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. Why Trent isn’t financial advisor
2. SEP-IRA basics
3. Holding onto sold yardsale items
4. Vesting schedule questions
5. Late model used electric car
6. Pressure cooker question
7. Marrying into very wealthy family
8. Super expensive wedding registry
9. Damaged books?
10. Saving old financial statements
11. Taking back charitable donations
12. Politics and radio silence
While assembling last week’s mailbag, I came across several questions from readers that referenced old articles that I had written many years ago for The Simple Dollar, some dating back to 2006.
The questions were great, mind you, but they did point out several things to me about the site.
First of all, there is a ton of good stuff floating around in the archives. According to my back-of-the-envelope math, I’ve personally contributed somewhere around 6,500 articles to the site over the years. 6,500! (You can browse through them if you’d like.) As I leafed through those articles myself, I discovered that a lot of them were very, very good pieces. I’m very happy with my “average” article quality, and if half of them are “above” that average, then things are pretty good!
At the same time, there are a lot of articles in the archives, especially the older ones, that could use a bit of a refresh. They skip over a lot of useful detail or they reference things that were timely in, say, 2007 that don’t make a lot of sense now, such as talking about bank accounts offering 6% interest rates and basing specific advice on that.
There’s also a lot of early posts that, although they contain great advice, I would simply rewrite at this point. This isn’t because they’re not good articles, but because I understand the topic better or because my perspective has changed after having a lot of additional experiences and having read countless stories from readers over the years.
So, over the next year or so, I plan on rewriting some of the best “classic” articles from The Simple Dollar. I’m going to redo the 31 Days to Fix Your Finances series, for one. I’m going to redo the Road to Financial Armageddon series. They probably won’t have the same names or quite the same format, but they’re going to cover the same core foundations of personal finance that the originals covered.
I hope you find them useful. I’m certainly looking forward to revisiting them.
Q1: Why Trent isn’t financial advisor
I remember you mentioning at one point (a month or two ago?) that you considered becoming a financial advisor, but that you decided this was not the right move.
I’m a mid-career (early thirties) guy and I’m considering switching to the financial advisory field, so I’m curious as to why you decided that this wasn’t right for you.
Obviously what’s right for you may not be right for me. But you’re a very insightful person, so I’d love to hear your reasons for deciding against this career path.
– Max
The simple reason is that I don’t feel as though my own personal skills and talents would match up well with being a practical fee-based financial advisor.
I think I would deliver solid advice to my clients. I know I have adequate knowledge to pass the tests (I’ve looked). I just don’t think I have the people skills needed to succeed in that kind of face-to-face environment. I’m good at analysis; I’m not good with the “bedside manner,” particularly face to face.
I learned this about myself because I dabbled in personal finance coaching for a while, and while the clients I worked with seemed very happy with it, I wasn’t. I actually felt like the whole thing was disastrous. I felt uncomfortable and I felt that I didn’t succeed at interacting well with the people asking for the coaching.
It’s just not in the cards for me. I know myself well enough to know where my skills lie and where my weaknesses lie, and I believe that one of the key skills needed for success in the financial advising field is one that I do not possess.
Q2: SEP-IRA basics
Can I open up a SEP IRA if I’m a freelance employee? I work in television and work project to project. I’m not on staff at the production company or network but I am paid through the payroll company they hire to pay people on the show. I get a W2 at the end of the year from the payroll company. I am not 1099. I have no option for retirement savings, 401K or any other investment options through the payroll company or production company.
– Jeff
In general, income from a W2 indicates that you are a full employee of that organization and doesn’t qualify as self-employment income, thus you cannot use it for a SEP-IRA. In terms of the IRS, it appears to them as though you just have a normal job.
In your situation, your best bet is to just open up a normal IRA or Roth IRA, depending on your income level. If your income is low enough, I usually encourage people to go for a Roth IRA instead.
If you find yourself bumping up against the annual IRA contribution limit, your best bet is to save the rest in a normal taxable investment account.
As always, you should consult a tax advisor before making specific financial decisions like this.
Q3: Holding onto sold yardsale items
What if I sell something at a yard sale, the buyer says they will pick it up later, mainly pays for it, leaves a phone number, but never calls, or comes back to get it… How long would I have to wait to resell the items?
– Connie
I don’t think there is any hard and fast rule for this kind of thing. The number one thing that would concern me is that you might be accused of stealing the item, so what I would probably do is stop by the local police department and simply ask what you should do, and then follow their guidance.
That way, if the person does eventually come back, you can clearly say that you did due diligence on the item and that you contacted the police and followed their guidance.
My guess? They’ll tell you to hold the item until your next garage sale and then re-sell it. After a while, I don’t think there’s any real expectation that the person would have any right to the item after it sat in your garage unclaimed for months or years.
Q4: Vesting schedule questions
I had a question regarding my investment strategies. My current employer offers a 50% match up to $4,000. Should i invest 4k with the 401k and then if I have any money remaining, invest it in a Roth IRA?
Also the vesting schedule is 1st year-0% 2nd year- 20% 3rd year- 40% 4th year-60% 5th year-100%.
I just started working and so far I love my job, but hypothetically speaking if I were to leave this job after just a year and a half would it make sense to invest in a 401k instead of a roth ira? I would basically lose all the “free money” given to me by my employer
– Andrew
I’d put it all into the 401(k). As soon as you cross the very first date where you receive any vested money at all, your 401(k) matching money will be of greater benefit to you than the Roth, and it just grows over time.
The worst case scenario here is that you don’t stick around this job until your second year, in which case you’ll just have your contributions in a 401(k) rather than in a Roth IRA – that’s probably slightly worse than having it in a Roth, but not substantially so.
On the other hand, the best case scenario is that you stick around for the full five years and everything is vested. In that case, you’ve just doubled your money and it will be doubled thereafter.
Use the 401(k). Get every potential dime of matching money. Even if it’s not realized, the potential of realization is worth more than the advantages of a Roth, in my opinion.
Q5: Late model used electric car
Does it make sense to buy a late model used electric car like a Chevy Volt or a Nissan Leaf? Are they cost effective purchases at that point? I only want a car for commuting and I want one with low maintenance costs and good reliability.
– Chandra
If you’re doing nothing but commuting and your commute is less than, say, 50 miles a day, your best bet would be to get a Nissan Leaf, which is fully electric. You can plug it in at home to charge it each night and the electricity cost is substantially lower than the fuel cost, plus the maintenance schedule on an electric vehicle is much more pleasant than that of a combustion engine vehicle. You will save money, provided the initial sticker price is reasonable and you have a good Nissan repair place nearby.
The drawback of the Leaf is that the driving distance on a single charge is relatively low, meaning you can’t go on a long trip with it. A day’s commute is fine. A several hour road trip? Not so much.
If you think you might rarely go on longer trips than your commute, a Chevy Volt is also a decent option. It’s an electric car that can switch over to a small gas engine if the batteries run out of juice.
I have friends that have owned both and haven’t heard a negative comment about either, though one friend absolutely loves her Nissan Leaf.
Q6: Pressure cooker question
Do you have any experience with pressure cookers? You often talk about using slow cookers for meal prep on busy days so I am wondering if you’ve ever used a pressure cooker and how it worked for you. It seems to me like it would be a similarly useful efficiency tool for home cooks.
– Gerald
I would very much like to try a pressure cooker, but as of yet, I haven’t tried one for anything beyond canning some vegetables with my parents many years ago.
For me, a pressure cooker seems like it would be great for things like quickly steaming vegetables or cooking rice. I’d use it to quickly prepare side dishes, in other words, rather than using it that often for main courses. I’d come home and pressure cook some fresh broccoli in a few minutes while I was serving the main dish from the slow cooker, for example.
Although that type of convenience would be nice, I more or less get the same convenience from using flash frozen vegetables. They also provide things like steamed vegetables and rice for a side dish in just a few minutes. Thus, I haven’t been quite motivated to buy one. Yet.
Q7: Marrying into very wealthy family
I’m a 25 year old man and I’m currently engaged to a 28 year old woman. My family was decidedly middle class but I was able to earn a scholarship to one of the lesser Ivy League schools where I met my wife-to-be. We’ve dated for five years and intend to marry next spring.
We didn’t meet each other’s families until this past Christmas. Just before I visited her family, she sat me down and revealed that she was from a very wealthy family, one of the richest families in America. She is a third generation descendant of that family but there is still a mind-boggling amount of wealth and she has a trust fund that has more money in it than I ever dreamed of earning in a lifetime.
My feelings for her haven’t changed. Meeting her family filled me with worry but they were mostly like any other family other than a few moments of cluelessness about how people with less money live their daily lives and about how some modern technologies work, but nothing too bad (and I just kept my mouth shut). She’s much more down to earth than that.
My biggest concern is financial protection for both of us. Let’s say we were to marry and then to divorce. How exactly does this all work? I know that a prenupital agreement often makes sense here but it’s nothing I have any experience with. Do you have any pointers or suggested readings?
– Kevin
My suggestion is this: talk about all of this openly with her. Tell her everything you wrote in this email – that you love her deeply and that you want to be with her for the rest of your life, but that this is a situation you’ve never been in before and you don’t want to do anything out of ignorance that would put either one of you in a bad place for the long term.
There are a lot of potential outcomes here. Her family may already have a standard prenup that they expect people to sign upon marrying into the family. If that’s the case, make sure you understand it before you sign it, but sign away if you love the girl.
She may also find the whole thing tasteless, in which case I’d simply make it clear that you asked out of ignorance – a sense of not knowing what to do in this situation – but also out of a desire to make sure nothing bad happened to her because you love her.
The best solution in a relationship is almost always honesty and candor, and if things ever get emotional, cool off a little but resume the honesty and candor. If you reach a point where you don’t feel like you can talk about a core issue with your partner, then your relationship has problems already.
Q8: Super expensive wedding registry
I am invited to the wedding of a coworker. I went to buy them a wedding gift but when I looked at their registry everything on it was at least $100, which is far beyond what I think is reasonable to spend given our relative incomes and our relationship. I’m not really sure what to do here. Thoughts?
– Kelly
In this situation, I’d go off the registry and give a consumable gift that the bride and groom would like, like a classy bottle of wine or something related to another interest of theirs.
I think that the relationship you describe here isn’t close enough for the kind of delicate candor that would be needed to talk this through, but you probably are close enough to have some idea of the couples’ interests and tastes and let that lead.
Remember, a wedding registry isn’t a hard and fast document that you must follow if giving gifts. It’s guidance for people who are unsure what to get and want to make sure that the bride and groom receive something they will actually like and use. You don’t have to follow it!
Q9: Damaged books?
What uses are there for damaged books (old paperbacks with failed binding and some missing pages) without burning them? Burning old books seems wrong to me.
– Ethan
If you object to burning a book for moral reasons – and I think that’s a perfectly reasonable stance – then your options are pretty limited with regards to what to do with a damaged book.
My honest reaction would be to remove the binding and send the individual pages in for paper recycling. Since the book itself is no longer functional, the pages could be used in this way to be transformed into different documents.
Another great option that a friend of mine with some artistic talent pulled off is book-themed greeting cards. He took individual pages of old books and transformed them into greeting cards, which he gave away as gifts to his friends that were avid readers themselves. He basically cut out a stencil from a blank greeting card, then affixed the paper to the inside of the card (so it could be seen through the freshly cut holes), then added a second card to the inside for writing. It turned out quite nice.
Q10: Saving old financial statements
How long should you save old financial statements? And what’s the best way to dispose of old ones so that there’s no risk of identity theft?
– Thomas
The safest rule of thumb for financial statements is to save them for seven years. I find it easiest to just keep them bundled with rubber bands by bill type and then by year so I can quickly find, say, my car insurance bills from 2013.
As for disposing of bills and financial statements, the best way to dispose of them is to shred them. However, most home shredders are incredibly slow when it comes to shredding large numbers of documents, so a better alternative strategy is to simply take them to a “shredding day” that’s hosted in your community, either by a bank or by the city itself. There you’ll find a giant industrial strength shredder that can shred many pounds of documents at once, which makes it very easy to shred everything of yours that needs shredding.
One advantage to shredding yourself, though, is that the material left after shredding makes for fantastic kindling for fires. That stuff is perfect if you go camping or if you have a fireplace in your home.
Q11: Taking back charitable donations
Several months ago, I donated to a charity based on their stated cause. I checked out this charity extensively before donating and their ratings on Charity Navigator were very good.
Recently, I discovered that there is some ongoing malfeasance at this charity. Money is not being used in the way that I expected it or desired it to be used. Their actual activities do not line up with their public documents or charitable rankings.
What is the next step for me to get my money back? Is it even possible?
– Marjean
Charitable gift enforcement varies from state to state. However, in general, a gift given by an individual donor without a specific charitable gift agreement is considered irrevocable. Once the gift is given, it can’t be taken back.
My honest suggestion with you is to put some sunshine on this charity. Get involved with it and figure out what’s actually going on, and if you find hard evidence of misdeeds, expose it. Other people who donate to this charity deserve to know what’s happening.
At the same time, make sure you know what you’re talking about. Don’t buy into a secondhand story that might be coming from someone with an axe to grind for some reason. Look for real data and real information, not tales, even from trustworthy people.
Q12: Politics and radio silence
Just wanted to thank you for not giving into the “political silly season” that seems to have invested so many other websites. I like to follow political news but I don’t need it everywhere and I’ve had too many people lose my respect because of their political rantings and ravings. Kudos for keeping all of that off of The Simple Dollar.
– Amy
Good personal finance principles apply to everyone, regardless of their political beliefs. My own personal political beliefs have nothing to do with the personal finance advice that I offer.
Beyond that, I think it’s foolish for anyone who is known for non-political things to speak on political issues. I have my own beliefs, but I’m far from a political expert. I am known and at least somewhat respected for my personal finance writings – there’s really no reason whatsoever for me to start writing and sharing amateurish political viewpoints.
If we’re ever sitting around somewhere off the record and just hanging out, sure, I might share some political perspectives. Here? There’s no place for it, as far as I’m concerned. There might be political change, but my interest here is solely on how to make the most of the current situation for your financial future.
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 Electric Cars, SEP-IRAs, Charities, Wedding Registries, and More! appeared first on The Simple Dollar.
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