Questions About The Career Game, Virtual Assistants, Rust, Life Insurance, 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. Very low interest debt
2. Family white board
3. Loaning money to a friend
4. Virtual assistant
5. Dividend stocks or not?
6. A little rust
7. Parents can’t retire
8. Zoning out at work
9. Need money in two years
10. I don’t care anymore
11. Hate the “career game”
12. Daily repeated activities
13. End of a bull market
14. Stepping back
15. Why term life insurance?

My oldest son is passionate about soccer and he has started playing at a surprisingly competitive level. He is currently the youngest player on his team, playing with kids that are quite a bit older and bigger than him and some of them are very skilled with their footwork.

What has impressed me with this isn’t that he’s able to play in this league or anything like that. What’s impressed me is that he’s just not intimidated by the other players.

On Saturday, his team lost a hard-fought game 3 to 2 against a team of kids that had to be older in average age than my son’s team. My son mostly played on defense because that’s what he’s best at, but what blew me away is that he repeatedly stopped and got the ball away from some kids that were at minimum two or three years older than him. He did not allow himself to be intimidated by the situation and by the other players.

Over and over again, he ran up there and did everything he could to get the ball away from the other team. A few times, he hit the ground pretty hard, and he just got back up and went back to it.

When my nine year old son, who is a bit small for his age, isn’t intimidated by an eleven year old who is a head taller than him charging down the field straight toward him, why should I be intimidated by the challenges in my life?

Q1: Very low interest debt

I have $1,700 in debt at 1% till july 2016, $1,105 for 1 year no interest and 3k in savings, my tax return will be $1,500 where is the best place to put it? I dont want the burden of debt but I do need more of an emergency fund (about 8k).
– Jim

Given the insanely low interest and the fairly low balance of your two debts, I don’t see any problem with just sticking the full tax return into your emergency fund. (If I understand it right, you have $3,000 in there and hope to have $8,000 eventually).

I’d then just make minimum payments on the two debts, then pay off the debts entirely right before their interest rate adjusts. Since you’ll have more than enough in your emergency savings to cover that, it shouldn’t be a problem (though you should try to avoid emptying your emergency fund to do that, so you should try to find other means to pay them off).

An $8K emergency fund is definitely a healthy number, so kudos on making that a goal.

Q2: Family white board

How do you use a “family white board”? We have one in our mudroom and it mostly gets ignored because it’s either loaded with old stuff or it gets smudged and useless. We used to do a “week calendar” and a “grocery list” on there.
– Amy

We keep one in our entryway. It mostly just consists of a weekly calendar for the coming week, listing everything that isn’t strictly “normal,” meaning besides games and school. We also list our evening meals on there.

We occasionally keep a small grocery list on the side of it, but it’s mostly just for items that someone thinks of during the week that eventually gets copied down to a “real” grocery list.

The board is high enough that only Sarah and I can reach it (our daughter, who is the tallest child, can just reach the bottom of the board). Thus, it never gets smudged or anything like that.

So, I’d suggest just focusing on the calendar and putting it in a place that’s higher and won’t get smudged.

Q3: Loaning money to a friend

When I turned 25, I received a large amount of money from a trust left by my grandfather (I was his only grandchild). It’s enough to almost sustain me for the rest of my life as I have it invested well (it earns some dividends and other income but that’s all reinvested for now).

Almost no one outside of my close family knows I have this money and I try to live as though I do not have it.

Anyway, my best friend since junior high had to take on a lot of student loans. She just now graduated with a doctorate in social work and has well over $100,000 in student loans. I admire her for going into social work and she’s going to find plenty of work, but it is not going to earn a lot of money. She is going to be burdened by that debt for many many years.

I have been thinking about lending her the money at zero interest to repay all of her loans. However, I have heard horror stories about people not repaying loans like this. I have known her for many years and I know she will repay it. What should I do here?
– Erika

What happens if your friend decides not to repay? What will that do to your friendship? Ignore your own gut instinct that your friend will of course pay you back. What if she doesn’t?

You have a very good chance of losing a friend if you loan your friend money, even if you do it with a promissory note (making it legally enforceable). If you do it on a handshake, the only reason your friend has to repay you is out of personal trust. You’ll have a hard time getting that money back if your friend chooses not to repay you. If you use a legally binding agreement, you have a chance of seeing your friend in court.

The other option is to gift it, but that’s probably not something you want to do and it can create its own mixed feelings.

I would never loan a friend any significant amount of money. For small amounts, I tend to just give that money to friends under the assumption that they’ll eventually do the same in return.

Q4: Virtual assistant

What do you think about “virtual assistants”? The idea is that you pay someone remotely by the hour to take care of some online tasks for you like filtering your email, handling common emails, make reservations, and so on.

I ask because my job offers 10 hours a week of virtual assistant service for people with certain job titles. I was recently promoted and talked to other people about it. Some of them loved it, some hated it, others didn’t use it. Just looking for more thoughts from people I respect.
– Carrie

I attempted to have a virtual assistant several times between 2009 and 2011 because managing The Simple Dollar was becoming overwhelming. Eventually, I chose to sell the site because I was having a hard time keeping up with both writing and site management.

During that time, I had largely good experiences with virtual assistants, with one caveat: I had to be very clear on what I wanted, and that required a lot of time and effort to make my instructions very clear, especially at the start.

If I were a busy professional – especially a self-employed one – I would strongly consider a virtual assistant. I’d even consider using one right now, but I basically feel like I have a strong enough workflow at the moment as to not need one.

In other words, I’d use it if I were you, assuming you have some discrete tasks that you can easily write a clear description for.

Q5: Dividend stocks or not?

I’m 34 and have been investing in stocks for approx 4 years and have accumulated a nice amount of stocks/etf’s/etc. I’m single, and a renter, and make solid salary, so i’m taxed in one of the highest brackets. I need your help figuring out the math of my investment choices.

Allow me to hopefully clarify. I love the idea of dividend investing and passive income. I currently own about 60% of my portfolio which are dividend paying stocks between 1-5%, with DRIP activated. I love seeing the stocks grow and the compounding interest of course. What I can’t figure out a clear answer on, is am I hurting myself in the future because of my high tax bracket–so my dividends are showing up as additional cash received and raising the amount I owe to the IRS.

So bottom line–at my current position would I be better off investing in NON-dividend companies such as Google/Berkshire/Amazon/etc INSTEAD of dividend paying companies? Presumably those companies will grow at a faster pace since they re-invest their cash instead of paying it out, and then I’m not paying more taxes.
– Charlie

This assumes that you’ll be selling these stocks at a point where your taxes are lower than they are right now. You’re betting on a long-term future where capital gains tax remains lower than your normal income. The cost of that bet is that you’re severely restricting which stocks you can invest in if you’re avoiding dividend-paying stocks, which limits your diversification. I generally don’t make bets like that.

Another thing to consider is that these dividends are likely qualified dividends (because you’ve been holding the stocks for a while), which means that you’re paying the long term capital gains rate on them already.

I just don’t see that you’re going to be gaining enough by moving your investments around right now to make it worthwhile.

Q6: A little rust

After this horrid winter, I have started to notice a little bit of rust on a few corners of my car. It’s a 2003 car I bought used about six years ago. I know that if it is just left alone it can really rust out your car but at the same time I don’t have a lot of cash to fix this right now. Fix it with debt or no?
– Terry

If I were in your shoes, being a person who will trade off a car once it starts giving me consistent troubles, I’d probably just look for an inexpensive over-the-counter rust treatment and use that to keep the rust at bay for the time being rather than going in for a truly professional fix.

It won’t do nearly as good of a job, but it will slow down the advancement of the rust and it’s way less expensive.

Ideally, you’ll be selling or trading the car for other reasons before the rust becomes an overwhelming problem. It might cost you a little bit on trade-in or resale value, but as old as the car is, it’s not going to be worth a lot no matter what you do.

Q7: Parents can’t retire

My father is 64 and my mother is 62. Recently, I discovered that they have no retirement savings whatsoever. Neither one is in line for a pension so they will be living off of Social Security. There is no way that they will be able to survive off of Social Security money even if they don’t take benefits until very late.

What should they do? And what should my brother and I do? I am really concerned that they will rely on us to survive.
– Jane

The four of you need to sit down together and have a conversation about the future. It’s not going to be a fun conversation, but it needs to happen.

Clearly, your parents can’t retire in the next several years at the very least. It’s likely that they’ll continue to work until they can no longer do so, out of necessity.

If they have any sort of expectation other than that, they need to make it clear – and you need to make it clear that if they don’t voice that expectation, you’re not going to be able to help them if they decide to change course.

You need to be planning ahead together so that neither one of you winds up with an ugly surprise in a few years.

Q8: Zoning out at work

How do you handle it when you “zone out” at work and find yourself just staring at your screen or at the wall not doing anything? I find myself doing it several times a day and when I snap out of it a lot of times several minutes have passed. That’s like a good hour lost each day.
– Mary

I generally don’t worry about it. Why? I’m pretty sure that the time I spend “zoning out” is time where my subconscious is actually working through problems.

I find that when I get back to work after “zoning out,” solutions to challenges – like how to write something that’s tricky – come to me quite easily, whereas before it was a real challenge.

I would accept those unplanned “zoning out” moments as being a helpful thing. I certainly see them that way.

Q9: Need money in two years

I have about $60,000 saved. I had been investing it in the stock market but I was on the verge of buying a house and so I took all of it out and paid taxes on it leaving me with $60K or so. But then the house fell through for a lot of reasons and I have decided not to buy for a year or two.

What should I do with this money? I have $60K sitting in savings right now and I intend to use it in about two years. Should I put it back into stocks or buy bonds or just sit on it?
– Marcus

If you’re intending to spend it in one or two years, I wouldn’t put that balance at risk. If you put it back into stocks, you are putting it at real risk because the stock market can be very risky over the short term. Look at 2008 for an example of that.

I’d just leave it in that savings account. If you want to earn a slightly better return, talk to your bank about their 1 year CD rates. Are they better than the savings account?

Another option is to shop around, both online and offline, for better savings account rates. If you can get another 0.25% in a FDIC insured savings account, you’ll get an extra $150 in interest over the course of that year. That’s worth shopping around a little.

Q10: I don’t care anymore

A few years ago I had a great job. I was engaged to be married. I loved going to work and I felt like everything was good. I had big plans and ambition.

Now, I can’t even get an interview. My girlfriend broke the engagement and then dumped me so I am single. I barely leave my apartment. I don’t want to do anything but sit around and surf websites. I survive month to month thanks to my parents who send me money all the time but I feel really guilty about it.

I want to care, but I just feel like I don’t care about anything any more.

I want things to get back to the way they were but I don’t know where to start.
– Dave

My honest reaction to this is that you may be suffering from a form of depression and that you may want to consult a doctor if at all possible.

A series of strong stressful events and disappointments can certainly trigger longer-term disorders. You should absolutely seek medical assistance to find out if there’s a way to fix this.

If you had ambition a few years ago and it’s vanished, that’s a change inside of you that needs to be fixed.

Q11: Hate the “career game”

In my field (software engineering), most people are extremely invested in what I call the “game.” Basically it’s a never ending cycle of certifications and classes to keep “current” on technologies we will probably never use. Most jobs are pretty high stress with long hours, too. I love the work but I hate the stress of the environment and the constant long hours with classes on top to boot. I just want to find a way to do what I love without feeling burnt out all the time.
– Phil

It sounds to me like you’re taking all the steps needed to stay in the top level of your field, but that all of that effort is burning you out.

My question would be how valuable it really is to stay in that top 10%. Is the extra compensation above “average” really worth all of that extra effort?

There are many positions for people with your skill set. Many won’t pay as well, but they offer other advantages that will likely help lower your stress level. Consider jumping on board some of those.

Q12: Daily repeated activities

How do you handle daily repeated activities on your to-do list? Do you just enter a lot of things and have them repeat daily (which makes your to-do list each morning look long and scary)? Do you just trust yourself to do it?
– Sara

The most successful approach I’ve ever used for this is to have a laminated “daily checklist” that was separate from my main daily to-do list. On my daily list, I just had one item – “daily checklist.” That served as a reminder to use that daily checklist.

That way, I didn’t get overwhelmed with items when checking my normal daily to-do list, but I also had a useful reminder of all of the things I wanted and needed to do each day.

I actually just use tags for this right now in my current list manager, Todoist. I basically hide all of the items that have a “daily-checklist” tag, but have another item that says “Do daily checklist.”

Q13: End of a bull market

So for the last six years the stock market has more or less gone up nonstop. At some point it will stop going up, right? Should I be worried about this? Should I change my retirement account?
– Sam

If your retirement account is appropriately balanced for your age (meaning it’s mostly stocks when you’re young and is more diversified when you’re close to retirement), I wouldn’t touch it. That’s what it should be.

Guessing when the market will have a downturn and trying to make moves in advance of that is called “market timing” and from what I’ve seen, it’s mostly a fool’s errand. No one can accurately predict the ups and downs of the stock market.

Yes, there will probably be a downturn in the near future. It might start tomorrow. It might start three years from now. If you assume that it starts tomorrow and sell all of your stocks but then find that it didn’t start for three years, you just lost a ton of money. If you assume that it will start in three years and wait for three years to sell, you just lost a ton of money.

Your best approach, assuming you’re in it for the long haul, is to just sit on your investments and wait. Only move out of stocks if your pre-planned date for using that money is getting closer.

Q14: Stepping back

Do you have any advice for stepping back from a charity that you used to volunteer for a lot but have gradually become somewhat disenchanted with? I still think they do good work but … there are some negative people there who have made me feel less than welcome. I’m not interested in a big conflict but I also feel guilty stepping away because I do appreciate the work that they do.
– Mona

Just do it politely with minimal drama. There’s no need to create a big issue about it. Simply state that you want to invest more of your time in other activities and interests.

You don’t have to burn your bridges on the way out the door. If you leave politely, you’re not going to leave behind a big negative image; instead, it will be largely positive.

If you burn a bunch of bridges on your way out, you’re not going to really change anything either. The only person that might feel better is you in the very short term, but over the long term, you’ll lose a lot of respect from the other people.

Q15: Why term life insurance?

My wife is pregnant and due in October and I have decided to get some life insurance on myself so that if I were to die suddenly my wife and baby would be able to make it just fine.

I have read some of your articles where you mention life insurance and you seem adamant that people should only consider term life insurance. Why? What’s so bad about other insurance?
– Dean

Term life insurance is your simplest form of insurance. If something happens to you during the term of the policy (usually ten, twenty, or thirty years), your beneficiary receives the value of that policy.

Other forms of insurance, like whole life insurance, mix in investment packages alongside the insurance so that they build in value over time. Most of the time, these packages look really good if you look at the very long term returns for them, but if you look at the short-term returns, they’re just not all that great.

In general, given the price difference between term policies and other policies, you’re better off independently investing that price difference into things that you have more control over, such as in a retirement account. Almost always, you’ll get a better return that way, plus you’re not tied to an insurance package for life.

I almost always recommend term life insurance for everyone because of that. Term policies are easy to shop around for, too.

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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