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. Need a wake up call
2. Cheap cross country move
3. Starter homes for children
4. Online shopping is shopping us?
5. Work to live!
6. Inexpensive footwear for summer hiking
7. Government retroactively attack 401(k)s?
8. Thoughts on “bug out bag”?
9. Tax return question
10. Is something built to last?
11. Thoughts on Pinterest
12. Long term disasters
This past weekend was absolutely beautiful weather-wise, and thus I spent most of it outside doing things like cleaning the yard or taking the kids to the park to play catch and/or soccer and picking asparagus and cleaning out the garden and fixing the rabbit hutch (we have a pet rabbit).
Then, as is often the case with spring weather, the forecast for this week predicts temperatures falling off of a cliff and a significant risk of freezing multiple nights this week, making me glad that I didn’t decide to actually plant anything, even though I was really tempted.
One of the most important things about gardening in Iowa is that you can’t just go throw plants in the ground on the first or second gorgeous weekend of the spring. It will freeze after that at some point. You need to wait for a while, and that usually means waiting until mid-May to plant (and even then, be prepared to do some emergency frost protection).
On to some questions.
Q1: Need a wake-up call
When I look at our financial situation on paper I know it’s a disaster. We have a combined net worth of -$200,000. Yes, negative. We have an absolute ton of student loan debt and a company was willing to give us a mortgage on the back of our promising careers. Now my wife is pregnant and is adamant about wanting to stay at home until all kids are in school.
Right now I should be freaking out. I can see that the numbers are going to have a hard time adding up starting in August but when it comes to actually changing anything I just don’t care. It’s not that I don’t know what to do, it’s that when push comes to shove I don’t feel enough motivation to change anything.
This seems like psychology of course and I should probably go see a therapist.
– Andrew
I agree that this question is moving into psychology, but I consider psychology to be a significant part of personal finance.
I really believe that personal finance success happens as a result of internal motivation, but internal motivation isn’t just something you can turn on and off like a switch. Everyone’s internal motivation works differently.
At an earlier point in my life, in order to trigger change, I really had to reach some kind of low point where I was really disgusted with myself. Simply seeing bad data wasn’t enough. I had to be sick and tired of some aspect of my life, often to the point of being ashamed of it, to want to change.
I have moved beyond that to an extent over the years, but it’s required a lot of self-reflection and constant self-review to get there, and even that I think is pushed by a sense of being unhappy with myself and the current state of my life.
I don’t know what your “trigger” or “switch” is, but it’s well worth your time and effort to try and find it.
Q2: Cheap cross-country move
Moving from Sacramento to College Park this summer. Cheapest way to move? Moving truck?
– Nolan
For a cross-country move, I strongly encourage you to minimize your possessions before going. Sell off everything you reasonably can sell off and fit everything you own in your car. If you’re not taking a car across the country, then try to get things down to a carry-on bag and a large suitcase and then mail one large box across the country the day before you fly to your new residence.
The thing is, cross-country moving in a truck is quite expensive, and it’s usually done just to carry possessions you can easily replace at your destination. Not only that, a move is a great time to downsize your possessions.
So, my honest suggestion is to sell off everything you can easily replace in College Park, reduce your possessions down to the smallest space you can, and then move at minimal cost. Use the proceeds from that sale to buy stuff you actually need when you get to College Park.
Q3: Starter homes for children
Part of your answer in a reader mailbag question today struck me. You said, “For me, enough money to retire early means that I have enough money in the bank to match our current income at a 2% withdrawal rate, plus enough money to fully pay for our children’s college educations and a starter home for each of them without touching the money needed for the 2% withdrawal rate.”
I’m pretty surprised that you’re aiming to provide each of your children with their own starter home considering your stated goal to raise fully independent people who are no longer dependent on you by age 18. Can you say more about your thoughts on this? Thanks!
– Kelly
The amount needed for a college education and a starter home is a thumbnail sketch of how much I want to have set aside for each of my children before I would feel comfortable retiring. Every situation is different, and I want to be prepared for all situations.
To put it in simplest terms, I don’t assume that my children will have the health needed to be fully independent when they reach adulthood. The implicit assumption with my children having independence at age 18 is that they’re physically and mentally capable of independence. I do not see that as a guarantee for all of my children.
I will do what I can to give them as much independence as possible, but I’m not going to throw my child out on the street at age 18 if they’re physically or mentally incapable of adult life. I would not retire early unless I felt I had the resources to support at least one of my children in adulthood in a state of partial or complete physical or mental incapability. My “rule of thumb” for that is to make sure that I would have enough extra resources to at least house them independently, and for that I would want to have enough resources for independent housing and educational tools.
If each of my children were to be functionally independent of me upon graduation, that would be fantastic. I would take the extra money we had put aside for them and put it to some other use.
It’s not enough to take care of every situation, but it’s enough to take care of almost all situations. Nothing is perfect.
Q4: Online shopping is shopping us?
Want to hear your thoughts on this Atlantic article: How Online Shopping Makes Suckers of Us All
– Dana
When I read that, my immediate thought is that this is the risk of buying online when you’re not shopping around at all for the best price. If you trust one retailer to always have the best price and never shop elsewhere for those items, then you’re putting yourself at the mercy of that retailer.
No retailer is going to just give you the lowest prices out of the goodness of their heart. They’re businesses. Their goal is to make money, and low prices are a tool to get you to use their business instead of other businesses, nothing more. It’s only competition that causes a business to ever have lower prices.
That’s why it’s always a good idea to shop around, especially if you’re not buying from a local store (and by “local” I don’t mean your local Wal-Mart or Target or other chain store). This article makes the case for shopping around and keeping competition alive and playing retailers off of each other.
Q5: Work to live!
The people who write into the mailbag have it backwards! You need to WORK TO LIVE not live to work! Most jobs have stuff that isn’t fun sure but the thing is that it doesn’t dictate your life. Walk out the door and DO YOUR OWN THING. If you hate your job focus on living life to the fullest outside of work!
– Will
I completely agree. Your job is not your life. If you happen to love your job and it gives you deep fulfillment, then by all means, pour your heart into it, but if you don’t have that abiding love, you don’t have to give your life up for your job. In fact, you shouldn’t.
Instead, view your job as something you have to invest your time and effort into in order to live in other aspects of your life.
Whenever I’ve been unhappy at work and unmotivated to do much to sustain my career, I usually step back and look at the big picture. The work I do – and the income I earn from it – sustains my happiest moments. All of the good things I have in life are supported by the income I earn from my work, and by doing my best work, I sustain that income and likely grow it over time.
My job is not my purpose. There are aspects of my work that I really do love, and I do pour my heart into those specific aspects, but I do not live for it. I live for the truly great moments in my life. I work in order to sustain those great moments, and I try to do my best work in order to provide a stronger guarantee of support for those moments.
I work to live, not live to work. You should, too.
Q6: Inexpensive footwear for summer hiking
My wife and I have decided to have a cheap summer vacation. We are packing up our tent and camping for several nights at state and national parks. Yay cheap vacation! A week with a full budget of food and lodging and everything under $700? Sign me up!
The thing is that I know I need new shoes for hiking before then. My current ones are literally falling apart. They were gifted to me 3+ years ago. So I looked at some magazines and checked out their recommended shoes and they were incredibly pricy! Not really into paying $200+ for hiking shoes! What do you recommend that’s reasonable?
– Brayden
I have large feet. Depending on the specific brand of shoes, I wear size 15 or size 16. What this means is that buying shoes in many stores is… hit or miss. I’ve had to learn how to buy shoes online.
What I do is identify some really good models for the purposes that I want, then I start watching prices on those models. I watch Amazon and eBay and Zappos and Overstock and a few other places, too.
I do this patiently. I use tools like CamelCamelCamel to keep watch on those models and wait until a sale on them pops up.
Because of this, I often wind up buying shoe models that retail for $100 or $200 or more for 50% off or, sometimes, even more than that off. My current pair of everyday walking sandals, for example, were purchased at 80% off. I actually bought three pairs of them, because they normally retail around $100 and I got them for $20 (they were Keen Newport H2‘s, by the way). I would never have paid $100 for them, but I was happy to pay $20.
The thing is, I had to wait months to find a price that low. I had CamelCamelCamel watching the price and I regularly checked on prices on them in a few places until I found them at the price I wanted, then I bought three pairs. (I knew I liked them because I had been gifted a pair in the past).
So, that’s my strategy. I know what models I like (or I use reviews that I trust). I start looking way in advance and keep searching until I find a price I’m willing to pay. When I do, I jump on it.
Q7: Government retroactively attack 401(k)s?
Can the government really retroactively tax the money in our 401(k)s if they want to? Been hearing about this a lot lately.
– Carl
I received a bunch of emails about an article that appeared in the Wall Street Journal, Grab Your Pitchforks, America, Your 401(K) May Need Defending from Congress, that makes the case that some in government want to change the laws concerning 401(k) taxation. Understandably, those with a lot of money in their 401(k)s are concerned.
First of all, I didn’t get the sense that there would be any retroactive taxation of money currently in 401(k) accounts. If you have money in there, I think that money is perfectly safe. You’ll have to pay taxes when you withdraw it, but not before.
Instead, the impression I got from the article is that they essentially want to make everything into a Roth. In other words, you pay taxes now on your retirement funds, then everything coming out of those funds later is tax free.
Doing that increases government revenue now, but decreases it later on.
Complete speculation here: I think this will end up somewhat being a “double tax” because I think the government is going to gradually move toward some kind of hybrid between income tax and VAT. For most of us, that means lower income taxes, but it means a national sales tax of some kind on all purchases (or most purchases). If they go with this in, say, 15 years, money coming out of a Roth IRA will essentially be double taxed, because you already paid income taxes on it but now you have to pay a high sales tax on everything you buy. When they start talking about changing 401(k) rules like this, I immediately start thinking about long term plans for a nationwide sales tax.
Q8: Thoughts on “bug out bag”?
Friend of mine keeps a “bug out bag” packed all the time. It’s kind of a general purpose bag that’s appropriate for any kind of trip he might take, with toiletries and casual clothes and a few other items in there that he knows he’d need on any trip. Idea seems cool but just having that stuff sitting there and not using it seems like a waste? Thoughts?
– Daniel
I keep a bag packed that I could just grab in a pinch to travel somewhere, such as a funeral. It has a bunch of basic toiletries in there, along with basic clothes for a few days (nothing too fancy) and a pair of dress shoes. I regularly rotate the clothes that are in that bag. I know that if I ever needed to suddenly leave for a funeral or something like that, I could just grab this bag, grab my suit, and go. I just need to go to the closet and grab those two things – that’s it.
Basically, as long as you keep regularly rotating the stuff in that bag, it’s not the worst idea in the world. If you’ve bought a bunch of clothes just to keep in that bag, that seems fairly inefficient, but I look at the clothes stored in that bag as just an extension of my wardrobe.
I guess you could call it a “bug out bag.” I keep it packed because I know that if I ever need it, I’m not going to be in the clearest of mindsets. Having it packed now means I can just trust it if things ever go wrong.
Q9: Tax return question
Just got tax return. Is it better to use it to pay off credit card debt now or to pay for vacation this summer?
– Brian
If those are your two options, you’re better off paying off your credit card debt now and then using the card to travel this summer. In that scenario, at least you’ll have a few months without any balance on the card.
A better approach, I would think, would be to pay off the card, then have a modest summer vacation that you can cover out of pocket so that you’re avoiding the constant expense of carrying a balance on your card. That’s just a money vacuum.
Without knowing your full financial picture, though, it’s really hard to give a perfect recommendation. However, given those two options, paying off your card is the best bet.
Q10: Is something built to last?
How do you tell if something is built to last or just overpriced? Lots of stuff talks about how great it is but it’s hard to tell what’s good and what is just marketing.
– Brenda
I usually rely on three things.
First, I rely on the reviews of people I trust. I look at Consumer Reports, for example, or the word of people in my life who have a good eye for these things.
Second, I rely on my own inspection of the item. The big thing I look for is construction quality and failure points. If I’m looking at clothes, for example, I look for the quality of stitching and whether there are any frayed ends anywhere and whether the cloth is well-made. Does it feel like it will easily rip? Are all of the seams well sewn? I also look at the number of potential failure points. For example, I tend to trust slow cookers with fewer modes and fewer electronic features than ones that have lots of modes and features, because the more features you have, the more failure points you have.
Third, I look at the default manufacturer warranty. When a warranty is thorough and comes from a company with a long history of such warranties (and backing up their warranties), I tend to trust the item more.
Those principles usually guide me pretty well.
Q11: Thoughts on Pinterest
I have been reading The Simple Dollar for a while, enjoy it and have learned a lot from it. I hadn’t been compelled to comment though, until I read Holly Johnson’s article on Pinterest.
I found it really interesting her take on Pinterest as my experience has been exactly the opposite. I use Pinterest to look for frugal ideas, DIY, thrifty decoration and so forth. It has been a “gold mine” of ideas and beautiful pictures that provide ideas to unleash my creativity with things I’ve got at hand or that I can get from second hand shops.
I am learning to crochet and knit and have found nice free patterns. Sure, there are lots of nice thing that are on sale, including patterns, but I just skip those.
– Monica
I think it comes down to how you use Pinterest – or how you use any kind of social media. Social media can definitely encourage spending, but it can also provide ideas on saving money, too.
Holly’s article, I think, was more of an encouragement to be aware of how social media might be influencing you, which is something I think you’ve taken to heart with this email. You went away from the article and looked at your own social media use and concluded that it was saving you money.
It’s that kind of self-reflection that is the value of a personal finance or a personal development article. Everyone’s different, and different people are going to walk away from such articles with different feelings. As long as you move toward self-reflection, even if you don’t line up with the article’s conclusion, then the article served its real purpose, which is to either push you to a better place or to get you to at least reflect on what you’re doing and conclude that it’s good.
Q12: Long term disasters
I just finished listening to the excellent new podcast S-Town. One of the topics that came up a few times was about how due to soil erosion, the practices used by the farming industry for mass production probably only have between 40 and 70 years left, at which point the farming industry will not be able to provide enough food to support the world population.
I know you have fielded questions from people that feel the collapse of society is imminent, and what they should do to prepare for it. What are your thoughts on what people should do if such a collapse is many years off, but possibly still in one’s lifetime, or in one’s children’s lifetime? Leaving aside questions about how to survive in such a world, how does this affect the view one takes about retirement savings in the here and now?
I have my own views on what humanity should to do avoid this dire future, but there are a disturbing number of people in this country that do not seem to care about living sustainably, and do not feel a responsibility to future generations to leave behind a world that can support human life.
The movie Children of Men, also excellent, addresses a different problem but contains similar themes, that being that if people feel there is no future for the next generation, it drastically changes how society functions. I’m very curious about how this would affect people’s current and future behavior as these possible scenarios inch closer and closer with each passing year.
– Chris
First of all, I suspect that in 40 to 70 years, most of the food that people eat will be synthesized in laboratories rather than grown out of the ground. Lab-grown meat is already happening and it’s healthier than what you get from an animal, and we can already make everything needed to provide a balanced diet. As soil erosion makes growing more difficult, we’ll gradually shift to things like this.
Does this mean that I think technology will dig us out of a lot of holes? No, but I don’t feel hopeless about the future, either.
I feel like humankind is fairly complacent right now, but that’s because there isn’t any imminent pressure pushing us anywhere. Humankind has largely been under pressure from its basic needs for the entirety of civilization’s history and many of us are now at a point where we’re under less pressure from our basic needs than we ever have been. We don’t know what that means yet, but many of us can feel that it’s different than what has come before and that leaves us feeling uncertain. I think it’s that sense of uncertainty that leads people to feeling that doom is around the corner, because doom has been around the corner for the entirety of human existence. We don’t know what the consequences of this will be yet.
If you’re asking me, my guess is that humans will adapt to climate change in their day-to-day living by throwing technology at the short-term problems rather than addressing the long-term problems and this will allow us to kick the can down the road until everyone currently reading this website has passed away.
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.
The post Questions About Starter Homes, Online Shopping, Hiking Footwear, Pinterest, and More! appeared first on The Simple Dollar.
Comments
Post a Comment