Questions About Water Filters, Credit Limits, Lifestyle Inflation, Banking Errors 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. Income change and credit limits
2. Water filter advice
3. Figuring out lifestyle inflation
4. Upgrading wardrobe to “professional”
5. Finding specific used items
6. Best place for Roth IRA?
7. Value of rice cooker
8. Resolving banking error
9. Parking money in retirement
10. Next step after healthy savings
11. Simple at-home bodyweight exercise routines?
12. Best home repair / DIY magazine?

Recently, my father celebrated his birthday. He’s in his seventies now, yet I have memories of him from when he was close to my age.

He’s lost a step or two over the years. I have memories of long hikes with him up and down giant hills. I have memories of camping with him when I was younger. I have memories of endless days of fishing and of hours working in a giant garden with him. These days, he’ll still dabble in those things, but without anywhere near the same intensity.

My father, the man I thought was borderline invincible when I was young, is now pretty old. It’s just the reality of things.

Rather than lament it too much, though, I want to spend a lot of time with him before he’s gone.

This past weekend, I got to spend a few lazy days mostly just sitting around chatting with him and a few other family members. I asked him for some advice on some things, and some stuff about our family history, and many other things.

And I listened. And I learned.

I might not always agree with everything he says, but there is a lot of wisdom packed into his more than seventy years of living. He’s had twice as long on this earth as I have and has seen and experienced much, and he’s one of the few people I know who will speak the full unvarnished truth to me.

That’s invaluable, and it’s something I deeply appreciate. It’s something I will cherish and tap again and again for as long as he’s still around.

I love you, Dad. And I still have many, many more questions to ask. So, kindly stick around for a while, please.

Q1: Income change and credit limits

I am currently working at a small nonprofit. Last month the staff was notified that we were all being laid off because our main funder suddenly pulled out, and we haven’t been able to make up the difference. I have recently accepted a one-year position […] and will be placed at another nearby nonprofit. I will be paid a stipend […], not an actual salary. The amount of the stipend will cut my current, already-small salary roughly in half, but due to my investments I will not suffer financially.

I have an American Express Blue Cash Everyday card, and Amex contacted me yesterday to request that I update my income information. My question is this: what will happen to my credit if I inform them of the decrease in my income? I have three credit cards and pay them off every month.
– Caroline

It’s really hard to tell, because it comes down to internal corporate policy.

Typically, if you report a reduction in income to a credit card issuer, you’ll see a reduction in credit limit to match. That’s because, due to a lower income, you’re a bit more of a credit risk, even if your credit report doesn’t indicate any change in your behavior.

My best guess is that American Express will do the same in your case, lowering the credit limit on your card. This may have a slight impact on your overall credit score, but not a devastating one.

Q2: Water filter advice

I write you with a question about water filters. [O]ur water is VERY chalky. We recently just had a baby and to make his food and drink, we use bottled water. I keep telling my husband that we should get a water filter and he told me to look into it. I know the website often contains reviews of said items, ones that are the best bang for your buck while giving you the best quality possible. Do you have any advice on this topic? I did a bit of searching and found Consumer Reports, but I need a subscription and am not ready to commit to that just yet. I also found another blog of a woman who tested many options and the best one she came up with has a base cost of about $1500. So I was just wondering if TSD had any ideas on this topic!
– Marilyn

It depends on whether you are going to get a whole-house water filter or just one for the faucet. In other words, is the water so hard that it’s unacceptable to use it for things like baths or laundry?

If you’re okay using it for every home use other than cooking and drinking, then your best bet is to get an under-sink filter, which is relatively inexpensive. I am a big fan of the APEC reverse osmosis system, which is pretty easy to install. It requires that you devote some under-sink space to it, though, and you do need some plumbing skill. You can get faucet-based and pitcher filters, too, but they don’t do as well in terms of filtering out hard water (they only soften it somewhat) and they go through filters pretty fast.

For a full house system, I’d honestly talk to your neighbors about it and see if you can get local recommendations. The exact water situation varies so much from location to location that I would not invest hundreds or thousands of dollars into a system unless I knew it would work well with local water.

Q3: Figuring out lifestyle inflation

Got a better job, so I decided to buy some stuff I’ve been wanting. Replaced television, subscribed to HBO, redecorated living room, went out to lunch a few times. Basically trying to live a “normal” life.

Stepped back and looked at the bills over the last few months and I was shocked. Spent sooo much money. But now I look at my life and don’t want to cut anything. I finally feel like a normal person and not a weird hermit cheapskate.

– Manny

First of all, the idea of being a “weird hermit cheapskate” is almost always a construct of how you feel about yourself in terms of how you think others look at you. That perspective is almost always more negative toward you than how others actually view you. Most of the time, they don’t think of you at all, and when they do, it’s usually positive. The things you worry about most – here, it seems to be appearing to be a cheapskate – almost never pop up in anyone else’s mind but your own. How often do you really look at someone else and think badly about them as being a cheapskate? And, even then, how often does that thought really have any impact on their life whatsoever? The answer is: almost none. So you shouldn’t care in any significant way about what others think of you.

Now, if you think that in the past you’ve deprived yourself of things you want because you were trying to save money, that’s a different subject. My recommendation to you is to think seriously about the stuff you’re spending money on and ask whether those things are really adding value to your life. Are you really getting $15 a month out of HBO? Are you really getting $20 in value each time from eating out several times a month compared to just making food at home or having people over for dinner?

It sounds like you’ve spent some money on one-shot things in the last few months, such as redecorating your living room, and that expense should be over. Going forward, just put a very critical eye on new expenses. Do they really add value to your life, or are they just giving you a quick burst of pleasure or convenience at a high price?

Q4: Upgrading wardrobe to ‘professional’

I got a great new job as a receptionist a few months ago and earn $16 per hour. Couldn’t be happier with my job.

However, a few days ago, I had a performance review that was mostly good, but the area that was most criticized was my appearance. My boss said that I dressed unprofessionally most days and that I should upgrade my wardrobe.

I mostly dress in Target and Walmart clothes because I can’t afford anything else at least not until recently. I have asked for some help on improving my wardrobe from friends but they immediately point to really expensive stuff that’s out of my reasonable price range.

Do you have any tips for shopping for a low cost professional woman’s wardrobe? Maybe suggestions from Sarah?
– Nina

Sarah has a very modular wardrobe. She has a collection of professional work clothes that mix and match together very well and she does just that – she mixes and matches them to appear as though she has a lot of outfits when she really doesn’t have all that many.

Her suggestion is to choose really well made clothes – stuff with really good stitching that fits you well – and buy limited amounts, and choose subdued tones for most of it. Then, have one or two items that add color to the mix.

My suggestion to you is to have a discussion with your boss about the desired dress code. Is it business casual? Business formal? How formal? It really depends on the clientele of your office and your boss can offer far more guidance than I can.

It is far better to have a few well-made garments that look good on you, that you can mix and match, and that can last and last and last than it is to have a lot of garments that may or may not look good on you and won’t last all that long. It’ll cost some up front to get good garments, but you’ll be able to use them for a long, long time.

Q5: Finding specific used items

Recently, I decided I wanted to try using a bread maker. I know that this is an item that many people use a time or two and then put in their closet so I want to find a used one. I tried going to yard sales this spring and didn’t find any. Checked some thrift stores too. How does one go about finding a used item like this to save money over buying new?
– Charlie

Weirdly enough, I was also recently looking for a bread maker, as I wanted to try making some loaves in a bread machine to compare it to making loaves by hand.

What I did is simply put out a call on social media to my personal friends asking if any of them had an old bread machine that they didn’t use any more, offering to buy it from them at a reasonable price. Not only did I have several offers very quickly, three different people offered to give me theirs. So, now I have a bread machine!

I suggest doing the same thing. Simply post on social media that you’re looking for a bread machine in good shape and see what happens. You’ll probably find that you have a friend who has one that they don’t use that they will either lend you or sell you at a good price or even give you.

Q6: Best place for Roth IRA?

I want to start a Roth IRA. Where is the best place to start it?
– John

It depends on a number of factors.

If you feel comfortable managing it on your own and have a healthy amount of money to start with immediately, such as a transfer from a bank account, I recommend Vanguard. They’re very hands-off and their funds have a high minimum (most require an initial investment of $3,000, though a few are lower), but their fees are very, very low. If you feel good controlling your own ship and have the starting money, I’d go there.

If you don’t have that much to start with, I’d probably go with Fidelity. They have a lot of funds with low initial minimum and their fees are generally quite good. They’re usually my #2 pick to Vanguard and they do have the advantage of some lower-minimum funds.

If you want a lot of help along the way, I recommend Wealthfront. They do a really really good job of making everything as friendly as can be. They basically just ask you a few questions and then handle everything from there – and the choices they make on your behalf seem pretty reasonable to me, in my experience with them. They also charge no fees on low-balance accounts (under $10,000).

Q7: Value of rice cooker

My big goal in 2017 has been to learn how to cook at home and save a lot of money on food and I have been successful mostly. I make a lot of meals at home now but I am still learning.

I like a lot of meals with rice and so far I have cooked rice in a large saucepan on the stove top. I am wondering what the advantages of a rice cooker are and whether it is worthwhile to buy one. I trust your opinion – the marketing not so much!
– Kevin

A rice cooker is designed really well for the task of cooking rice, period. If you cook rice more than a few times a week, the conveniences that it offers is going to make it worthwhile.

If you’re only an occasional preparer of rice – less than once or twice a week – then the cost probably isn’t worth it. You can do a good job with the tools you’re already using and the rice turns out fine.

The advantage of a rice cooker is that you just dump in the rice and some water and hit a button and walk away, then in 20 minutes or whatever you have cooked rice. That’s a convenience when making meals. However, it’s not a convenience that’s worth paying a lot for unless you’re doing it a lot.

I think rice is a great staple food and highly recommend using it as a part of a rounded low-cost diet, but if you’re not cooking it multiple times a week, I wouldn’t get a rice cooker.

Q8: Resolving banking error

Two months ago, I received a large overpayment from a client, a large corporation. It was pretty clear that someone typed in the wrong number and added a zero beyond what I expected to be paid.

I contacted the company to have the error corrected and I was told that there did not appear to be an error on their end and that the account was paid and closed.

What exactly should I do with the extra money? Should I just hold onto it? How long?
– Ainsley

Please note that I am not a lawyer. However, I have had experiences with overpayment and consulted a lawyer on the matter.

Once you have informed the employer of the overpayment, there is a two-year statute of limitations on them getting their money back. Document the date that you informed them, then just sit on the money for two years. At the end of those two years, you can treat the money as yours.

If they want their money after two years, simply inform them that you contacted them about the overpayment more than two years ago, stating the date and method of contact.

As always, you should contact a lawyer in your area on matters like this, as exact statutes vary from state to state.

Q9: Parking money in retirement

I’ve been with a local government municipality for almost 23 years. I am very fortunate that this company is one of the last dinosaurs that has a defined benefit pension plan. We also have the ability to contribute to a 457 defined contribution plan which I have been doing for a long time. It is through [a large, well known, established insurance company]. The plan definitely does not have many choices for investments. For example: one international fund only, one small cap only, one mid-cap only, the only two choices for large cap are a 500 index fund and [a managed mutual fund].

However, there is one very attractive fund that they call the “General” fund. It returns a guaranteed 4% with NO fees! To me, that’s like having a guaranteed bond fund that returns 4.5%, I know that sounds crazy for them to offer that, but that fund has been there since I have worked there and before that.

Here is the question: when we retire, we can take our full 100% pension to be paid over our lifetime, or we can take a hybrid lump-sum and reduced pension. The maximum lump sum we can take is 25%. To keep it simple round numbers, let’s say I retire, get $50,000 per year for life and my 25% lump sum is $400,000. If I didn’t take the lump sum, my pension would be $65,000 for life. Most people do take the 25% lump sum because if you died early of some unforeseen issue, your spouse would only get 75% of your annual pension and would miss out on the ability for the lump sum to compound over time in an IRA. Obviously, the only prudent thing to do with the lump sum is to roll it over tax-free to an IRA. You can pick where it goes (company to invest with).

Question: would you choose an investment company with many more investment options like a Vanguard to put your lump sum money into, OR would you roll the money over into the available IRA option which has that terrific “General” account option? Very very limited investment choices, but I feel like giving up options might be worth that ability of security. Your thoughts?
– Sharon

I looked into the fund you’re describing and while you are correct that the fund does offer a guaranteed rate, that rate adjusts every six months depending on a number of factors. Right now, that rate does appear to be close to 4%, but in the recent past, it has been below 3%.

Furthermore, it does actually charge fees. From the prospectus: “[t]he [account] operates without a stated expense ratio because it does not have a set management fee and credits a pre-set guaranteed rate regardless of the financial performance […] The target spread levels for administration revenue and the risk charge are disclosed on the Cost and Revenue Disclosure for each plan.”

This means that the actual average annual return is going to be somewhat lower than that stated 4%, but the amount seems to vary from plan to plan.

In short, this isn’t truly a guaranteed 4% for life. It’s a guaranteed 4% before administrative costs for the next six months, at least that’s how it seems to me.

That’s not to mean that this investment is bad. It just means that you should not expect it to return 4% for life. If you want to get an average annual return of 4%, you will have to take on at least some small amount of risk. If there was a risk-free way to get a 4% return, almost every retiree in the world would be on board.

Q10: Next step after healthy savings

I have 6 months of salary saved up. 1/2 in an interest bearing checking account and 1/2 in 12 laddered CDs. I have $0 debt and contribute to my workplace 401k. What should my next financial strategy be? I’m 46 years old.
– Kate

The first thing I would do is make sure that my retirement savings puts me on a very good pace for retiring at a traditional retirement age. If your retirement investments continue growing at their current rate along with your additional contributions along the way, will you hit a goal that you’re happy with when you’re 65? I’d even try to go at a bit higher pace than that, simply to make sure that you’re in good shape even with some bumps on the road.

If you’re in good shape with retirement, start thinking about your other goals. Do you have any debts? Would you like to retire a little bit earlier? Do you want to travel more? Choose one and focus almost exclusively on that – it’s far better to achieve one big goal than to make only a little progress on several.

Don’t worry about making a decision today or tomorrow, either. Give it some thought and think about where you really want to be in the future.

Q11: Simple at-home bodyweight exercise routines?

I’ve been looking at at-home bodyweight exercises and they’re all really complicated and people keep talking about injuring themselves. Can you point me to something simple to get started?
– Mark

My favorite simple bodyweight exercise routine is the 15 Minute Morning routine from Darebee. It’s just a simple repeated cycle of a handful of very basic exercises that, when added together, work most of the major muscle groups in your body along with providing some good cardio work.

That routine can provide a great framework for more advanced exercises, too. Finding it too easy? Do a more challenging variant of a squat, like a deep squat or a Bulgarian split squat, and add that into your routine to replace the basic squat. Change your plank to a side plank or a decline plank. Just keep improving the difficulty of the exercises in the routine and the routine will grow with you.

It really doesn’t get much simpler than that, to be honest. I really enjoy progression bodyweight exercises and I think there are ones that work well for virtually anyone. They’re usually very simple, with just the variations on those simple exercises providing the level of difficulty you want.

Q12: Best home repair/DIY magazine?

I had a question for you. I wanted to get a home repair/DIY magazine for my son–which are the best ones, in your opinion?
– Charlotte

There are a lot of these on the market and the “best” one really depends on the skill level and interest level of your son.

In my opinion, the best DIY magazine on the market is Fine Homebuilding. It has very informative articles and lots of really interesting projects, but it assumes quite a lot of DIY skill from the reader. Many of the steps in the project descriptions assume that you already know how to do rather complex tasks. Now, I will say that you can find references on how to do those tasks online, so if your son is willing to tackle some complex projects and can use online resources as a supplement, this would be a good choice.

This Old House (affiliated with the TV show of the same name) is a really solid magazine, but much like the show, it focuses a lot on refurbishing older houses, particularly in a country or cottage style. If that’s in line with your son’s interests (bringing older houses up to date and using some rustic elements), this would be a great choice and probably better than the above magazine, but the further away it is from what your son likes, the better off he’d be with another option.

Woodsmith is a fantastic magazine, but it is very focused on woodworking projects and often assumes that the reader has a ton of woodworking equipment at their disposal. If your son has some woodworking gear and is really into that aspect of DIY, then this is probably the best choice; otherwise, I’d choose another option.

I hope one of these choices hits the mark!

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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