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. Short term money options
2. Pension and retirement
3. Pension calculators
4. Going out to the movies
5. Edible homemade gifts
6. Unused gift without receipt
7. Cheaper rent or shorter commute?
8. Investing in best mutual funds?
9. Wanting to downsize possessions
10. My Year of No Shopping
11. Very old savings bonds
12. Goal oriented planner question
We’ve received a lot of feedback about the site redesign in the last few days and I wanted to share a few things regarding the redesign, particularly for long-time readers.
First of all, we’re still looking at the best way to design Money360 for the future. I personally am not a good web designer, in the sense of making a visually attractive site that also helps the site earn the revenue it needs to keep the doors open. Anyone who is a long-time reader knows that the earliest designs of the site, which I kludged myself, pretty much constantly went too far in one direction or the other. It is really hard to find a balance between the different elements – an appealing visual look, readability, and revenue generation.
Most of the design decisions were meant to reflect how most people come to the site for the first time. First-time visitors are quite often brought to the site via Google searches for things involving credit cards, so we put that information right at the top. However, finding the usual blog postings is easy – just scroll down a bit or click on the button that says “Explore our blog” right at the top. If you’d like to bookmark the blog postings directly, here you go.
Also, it’s now really easy to read just my (Trent’s) articles, a long-requested feature that did exist in the past and was hard to get to. Here’s a link straight to just my articles. I will say that there are other people who contribute to the site sometimes that I think do a fantastic job (Holly Johnson immediately comes to mind as I’m typing this, mostly because I’ve known her and her great work for years, and others do a great job too), so I hope you’ll keep an eye on the full blog going forward, which mixes my articles with Holly’s and others.
As a final note, we are still tinkering with the design, so please keep sending feedback to.
We are going to pay all our debt (but the house) within three months, it is only $7K. Beside maxing out our IRAs, 401K contributions and building our emergency fund, what can we do to make our money grow in the short term? Is a money market account a good move? We thought about buying a rental property but have not make any decision yet. We are in our mid 40’s, have excellent credit score (close to 800) and as a couple we make close to 90-100K.
The best place for money in the short term is a money market account. It doesn’t earn money at a fast rate, but it does keep that money safe from market hiccups.
Almost every other investment has some degree of risk associated with it, whether that risk is relatively low (like with A-rated bonds) or relatively high (stocks, real estate, Bitcoin). Money market funds and savings accounts are about as safe as you can get, which is a good option if you’re intending to spend the money in the short term.
To be clear, I define “short term” as being less than five years, or perhaps even a little less than that. “Long term,” for me, is defined as ten years or more. I generally keep very little risk in investments that I intend to use in the short term and have quite a bit of risk in investments that I intend to use in the long term. I usually mix it up in between the two.
How/what strategy is the best way for someone with a defined pension benefit to calculate their retirement needs? You always read, person retiring assume they live to 90. Number of years to live on = 90 minus retirement age. Figure out a 4% withdrawal rate from your nest egg assuming a very conservative (this is just me, 5% growth of account). Can the amount that you budget/estimate that it will take to live off of annually be at or less than 4%? So, if someone has a defined pension payout for the rest of their life of $50,000 (I wish, but just keeping the math super simple), is it easiest and most accurate to just subtract the $50,000 from the annual amount you assume you will need in retirement life, or would you figure out a way to estimate the present worth value of what $50,000 a year looks like now in today’s dollars over X years and add it to your current nest egg?
That’s generally considered the best way to calculate retirement with a pension. You just subtract the annual amount of the pension from the annual amount you want to live on and do the math from there.
Most of the time, people don’t include inflation in retirement calculations. Instead, they usually choose an annual number that’s substantially higher than what they’ll actually need in retirement and use that as a baseline. I usually just use my current salary converted to my expected retirement age, because when I retire, my spending is going to drop (yes, even as someone who works from home, but it would be even more so if I worked outside the home). Some sources encourage you to use 90% of your current salary, or 80%. The truth with all of them is that your spending is likely to drop by more than you think once you remove work-related incidental costs, commuting, work clothing, eating out, and so on from your budget.
So, let’s say I make $50,000 a year right now. I use an inflation calculator and that says I’ll be making $70,000 a year when I retire. If I’m assuming a 4% withdrawal rate (which should be safe for 30 years or so), I should multiply that number by 25, which is $1.75 million. But wait! If I have a pension that I expect to be $40,000 a year, that annual number drops to $30,000. Furthermore, if I expect to bring in $15,000 a year in Social Security, that annual number drops to only $15,000 a year, which means my target number is actually only $375,000. That’s a lot easier to reach, especially with a lot of years to go.
Chris had a follow-up question.
It is difficult for someone with a future pension to use any online retirement calculators because hardly any of them allow future annual pension amounts to be factored in. Do you know a site that does allow this/takes this into account for retirement planning?
Many retirement calculators don’t include pensions at all because they’re so rare, but I find that strange because they really are easy to include.
For a simple retirement calculator with a pension included, I’d check out the . It takes just a handful of very simple inputs and produces a robust report.
The is much more robust, but involves a great deal more data entry. It covers pensions quite well, too.
My circle of friends loves going out to the movies together but doing so always turns into a really expensive night. Movie tickets + snacks at the movies + going out to eat afterwards + usually going to the bookstore or something after that = lots of expense. I actually turned down going to Last Jedi with them because I couldn’t afford it. But I don’t want to lose friendships. Don’t know what to do. I don’t want to spend $100 just to hang out with my friends.
First of all, $100 is most certainly an exaggeration unless you’re going to a very nice restaurant, buying a lot of drinks and snacks, and probably also leaving the bookstore with an armload of books.
Here’s a suggestion: eat a meal at home, then go to the movie with your friends on a $10 ticket, don’t buy snacks while there, then either skip the meal or just go there and order water and an appetizer (less than $10), and then if they go somewhere else afterwards, tag along if it’s free and don’t buy anything if it’s a store. There – suddenly your “night out” is less than $20.
It only becomes expensive if you indulge in every optional purchase available. If you buy concessions at the movies, that’s another $5-$10. If you buy a meal at a restaurant, that’s another $10-20 (at least). If you buy a bunch of books at the bookstore, that’s $10-infinity. Just skip all of that. Focus instead on your friends.
Just wanted to give a big shout out in favor of edible homemade gifts. These are almost always appreciated! If you can make a big batch of chocolate bark or a bunch of jars of preserves or something like that, I will always like them!
I agree. There are few gifts I actually appreciate more than homemade edible gifts. If you make me chocolate bark or a jar of pickles or a big jar of sauerkraut, I will love you.
The best part about gifts like that is that they cost relatively little money for the person making them. If you have an inexpensive way to acquire the ingredients, then a homemade food item is very inexpensive.
In fact, I have friends who are motivated to garden simply to give the produce (mostly) away. They use it to make pickled green beans or homemade salsa or something like that.
My friend gave me a Keurig without a gift receipt and I do not want it. I can’t figure out where he bought it though. What can I do with it? I have zero interest in using it and it’s new in the box.
If it’s not something that seems to be carried at a local retailer, your best bet is probably to turn to or and do it very quickly. Simply state what it is – a new Keurig in the box with the model number – and list it at a price a little below what it sells for online.
If you manage to do this before the holidays, you’ll probably get a bunch of offers very quickly and end up selling it for cash in hand to someone who’s trying to get a low-cost holiday gift for someone else.
You’re actually lucky to have received this gift a week or so before Christmas, because this enables you to flip it pretty quickly. The same advice holds true after Christmas, of course, but you may have to sell it a bit further below MSRP. Often, bargain hunters trawl Craigslist and Facebook Marketplace after the holidays.
My current commute to work takes about an hour and a half each way. I have to drive to a train station and take a commuter train into the city and then take the subway to a stop that’s about a minute from work. I do it because the rent is way cheaper out here in the sticks.
I am considering moving in to the city or at least a lot closer because I lose three hours a day to commuting. However rents go up a lot when you start getting closer to the city and I am nowhere near financially ready to buy anything.
My estimation is that it will cost me about $800/month in extra costs to live closer. The rent will be a little more than $1,000/month more but it will save on wear and tear on the car and train costs. But I will cut about 2 hours per day out of the commute.
Is 2 hours per day of doing something besides commuting worth $1,000/month?
It depends on how you use the commute and what you fill those extra two hours with.
Do you use your commute for things like meditation and journaling and reading challenging career-pushing books? If so, you’re getting some real value out of your commute. If you use it to play Clash Royale on your phone, then that time isn’t spent with a great deal of value.
Compare that to the value you’d get out of those extra ten hours a week. Would you spend it doing something really cool? Would you take care of things that you really need to tackle but just don’t have the time? Or would you binge watch Netflix?
If those two hours are a huge value upgrade for you, then it’s arguably worth it. However, if those two hours are only a value upgrade because you sit there in a daze during your commute, you might want to consider trying to make your commute time more valuable. Use it to read things that boost your career or your understanding of the world, or use it to meditate, or use it to write in a daily reflective journal.
So I was reading Money Magazine and they listed a bunch of the best mutual funds. I went to my retirement account and they offer none of them. How does one even invest in those things?
In your retirement account at work, you don’t invest in those things. Your retirement plan at work involves a select set of investment options chosen by whatever company runs the plan. Often, they choose options that are generally beneficial for the company, which is one of the big drawbacks of many workplace retirement plans.
So, how do you invest in these “best” funds then? One way is to open up your own Roth IRA account at a brokerage that deals in those funds. You could go to, say, Fidelity, which offers a lot of funds that often pop up on those lists.
You can also open up a normal taxable investment account at a place like Fidelity, where you can buy and sell those types of funds with no restrictions. The only catch is that there’s usually a fee associated with buying and selling (though some places offer a handful of free trades) and you have to pay all of the taxes out of pocket.
I took your advice and went for a couple of months without really buying anything except for food and household necessities. Now I feel like I own far more stuff than I ever should and I want to start getting rid of it and recouping at least some of the money. I live in an apartment so yard sales are out. Do I just Craigslist this stuff?
and are where I’d start for items that are either difficult to ship or that you have in large quantity with relatively minimal individual value, like a pile of old DVDs or old video games. Sell stuff in batches so that you’re not overwhelmed all at once with transactions.
If items have some decent individual value and are relatively easy to ship, you may want to consider putting them on or . You wouldn’t want to do this with every single bargain bin DVD you own (list those on Craigslist), but if you have box sets, this might be a good place for them.
If you ever find that you have difficulty selling an item, don’t be afraid to donate it to Goodwill.
This following question goes hand in hand with Jenny’s.
Did you see this article at the New York Times? ? Thoughts?
I really like the premise of this article. If you make a conscious decision not to buy anything other than food and household essentials and other things that basically amount to needs, you quickly find yourself feeling as though you have an abundance of possessions and find that rather than wanting more, you’re almost overwhelmed by how much you have. This article really hammers home that point.
I think that if you consistently buy stuff, you constantly follow that buying with more wanting, and wanting with more buying, and buying with more wanting, and so on. By simply disrupting that cycle by saying “NO BUYING!” for a while, your wanting starts to disappear and in its place comes a real assessment of how much stuff you have.
It’s a good idea for everyone to sometimes take a long break from buying non-essential things and see how that break affects how you view your abundance of possessions.
I recently found a bunch of savings bonds in my name that were issued in the late 1970s and early 1980s. Are these worth anything any more? What can I do with them?
They do have value! You can use from the Treasury Department to see how much they’re worth. It’s likely that the bonds are worth at least their face value at this point, but are also likely to no longer be earning interest.
Many local banks will cash savings bonds for you, though not all of them. Check with the bank you already do business with and ask whether or not they offer savings bond cashing.
You will likely have to report these bonds on your taxes, so be sure to keep some of the money aside for taxes for now. Keep records on the bonds you sold and who bought them for you, and save about 20% of the cash you get out of the bonds for taxes. Though the rules on old savings bonds and taxes are a little arcane, a program like TurboTax will have no problem figuring it out for you.
Congratulations – you’ve come into a small windfall.
I loved your goal oriented planner roundup but I found myself struggling to find one that’s good for me. I am a stay at home mom who is trying to start a small crafting business and get in better shape. What one should I use?
If your primary focus is on parenting and the other elements are side goals, I’d probably suggest the . It’s pretty much perfect for a stay-at-home parent or a homeschooling parent that’s focused primarily on child enriching activities and home economics, though it does provide space for other things.
If you feel like you have parenting largely under control and you just have those three big areas of focus for the year – parenting, the crafting business, and fitness – I’d probably point to the . It’s good if you’re seriously focusing on just a few goals and really want to think about and track your progress on them every single day.
Without knowing what your day to day routine is like, those are my best guesses. Good luck!
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.