that encourages you to get into better shape, perhaps you can look for a job that requires some activity, but not as much as this job.
Regardless, if your work is making your life miserable, it’s not worth it. People should work to live, not live to work.
Under the usual “early retirement” plans, people are encouraged to put a lot of money into an investment account and then sell off those investments when they’re ready to retire. Doesn’t that create a HUGE tax bill?
There are two big factors that make the bill not as big as you expect.
For one, people typically don’t empty out their entire investment account all at once. They’ll usually leave much of it in place and slowly withdraw it or move it to other investments.
For another, when that money is withdrawn, it’s usually hit just with long term capital gains tax – and that’s only on the gains. That rate for most people is 15%.
So, let’s say you invest $10,000 and let it sit for ten years. At the end of those ten years, it’s worth $20,000. You withdraw all of it. You only owe taxes on the $10,000 gain and that’s only a 15% rate. So, out of that $20,000, you’re only paying $1,500 in taxes – that’s a 7.5% rate.
That’s pretty good. It’s far from what I would view as a giant tax bill.
What are your thoughts on the traditional goal of being “rich”? Let’s say you’re shooting for a net worth of five million or more. How would you go about it?
That type of goal isn’t on my radar at all. My goal is to save enough so that I can live off of the dividends, which doesn’t require anything close to $5 million in the bank.
If I were shooting for that kind of money, I’d focus entirely on entrepreneurship. The only way most people are going to build that kind of wealth is by either building a successful business or being at the absolute top of their field (and that’s only in a relatively small set of fields), so I’d focus on entrepreneurship.
Building a successful business usually requires you to throw your heart and soul into it, building a good idea into something that a lot of people really want and will pay for. I’d simply study entrepreneurship.
I am the volunteer treasurer of a small non-profit organization for a two year term. The organization has asked me to get a credit card associated with the business checking account. The card would have the organization’s name and also my name. I would open the credit card this year and cancel it two years from now. Will this card show up on my credit report and if so, how will it impact my credit score?
It depends on what you’re required to provide for this credit card. Are you required to provide your own Social Security number in order to get this card? If you are, I’d expect it to appear on your credit report. If you’re not required to provide that, it probably won’t show up.
If it does show up on your credit report, it will likely show up as a revolving line of credit. Honestly, it probably won’t have a tremendous impact one way or another, provided that the bills actually get paid on this card. If the card ends up getting pushed up to the credit limit, it could have a negative impact. However, if the bill is paid regularly and the balance remains low, it will probably give you a credit bump.
I have seen cards that were simply registered to the business and used the business’s tax ID for the card. I’ve also seen cards that were effectively registered to the person on the card. I’m not sure which this is, but a requirement of your Social Security number is a pretty sure sign.
I found your argument on behalf of an emergency fund to be very thoughtful. I had not considered that relying on a credit card during an emergency might not always work as in the case of identity theft as you mentioned or in other crises.
However, I can’t help but wonder if you’re not overstating that risk. Even in the event of identity theft, you should still have access to pre-existing lines of credit, right? Why would a bank ever call you and say “sorry but we are canceling your card”?
I’m not really too worried about the situation you describe.
What worries me is something like the Target credit card breach. During that period, my credit card was temporarily closed for a while as a replacement card was issued, which took a couple of weeks. No charges were allowed until I reported my new card as received.
If an emergency happened in that timeframe and I was reliant on that card for an emergency, then I’d have a real problem on my hands.
That’s why I can never fully trust credit cards for my emergencies. There are simply situations where they won’t come through for you, and that’s often when you really need them (think Murphy’s Law).
Do you know of a skillet that has a good no-stick surface that won’t just wear off in a few years? I have bought several Teflon skillets but the Teflon surface starts to wear off in three years or so and as soon as that stuff starts to peel you need to pitch it because you don’t want Teflon in your food. Suggestions?
Your solution is to buy a cast iron skillet and properly season it.
A cast iron skillet – after it’s well-seasoned – will develop a patina that is actually an incredibly good nonstick surface. You have to clean it a bit differently – with a wire brush and water rather than through the dishwasher – but it really works well.
I highly recommend the Lodge pre-seasoned cast iron skillet. While it’s “pre-seasoned,” I still recommend seasoning it a time or two by cooking something really buttery or fatty in it at first. For example, don’t cook eggs in it the first time you use it or else you may have a mess.
A cast iron skillet will last for many, many years of home use and you can cook practically anything in it when it’s well-seasoned.
I have read and learned some excellent techniques from your article https://www.thesimpledollar.com/save-money/the-frugal-shave/ but do you have any thoughts on the Dollar Shave Club https://www.dollarshaveclub.com/? Is it a value, etc.
My brother sent me an email asking me to sign up, and then he gets 5 bucks incentive toward his. 12 bucks (for cheapest option) doesnt sound bad, but it really limits what control I have to ‘save’ money on blades if they are going to charge me regardless. Maybe it’d be cheaper to just give my bro the 5 bucks, and save the $7.
I have two seemingly contradictory things to say about Dollar Shave Club.
First, compared to just buying cartridge blades, it’s actually a pretty good deal. Two, I signed up for it for a while… and then I cancelled it.
I unsubscribed because, frankly, they sent more blades than I actually use. With good razor habits – keeping them dry and using a razor cartridge sharpener – I wasn’t going through the number of blades they sent me each month. I quickly started building up a backup of the blades. After a while, it became silly enough that I just cancelled the service. I’m still working through the backlog.
At the same time, cartridge blades aren’t the cheapest way to keep cleanly shaved. That would be a safety razor with individual razor blades, which can give you a shave as cheap as a penny per shave.
I think for people who get a cartridge razor, don’t take care of the blades, and toss the cartridge after two or three uses, Dollar Shave Club will save money. The further you deviate from that, the less of a bargain it becomes.
I am 29, my wife is 28, we have no plans for children and are healthy. We both keep seeing articles talking about how useful HSAs are and we have the chance to put money in one, but if we don’t have any health problems is this a good idea?
HSAs are only beneficial if you actually have medical expenses. Without medical expenses, they’re not as useful.
However, that doesn’t mean you shouldn’t contribute right now. If you’re allowed to put money in there and it will stay there for a number of years, it can make sense to contribute a little each year so that you can cover expenses later on when they pop up.
Generally, HSAs are available with medical plans with a high deductible, so if you just put away a little ach year – say, $20 a month – you’ll find that you have $1,000 in there in four years. If you then have a medical problem in four years, you’ll have $1,000 to cover your deductible and it’s tax free.
So, the reason for saving isn’t for right now – it’s for things that pop up down the road a bit. I’d contribute a little, but I wouldn’t make it the highest priority.
When I was younger, I made a bunch of stupid moves. I wound up convicted on a drug trafficking charge that will haunt me for the rest of my life.
When I got out of prison, I felt like an outcast back in my home town. A lot of the “respectable” people will have nothing to do with me. If I go to community stuff I am basically just ignored.
My father went to bat for me big time and got me a job in an HVAC repair business. He paid for the classes I needed and got me a job thanks to an old friend of his.
The problem is that I don’t ever think I am going to get ahead here. As nice as my boss is, I know he’s nice because he’s an old friend of my dad’s and if he ever decides to close up shop I’m probably out of a job again or at the least I have no chance of ever managing this place or doing anything more. If I started my own business I don’t think I would have customers here. I just feel stuck.
I know that the obvious answer is to move and get a fresh start, but I’m not sure I could find a job like this anywhere else.
What should I do?
I don’t know exactly what you were convicted of, but if it is only one felony conviction, you may want to look into getting it expunged from your record. You can quickly find out if this is possible for you by contacting your lawyer.
If you’re able to get that conviction cleared from your record, then you no longer have to worry about background checks. You should skate right through them.
Of course, you may be in a situation where you can’t get that conviction cleared. If that’s the case, I would probably turn to your boss and talk to him about long-term plans. Is he planning on closing the business when he retires? Is he thinking of expanding or franchising? You have one person who does trust you in your field, so I’d look at what I could do to build upon that.
I’m dong a project on financial responsibility and I was wondering, do you knew of any research which tracks how much people care about it over time?
For example, intuitively it seems obvious that when the financial crisis hit and people may have started losing jobs, people cared very deeply about financial responsibility. This is likely displayed through a series of actions like:
A shift to using debit cards over credit cards
Consumer “consumption” on financial education (through the purchase of books, attendance at seminars, or visits to websites like yours)
People investigating their credit scores
Have you heard or seen of any study which tracks these or similar indicators?
The most obvious thing I know of along these lines is the upturn in savings rates during periods of economic downturn. If you look at that chart and go back to every point of economic downturn over the last twenty or thirty years, you’ll see a spike in savings rates.
Of course, over that timeframe, the economy has generally been strong much more than it’s been weak, so overall the savings rate has declined.
I don’t know of any studies that analyze actual consumer behavior beyond that.
You’ve spent most of the last decade researching and thinking about and experimenting with self-improvement. Have you ever considered writing a book that covers just the stuff that actually works?
I have, actually.
I have about six different half-written manuscripts floating around, one of which is basically what you’re describing here. It focuses on the things I’ve done in all of the different dimensions of my life over the last decade or so to enable me to change careers, build a business, have a tight family, get rid of all my debt, and gain a great deal of inner peace (among other things). I just stick with the stuff that actually works.
It is good to know that there’s interest in a book like that. When I hear these kinds of requests, I’m more likely to put a higher focus on that particular project.
Do you still use GTD as your system for keeping track of things you need to do? Or have you moved to something else?
I use what I would call a partial GTD system to keep track of all of my tasks.
Whenever an idea or a task pops into my head, I write it down (usually in Evernote). A few times a day, I go through those new notes in Evernote and do something with them, adding stuff to my to-do list or whatever needs to be done with each note.
Each day, I make a to-do list for the next day that usually has two or three big things and several smaller things. I also have a big ongoing list of “next steps” for projects. During the day, I just look at that daily to-do list and my big list of “next steps” when figuring out what I’m going to do next. I don’t like to waste time wondering what I’m going to do now.
Each week, I spend some time reviewing all of that, figuring out which projects are working and which ones aren’t and whether I missed anything.
That’s basically the same as the Getting Things Done system, though it’s not nearly as formal.
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.