Reader Mailbag: Saying Something

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. Life insurance money lost
2. Rental houses
3. Feeling buried in debt
4. Nostalgia and closet space
5. Pressure cookers
6. The “must have” Christmas gift?
7. Caring for leather furniture
8. Stuffed animals
9. Social Security problem
10. Rare Victrola

Whenever it feels like there’s nothing to say, say something.

When the people you care about are going through something tough, even if you don’t have words that can help, give them a pat on the back and simply say, “I’m here for you if you need me.”

It matters. It really helps, even if it seems like you’re not doing much at all.

Q1: Life insurance money lost
In 2009 , a good friend sold us a Universal life . At the very mention of the word ‘Life Insurance’ me and my husband said that we are not interested since he has coverage through his employer which we can carry even if he leaves the present company.So he changed his tactic and totally concentrated on the investment part of it and said money grows under a tax free umbrella etc etc and we finally bought it out of I should say 95 % trust in the friend. On top of enrolling in Life Ins for my husband, he also enrolled us in Life Insurance for our 3 kids who were then aged 11,6 and 4.He said that it would be a good way to help their college ed.We did not do our homework.I totally understand we were being foolish. Anyway, we were paying 1480 dollars monthly,1000 dollars for my husband,180,150 and 150 for the 3 kids.We did this 2 years and finally stopped it having paid almost 36000 dollars because we realized that all the spare money we could save was being drained and that this was not worth it after all. When I read the policy papers that he gave us it said that for 5 years the cash back is zero.

I read some finance books and realized that this man had been cheating us all along. He even made me roll over money from my 401K in Fidelity when I was working to an ING Annuity that cannot be broken without incurring a penalty in the first 10 years.

My question is , is there anything that can be done to get back atleast a part of our lost money in the Life Insurance sham?
– Brenda

At this point, you’re probably out of luck, unfortunately. Unless you have documentation about how you were misled about the insurance you signed up for, you probably don’t have grounds for legal proceedings, either.

I wish there was a magical fix for you to get your money back, but if the policy doesn’t pay anything during the first five years, that’s what you’re left with.

Use your story as an example of what can happen if you don’t shop around for insurance.

Q2: Rental houses
Have you considered investing in rental properties? It’s a pretty easy way to make money.

– Joe

Based on my own experience, I wouldn’t always call it “easy.” I would call it rather risky, in fact.

For example, recently, a rental home in our area was discovered to be a meth manufacturing lab. Unsurprisingly, they were also using the stuff, which meant that they didn’t have any assets. This was after months of not paying rent on the home, of course.

The owners are now left with a serious mess. They’re trying to get their insurance company to pay for the cleanup but the insurance company is trying to argue out of it. Either the owners are going to be paying a lawyer or they’re going to be paying to fix all of it themselves, because the house is unlivable right now and is listed as a known DEA meth house.

Many people advocate buying rental properties as a great way to make money. That’s true if you’re in an area where you can easily fill the rentals and if the people who rent from you are good people.

Just like every other investment, rental properties have risks and downsides, so I don’t particularly single out rental properties as a wonderful investment. They’re one option among many, and they work best when the owner has time to actually be involved with the property on a very regular basis.

Q3: Feeling buried in debt
My Wife and I are the typical young married couple who have tried to live outside our means for some time now. I feel as though we are buried in debt and don’t know the first step to solve the situation, or even if it is able to be fixed? We were fortunate enough that my wives parents payed for her college expenses but I was not so fortunate. I Currently have around $50,000 in student loan debt. Most of it private loans. In addition to this debt we have roughly $10,000 in credit card debt with a mortgage to boot. What ides or methods would be best to take as a first step to attempt to move in the right direction. I have considered the dreaded bankruptcy path but as far as I know that would only solve the credit card and mortgage route leaving student loans to be paid. Not to mention bankruptcy is not a very appealing situation.

– Jim

The first thing you need to do is sit down and make sure that you can cover at least the minimum monthly payments on these loans. If you are unable to do that and keep food on the table and a roof over your head, bankruptcy is probably going to be your option.

If you can keep your head above water, what you should do is continue to make minimum payments on all of the debts except for whichever one has the highest interest rate. It’s probably going to be one of the credit cards. You can figure out the interest rates by digging through the statements you have.

For that highest interest debt, make the biggest possible payment you can each month on that debt. To get started, you should look around your home for items you can sell without really missing them and use that money to really knock on that debt as hard as you can and as quick as you can.

Once that first debt is paid off, keep going. Focus on the new highest interest debt and, again, make the biggest possible payment you can on it each month.

That’s the only way to get out of it. You should pair these payments with frugal living, as doing things like eating leftovers, cooking at home, and limiting entertainment expenses will help you make bigger payments and get rid of your debt faster.

Q4: Nostalgia and closet space
Whenever I clean out the closets and try to sell stuff off, I end up spending a bunch of time thinking about how important this item or that item used to be to me and I end up feeling like I just can’t bear to let it go without losing some part of me.

– Andrew

Those memories are not part of the object you’re holding. They’re a part of you.

If the thing you’re looking at isn’t important enough to you to be on display in your home or in active use, then it’s not really serving any purpose. Sure, everyone holds onto a nostalgic thing or two, but, honestly, most of that stuff is all about triggering memories. The value is in those memories, not the stuff.

Keep that in mind the next time you try to clean out your closets.

Q5: Pressure cookers
I wonder if you’ve thought of looking at Pressure Cookers and meals from that. I recently purchased a great Presto 6 Qt PC online discounted to $54.00 and no sales tax or shipping cost. And it arrived on Long Island in 4 days.

The other night I made delicious “melt on the bone” ribs in 15 minutes. Had a complete dinner done in less than 30 minutes. Have lot’s of left overs. And you can use cheap cuts of meat as well.

Pressure Cookers are making a rapid comback. They died off after WW2 in favor of T.V. dinners and fast foods. But they are long lasting, easy to clean, and safe.
– Roger

My mother used a slow cooker quite often when I was growing up, primarily for canning. I do recall her occasionally cooking other things in it as well – roasts, I think.

It’s certainly worth looking into if you make a lot of home-cooked meals.

I confess to not being really familiar with them for home use, but they certainly seem like they would be good for cooking roasts and other meat items and perhaps cooking some vegetables as well. We usually use a steamer or boil the vegetables we cook.

Q6: The “must have” Christmas gift?
We asked our son to make a Christmas list a few days ago and he gave us one with one item on it – a Playstation 4. So we did some research and found that they’re going to cost $400 (!!!) and not only that they might be in really short supply this holiday season.

What do you do if your kid asks for only one thing for Christmas and it just isn’t going to happen?
– Jen

Be direct and clear. Simply tell your son that it’s not realistic for your family to be able to afford a Playstation 4 and ask that he suggest other Christmas gifts.

He may not like that idea. Depending on his age, it might be time to gently introduce him to the financial realities of adulthood. I would say if he’s an eighth grader or above, this might be a good idea, as you can turn this situation into a learning moment.

The worst thing you can do is be vague here. Make sure that you’re not going to get him the PS4 and stick to that idea and be clear about it. Vagueness will make him think he’s going to receive one and that will make Christmas morning quite disappointing.

Q7: Caring for leather furniture
We have a La-z-boy 3 seat sofa and a love seat made of leather. I have searched your newsletter and also website for some leather care tips but only found that you try to avoid them as they are expensive. But if you have one, could you please so some light on caring it with least expense?

– Amanda

The best thing you can do is address stains immediately if they happen with soap and warm water. Don’t hesitate even a second – clean them immediately. The easiest way to damage leather is to allow for long exposure to potentially damaging stuff. Don’t use the expensive leather cleaners – just stick with basic soap and warm water.

Of course, that also means you should minimize your furniture’s exposure to direct sunlight. Ideally, it should be completely out of direct sunlight. Leather will certainly fade over time and sunlight will make that process far faster.

The only real expense should come from occasional reconditioning, which should be noted in the materials that came with your furniture. This is to replace the natural oils in the leather. This is pretty infrequent, though. Some manufacturers will suggest reconditioning more frequently than is necessary to sell reconditioning oils, so look up your furniture online for detailed advice.

Q8: Stuffed animals
My eleven year old daughter used to collect stuffed animals by the dozens, but now she only really wants to keep two of them. She’s actually said she wants to get rid of the rest of them.

What do we do with them? I can’t imagine they’d sell at a yard sale.
– Connie

If you’re having a yard sale anyway, it can’t hurt to put them out there, but you’re right that they probably won’t be hot ticket items. The same is true of Craigslist.

You could try taking them to Goodwill and let them decide what to do with the stuffed animals.

You could also distribute them as hand-me-downs, particularly the ones in good shape. Are there any nieces or nephews that are young and might like some stuffed animals? If you suspect that some may be coming along, put the stuffed animals in storage for a while and pass them down later.

Q9: Social Security problem
My husband and I are newlyweds and have gone through some very hard changes very early in our marriage. We started a business and my husband ran it while I work for a non-profit. We had to shut down the business (we are in debt about $30K) and he recently got a job with a Mom & Pop car dealership. The new job does not take taxes out of his check or social security, etc.

I have never had a job like this and he is not much of a financial planner so I end up being the person thinking about these things.

I know we need to put money back for income taxes from his checks but I don’t know how much to put back? I have heard numbers from 10% all the way to 30% to be on the safe side.

What is your educated opinion and is there anything we should do about lack of social security benefits? Should we ask to maybe after he has been there 3 months (typical probation period) to be classified as a W-2 employee?
– Anna

When you file your taxes at the end of the year, he’s legally obligated to pay taxes and Social Security on his income if it hasn’t been taken out of his paycheck. You’ll do this when you file your yearly income taxes, and you’ll likely have to pay rather than receive a refund.

Many people in your situation consider skipping this. That’s tax evasion and if the IRS finds out, you are going to get hit like a freight train.

If you find you can’t come up with the money you owe, you need to the IRS quickly. They do usually work with people who are up front about their situation.

My advice? He should be saving about half of each paycheck for this.

Q10: Rare Victrola
I recently found a Victrola that plays cylinders. The cylinders are in great shape and the two I tested actually worked (not particularly high fidelity recordings, but clear enough and recognizable). I know these have to be worth something, but I don’t even know where to start when it comes to selling them.

– Joseph

The first thing you should do is assess the model. Here’s a guide to what various models are worth.

Once you know what it is, I’d get ahold of an auction service near you. This is the kind of item that tends to sell well at auction, but an auction service will help you put it in the right place.

I have a relative who has one of these for home decoration (I believe she has a cylinder one, but I’m not sure). They really are beautiful vintage items.

Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. Iíll 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.

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