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. Prepping for shutdown #1
2. Are piano lessons worth it?
3. Which loan first?
4. Prepping for shutdown #2
5. Investing teenage earnings
6. Tax preparation for Linux
7. Prepping for shutdown #3
8. Renting versus buying
9. Cord cutting in 2019
10. Prepping for shutdown #4
11. 50 year old mixer value
12. Strategies for reading more
Before I get started today, I wanted to address the government shutdown in a general sense.
One, I am not interested in talking about the politics of what’s going on in Washington right now. That is not a topic of interest to Money360.
What I am interested in, period, is the impact that this shutdown will have on the everyday lives of a lot of Americans if it continues. This doesn’t just affect federal employees, who are about to reach their first missed paychecks. It affects a lot of government contractors as well. There are many people who have already lost irrecoverable work due to the shutdown and within a week or so there are many, many people who are going to be hit hard by the financial aspect of this shutdown.
Over the weekend, what had been just a question or two about the shutdown turned into a flood, and I’m going to address the apolitical ones in this mailbag. I don’t want to turn it into an “all shutdown” mailbag, but there will be multiple questions on the topic.
I do expect that the shutdown will be over within a month, perhaps within a week or two. However, it is a good idea to prepare for a shutdown that extends indefinitely.
A final note: I know that there are Simple Dollar readers who work for large banks and major credit card companies. If you want a PR bonanza right now, you should consider rapidly promoting and issuing a credit card with 0% APR and free cash advances until 30 days after the shutdown as well as no payments due until 30 days after the shutdown. I generally don’t advocate for credit cards in any way, but this is an exceptional situation and an offer like this one could make the difference for a lot of families. I also call on banks to issue letters to federal employees that they’ve loaned money to and extend a grace period through 30 days past the end of the government shutdown. Those kinds of moves will earn you an incredible amount of goodwill from your customer base, earn a lot of great PR, and also actually help a lot of families right now, without a steep cost to your business (it’s basically customer acquisition).
On with the questions.
Hi! I am 29/F single and sitting at home since the shutdown began. Great job when I’m not locked out. I have 3 months emergency fund so things are fine for me but I am wondering if I should look for other work.
I don’t think it’s a bad idea to use this window to see what’s out there in your field, though you might not necessarily want to jump ship quite yet if you like your current job quite a bit.
If I were you, I’d do some job searching and put out some feelers if you have a professional community in which to do so. This is a moment to polish your resume and think carefully about your next steps.
My gut feeling is that the shutdown will end in the next month or so, so you should be able to ride it out and go back to work. However, it doesn’t hurt to take a look at the job market in this moment.
Do you have any experience with learning piano/keyboard? We’ve been gifted one for my 8-yr old daughter. I know how to read music and notes from the treble clef, so I thought I would help my daughter learn notes first and then set down to the keyboard to see if there’s any real interest before investing in lessons. Any and all suggestions/resources are appreciated!
Not too long ago, we had a daughter in the same exact situation and an old keyboard in the closet.
Our solution was simple. We set up the keyboard with a bench near our daughter’s bedroom and let her play around with it. We wanted it to feel completely like “play” so that she could engage with it on her own terms and decide if it was fun.
We told her that she could try whatever she wanted (provided she didn’t turn the volume up to max) and she could ask her grandma (who can play well) if she had any questions. We wanted to see if she engaged with the piano on her own terms in her free time because it was a genuine interest before we invested in lessons.
And she did. She kept sitting down at the keyboard and trying different things. She would hear a song and then go down there and hit keys until she could piece together the melody, with no lessons at all, and she was doing it every day or every other day, completely on her own.
That was when we decided to get her lessons. If she hadn’t touched it, we wouldn’t have bothered.
I’d try the same approach. Set it up and see if your daughter gravitates to it during her spare time. If she does so consistently and tries to figure out melodies on her own, then lessons would be a good idea. If she doesn’t ever touch it and it starts to gather dust, piano isn’t for her.
Hey Trent, I have a question regarding which loan to pay off first.
Loan A $5000 @ 4%
Loan B $1000 @ 7%
My daughter says to pay off the larger balance and I say to pay off the higher rate first. Thanks and I enjoy your writing.
You’re absolutely right here, Dan. You need to look at it in terms of total interest.
Right now, Loan A ($5,000 at 4%) is generating $200 in interest a year. Loan B ($1,000 at 7%) is generating $70 in interest a year.
Let’s say over the next year you’re able to pay off $1000 in debt.
If you put the $1,000 toward Loan A, it’s now $4,000 at 4% and is now generating $160 in interest. Loan B is still generating $70 because it didn’t get paid down. Thus, your total interest is $230.
If you put the $1,000 toward Loan B, Loan A remains at $5,000 and still generates $200 in interest, but Loan B is paid off and thus generates $0 interest. Thus, your total interest is $200.
You want to aim for the lowest total interest, so paying off Loan B first is better. Paying off the debt with the highest interest rate is always a good call.
My wife and I are both federal employees. We have three kids. We can make it through the end of January without missing any bills but after that what do we do? Live on credit cards? We don’t have great credit.
First of all, as I said at the top of the article, I think the shutdown will be over within a month. I would not go into panic mode at this point.
Having said that, you should take this opportunity right now to shore up some things. This time off is a great window to do some things like going through your closet and selling off unwanted possessions, air sealing your home to cut energy bills, and prepping some meals in advance. Those are little things that will help cut bills going forward and make it easier to get through if the shutdown goes on for a while.
I would also strongly encourage you to start polishing up your resumes and asking around your professional networks about job openings. That doesn’t mean that you’re going to quit your job and move on, but that you start opening those windows in case you need to make that leap.
I have two teenage children who have a very successful neighborhood landscaping business. The older one cleared over $10,000 this year; the younger one $2000 (he assists as needed). They keep up with their schooling, play flag football, go on family vacations and are involved in church and extended family activities, volunteer as tech for a local youth theater. Great kids. My question is, what should they do with their money? I’d like to see them invest some of it in a Roth IRA, where they can tap the capital without penalty as needed, but start longterm savings even if it is just with the interest accrued until they need the capital. Not sure if college or trade school is in the cards for the 16 year old; 14 year old is definitely college material but lacks direction for now. What would you recommend?
A Roth IRA is a solid idea here, especially if you’re not sure what they’ll be doing in the future. A 529 account is also a good idea, as it can be used for any educational purpose.
For the older child, $10,000 is well over the maximum contribution to a Roth IRA, so he’ll have excess to deal with. If I were him, I’d max out the Roth IRA, then put the rest into a 529. The money in a 529 can be used for tuition, books, supplies, room and board, and other expenses at any accredited trade school or college in the country.
For the younger child, you could go either way. I’d probably lean toward the 529 for him, but either one is fine.
My tendency is to assume that all children will eventually have some form of postsecondary education, whether it’s trade school or college, and putting money in a 529 never hurts.
I just bought a Linux system. Are there any tax preparation products that work on Linux systems?
There isn’t a good tax preparation software package available for Linux.
The best solution if you’re a Linux user is to use a web browser based tax preparation tool. In my experience, the best wholly browser based package is Tax Act, which is what I’d recommend in your situation.
If your return is simple (you don’t have children and just have a normal paycheck), it’s free. Otherwise, you’re probably in the Basic+ or Deluxe+ package.
I work for [a government agency that isn’t shut down) but am not getting paid for my work or should I say I will get my back pay whenever the shutdown ends. If I don’t work though I could lose my job. I have a 45 minute commute each day and I am getting worried about being able to buy gas. My credit cards are almost maxed out after Christmas gifts.
Best strategy here? If shutdown doesn’t end by end of month I am out of money and no credit either.
First things first: you have to live as absolutely lean as you possibly can. Don’t eat at restaurants. Don’t go to coffee shops. You have to cut all of that out until the shutdown is over. This shouldn’t be optional. If it’s uncomfortable, blame Washington.
Second, I would be using every spare second I can to search for another job. Unlike a few of the other people who wrote into the mailbag, you really can’t afford any shutdown time at all. Polish your resume and use every spare second to hit the job searching hard.
Third, never, ever, ever let yourself be in this situation ever again. This absolutely has to be a key learning moment in your life. It is an extremely poor idea to be in a situation where you are dependent on the successful arrival of the next paycheck. You have to start living a little beneath your means and putting aside some money to get rid of debt and build up an emergency fund. If you don’t do that, you’ll be right back in this bad situation as soon as anything goes wrong.
I suspect the shutdown will be over within a week or two, but don’t forget how this feels. Never forget how this feels. Use it as a tool to shape things for the better.
What happens when you get old and rent is higher than you can afford?
This question is part of an ongoing discussion about renting versus buying.
If the rent is higher than you can afford, then you either (a) have to earn more income or (b) have to move to a lower cost situation. That doesn’t change, regardless of your age.
The implication, of course, is that you’re paying in old age for mistakes when you’re younger. That’s likely true, but the mistake wasn’t in choosing to rent. The mistake was in renting and then not wisely using the amount you’re saving each month. Home ownership is an expensive proposition, one that is not fully recouped, as it includes insurance, property taxes, and tons of maintenance costs on top of the mortgage. Those costs far exceed the typical cost of renting (which has no property taxes, minimal insurance, minimal maintenance costs, and often includes some utilities, too).
Obviously, the worst move is to rent and then put nothing aside for the future. If you’re doing that, you’re neglecting much of the advantage of renting.
I want to cut the cord in 2019. Will you have an updated cord cutters guide? I was read the 2018 version, but it did not mention Roku devices at all. I just scored a good deal on one at a discount. Thank you for the great service you offer all of us in living a more conscious life!
There are a plethora of devices on the market that attach to your television and provide streaming services and Roku is definitely one of the options. I simply didn’t recommend it in the earlier post as I hadn’t used one since 2010.
Since that post, I’ve actually had experience using multiple Roku models and I’d put it on par with any of the other streaming devices I’ve tried (Apple TV, Amazon Fire, and TVs with embedded streaming tools).
I don’t have a specific recommendation other than to say that if you’re getting one of those three, you’ll be fine, so you should just seek the best deal you can.
I am 56 F federal employee for 31 years. Sure you’re getting questions about shutdown. I have been through several of them. My advice is to just enjoy the time off and don’t panic. Not good for national economy or for any of the politicians to not pay federal workers for very long and none of them want this stuck to them. They will work it out one way or another and I expect it quick. Just enjoy the vacation! I visited my grandkids for a week.
This is a nice shot of reality here from Mindy.
There is a strong political motivation in Washington to end this shutdown, particularly when it reaches a point where federal employees miss a paycheck and start being unable to pay bills. The backlash against Washington will be incredible and the damage of losing employees and losing faith from those who remain will be nearly irrecoverable, not to mention the further erosion of trust from the American people.
Keep that in mind. Prepare, but don’t panic. Enjoy the time off a little bit.
My great aunt has a 50 year old stand mixer that has worked since I was a kid. She is unloading a lot of her possessions and says she’ll ship it to me if I pay the shipping cost which is about $32. Is it worth it?
A lot of those old appliances will basically run forever. The mechanics inside are usually simple and very well constructed.
If you have a use for the old stand mixer, then it’s probably worth it because that thing will likely keep running for many, many years to come.
The question you should really ask yourself is if you have a use for it. If you don’t, then spending $32 to have that large object shipped to you isn’t worth it.
Do you have any tips for a “read more in 2019” resolution? I want to check out books from the library and read more.
My recommendation is to turn off devices for an hour each evening, sit in a comfortable chair, and just read. Turn off the TV. Turn off your phone and leave it in another room. Turn off your tablet and leave it in another room. Just settle in and read.
Screens are such an easy distraction. They’re usually moving and making noise, so we’re instinctively pulled out of our focus to look at them. Our phone dings or vibrates with a reminder. Something moves on the television. Our attention is grabbed.
The best thing to do when you have a book in your hands is to kill those distractions completely for a while and let the book take you away. I find that I’ll often lose track of time in a book if it’s good, which is why I will sometimes set a loud timer in the other room when I must stop reading.
That’s my big suggestion for you.
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.