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. Next steps in life turnaround
2. Overseas concerns
3. Buying local for the holidays
4. Making basic investment choices
5. Market timing or not?
6. Thinking about 2017 goals
7. Philosophy, psychology, and financial progress
8. Converting photos to digital
9. Roommate without lease?
10. Beard maintenance
11. “Holidays” versus “Christmas”
12. Board games for the holidays
Lots of long questions this week, so let’s dive right in!
Q1: Next steps in life turnaround
I have written to you with two questions in the past. The first I had an opportunity to take a graduate assistantship that would provide free tuition and a stipend but I needed to quit my stable part time job to do so. That proved to be a pretty good deal in the end. Second I purchased a home through the USDA rural assistance program even though you didn’t quite like the idea because I didn’t have enough cash saved. Buying this house has actually turned out to be a GREAT decision financially and personally. The new school district is much, much better than the old one, the medical facilities are far better, I have made more friends, and having this little house has reduced our other expenses greatly because my kids and I are just so very happy to be here and there is room for all of our frugal at home hobbies. In addition, I got a very good job with great benefits that was closer to the new house so work related expenses went down, salary and benefits went way, way up.
I am at the point now where I am on track to save/invest 27% of my salary (with a generous 401K match). By the end of the next year it will be even more as some of my expenses go down (I am carrying a bit of 0 percent debt). My current question is where to put some of the money. I use the 401K to get the match (the match starts in January after I am with the company for a year but I already am putting in the 5%). There isn’t quite enough extra to both increase my emergency savings and max out my Roth IRA. I have only until April to max out the 2016 so I feel as if that should be priority as I have good investments there at a reasonable cost. I can move some funds in a decent bond fund that I already have open – averaging between 2 and 3 percent growth; I can leave funds and add to the index funds at increased risk; or I could put the money in on-line savings but of course right off the bat there is a loss of $ due to inflation. I am on track to pay down the 0 percent loan will occur before the deal expires regardless. I tend to be a fairly bold investor – the kind that likes to increase my investments when the markets go down. My job is quite stable for at least the next 4 years and probably at least 5 after that as it is a renewable state government contract. I have a good amount of both short and long term disability and life insurance.
You are more conservative then I am but I am curious what would be your decision with “extra” funds? My current plan is to:
max out 2016 IRA
increase emergency fund
increase 401K contribution
max out 2017 IRA
increase car replacement account funds
continue to increase 401k contribution to at least 15% while continuing the IRA max ( I believe that this will take approximately 3 years to achieve)
As I said the credit card debt (and there is no other debt except the mortgage) is on track to be paid outside of these funds and is accruing no interest. Additional funds past this list would I suppose go towards paying off the house but my interest rate is quite low so this is a low priority. My options with the 401K are not as good as the Roth so I will always prioritize the Roth before increasing the 401K.
Five years ago I was living in a “shack” and I used to walk to the library to study so as to save the electricity use of using a light to study my graduate school work at home because I was raising my kids on an income low enough to get the earned income tax credit. I still live in a very modest home furnished with yard sale furnishings and we still live quite simply in every other way. My priorities over securing my retirement are to help my kids get through college and maybe at some point to travel a bit; other than those things I am very content with my life and my new job. I also continue to invest in things that save me money or increase my self-sufficency or earning power – new skills, household tweaks that save money such as programmable thermostats, hot water heater timer, etc.
It just doesn’t make sense to prioritize putting money in a bank account where it earns nothing over maxing out the Roth and of course the option of putting money in the 2016 Roth disappears in April; there is also an option in the Roth for cash reserves. What would you do?
– Alex
It’s hard for me to make an exact recommendation without knowing all elements of your current financial state, but your current plan makes sense based on what you’ve written here.
For most people, the only purpose of using a savings account at current interest rates is to hold a cash emergency fund (car repairs would be included in that, so you’d probably want to bolster it if you were sure car repairs were coming in the near future) or to hold cash for a purchase that’s going to be made in the relative short term (less than a year at the most). For all other purposes, your money should be invested elsewhere, and that seems to be what you’re doing.
The way you have that list prioritized – again, assuming you already have a small cash emergency fund – is completely sensible. Good work, and congratulations on the positive progress in your life!
Q2: Overseas concerns
I’m starting a multi year overseas assignment with my employer. A few questions I’m soliciting advice on, if you’d be so kind:
Should I freeze my credit against new inquiries?
I have an emergency fund in the US. How much should I worry about tapping it during my assignment?
Any good expatriate resources you recommend?
– Philip
If I were you, I would keep my finances as simple as possible while overseas. Financial regulations for Americans working abroad are messy and difficult and are likely prone to change under the incoming administration.
I think freezing your credit is a good step, especially if you have no plans to use it while abroad. If your account is in a large US bank, you should be able to access it overseas, but you may want to check if it’s in a smaller regional or local bank. This is probably the best collection of expat financial resources that I’ve found.
One final bit of advice: fill out your US tax forms early each year, even while abroad. Just because you’re in another country doesn’t mean that the IRS doesn’t want your tax forms.
Q3: Buying local for the holidays
Husband and I have to shop for his family members for the holidays. (my own side of the family doesn’t do xmas presents for adults because we think it’s silly)
I would like to only shop small and local to support the local economy. Financially this will be more expensive but it’s something I believe strongly in.
His family always gets me a bunch of stuff that I won’t wear/use and it’s usually from Walmart which I don’t support. I have asked that they don’t buy me things but they insist. They spend anywhere from $100-300 per person- for ADULTS. They’re very generous but I don’t want to spend that kind of money so it feels uneven. I try to keep it under $40/person and often get locally produced food items in baskets instead of individual gifts.
Question 1: How do I get them to stop buying me stuff I don’t need or want?
Question 2: Why don’t you promote shopping local instead of just shopping inexpensively?
– Maxine
First of all, don’t worry about what others buy you. People choose to give gifts to others, and it’s the least you can do to accept those gifts graciously. If you find that they’re not for you, exchange them or sell them quietly and use the money for something you would want, but try to find value in what they give you if you can.
You also shouldn’t worry about matching them. Don’t even try. Instead, follow your own heart and give gifts that are meaningful both to you and to them.
The biggest reason I don’t talk about “shopping local” is because that’s an individual value that people choose to add to their shopping that comes with a premium. That’s true for any such rule that people add, such as “buying organic” or “buying gluten free foods.” If you add a rule that says, “I’ll only buy stuff that is made in my state,” or something like that, you can still follow all of the principles of frugal shopping. You can still shop around, seek the best value for your dollar, haggle a little, and so on. It’s a value that you choose to add to your purchasing decisions and not a value that people universally agree on. The only value in terms of shopping that I actively promote is seeking the best “bang for the buck” when shopping; if people wish to add their own additional criteria on top, that’s great!
Q4: Making basic investment choices
I am a youngling just about to turn 25. My company provides a 3% match in a Vanguard SIMLE IRA which I have taken for 2 years thus far. I am planning on paying off my debt next year and would like to begin building up retirement savings. I also have some funds with Betterment in regular investing. I have been told that while I am in a lower bracket, it is best to invest in Roth IRA’s which is what I plan to do.
Do you suggest I go with Vanguard, Betterment, or other?
And if I do Vanguard, how do you suggest I invest my funds in both the SIMPLE and Roth? (Roth allows ETFs?)
My current Vanguard setup is with 3 funds, but $25/fund are eaten up by fees. I only have about $4,500 so far, but will have closer to $7,500 next summer after I receive my employer match (sadly on an annual basis rather than monthly).
Would you suggest a better setup, i.e. fewer funds?
I’m currently mixed up with a 2055 retirement fund, Total Stock Market Fund, and International Stock Market Fund. Roughly a 40/50/10 % allocation, respectively. 95% stock 5% Bond.
Any guidance would be appreciated and considered. I am an accountant, but I don’t know much about retirement planning aside from the general advice that we hear all the time – fewer eggs in one basket, lower fees, etc. And it would seem that advice with Funds would be slightly different than advice with individual stocks.
– Max
With Vanguard, your goal should be to get your account up to Voyager level, which means that you have $50,000 in assets there and no longer have to worry about those fees. Until then, I would keep all of my money in one very broad-based fund, such as the Vanguard Total Stock Market Index or a Target Retirement Fund.
The $25/fund/year fee can devour a lot of gains at smaller balances. Given what you seem to want, I’d strongly consider putting it all in a Target Retirement 2060 fund, which is a bit more aggressive for your age than 2055.
I generally think Vanguard can’t be beaten once you get up to a high balance, but there are good arguments for other services at lower balances. I think you’re fine, but once you get up to the Voyager level at Vanguard, I’d probably put everything there.
Q5: Market timing or not?
I’ve wanted to take a year off to walk the Appalachian Trail and do a few additional personal projects for a very long time. My employer has an “unpaid sabbatical” program where you can take up to a year off unpaid and guarantee your job back when you return if you meet certain criteria (and I do) so that’s well in hand. I decided that I needed to meet a certain threshold of money invested ($50,000) before I took this leap. With recent gains in the stock market, I reached that level.
Now my employer requires eight weeks of notice before an unpaid sabbatical and I will be submitting that paperwork soon. My question is this: should I take money out of the stock market now and put it in savings? Or should I leave it in there to continue to earn gains and dividends?
– Larry
Honestly, I’d take it out. You have enough value to guarantee the success of the sabbatical right now and leaving the money in there introduces a risk of falling short near the end of the sabbatical if 2017 is a weak year in the stock market.
To me, this isn’t really a market timing issue. This is a “goal timing” issue. You’ve reached your goal, you have no need for possible future gains, you can be disadvantaged by possible future losses, so take the money out and put it somewhere safe.
If I were making the choices here, I’d put it in a savings account at your local bank and set up an automatic transfer to move $4,000 a month into your checking account starting after you’ll receive your last pre-sabbatical paycheck from work.
Good luck! Walking the Appalachian Trail sounds incredible.
Q6: Thinking about 2017 goals
I’ve been thinking a lot lately about what I want to achieve in 2017. Not so much “New Years Resolutions,” but things I want to make happen in the coming year. What are your plans for 2017? Any advice on making them work?
– Stephen
I usually write a post or two close to the end of the year about such goals (and this year will be no different), but I think that many people see the turning of a calendar year as a great opportunity for a fresh start. I tend to think of a “New Year’s resolution” as just being a poorly-planned goal, an off-the-cuff idea of something someone wants to change but rarely sticks with it because they didn’t think about it or plan ahead with it.
My best advice for you for goals for the coming year is to just choose one or two of them, then break them down to specific things you can do every day to make progress on that goal. Also, don’t choose a goal based on the destination, but instead choose one based on the journey.
For example, you might be thinking “I want to lose 100 pounds in 2017.” Great, but not great. Instead, try this: “In 2017, I’m eliminating soda and added sugars from my diet and I will visit a gym three times a week.” Those things directly point at specific daily life changes you can make and the weight loss will be an inevitable conclusion.
I’ll expand on this a lot near the end of the year.
Q7: Philosophy, psychology, and financial progress
I have been following your blog since 2008. For me reading your articles were not for getting out of debt, but to stay frugal. Even at that time we did not have any debt.
As you said in your article Finding Something New on the Long Financial Journey, we also learned a lot about ourselves and life on the course of this journey. And when I read the below sentence, I could not resist myself from sending you an email.
“Very quickly, you start running into some very challenging questions, ones that aren’t easy for anyone to answer. They lead directly into reading about philosophy and psychology and spirituality.”
We are also in the same stage. Now-a-days we also discuss a lot about philosophy and psychology at home. During the last 1-2 years, I have been reading about great leaders of the past. If you look very carefully, you see that they also read lots of books in these areas. In short, what we (my husband and I ) concluded is that to have a meaningful life you need to understand philosophy and psychology.
And some random thoughts we discussed were:
1. Modern slavery – I feel like consumerism is the modern way of ‘slavery,. becuase you work the whole day (sometimes not even having time to spend with your family and children) and then send that money in buying unwanted things. Who is benefiting from this? Not you. You work, get salary and give it to these business owners. They show you more shiny things and make you work again to own that. And the cycle goes on. At the end you are not working for you, instead for others.
2. Three concepts originating from the same root. 1) Minimalism – own things that you really really need. 2) Frugality – spend only for the things you need 3) Essentialism – do only the things that help you to lead a meaningful life.
3. To understand all these intertwined forces/beliefs playing on you, you need to have a certain level of knowledge. And knowledge can be divided into 2 types – one which is known to all and the second type which can only be acquired by doing (self-) analyis. The second type is very difficult to understand. and here comes the philosophy and psychology. Example for the first category : smoking is not good for your health. Even a smoker knows that it is not good for your health. Example for the second category: Recently you wrote an article saying that it is notthe things that you buy make you happy. Instead you need more time – personal time, family time and time with your loved ones. (This is the article which I have in mind: Filling the Empty Spaces). If you say to a person (a true ‘consumer’), that he doesnt need that new gadget/app/dress/etc and instead what he needs is time, he may look at you like you are crazy. This is because he doesnt have that minimum knowledge level. Okay, now what action can be taken for these? For the first category, (exercise) just do it / (smoking) just dont do it. Here self-discipline plays the role. For the second category – what can we do -read, read, read… (That is the only way to get this type of knowledge). Reading leads to do (self-)analysis, which leads to understanding life better. This helps to take actions to change ourselves.
– Maggie
I completely agree with you that the most valuable tools that people have in terms of making better choices for their life is a healthy diet of reading and thinking about what you’ve read along with a healthy dose of self-control. If you can’t – or won’t – do those two things, it becomes progressively harder throughout life to make long-term decisions, and I think that’s the biggest value of reading and reflecting – it really forces you to expand your horizons and think more about the long-term consequences of your choices.
I think that’s why I find that philosophy and psychology and theology tend to draw me in as subjects: more than most other subjects, they have a very long time horizon. They’re not about quick fixes. They’re not about solving one’s problems by Saturday. They’re about building a strong foundation for a great life, but that foundation takes a lot of time to build.
Almost everything you write above dances around that key idea. I think that, as a person reads more and more in those subject areas, they begin to think in more of a long-term sense but they also begin to develop their own particular distinct worldview that overlaps with many others, but is their own, drawn from a mix of what they’ve read and learned and their own experiences. But it is only through reading thoughtful and valuable material, trying to match it and apply to life, thinking about it in the long term, and practicing a lot of self-control that you can build that kind of personal worldview.
Good thoughts, in other words.
Q8: Converting photos to digital
My mom has a shoebox full of old pictures and about ten photo albums that I would like to digitize for her and put on a picture frame. It seems like a ton of work though. I looked into having someone do it for me and it was just really expensive that way. Are there any cheap ways for converting photos?
– Tara
The truth is that there is no truly “cheap” way of digitizing a huge number of old photos and prints. It’s simply an expensive process, even if you forego pretty important elements like color correction and basic editing. It’s going to add up.
The cheapest per-print rates you’ll find will get down in the range of about $0.25 per print if you buy scans in large bulk. So, if you’re scanning 1,000 photos, that’s about $250. I’ve had good success with ScanCafe in the past and that’s their rate.
There’s almost no way an ordinary person at home could scan things at a fast enough rate and correct them at all to match up with that cost. Even if you’re managing to scan, color-correct, and save each print in five minutes, that’s still effectively $3 an hour you’re saving, and it’s probably taking most of your focus to do it that fast.
These companies manage to do it by having machines that just scan batches of photos automatically, with a person nearby to fix any issues, and then another person to color correct and touch up images as they come through. That’s really the only way that the cost can get that low.
Q9: Roommate without lease?
How long can I let someone stay on my couch without adding them to the apartment lease?
– Thomas
Such things are rarely written into the specifics of a lease. It usually just specifies who is “living” in the apartment. What you’re actually asking is how many nights does it take for an overnight guest to be considered a tenant.
The truth? It depends on the landlord. Most of the time, the landlord isn’t going to care, but it’s at the landlord’s discretion entirely. The landlord is generally only going to care if the extra roommate is causing problems or else the presence of said roommate on an actual lease would mean more income for the landlord.
There’s usually a general clause in a lease about things not directly covered and how they’re at the landlord’s discretion. This would fall under that.
My advice? If the person isn’t being a nuisance to anyone or the property, I’d just let them stay as you wish under a personal arrangement with that person.
Q10: Beard maintenance
So I’m considering growing a beard and I’ve read a lot of articles about how to maintain one. They talk about things like beard oil and brushes and stuff. How much of all of that is necessary?
– Mark
It depends on what you mean by “necessary.”
Beard oil simply serves to help moisturize the skin under the beard and make the beard hair look more shiny instead of scruffy and dry. It looks better, in other words. A brush means that you’re just detangling the beard and straightening it, much as you would do with the hair on your head.
I think a brush is pretty necessary, but I’m not convinced you need a special brush for it. As for beard oil, I think it entirely depends on how “dry” and “scratchy” and “frizzy” your beard is, and that has a lot to do with your natural beard and how oily it naturally is as well as how you want it to look.
My feeling is that a good looking beard varies widely in terms of the amount of effort it takes from guy to guy. Some guys have perfect, fluffy beard hair that looks good naturally. Others have dry crackly scraggly beard hair that takes a lot of effort to not make them look like a crazed hermit. The first guy probably doesn’t need beard oil. The second one probably does – or should just go beardless.
Myself? My beard goes right to “scraggly,” and it doesn’t have to be very long either. I stopped with my beard close to my graduation and haven’t grown one since, other than a three week experiment because my kids wanted to see it.
Q11: “Holidays” versus “Christmas”
Why are you so afraid to use the word “Christmas” in your articles? Do you just go through and replace it with the word “holidays”? Bet you won’t even address this.
– Kevin
My family celebrates Christmas each December, just as my family did when I was young and my wife’s family did when she was young. It’s a tradition for our family.
However, I have a very close and dear friend whose family celebrates Hanukkah each December. She personally does not find it “offensive” if I talk about Christmas around her, but I consider it basic respect for her and her practices and beliefs if I don’t forget about Hanukkah this time of the year and how her family chooses to celebrate it. The truth? While some practices are different, there are a lot of elements that are very similar in terms of how our families celebrate those two holidays.
There are actually a lot of holidays with both religious and cultural history this time of the year. Christmas and Hanukkah are big ones, but different groups celebrate Yule, Saturnalia, Omisoka, Kwanzaa, Boxing Day, Saint Lucia Day, and the Fiesta of Our Lady of Guadalupe, among others.
The Simple Dollar isn’t a religious blog, nor does it try to be a cultural blog. Sometimes those elements seep in a little; they just do, but that’s not the intent. I have readers that celebrate many of those events I just listed and don’t celebrate most of the others. There is no reason not to be welcoming of people of all religious and cultural traditions on a site that’s about the personal finance concerns that we all share. There’s no reason at all.
Q12: Board games for the holidays
I would like to get a board game or two to start an occasional family board game night. Family includes two adults, child age 12, child age 9. Want to spend $50 or less total. Suggestions?
– Nina
Ah, writing a question about board games is one of the surest ways to my heart, especially when you want to play them with family.
My honest suggestion for a “first” board game for a family is Settlers of Catan or Ticket to Ride or Pandemic. All three are widely available, are easy to learn, and work perfectly well for your family. Those three games are often on sale in various places, so I’d definitely shop around at big box retailers and on Amazon. Those three games would each eat up somewhere between $20 and $40 depending on how patient for a sale you are.
I’d accompany that with a single smaller game. I’d suggest any of the following that you can find in your price range: Codenames, King of Tokyo, Dixit, Splendor, Carcassonne, or Hanabi. You should be able to find these games in the $10 to $30 range, so you can mix and match those along with the other game.
For example, you can currently get a pairing of Hanabi and Ticket to Ride and Codenames for $53.47 on Amazon, which is probably what I’d recommend. Your family will have a ton of fun with those three. You can easily mix and match some of the other titles mentioned above in here if you’d like.
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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