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. Second home
2. You Need a Budget changes
3. Taking frugality too far
4. Frugal sketching supplies
5. Timeshare info sessions for freebies
6. Food staples when money’s tight
7. Stock downturn and rebalancing
8. Milk and eggs on sale
9. Thoughts on Kasasa
10. Why panic because of downturn?
11. Keeping financial success a secret
12. Letting go of old hobbies
Most weekdays, I get up early to write – sometime between 5 AM and 5:30 AM. This gives me somewhere between one and two hours of writing while the house is pretty quiet. My wife usually gets up and starts her daily routine around 6:30 AM and the children sleep in until almost seven.
This is the most productive period of my day, at least at the start of it. I’ll usually drink a big glass of water, eat a piece of fruit, and settle in for about 80 minutes of solid writing in a very quiet house, which is incredibly valuable.
Then, I’ll hear the sounds of my wife stirring down the hall. She’ll get up and take a shower, so I can hear the shower running. I know then that my morning writing session is running short.
Then, the children start to wake up. Invariably, my oldest child wakes up first. He will usually come into my office, opening the door quietly if I have it shut, and just stand there for a minute until I look at him. Then he will usually wave or something and then go downstairs to play or read a book. I know then that my time is very short.
About ten minutes later, my daughter and youngest son wake up. They usually stick their heads in and yell “HI DAD!!!” They have no qualms about interrupting.
At this point, I know I need to write down whatever spare strands of thought I have in my head so I can pick them up later. Because within a couple of minutes, my wife usually stops in and says, “I’m going to leave for work in a few minutes… can you get the kids some breakfast?”
Of course, then I go downstairs, get everyone breakfast, take care of the inevitable last minute emergencies (like making sure everyone has clothes and they’ve brushed their hair and they can find gloves), and make sure the children don’t dawdle so long that they miss the bus.
It’s funny. Every single weekday morning follows almost the exact same routine. You’d think it would get boring after a while, but it’s been happening more or less the same way for years and I never get tired of it.
Q1: Second home
I own a home. They say the second home is easier to buy than the first because of equity you may accrue. My question is, when is the right time to get that second home? Mortgage on the first home is 350,000. Current market value seems to be 700,000. I am a teacher six years in. And have no savings aside. Still paying down $24k in a secured line of credit. I am dating a girl for a year and a half. I am 31 and she is 29. Should/When should I buy the second home?
– Neal
On a strictly financial basis, you do have enough for a down payment on another home, as the $350,000 equity in your home could probably be used for a down payment on another home of similar value.
My question would be whether you’re wanting to just upgrade your current home or whether you want to simultaneously own two homes, and if it’s the latter, what you intend to do with the unused home. Is one going to be a rental? Is one going to be a summer home?
Overall, I think that’s a horrible idea unless you have a lot of money in the bank. If you are a teacher, you are likely not drawing an enormous salary. I am not sure how you are affording your current house, honestly, without some help from somewhere. Since I don’t know what that additional income is like, I really can’t recommend any kind of house buying move here.
I’d suggest you sit down and figure out exactly what you want and why you want it. What are you hoping to get from this second home that you don’t have right now? Could those needs/desires be met in a different way than owning another home?
Q2: You Need a Budget changes
I don’t know if you have heard, but YNAB has gone from a pay for upgrades system to a monthly fee system for their product. I’m wondering if you would still recommend this as a budgeting product, or if the fee structure is something that would steer you away from it? If so, what would you recommend instead?
– Mary
I understand completely why a software company would want to move to a fee system. It is pretty hard to sell a software package twice, especially one for personal use, and once you’ve sold to a lot of people in your market, it’s hard to keep revenue coming in. I also want to say that You Need a Budget is a very good piece of software, one that I use all the time and really value.
For me personally, I’m sticking with You Need a Budget 4 for now, and possibly for good. The software does pretty much everything I want it to do without the fee system involved. I have no reason to upgrade.
As long as YNAB 4 is still available, that will be my recommendation to people. When it stops being available, then I’ll have to reconsider, but that appears to be still in the future.
Q3: Taking frugality too far
How can you tell when you’ve crossed the line from frugal into cheap? I spend a lot of time each week doing things to save money and sometimes I worry that I am being a total cheapskate. Especially wondering when it comes to DIY projects.
– Karen
I think there are several sins that you are taking frugality way too far.
First, if your frugal choices are causing you to be socially isolated, particularly from people you care about, then it might be a problem. Basically, if you’re choosing to save money rather than maintain a personally important relationship, then you might want to rethink things. Of course, sometimes you may find that you are becoming less compatible with someone, but that doesn’t mean the answer is to simply be less social. You should seek out newer relationships as a replacement.
Another sign that you might be overdoing frugality is if it is having a negative impact on your health. If you’re choosing not to eat because food costs too much or you’re not going to the doctor for a serious ailment because of the costs, frugality is probably getting in the way of your health.
Yet another sign of frugality swinging into cheapness is if you’re giving up things that are really central to the joy in your life to save money. Frugality is about bang for the buck, not giving up everything so your bank account goes up.
If you’re doing those kinds of things, then you’re becoming a cheapskate, which isn’t a positive thing.
Q4: Frugal sketching supplies
My daughter is in tenth grade and has some impressive sketching skills. She can do things that look almost lifelike with a few supplies and some time. The problem is that she’s pretty picky about sketchbooks and paper and pencils and pens and such. I think that her skills will translate into some kind of career someday, but for now they’re really expensive. Do you have any tips on finding art supplies on the cheap? Or is there something else I should be doing as a parent?
– David
I have a few friends who are accomplished artists but still manage to be pretty frugal about things, so I asked them for advice. The suggestions I got were numerous.
First, they suggested that she practice specific elements on junk paper and save the good paper for complete finished sketches. So, if she’s trying to work just on nose shapes, she should work that out on the cheapest paper you can find and save the much more expensive good paper for final sketches. One of my friends said she spends 95% of her time working on things on scratch paper, so she actually doesn’t go through much good paper at all.
Next, they suggested constantly watching for sales on the types of art supplies that she uses and buying them then, even if you won’t need them right away. This is apparently especially true for the things that she does, which usually involve pencils and pens and paper, which can easily be stored.
I asked them where to find sales and they said to watch the local stores, Amazon, Michaels, and art supply store websites like Blick. Just visit them regularly and look for sales.
They also suggested using some of the better supplies as gifts for gift-giving occasions instead of buying them endlessly. Get her some of her nicest sketchbooks for Christmas, but if she needs some in the middle of May, get lower-end ones or encourage her to spend her own money.
This all seems like very good advice.
Q5: Timeshare info sessions for freebies
The neighborhood I live in seems to be a target for people selling time shares. I’ve had salespeople come to my door and leave flyers wanting me to come to meetings about timeshares. “Come have lunch on us and learn about Holiday Joe’s Beach Destinations” or whatever.
What are the ethics of going to these meetings? I’ve gone to a few and they usually require you to sign in with your contact information and then afterwards they pester you nonstop. But the lunch is usually good and free and sometimes they have raffles. I have no interest in time shares so when they call me afterwards I just say “not interested” and hang up. But I know I am not interested. Is this an okay thing to do?
– Jill
I see no problem with doing this. Honestly, for them the cost of the lunch is worth it to have a random person listen to their presentation. They have people like yourself cooked into their signup rate, I’m sure. If not, then their business model is terrible.
Some people suggest sharing bogus information at such presentations. While there’s nothing they can really do about you sharing false information with them, it seems fairly dishonest as an approach. Part of the value exchange here involves your contact information.
That being said, it would not be worth the value of a free lunch to have to sit through a presentation like this and the pressure sales tactics that would follow. That’s just not enough value for me. I’d rather make a sandwich at home for a dollar or two and then spend the rest of that time doing something fun.
Q6: Food staples when money’s tight
What did you and Sarah do when buying groceries when money was really tight? Like how would you handle it if you only had $25 or $30 and had to feed your family for a week?
– Jenny
Honestly, I’d go to the store and load up on whatever produce and meats were on sale. Then, if I still had money left over, I’d buy things that provide a lot of good nutrition at a low cost, like dry beans and bananas.
Even today, if you apply that approach at the store, you can walk out of there with several heavy bags of food for $25-30. Of course, this food will require some effort at home to prepare – you can’t just pop open a bag of dry beans and start munching, after all. I think that’s something many people overlook in their food purchases. They’re often paying a lot more for convenience, like paying for about 4 ounces of beans and 12 ounces of water when buying a can of beans versus spending less than that for a pound of dry beans that they actually have to *gasp* cook themselves (even though it’s really simple).
Money still stretches pretty far at the grocery store once you turn away from the convenience foods and the higher-end fresh items and focus on the low-cost produce and meats and the staple foods like dry beans. That stuff is inexpensive and it goes a long way.
Q7: Stock downturn and rebalancing
I’m not (too) worried about the recent drop in stock prices but I am worried a little bit about future contributions to my retirement plan. I currently put in 80% stocks to 20% bonds, which is what I have been doing from day one. This was advice given to me by my plan manager and matches up with what everyone recommends in books and such. Should I change that now because of the downturn?
– Kevin
I wouldn’t change that a bit.
What you’ve probably found over the last several years is that, although you were contributing at an 80% stocks to 20% bonds ratio, that’s not actually what you currently have in your account. Assuming your stock dividends were being used to buy more stocks, your actual ratio in terms of what you own is probably something like 87% stocks to 13% bonds.
As the market goes down, all that’s going to happen in your account is that the percentage of stocks will slowly go down and the bond percentage will slowly go up. Even if it actually reaches 80% to 20% within your account again, all that would mean is that over the period you had invested, those investments did equally well.
Honestly, if that’s the investment approach you’ve decided on for your situation and risk level, you should ignore what the market is doing right now and just keep trucking along with it. You’ll be fine.
Q8: Milk and eggs on sale
Milk and eggs are both on sale this week at the grocery store. I plan on having lots of scrambled eggs for breakfast!
But then I had a question. Is there anything you can do long term to get the most value out of eggs and milk? Obviously the stuff goes bad after a while. I think you can freeze milk, right? What about the eggs?
– Kerry
You can freeze eggs with little problem. If you let them thaw slowly in the refrigerator and make scrambled eggs with them, you’ll honestly not be able to tell the difference.
Milk is a bit trickier. It seems to undergo some noticeable changes after freezing it, at least if you’re drinking it. Some of the non-water materials in the milk seem to clump up a little, almost as if it became a bit non-homogenized. The flavor and texture seem to be a little off if you drink it straight, though it seems to be fine as an ingredient in other things.
Using milk and eggs as ingredients in other things that are frozen seems to be fine. We often make homemade ice cream and gelato, for example, and freeze it in containers for fairly long periods. If you’re looking for a use for extra milk and eggs and have an ice cream maker, make some right now for use in the spring when it’s warmer and ice cream is more palatable.
Q9: Thoughts on Kasasa
Any thoughts one way or another on Kasasa? My local credit union offers Kasasa accounts. Seems like a nice return but way too many hoops to jump through.
– Mel
First of all, what’s Kasasa? Kasasa is essentially a cooperative program among credit unions to give them some leverage with larger groups like Visa or Mastercard. Given that credit unions are about providing benefits to members rather than profits, these benefits usually pass back to the customers.
Kasasa accounts usually offer a great interest rate, but they come with some particular usage requirements. The most common requirement is that you use your debit card to pay for purchases a certain number of times per month. If you meet that threshold the previous month, you get the great interest rate in the coming month; if you don’t, you usually get a crummy rate.
My feelings on these kinds of accounts hasn’t changed. If your normal usage of your debit card and your account matches up with what Kasasa demands, then it’s worth using it.
However, if you don’t normally do things in the way that Kasasa would want, or you could do it but you’d have to keep track of your purchase count and so on, then it’s not worth it at all. You’ll earn a little more, but it won’t be enough to make a big difference.
Let’s say your Kasasa account earns 3% interest, while a normal account earns 0.5% interest. Over the course of a year, on an average $1,000 balance, you’re talking about a $25 difference. If that means that you have to track your purchases or sometimes make more purchases to make the cutoff, it’s not worth it.
Q10: Why panic because of downturn?
Maybe it is just my personal mindset but I don’t understand why people get really panicked when the stock market drops a little. It’s not as if America is on the verge of collapse any time soon. The value will come back. I mean, I understand why the market drops a little sometimes – people buy in too much and then decide to sell because of some bad news or something. What I don’t understand is the fear and panic that goes on when it happens?
– Erin
For starters, some people have a lower risk tolerance than others. When they see the value of their investment jumping around like that, they get nervous and want their money to be somewhere that doesn’t jump around like that.
For others, they buy completely into the panicked tone that some financial writers get into when the stock market gets jittery. If you read mainstream financial news online right now, much of the talk seems very panicked and scary, as it always does when the stock market drops a little. Some really buy into this and whip themselves into frenzied fear.
Still others are really risky investors and speculators who are doing things like buying derivatives and selling things short. A poorly timed market drop can be extremely painful for someone who is leveraged like this – like “lose all of your money in a few days” kind of painful – though a person in that situation can make a lot of money very quickly if things go well.
If you add those factors together, it becomes clear why the fear factor exists. It just doesn’t add up to enough for most people to really do anything with their money. Just stay the course. Eventually, the market drops enough that everything appears to be on sale.
Q11: Keeping financial success a secret
My wife and I are going to pay off our 30 year mortgage at about the six year mark in March. That will make us debt free and then we can really start hammering hard toward our big goal of retiring early. So excited about this!
Problem is I can’t share this news with my family. They have a deep distrust of anyone with money in the bank and basically view anyone with a windfall as someone to cozy up to for gifts and stuff. Since Marcia and I are both frugal people it’s easy to seem on the surface as though we’re struggling financially and I don’t want that to change because I don’t want to deal with the “moocher” behavior I’ve seen many times.
Other than that, my family is full of wonderful and caring people but I just feel sad that I can’t share this good news with them.
– Joe
I can understand that sentiment. It hurts, but you’re probably better keeping the news to yourselves.
The important thing to remember is that none of this is really their business in any way. They don’t need to know your financial state. They don’t have any reason to really know. The only reason you would share this news with them is to celebrate, and they likely don’t have the same motivation to celebrate as you would.
Just keep it to yourself. It’s awesome news, but it’s news that you really have no reason to share other than to get some slaps on the back and smiles.
Q12: Letting go of old hobbies
I seem to jump from hobby to hobby every year or two. That means I usually accumulate stuff related to a particular hobby then move on to another one and just put the old hobby stuff aside and then eventually into a closet. Whenever I come across old hobby stuff I look on it fondly and don’t want to get rid of it but then I don’t really do anything with it either because I’m not as into that hobby any more. How do you let go of old hobbies?
– Stacia
This is something that happens to me on occasion. I have several semi-discarded hobbies like this that are floating around.
For each of those hobbies that ends up in that kind of moribund state, I pare down what I own for those hobbies to the point where I could still dabble in it if I wanted to, but I don’t need every odd piece of gear that I ever owned.
For example, let’s say you were really into playing the guitar ten years ago. You owned several guitars, piles of tablatures, an amplifier, and so on. What you might do is keep just one guitar and a set of strings for it, sell off the rest of the stuff, and look up tablatures online if you need them.
Another example is what I did with my old collection of Magic: the Gathering cards. I kept just enough to have a few decks around to play with if I ever felt like doing so, plus a few very sentimental cards. I sold everything else. I can still play Magic if I like, but I don’t have half a closet full of cards.
I can go on with example after example like this. Just pare down your possessions related to the hobby so that you could still pick it up at some level if you ever chose to. I’ve done this with many hobbies, ones that I’ll pick up again one afternoon a year or so.
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.
The post Questions About You Need a Budget, Eggs and Milk, Timeshares, Old Hobbies and More! appeared first on The Simple Dollar.
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