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. Savings and short-term deals
2. Cash-out refinance and student loans
3. Finding local clubs
4. “Maxing” a 401(k)
5. Cheapest GPS option?
6. Moving towards major career change
7. Selling baseball cards
8. Cost of children
9. Selling a business
10. My favorite board game
Going for a day-long car ride with multiple children can be really tricky. They get bored. They get hungry and thirsty. They need a diaper change. They get restless.
I’ve found a few tricks that really work. First, keep food and snacks and beverages in the car. Take more than you think you’ll need. Second, whenever you stop for gas, everyone uses the bathroom. Third, if you have a very young child, try to drive in the evening and feed the child just before departing (so they’ll sleep). Fourth, have more activities for the car than you possibly think your kids can get through (road trip games, songs, and so on).
The key is to get as much time between stops as possible, as this will greatly shorten your time on the road.
Q1: Savings and short-term deals
I had a new dilemma lately, and I was wondering how you would have handled it. I am very good at setting and keeping financial goals by using targeted savings accounts. However, twice this month, I was offered great deals on two of my targeted goals before I had saved enough, but I knew that the offers would not be around by the time I *had* saved enough.
The first was a trip for which I’m saving. I was not going to buy plane tickets for another two months, but then found an early deal on tickets whereas each ticket was about $200 less that I was planning to spend. I had not saved enough to purchase the tickets yet, but I couldn’t pass up a savings of $400 (two tickets), so I dipped into my (non-vacation fund) savings to buy the cheaper tickets early.
The second was a new bicycle. I have two cars that I never drive and am trying to sell, and I commute daily on a bike that is much lesser quality that I need for the amount of riding that I do (sticky gears, etc). I was planning to drop $300 on a new bike once the cars sell, but then was presented with an opportunity to buy a $1000 bike for just $125. Again, I dipped into my savings to purchase the bike.
I will have my savings back to par within 2 months (and it still has a decent amount of money in it), but I was wondering what you thought about this type of situation. Even if I had left my savings alone, put the purchases on a credit card, and paid off the card in two months, I would have saved money on the purchases– And otherwise, I would have definitely made these purchases later on, and they definitely would have cost more than I paid.
I don’t think there’s a thing wrong with this as long as you have plenty in savings after the move. I use my emergency fund for things like this all the time (assuming I can’t just cover it with my checking).
The big key is to make sure you’re not eliminating or severely hurting your emergency fund to do this. I would never, ever take out more than half of my emergency fund balance for such a thing, and if I were to regularly do such a thing, I would target a larger emergency fund than I normally would.
It is a very good thing to have more capital on hand so you can take advantage of such offers, but you shouldn’t dive into such offers if you don’t have plenty of money in the bank. You’re just begging for a major crisis if you do this without adequate cash.
Q2: Cash-out refinance and student loans
I am currently refinancing my house from 401,500 at 4.125% (original loan) to 397,000 at 3.625%. Depending on the appraisal, I may be able to get about $10000-15000 cash out. If I do a cash out refi, the interest rate may go to 3.75%. In either case, my monthly mortgage payments will be lower. I have about $75,000 in student loans at 4.75% with about 28 years to pay them off. I have been paying a little more than the minimum every month, but the total is reducing slowly. So, should I do a cash-out refi and use the money to pay down my student loans?
You’re essentially shifting your debt from your student loan to your house. There are good things and bad things about this move.
The bad thing is that you’re increasing your collateralized debt. Your house can be repossessed if you can’t make payments, whereas there’s nothing to repossess with a student loan. On the other hand, student loans are incredibly difficult to get rid of during bankruptcy (if you were to reach that stage). These points are moot if you keep yourself in good financial shape, of course.
If I were in your shoes, I’d do this. Your monthly mortgage payments will drop a little and you’ll make a big jump with your student loan. I would keep making “more than the minimum” payments on the student loan in this situation.
Q3: Finding local clubs
I would really like to find a local book club to join and maybe a board game club, too. I don’t know many people in this city and I would like to find some people with common interest, but I don’t know where to find them. Any ideas?
There are several good places to start. My first stop would be the local library, which often hosts such events. They usually have a schedule of events posted somewhere, so ask a librarian.
My next stop would be meetup.com, which lists group meetings of all kinds in your area. It seems to be much more populated in larger cities than smaller ones, but you sound like you’re in a larger city of some kind, so it’s worth a shot.
After that, I’d check out shops that specialize in your area of interest. Many book stores and game stores (especially independent ones) foster such clubs.
Q4: “Maxing” a 401(k)
I see in lot of your letters where people say they have max’d their 401ks. Are people actually maxing the 401k/IRA limit of 17,000 for 2012 or are they just contributing the max to match employee contributions?
Sometimes they mean one, sometimes they mean the other.
For me, “maxing” usually means the first definition – they’re contributing all the way up to the cap. However, I’ve found that sometimes people are referring to the latter, and their idea of “max” is the maximum amount that gets employer matching.
If I’m unsure, I assume the first definition.
Q5: Cheapest GPS option?
My wife just retired (I retired a few years ago) and we’re planning on doing a lot of traveling around the U.S. in a car over the next year or two. We want to see all of the national parks and monuments in the lower 48 states.
We’ve decided that, rather than using maps, our best approach for navigation would be GPS. We’ve used a friend’s GPS unit before, but we want to figure out what the best “bang for the buck” is when it comes to GPS.
If you’re going to do that much driving, I agree that a GPS will be very useful.
As for what to get, it really depends on the other options available to you. For example, if you have a smart phone with an unlimited data plan already in place, your best option is to download a GPS program for that phone. However, if you don’t already have this, the expense is not worth it just for GPS.
If you assume that you guys have only a low-end cell phone and just a voice contract (much like my parents have), I’d definitely go for a low-end standalone GPS device. I’d go for something like the Garmin nüvi 50LM, which has virtually every feature you’d want, lifetime map updates, and a very reasonable price.
Q6: Moving towards major career change
I am at a point in my life where I know I have to do something. I don’t have a really horrible, heart wrenching tale nor I am in debt, but I want to make things happen. I want to start my own business. I know what I want to do, and I know that I can do it. (I want to be a professional organizer; I am one of those people you might call a “neat freak”.) I am trying to follow what I feel are the right “steps” – reading the SBA website, researching NAPO (National Assoc. of Professionsal Organizers) and learning about taxes, etc. I am looking into my possible local resources – NAPO Chapter and Women’s Small Business Support Group. I have a B.S. in Management – which I have put to zero use. I have worked a couple of jobs since college, which I have started with optimism and have not enjoyed, but the bills have to be paid. I’m also reading up – currently on Dale Carnegie’s How to Win Friends and Influence People… business type psychology books. But honestly I am terrified to go out and actually do a job – if I were to get one. It is a very overwhelming feeling. Do you have any advice?
It sounds to me like your issue isn’t understanding what to do, it’s a fear of actually doing it. That’s a psychology issue.
If you have a health care plan that covers psychology, you should talk to your doctor about this.
I’m not a psychiatrist or a psychologist, I just know that it’s good to talk through the challenges you have with someone who can help you piece through them.
I’m going to assume they’re more than fifteen years old, which means they predate the era of “memorabilia cards” (baseball cards with pieces of game jersey, bats, etc. embedded in the cards).
Basically, if the cards are newer than about 1970, they’re not going to be worth much at all. Cards from base sets newer than that were printed in such high numbers that the supply far, far exceeds the demand in the marketplace.
When you get into older cards, though, things get interesting. The demand is higher for them, the supply is much lower. If you find yourself with a lot of pre-1970 cards, I would get the collection professionally appraised, especially if you’ve heard of some of the players depicted (Mickey Mantle, Willie Mays, Lou Gehrig, etc.).
The easiest way to tell the age of a card is to flip it over and look for either a copyright date or the last year of statistics on the card.
Q8: Cost of children
I am considering retiring for the next two years of my life and travel the world because I’ve held many jobs and owned numerous businesses since I was 9 (for many young people, retirement is “college” – but I prefer world travel). I am currently 21, have no debt, make about $95,000 a year from 3 businesses (fluctuates), posses almost a million in wealth and co-own a house with my twin sister (we’re boy-girl twins). While this sounds like a lot of money, I have an unusual situation regarding my financial goals. I want to have kids later in life (after 35) as there’s a ton of evidence that for men we have a higher probability of passing on longevity genes to our children if we have kids at an older age. I also want to have kids through surrogate mothers, so I’ve calculated that each child will cost $100,000 per child (I want at least 5). This means that my current wealth will evaporate pretty quickly just on surrogacy costs, if all goes as planned in this area. I’ve learned in business that you should never under-prepare, which is why I ask this question: based on your experience from your own story and from others you’ve talked with, how much does the average child cost? And how should one prepare for this cost as time goes on (as money carries a time value)?
You need to decide what exactly you’re intending to pay for with these kids. The $100,000 per child will cover a childhood with public education, decent food, and minimal travel. If you want to travel with them, tack on more. If you want them to have collegiate education, tack on a lot more.
Some estimates (with these extra costs included) total up to $250,000 or more.
The thing that you need to remember is that this bill won’t come due all at once. It will be slow throughout most of the child’s life, particularly slowing down during elementary school. The big costs usually hit as they approach and enter college. This means you’ll have more time to save than you think and that your normal income will absorb most of the cost.
In other words, I wouldn’t worry about it too much yet. I think you’re in incredibly good shape.
Rex had a second question.
Q9: Selling a business
Another question I’ve pondered is what should I do with my businesses before I retire for two years? I gave one business to my twin sister this past year, but the other two I’ve considered selling or giving to her. That being written, she’ll be taking care of our house while I’m gone, so I don’t want to overwhelm her with responsibility. Given that I’m young and unaware of what to do with a business before retiring for a brief time, what is the best way to proceed here?
If you want to have nothing to do with the businesses at all while you’re gone, your best choice is probably to sell it. Your sister might be one potential buyer, but you might want to also look at your competition, as they might be thrilled to buy you out.
If you’re willing to have at least a bit of while you’re gone, you could hire a business manager to run them for you. Since I don’t know the specifics of your business, this may or may not be an option.
Given that you seem to want to escape, though, I would lean toward completely selling the businesses.
My “favorite game” changes somewhat over time. With me, what often happens is that I’ll get really interested in a game and want to play it all the time for about 30 or 40 plays. After that, the game falls into what I think of as a “hall of fame,” where I’ll happily play any of those games at any time, but I don’t have a burning desire to play it.
If I had to pick one game from my “hall of fame,” it would be very, very hard. After some thought and some time looking at the games on my “hall of fame” shelf, I’d probably choose Agricola. It’s themed around a medieval farm, works well with any number of players from one to five, has an insane amount of variety, is deep but doesn’t have a lot of downtime, and can play in a couple of hours (no never-ending games like Monopoly).
Right now, the game I’m enamored with and want to play all the time is D-Day Dice, a dice-rolling game set in World War II – but it’s not really a combat-oriented game like Risk. It’s more about resource management. It plays quickly, and works from one to four players really well (both competitive and cooperative). I’ve played it a bunch in the last week.
Got any questions? Email them to me or leave them in the comments and 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 hundreds of questions per week, so I may not necessarily be able to answer yours.