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 in super-tight budget
2. Exercise equipment
3. Holiday decorations for new apartment
4. Stock market versus home ownership
5. Portable office backpack
6. Balance transfer drawbacks
7. Reality show warning
8. Worried about automation
9. Homemade gifts and feeling cheap
10. Holiday cards worth it?
11. One or two cars?
This time of the year, I start to get a LOT of questions about the holiday season. People want advice on gifts, family relations, budgeting, and so on.
I typically write an article discussing frugal gift ideas early each December in order to clear out a lot of those questions at once (you can expect that post sometime in the next ten days or so), but the reality is that the holidays are on the minds of a lot of Americans right now and it can be a real financial struggle to figure out how to make the holidays as wonderful as you want them to be.
Remember just one thing: very few people will ever judge you based on how much you spend if you are thoughtful with what you do. If you make thoughtful choices that really reflect the recipient in your choice or do something special that goes beyond what can be bought in stores, people really aren’t going to care about the price tag at all.
In other words, don’t spend yourself into oblivion this year or any year. The people that you’re giving gifts to wouldn’t want that. Instead, find ways to be thoughtful without spending too much.
I am currently in my early thirties, single, and renting in Jersey City, NJ (right across from New York City). I don’t own a car or have any dependents and my commute costs are paid by my company. I have approximately $9k in CC debt at 0% until 4/2019 and no savings other than about $9k in 401k. I have a budget set and don’t splurge on clothing, dinners out, or much else. After taxes I take home about $2600 monthly after contributing 5% to my Roth 401k (no match until 1/2018) then I hope to increase that. My expenses are as follows: Rent $1600 for a Studio apt within 2 miles of work, Savings of $400 to pay off my CC debt, $140 CC payment, $160 food, $65 for Internet/TV combined and $60 cell phone smaller expenses ($25 haircut, $20 laundry, $8 TiVo) I have little spare time and have high medical costs (doctors, prescriptions, etc.). Without starting a side gig like working part-time or blogging, I don’t see where I can cut my budget or how I can earn more. Any advice?
The most obvious thing I can think of is to seek out a roommate. That single move will knock off $800 from your rent, which would be a life changer for you.
To take a different approach, you could sit down with your boss and talk about what you would need to do specifically to earn a raise. What benchmarks do you need to hit to earn more? Your boss should be able to give you some guidance here.
Another thing to consider is that if you just ride this out for a while, those credit cards are going to go away, freeing up quite a bit of money each month for you.
You’re headed in the right direction and you have a few options, but things are tight for now. The biggest ingredient in financial improvement is patience.
I want to buy some free weights and a treadmill for home exercise during the winter. (didn’t really get how cold Wisconsin was going to be!! lol!) Is it okay to buy these at a used sporting goods store?
Both of those items should be completely fine to buy from a used sporting goods store. You may also want to consider shopping on Craigslist for those things, as they often show up there.
There are very few sporting goods that are a bad idea to buy secondhand. I would hesitate to buy any gear that’s safety-related secondhand, as it may have suffered damage already and be less effective at protecting you. Almost all other equipment should be fine.
One final tip: before you invest in home equipment, make sure that you’re actually going to have a home exercise routine that makes the equipment worth it. Do you already exercise at home with a routine of some kind? If not, I wouldn’t buy everything all at once. Buy things a piece at a time and see if you actually stick to a routine, or else you’re just buying some expensive laundry racks.
My fiance and I moved in together in August. Before that I lived with four other people in a rented house. This is the first year that I have needed holiday decorations. I want to make things look Christmas-y but we don’t have a lot of money. Thrift shops have nothing but junk.
For your first Christmas, go minimal. Do things like “wrapping” your pictures so that they look like gifts hanging on the wall, or making centerpieces out of pine cones or cuttings from pine trees. Have a very small, very basic tree, with stringed popcorn kernels as decoration.
Then, on December 26th or 27th, head out to the stores and buy decorations for the following year. Right after Christmas, holiday decorations of all kinds go on sale at most department stores, making it a perfect time to stock up.
Put those items into storage and pull them out next year. You’ll have plenty of things to decorate with at the right price.
If a person buys a house with the intent of living there for more than ten years, doesn’t it make sense to make the smallest possible mortgage payments and put extra money into retirement? The stock market returns 7% a year on average over the long term but mortgages are at like 4.5%.
On average, over a period of longer than ten years, you’ll be money ahead by putting money into your retirement account and investing it aggressively than making extra payments on your mortgage.
However, the “floor” – the worst likely outcome – is better for putting money into your mortgage than into the stock market.
That’s what makes investing tricky. Paying off your house mortgage early is a safer investment than the stock market. Some significant percentage of the time – 30% or so – it’s going to be financially better to pay off your mortgage. The other 70% of the time, the stock market is better. However, the worst case scenario for stocks is a loss, whereas paying off your mortgage your mortgage is always a gain.
That’s why it’s hard to say that there is strictly a right or wrong answer to this question, because it all relies on estimates of future returns. The only right answer is to spend less than you earn and do something worthwhile with the difference, whether it’s putting money away for retirement or paying down your mortgage.
You’ve mentioned a few times that you have a North Face backpack that you use as a portable office. What do you carry around in there?
My trusty “portable office” has pretty much everything I need to work almost anywhere. Here are the contents, which vary slightly at any given moment but are pretty consistent:
+ My laptop and laptop charger
+ A charger for my cell phone
+ A rechargeable external battery
+ A headset for listening to audio and occasionally making Skype calls
+ Several pens
+ A couple of notebooks – one is more of a writing pad
+ A book or two
+ A magazine or two
+ An empty water bottle
+ A few granola bars and (usually) a protein shake or two
+ A toothbrush and a small container of toothpaste
+ A few breath mints
+ A multitool
I can handle almost everything that my professional life might throw at me with those items. I just keep everything packed all the time.
Are there any drawbacks to transferring your credit card balance to another card? I got an offer for 0% interest balance transfer for 12 months and that would save me about $1,200 in interest.
There are a few drawbacks.
One, some balance transfers charge a balance transfer fee. This is usually just tacked onto the balance transfer amount – a balance transfer of $1,000 with a $50 fee would become a new balance of $1,050.
Two, the interest rate on a transferred balance once that initial offer runs out is often really high. A 32.9% interest rate is completely normal with a balance transfer.
A final indirect issue: it is common for people who have recently transferred a balance to suddenly have a bunch of available credit, and then they use it up in short order. That puts them in an even worse place than they were before.
Be aware of those drawbacks and be careful to avoid them.
I just wanted to offer a “warning” to any of your readers who might be persuaded to take on DIY projects or make lifestyle choices based on reality shows. Most people on reality shows are fairly wealthy to begin with. Many of them have trust funds or receive a great deal of “outpatient financial care” from their parents which enables lifestyle choices that are impossible for most Americans. Many of the choices made are showy but very impractical for the long term. Treat such shows as pure entertainment, not DIY or lifestyle advice.
The vast majority of “reality programming” on television should be treated solely as entertainment and nothing more.
As a viewer, you are barred from seeing the full reality of the situation. You don’t see the finances of the people involved. You don’t see the lifestyle choices and requirements involved off screen. You don’t see how the people on the show are being compensated for whatever is happening on the show. Are the producers paying for this? How much?
Because of that, I have a hard time seeing any value in most reality shows beyond the pure entertainment factor of the situation.
I am worried that in the near future my job will be eliminated by automation. I do not have any training for anything else other than entry level retail.
I work in part supply. Basically my job is to pick parts out of a large warehouse and put them in bins to be shipped down a conveyor belt to [an assembly line].
Parts of the system have always been robots but over the last few years they have installed more sophisticated stuff and now there are only a handful of people up here left. We do the trickier tasks but it is clear that it is just a matter of time before robots replace us too.
What should I do? The people who were replaced before were “bought out” but I don’t want to trust that.
Get ahead of this. Talk to your supervisor about what you would need to do to become a technician for the robots that do the part picking. You already have a ton of domain knowledge about how the warehouse actually runs. Combining that with the technical skills for managing the arms would make you very valuable, and your employer would probably be interested in helping you to transition to that new job (as it would be far cheaper than retraining someone on your domain knowledge).
So, my first step would be to talk to your supervisor about it. Tell him or her that you can see which way the wind is blowing and you want to get ahead of it and actually be a part of what’s to come instead of becoming obsolete.
If they’re excited about it and want to help you train, take advantage of it. Dive in deep and learn as much as you can.
If they seem indifferent, you should expect that they’re planning to downsize you. At that point, you need to figure out what you want to do next and prepare for the cost of transitioning to a new job or career. Take advantage of the job you have for the time being to pay for the cost of classes or whatever else you need for a new position.
I don’t have much money and want to make homemade gifts for everyone but I feel so cheap when everyone else is buying each other nice things and I’m giving people bundles of cookies and jars of jam. I feel like such a pathetic cheapskate and so I end up feeling bad and buying people stuff too.
Here’s what I’ve found about homemade gifts: they’re the most loved of gifts if you really put in the extra step to personalize them.
For example, if your sister really, really loves apples and you make homemade apple butter for her and put it in a jar and put a note in with it about the time the two of you enjoyed apple butter together, that’s going to utterly blow away any store bought gift she’s likely to receive.
It’s that personal touch that makes handmade gifts excel. It’s not just making a bunch of jars of jam and giving them to everyone regardless of their personal tastes. It’s about finding some way to connect the gift you make specifically to the recipient so that they feel like you made it just for them – and you did. That’s when homemade gifts feel really special.
You have time. Spend some time thinking about something that the person you’re giving to will really like and make that thing, whatever it is. That’s the key to a mind-blowing homemade gift.
If you can’t come up with anything, then buy a thoughtful gift. Having to just buy a few gifts means that the holiday is still pretty inexpensive.
Is it worth it to send out holiday cards to people? Seems like an expensive waste of money.
For me, the value of holiday cards depends wholly on the effort I put into them. If I’m just buying a bunch of highly expensive customized cards of which I print off about 100 and hastily mail them out without any additional effort (or merely to stuff a self-congratulatory “family newsletter” in the envelope), I personally don’t feel like it’s worth it. I don’t think there’s enough value there.
The primary value of holiday cards is to genuinely touch base and reconnect with people, and you can do that with a very simple card with a blank inside. If you really want the recipient to have a nice picture of your family or kids, just run off a bunch of prints and put them inside the card.
The problem here is that the blank inside cards not only take time, they take some thought, too. You have to think of something worthwhile to write on the inside that’s personally meaningful to the recipient, and that can be really hard to do. It’s that challenge that makes the personalized card worthwhile.
Put yourself in the shoes of the recipient. What’s more meaningful to you: a card that looks like it was pushed out of a factory somewhere, or a handwritten note that reflects on the relationship between you and that person? The thing is, that handwritten note is usually far less expensive.
While I don’t need to replace my paid off, mid-sized, not terribly fuel-efficient car for hopefully several years, I like thinking ahead. Most of my year-round driving consists of short trips to the grocery store, to church, and to the gym, so usually I consider a subcompact, fuel-efficient car like the Prius C or the Honda Fit. But during the summer months I drive to hiking trails nearly every weekend, and each trip is usually over a hundred miles. I don’t look forward to taking a subcompact with low clearance up steep or poorly maintained Forest Service roads out of cell service.
A friend suggested getting an early 2000s SUV for the trails along with the subcompact for everything else. While I like the idea of having the right car for the right place, I hesitate at paying insurance and maintenance costs on two vehicles. Do you have thoughts on this?
Well, with the “early 2000s SUV for the trails along with the subcompact for everything else,” you’re basically describing our vehicles. We currently have a 2004 Honda Pilot and a 2009 Toyota Prius in our driveway. My wife uses the Prius for commuting and we use the Pilot for most other uses – my daytime use if needed, hauling the family around, and so on.
What you seem to be looking for is a relatively fuel efficient and low cost all wheel drive sedan. You want the good fuel efficiency for commuting and local errands and the all wheel drive for hiking.
That’s basically Subaru’s wheelhouse – they make several models that fall right into that description. The Impreza (available as sedan or hatchback) and Legacy are both relatively fuel efficient and inexpensive sedans, while the Forester is a very solid inexpensive SUV that’s more roomy but a bit less fuel efficient. You can find them both new and late model used without too much effort.
If you’re willing to spend a little more, I can personally speak very highly of the Toyota RAV4 hybrid SUV, which is a small SUV that gets over 30 MPG both highway and city and has AWD. My in-laws have one and it is a very nice vehicle, though it is about 25-40% more expensive than the Subarus listed above.
Hopefully this gives you some options to look at!
Do you have any big financial regrets? You reflect on your good moves a lot but what ones do you regret?
I regret not starting sooner. One might think that I would never regret spending a lot on my twenties, but the only thing that I spent a lot of money on that I don’t regret was my honeymoon with my new wife where we went to Europe. That one thing I wouldn’t undo, but almost everything else that I spent significant money on in my twenties is something I regret.
In more recent years, I regret not getting a better grip on my hobby spending. Overspending my hobby budget has been my most constant financial error in recent years, even though I recognize that most of the “overspending” tends to be on things that I never end up with enough time to really enjoy.
There are times when I regret leaving my research job and switching to work on Money360 full time, but that’s mostly because I miss the more interesting aspects of the work and a few of my coworkers. I still keep in with three of them, almost a decade later. Could I have made it all work for another couple of years? Should I have? I’m not sure if it’s a regret, but a question about my past.
I regret trying to manage all of Money360 by myself for so long. I should have done something different much sooner, because the stress of managing all aspects of the site from writing to the software that runs it to social media to talking with advertisers to making sure the server was running, all of it, almost completely burnt me out on anything having to do with it in 2010 and 2011. It took me a good year to recover any real passion for writing content for the site.
I have a lot of regrets. Those are just the big ones. The thing is, I try not to dwell on them but instead use them as fuel for making better decisions going forward. I can’t undo the past. All I can do is use the past to make the future better.
Got any questions? The best way to ask is to 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.