What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. When bills exceed income
2. Super Bowl party planning
3. Lessons from piano
4. Thoughts on 2012
5. Handling a pay raise
6. Shipping a package
7. Deferred compensation
8. Celebrity fandom
9. Buying a home impatiently?
10. Garden planning
In a given week, I receive literally hundreds of messages from readers that include questions that are intended for the Reader Mailbag. I’m able to answer 10 per column and I usually squeeze in a few more as standalone posts during the week, but that still means that I simply am unable to answer a lot of the questions that come my way.
For a given mailbag, I try really hard to pick out “representative” questions – ones that are similar to the questions others have asked me recently – as well as a few unique or quirky ones to keep it flavorful. I also try to make sure that the subjects aren’t totally repetitive. I also file away ones that are “borderline” so that I can use them in the future if I happen to need an extra question or two (I just checked and there are 120 questions sitting in my “borderline” folder right now, actually).
Given that, I do read every email that comes my way (that I see, anyway – spam filters do sometimes catch real emails), and if your exact question doesn’t show up in the mailbag eventually, I’ve tried to find some way to address the question you’ve brought up, either by answering a similar reader question, writing a standalone article on the topic, or something similar.
Q1: When bills exceed income
What do you do when you have more bills than income? My husband and I are swamped with medical bills, I had a surgery and then we got pregnant, and 6 months later had a stillborn. We have medical bills for both. I was out of work for 6 weeks and that put us behind since short term disability is only 67% of my wage. My husband works 2 jobs and we are still struggling. I know we will catch up and be ok, but I dont know if I am trying to pay too much too fast in fear of falling even more behind (we have credit card bills too and student loans) , or what, but we are struggling.
So – do you let yourself fall behind to keep money in your account to live off of and not get anxiety that you’re about to go negative, risking the inevitable “down -hill spiral”, or “domino-effect”, or do you pay everything that is due and just keep chugging along?
I use coupons, we buy off-brand, we try not to eat dinner out, we buy our 2 year old’s clothes 2nd-hand. … I just dont know what else to do and fear that we will always live like this. What are we doing wrong?
Can you help with any advice?
The first thing you need to do is reorganize your debts. Medical lenders tend to be the easiest to talk to about delaying payment or reorganizing a payment plan, so I’d start there.
Call up the organization holding your medical bills and explain your situation. Tell them that the medical problems have put you in a short-term financial pickle, but that you’re heading for recovery and you need a bit of breathing room right now. Ask for a grace period where no payments are due and perhaps a lower payment plan after that.
Then, use that time to crack down on the other payments. Try to knock out some of them while your medical bills are waiting. You won’t be walking the tightrope at that time, so you should be able to knock some out of the park.
Q2: Super Bowl party planning
Every year, about 20 of us get together for a Super Bowl party. About six years ago, we agreed to host it on a rotating basis, and this year it’s our turn to host. That means we have to plan an enjoyable party for thirty people or so. How can we do this without spending hundreds of dollars?
No matter how you slice it, the party is going to be fairly expensive. However, you’ve had a run of six years where you’ve not had to pay a dime for an enjoyable Super Bowl experience and, in future years, you’re not going to have to pay a dime. How much was each party worth to you? $20 apiece for all of the food and camaraderie? That’s $240 right there, and that doesn’t even include the future years.
So, how can you drive the costs down? I’d bulk buy everything I might use for this party. If you have a friend with a warehouse club membership (or if you have one yourself), utilize it to buy everything you’re going to need for the party in bulk. Plan everything that is going to be out there for consumption before you ever leave the house to shop. Make as many of the snacks as you can by hand on Saturday, since making them from scratch will also save you money. Also, make sure that some of the things you’re buying are things you can re-use later on if there’s leftovers.
It’s still going to be expensive, but those tactics should take the edge off of the expense for the party.
Q3: Lessons from piano
A couple of years ago I remember that you were learning the piano. I think you stopped in the meantime but I’m not sure. It might make an interesting article to undestand your experiences from this. What forms of learning did you use, teacher, online, song books? What goals did you want to reach? How long did you practice for (daily / total)? What would you differently next time?
I stopped with learning the piano for two reasons. One, it was very difficult to find consistent time for lessons, and I was driving about half an hour for those lessons, meaning I needed a two hour uninterruptible block. It was very tricky to find that block every week. Two, we did not have a piano at home, so I had to walk to a nearby church just to practice. It added up to a situation that made things difficult, so I migrated to learning instruments I could actually play at home (acoustic guitar and harmonica).
If you want to learn a new skill, it needs to be at least reasonably convenient for you to practice that skill. The more time and distance you have to travel to practice, the harder it’s going to be to keep up with it.
For me, learning a new skill works best when I require myself to spend an hour a day on it, usually spread out into four fifteen minute batches throughout the day.
Jeff had another comment worth addressing.
Q4: Thoughts on 2012
I’ve read your blog for approx 3 years and still enjoy it greatly. I personally found the articles from the second half of 2012 to be much better than the beginning of the year.
When I finally came to the decision to sell Money360 at the end of 2011, I was burnt out on everything having to do with the site. What I needed more than anything was a vacation from anything having to do with it, but the agreement I signed mandated that I keep writing two articles a day.
I did the best I could, but for the first few months of 2012, I dreaded doing it. I was just burnt out. I never missed an article, but my heart wasn’t really into it.
So, what I did is that I just took it slowly. I tried to get the required writing done as fast as I could and I spent a lot of time seeking other interests, and as the year moved along, my energy and passion for writing about the subject started to come back, and I think it showed in the writing.
You’re far from the first person to send that kind of email, by the way.
Q5: Handling a pay raise
I’m about to change jobs, where I’m going to receive a 50% higher salary than what I make currently (it comes out to about 25% more after taxes, which is still a chunk of money).
I’m planning on saving the difference, but I’d really like to defer it for a month or two. Can’t I take the first two months to buy some long-overdue items before I put everything away? My glasses are scratched and the frames crooked — I’d really like to buy new glasses. And the soles of my shoes are worn down to the point that I’m walking crookedly. It’s not a giant lifestyle inflation — just a few items that I’d otherwise not buy so easily. What do you say? Can I get your permission to defer saving by a month (or two)?
To be clear: I can afford new glasses without going into my savings, but it would bite into my bank account buffer money, and I’d rather not do that.
There’s nothing wrong with doing what you’re suggesting. The challenge will be flipping the switch back to savings once you’ve taken care of those “needs.”
Once you have a hammer in your hand, everything begins to look like a nail and you’ll find lots of “problems” to solve with that money that wouldn’t have been problems at all without that money in hand.
If I were you, I would set three or four specific things I wanted to replace and then stop there as soon as they’re paid for, then flip the switch to savings. Hold to this even if you start seeing stuff you’d like to take care of.
Q6: Shipping a package
I usually ship packages to my grandchildren on their birthday. I usually use the post office to ship but their rates just seem to be going up and up and up. What’s the best “bang for the buck” way to ship a small-ish package?
It really depends on the package. For really small packages – say, the size of a VHS tape or smaller – the postal service is the best service.
If you start moving up in size, though, I tend to find that UPS offers the best rates on bigger packages. I’ll still sometimes use the postal service out of convenience for some packages, but if I have more than one, I’ll make it to the UPS office.
FedEx is the only other service that’s even remotely local. They’re pricy if you just walk in off the street, but my experience has been that if you need it there on a certain date, they’re the ones that are going to pretty much guarantee to make it there.
That’s my experience with the package services, anyway.
Q7: Deferred compensation
My husband’s company recently offered him the option of deferred compensation. I had never heard of such a thing, and after attending webinars on the subject, it seems like a good deal for us.
We already max out his 401K along with catch up (he’s 50) and the company match of about $3.5K a year. The only risks that I can identify with the deferred compensation is that if he loses his job or leaves the company, he’ll have to take a lump sum payout; or, if the company is sold (they are a subsidiary of the sponsoring company) we will also have to take a lump sum payout. These risks seem reasonable and not very likely at this time. Our plan is to stay with his current company until we retire in about 15 years. [BTW – my recent job change put me in a job that doesn’t offer a retirement plan, so we lost our ability to save the $17K we were previously saving for retirement via that path.]
Our payout options are either lump sum or to take the payment over a period of time up to 10 years. If we use the deferred compensation money for our first 10 years after retirement (from age 65 to 75), then we can start using our 401K savings and social security at 75 if we’re around that long.
Does this seem reasonable? Can you see a flaw in our thought process here?
It seems like deferred compensation fits with what your financial goals are.
There’s only one big problem with deferred compensation. If your company goes bankrupt in the interim, you’re just out of luck with that money. You have a high likelihood of never seeing a dime of it.
Taking deferred compensation means taking on a bit of risk in the form of the stability of that company. If that’s a risk you’re comfortable with, then go for it!
Q8: Celebrity fandom
My twelve year old daughter seems obsessed with celebrities and has told me that her only real goal in life is to be famous. Rather than doing her homework, she spends tons of time grooming herself and practicing “poses” in front of a mirror. How can I even start to move her on the right track?
Very few celebrities become famous in a lasting way without a strong educational background and some level of post-secondary education or training. There are exceptions to this, of course, but those exceptions come from someone who exhibits something that’s genuinely exceptional in some form or another – usually a talent they’ve groomed from the very start of their life.
Do some research on the celebrities she admires the most. Find out how they got their start and how much hard work actually went into building their path and share that with her. Almost every well-known celebrity, even if they appear “dumb,” has a sharp plan, a good educational and training background, and an incredibly strong work ethic.
If she genuinely wants to be famous, she should spend less time looking in the mirror and more time hitting the books and eventually taking business classes and developing skills that will entertain and attract others.
Q9: Buying a home impatiently?
My husband and I are trying to get in a position to buy a home – we really dislike our current rental house and are feeling very impatient, but we want to be smart about it as well. Moving to another rental isn’t really an option both for practical reasons (several pets) and financial (we have exceptionally low rent). I am 40, my husband is 33, and we have a 2 year old son. Our only debt is outrageous – $175,000 in student loans. Our plan for those is public service loan forgiveness – basically, work in public service for 10 years and pay based on our income (currently $300/month, will go up to around $450 next year) with the remainder of the loans forgiven. We have 2 years of eligible payments made so far and my husband has a stable job in public service, so we feel relatively safe with this plan. My husband’s income is just under $70,000 and I am a stay at home parent. We currently have $10,000 in an emergency fund and $1,000 in a house down-payment fund (obviously we just started). We have been saving at the rate of $1500/month since we paid off our last non-student loan debt over the summer. My husband has 6% of his salary going to a 457b retirement account, his employer pays 6% into a defined contribution account and he is vested in a defined benefit pension. The price range for homes in the size and location we are seeking is $250-300K. With all of that information, do you have any advice for the timing of purchasing a home? We want to do it as soon as we can, but we don’t want to make a bad financial move just because we’re impatient.
Well, assuming you’re shooting for a $250K home, you’re going to want a $50K down payment. Without that, you’re going to be stuck either paying for insurance on that mortgage or getting some other suboptimal mortgage package.
At your current rate of savings, that puts you at down payment level in a bit under three years. I would accept that timeframe and live with it for now.
Spend that time getting to really understand the homebuying process, what the expenses are, what the added expenses of being a homeowner are going to be, and then start the shopping process when you get closer to that timeframe.
Q10: Garden planning
I’ve been thinking of starting a garden in the spring. I read a few older articles by you where you said you’re usually planning your garden by mid-January. What do you for garden planning?
We have lots of seeds ordered and expect delivery in the fairly near future. Our primary source for seeds is Seed Savers.
Before we ordered seeds, we sketched out our plan for planting our garden this year on a piece of paper, identifying what we wanted to plant and roughly where it would be. This informed our seed-buying decisions.
When the seeds arrive (soon), we’ll be starting some seedlings in our house under a grow light. This will occupy some of the space in our home for a while until spring bursts forth.
Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. 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.