Questions About Space Heaters, Engagement Rings, Insurance Company Failure, and More!

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. Space heaters
2. Selling off engagement ring
3. Site layout help
4. Planning for health care
5. Challenges of cooking at home
6. Money talk with new wife
7. Legality of personal finance blog
8. Life insurance if insurer fails
9. How I use Evernote
10. Credit card utilization questions
11. Spending now versus later
12. Dollar Shave Club tip

One of the strangest parts about a Midwestern winter is in the weather forecasting. The weather forecasters will tell you that a huge winter storm is heading your way and you’ll want to prepare for it with lots of supplies… and then the storm completely misses you.

At other times, there’s a huge storm that’s forecasted to go a state’s length north of you or south of you and it gets almost no mention on the local weather until it shifts direction six hours before the storm hits and you wake up to an unexpected foot of snow on the ground.

The best solution? Just assume there might be snow at any time and be prepared for it. Have your shovels and snowblowers ready for the worst.

Q1: Space heaters

Keep reading conflicting information about utility cost of space heaters. Thoughts?
– Eldon

Space heaters are cost effective if you primarily stay in one room in your house and turn your furnace down very low. It’s cheaper to use a space heater to heat a single room than it is to use a furnace to heat your whole house.

However, if you’re using a space heater to heat two or three rooms, it quickly ceases to be cost-effective. Your furnace is much more efficient than a space heater, though how much more efficient depends on the heater and the furnace.

So, are you willing to live in a situation where one room is heated by a space heater and the rest of your house is cold? If you are, than a space heater saves money. If you want several rooms to be warm, then just stick with your furnace.

Q2: Selling off engagement ring

I’ve been married for 3 years and I no longer wear my engagement ring.

It sits really high. It spins around. It snags on sweaters, gloves, etc. I’m afraid to lose it. I’m afraid to hurt it. It gets in the way.

I now wear a flat ring that I found on the internet that was super cheap.

When we picked out my engagement ring I thought it was the best thing ever and that I’d wear it always and bla bla bla. I was one of those girls that valued a big engagement ring. We spent ~4k on it.

My values have changed a ton since then. I now value paying off student loan debt and becoming independently wealthy and saving for retirement and not ever having debt again. (we are getting there thanks to your blog and blogs like yours and Dave Ramsey’s baby steps. So thank you!)

Here’s the deal… I want to sell it and use the money to pay down student loans. It sits in my jewelry box being sad. I am not attached to it in any way.

What’s the best way to sell it?
Should I do it?

– Jessica

Talk it over with your husband first and make sure that you’re not trampling on any emotional issues there. Then let it sit for another month and really think it over, and if you’re still sure you want to sell it, sell it.

The thing to remember is that an engagement ring is just a thing. It is not your engagement. It is not your marriage. It is a ring, a physical object that, if you’re not using it, you might as well sell it.

Another option to consider is whether you want to get the ring remade into something that fits you better and doesn’t snag on everything, perhaps with the jewels embedded in the band in a size that fits you well.

Q3: Site layout help

Hello! I love The Simple Dollar and want to create my own blog to promote you guys and add my own personal financial tips and tidbits! I love the layout of your site and blog and wanted to know which web hosting site you guys use as well as which website creator do you use? I want a similar layout that allows me to create a blog but have previews on my front page!
– Kevin

The layout for The Simple Dollar is a custom layout made by our team. However, there are many layouts that are similar to it; they’re typically referred to as “magazine” layouts.

Since I don’t know what specific software you’re using for your site’s back end, I can’t point you to any specific templates, but if you do some searching for magazine layouts within the template options for your site, you’ll find something that works.

Q4: Planning for health care

I love your thinking and approach to $ management, perhaps because it mirrors mine. However, I think you and Sarah missed one point in this post. It is the one that bedevils the best of us and is the least manageable: HEALTH CARE

This is the one expense we cannot adequately predict or accommodate. More families are brought to bankruptcy by this expense than any other thing. No one can predict the entire future or cost of healthcare. So, unless you are a Trump or CEO with unlimited resources, it is very unwise to rely on self-pay schemes to keep your family afloat financially. With Obamacare, flawed as it is, the ordinary family at least has a chance at self-financing insurance; with the Republican plans to repeal national-type healthcare access, and return it to the for lots-of-profit sector, we all stand to lose our shirts as the result of an accident, an epidemic, or simple arbitrary rising medical costs.

So, my question is: how do you plan to work this problem out? If you are young, healthy and active, it might not be much of a concern at this point. But the first time your son neglects to wear his helmet and gets a concussion falling off his bike, your family might be in deep do-do. With pre-existing conditions back in the insurance rate and approval mix, you might be priced out of the market. If you manage to escape high cost insurance or simple bills until you and your family are older, you may be denied [remember Obamacare required acceptance; the coming plans are oriented to guarantee profits for the companies and thus will be denying more applications as well as renewal of policies] Oh yes, arbitrary policy cancellations will most certainly occur, and you may well be left with nothing.

Murphy’s Law always seems to come into play. So, just when your son needs million-dollar surgery and follow-up, there may be no teaching positions available for Sarah, or there may be a general downturn in employment possibilities. Boom! there goes everything!

People in Canada don’t face this scenario and are much more free to plan because they can reasonably manage their lives, predict and control for future expenses. How can we in the States plan better?
– Stacy

Many studies have shown that national healthcare (like what Canada has) is much more cost-effective for the average citizen than the system we have in place here. It is a fact that the United States spends far more on healthcare per citizen and as a percentage of GDP than almost all other developed nations. We lag far behind nations with nationalized health care, simply because including all health care services under a single bureaucracy makes things more cost-efficient.

America has, and has always had, a strong independent streak that tends toward small governance and hard work and individual independence, which is a big benefit in some ways and a drawback in others. This helps us in terms of building a steamroller of an economy, but it hurts us in our resistance to adopting the most efficient solutions to broad concerns.

I feel that for every American who’s not exorbitantly rich, healthcare is like playing roulette with ever-changing rules. I feel like the Affordable Care Act was a flawed step in the right direction in terms of guaranteeing coverage for all, but the rules are likely to change again.

The only real solution I can recommend is to consistently spend less than you earn, stay out of debt, put away money for the future, have the best healthcare insurance package you can afford under the current rules, take advantage of things like COBRA if you have to leave your employer, and just cross your fingers.

Q5: Challenges of cooking at home

I thoroughly enjoyed reading your article of November 29, Figuring Out a Great Life on a Limited Budget. One fact mentioned in the article is that Americans now eat out more often than they eat at home due to a growing lack of comfort in the kitchen, and because of the time and planning it takes. I can’t help with time and planning, but have some thoughts about people thinking they can’t cook.

I have noticed this trend among younger friends, and every one of them tells me that they were taught to cook by their mothers and grandmothers, but the recipes just don’t turn out for them. When I ask for examples, they almost invariably mention cookies coming out of the oven either raw, burnt, or both. They are all using ranges about 2 to 8 years old.

When we moved to our current home 10 years ago, we bought a new range. And another, and another…until finally we had replaced the range SEVEN times in as many years. Whirlpool, GE, Kenmore, and the other usual brands. Gas, electric, dual fuel. Not one of them worked properly, and none of them were ‘cheap’. All came from Sears simply because I bought an extended warranty with the first one and all subsequent ranges.

I finally broke down and bought a Bosch dual fuel range with an electric oven and gas (propane) stovetop. It is expensive–about $3,000–but it works beautifully. It really didn’t cost me that much since I kept moving up a notch in price with each return under warranty, but it’s still a bit pricy.

It is my unproven theory that Americans are being led to think that they cannot cook because of the trash that is being foisted off on them as cooking appliances. They simply do not work, and the problem is often vast temperature fluctuations caused by the thermostat going bad–frequently in ranges with convection ovens. My nice repairman told me that. We have become fast friends.

So my advice to families who would like to eat at home but think that they can’t cook is to get a good range. You probably can’t say not to get one supposedly made in America. You know – the ones that arrive in boxes clearly marked “made in Mexico” or “China”. But you could recommend dual fuel stoves. Gas ovens are notoriously bad, but the gas stovetop is extremely economical and much more effective to use.

Consumers should also check the return, warranty, and repair policies. Sears, for example, will not replace a range unless it has had four repairs for the same defect within a year. But when you call for repair, they will schedule that repair 6 weeks out. I have spent literally weeks on hold with their customer service. And gone through two perfectly good phone handsets. The phone was fine, my temper not so much. Many smaller, local companies offer better warranties and service.

After cooking with several younger friends in my home with a good range, they are amazed that what they made turned out so well. Bosch needs to put me on commission.

With regard to Crockpots, some work just fine. But the stainless steel ones (the ones at Costco, thankfully) cook WAY too hot. I’ve had two. The enamel-coated, old-fashioned looking ones work fine.
– Alice

I actually think there’s a lot of merit to your theory that one obstacle today to learning how to cook at home is cheaply-made appliances that don’t heat evenly and tend to break frequently. There’s probably some truth to the idea that my obsession with finding tools and appliances that are reliable and long-lasting has led to success in our ability to cook most meals at home, and I agree with you that many tools and appliances in the kitchen are not well made or consistently made.

Part of the problem is that “family recipes” are often specifically written to match the nuances of the appliances where they’re cooked. Your grandma might make biscuits at 350 for 10 minutes in that old stove she’s had since the 1960s, but it does not heat the same as the new stove you just bought. Yours is going to heat differently, which might produce very different results. I know that our current oven has a coil in it that is about 5% warmer than what the temperature actually says on the display, something I only learned through trial and error and seeing some things inexplicably burn.

I am in complete agreement with you that fewer kitchen tools is better and having good tools is the best. I’d far rather have nothing in my kitchen but a few glass bowls, one good knife, a mixing spoon, one good blender, and a reliable stove and microwave and a toaster (and maybe a slow cooker with an actual crock in it) than tons and tons of specific tools that often don’t work. Get good kitchen tools! One good tool is worth ten junk ones.

Q6: Money talk with new wife

This August, I got married to a wonderful woman and the first few months of marriage have been wonderful. But there is a money problem on the horizon and I want to figure out how to handle it now rather than later.

When we first started dating, I was a pretty free spender as was she. We went on expensive dates, trips together, bought lots of stuff, and so on.

In the few months before our wedding, I started to have a lot of second thoughts about the expense of our wedding. We paid for all of it ourselves, but a lot of it went on credit cards. Right now, we have about $24,000 in combined credit card debt.

The more I thought about it the more I realized that I didn’t want that kind of debt hanging over my head. I still have student loan debt and a car loan and there will probably be a mortgage at some point. That kind of debt holds you in place. So I started searching for personal finance sites and found yours. I’ve read through a lot of the archives and I greatly value your thoughts.

My question is how I approach this change of heart with my wife. She does not seem to mind our growing debt and is more focused on her career. We have made a decision to not have children for at least five years at which point we’ll both be 32 and we’ll revisit the question then.

Looking forward to your thoughts.
– Stephe

I would approach it from the perspective of wanting to have your lives in the best possible shape when you’re 32 no matter whether you choose to have children or not.

Simply say that your primary focus of the next five years is to put you both in a place where you have limitless choices of what to do next when you make the ultimate decision as to whether to have children or not. You want a stay-at-home parenting decision to be an easy one if one of you chooses to make it. If you don’t, or if you choose not to have children at all, then you have the resources to pretty much follow any career avenues you might want.

Don’t focus on cutting back. Focus instead on building freedom, because that’s what you’re doing when you unshackle yourself from debts.

Q7: Legality of personal finance blog

I am a regular follower of your website and I truly enjoy your posts. The content is rich and useful in my life. It has inspired me to want to create my own personal finance website with a slightly different niche.

I was curious on the legality of starting my own personal finance blog. I recently graduated with a Bachelor’s Degree in Finance but I do not hold any professional certifications or designations. I want to provide educational finance information on budgeting, debt, and investments but I would not ask for any compensation from the visitors of the site. Instead, I would receive payments from advertisers and affiliates, similar to your strategy to help keep the site running.

I was wondering if you could provide me information on the legal requirements your site had to go through to be able to provide this information to the public legally. Thank you for the great advice and inspiration.
– Arthur

The rules that the Department of Justice operate under concerning financial advisors contains a pretty clear exception for advice given to the general public. This is the umbrella under which all financial blogs operate, as well as podcasters and radio hosts such as Dave Ramsey and Clark Howard and TV hosts such as Suze Orman and Jim Cramer.

Beyond that, each and every page on pretty much any financially-themed blog you’ll find makes it very clear that the site is for entertainment purposes only and that, if you want financial advice based on your personal situation, you should go to a certified financial advisor.

The only area where you might be grey is if readers email you and ask about specific investments and you don’t answer them in a public forum, which is why my reader responses to mailbag queries are completely public.

I never claim to be anything more than a guy who has worked to figure out my own financial issues. I am not part of the financial industry, nor do I claim to be, nor do I ever want to be.

Q8: Life insurance if insurer fails

I have read many of your insurance articles on your website and am very thankful for all the information you have shared in these articles. My question is, have you written any articles regarding what happens to life insurance reserves if a life insurer closes its business, not because of insolvency, but just closes its business (retires). My belief is in this instance, all life insurance reserves should go into a constructive trust for the policyholders until a new insurer is found, but I am trying to find literature to support that statement.
– Maxwell

Insurance companies have to go through a lot of regulation to be able to sell insurance to the public. One part of that is that they have to contribute to an insurance guarantee fund in every state.

So, if an insurer fails in your state, the first thing that happens is that in the short run, your insurance is backed by the money in that insurance guarantee fund. That fund then tries to find another insurance company to buy or take over your policy, at which point you basically function as one of their customers and then you pay them going forward. If they can’t, then the state fund continues to insure you for the length of your policy (but that doesn’t happen).

However, it’s worth noting that each state has a limit as to how much the insurance guarantee fund will actually back up. Many states have a cap of $250,000 for payouts from their insurance guarantee fund, so if something were to happen to you while the state was running your policy, that’s all you’d get.

You can use Google to find out the specifics of the state guarantee fund for your state by just searching for the name of your state plus the phrase “insurance guarantee fund.”

Q9: How I use Evernote

I see that you are an Evernote user I recently upgraded to the plus membership for 18 months and have put a lot of documents for work that I can access off-line also some personal info as well. I would be interested to know how you utilize Evernote or if there is a past article I missed about it.
– Jim

First of all, Evernote is a simple tool available for smartphones, Windows, Mac, and the web that lets you keep and organize notes of all kinds – written notes, images, sound recordings, and mixed media. They store all of the notes for you in an account.

My biggest day-to-day usage of Evernote is in a single note, actually. I have an ongoing “Things to Think About and Remember” note that I access constantly to add notes, quotes, images, things I need to remember, ideas, and all other miscellany. Once a day (at least), I go through that note and process everything in it. I used to make a note in my “inbox” for each of those random thoughts, but I’ve actually found it more efficient to just use one note for it. Many of the items are things I can take action on immediately, like adding something to my bigger to-do list or adding something to my ongoing grocery list or launching a new document for a new article idea. Some of them are things I want to hang onto for later, so I have a note system so I can retrieve those notes at a later date. I don’t use Evernote for storing everything like I used to because I found that there were too many “junk” notes in there that I had no interest in seeing again, so I started only saving stuff that I think I might genuinely want or need in the future.

I was tempted to turn this into an article on its own but I condensed it down to this single answer. If you’d like to see a full article on how I use Evernote, let me know and if I get a healthy handful of responses I’ll write one.

Q10: Credit card utilization questions

While I have been a faithful reader for some time, this is the first time I’ve written to you with a Mailbag question regarding how credit card usage affects credit scores and hope you might be able to help me with an answer.

I have 6 credit cards which have limits which total $54,450 and have about $11,521 balances on 2 cards with 0%.
-Card 1 – $9,800.00/$9,521;
-Card 2 – $17,000.00/$2,000;
-Card 3 – $10,800.00/$0;
-Card 4 – $8,600.00/$0;
-Card 5 – $5,500.00/$0; and
-Card 6 – $750.00/$0.

For months I was making it a point to use each of the cards at least once per month thinking it would help my credit score and make sure that the cards are not deactivated by the respective companies. Recently, however, I checked my credit report and, while the good was pretty darn good, it was noted that my credit score was negatively affected by using too many accounts. Question 1 is what is the sweet spot of minimal use/amounts charged of a given card per year? When should I use each card?

Also, when discussing credit utilization ration, I often see writers mention that credit scores will go down if you are using, say, $9,500 out of a $10,000 credit limit on a given card. I don’t know whether it is for ease of example, but it seems like everybody always talks about the credit limit of one card rather than the limits over all cards. Is credit utilization percentage calculated per card or by overall credit limits? In my case, Card 1 is almost maxed out (95% use of Card 1), but the others are not used (0% use of Cards 3-6) or not nearly used (15% of Card 2). Is Card 1’s 95% utilization going to hurt my credit more even though, overall, I am at about 20% credit utilization overall? What I guess I am wondering is which numbers matter most.
– Maxwell

First of all, the exact mechanism of credit score calculation is a trade secret, meaning that the exact formula is not known to the general public. All that is known is what Fair Isaac (the company that calculates the FICO score) has said along with observations.

In general, credit utilization seems to include all credit cards at once, so your credit utilization in terms of your credit score is at about 20%, as you noted. This is a pretty good number for building a good credit score. On the flip side of that, having too many lines of credit, as you’ve noted, can actually hurt your credit score a little.

A FICO score is made up of five parts:

35% – Payment history
30% – Credit utilization
15% – Length of credit history
10% – New credit
10% – Credit mix

You’re probably seeing a slight negative push in the “credit mix” area, one that’s probably being counterbalanced by the “credit utilization” area. If you were to cancel two or three of your unused cards, your credit score would probably go up a little. Your “credit utilization” would go up, but not enough to get into an area where it would have a big negative impact, and it would also likely boost your score in the “credit mix” area.

Yes, it’s not transparent, but it’s in that lack of transparency that Fair Issac Corporation has a product to sell.

Q11: Spending now versus later

Seems to me that the idea of financial independence has it backwards. Why would you not spend your money now when you know you’re healthy and can enjoy it?
– Daniel

Right now, when I’m healthy, is the best opportunity I have in my life to earn money, but not necessarily the best time to spend it. If I’m very happy with my life without spending a lot of money, why should I spend a lot of money?

The thing with financial independence as a goal is that you’re stacking money up in savings at a pretty fast rate. If I ever decided that something had changed in my life and I no longer wanted financial independence and wanted to spend my money on something else, not only do I have a lot of breathing room in my current day-to-day finances (because we’re spending a lot less than we earn), but I also have a bunch of money saved up that I can tap, too.

I have money there and I could spend that money… but why? It wouldn’t buy anything that contributes significantly to the joy in my life right now. Sure, I could get a few bursts of pleasure that fade pretty quickly, but, again, why? I get a lot more baseline lasting joy in my life from having some money in the bank and knowing that I’m heading toward a life where I don’t have to work for a living at a relatively young age. That actually makes me feel quite happy.

If that ever changes, well, I can always start spending more money.

Q12: Dollar Shave Club tip

If any of your readers use Dollar Shave Club you might want to be aware that their razors are supplied by Dorco, who sells razors from their own website. You can get the same exact razors for cheaper there without the monthly subscription since you can just buy them when you need them.
– Frank

Dorco does seem to be the razor supplier for Dollar Shave Club, so if you’re in it mostly for the razors, you can probably save money by buying from Dorco directly.

The Dollar Shave Club / Dorco razors, in my experience are of perfectly good quality and comparable to most cartridge razors on the market.

Personally, I believe the best bargain in shaving is to use an old fashioned safety razor like this one and replaceable individual blades. The upkeep cost on this is a tiny fraction of the cost of cartridge razors and gets a very close shave every time, though you kind of have to “relearn” how to use it after using a cartridge razor for a while as the most effective strokes are very different.

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.

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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