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الاثنين، 26 يونيو 2017

Questions About Summer Parties, Tea Kettles, Cooler Cooking, Lifestyle Inflation, and More!

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. Helping nieces and nephews
2. Sharing costs for summer party
3. Making games for camping
4. Career advice for financial success
5. Americans have no savings?
6. Cooking in a cooler?
7. Electric tea kettle thoughts
8. Starting a Roth IRA
9. Bank password security
10. Toastmasters
11. Busy hours and lifestyle inflation
12. Expensive hobbies

It’s amazing to me how quickly the summer can drift by. It literally feels like just a few days ago that my children were still in school, yet now June is nearly over and their summer vacation is already slipping past.

I want to believe I have all the time in the world for the things that are important, but the truth is that none of us do. It’s easy to believe that there will be endless warm summer afternoons when your children are young so you can put off going to the park with them, but the truth is that they will grow up. There are only so many warm summer afternoons.

Today, I really should get some work done, but instead I’m going to go with my kids to the park. I’m going to spend the day with them under the summer sun. Maybe we’ll swing. Maybe we’ll go on trails. Maybe we’ll play soccer. Maybe we’ll roll down a hill.

Whatever we might do, this is going to be one warm summer afternoon when my children are young that isn’t going to slip through my fingers. My goal is to finish up this mailbag before they wake up and have breakfast, and anything else I don’t get to can be finished later.

Some things take priority, after all.

Q1: Helping nieces and nephews

I enjoy reading your site and other financial independence blogs. I recently sold my business for enough money that I am financially independent with a lot to spare. I am 48, single, childless, and never intend to have any. However I do want to help out my nieces and nephews. What is the best way to help them out? I don’t feel like I should just give them cash. Range in age from 4 to 26.
– Gavin

For the younger kids, the best thing you could do is quietly open up a 529 college savings plan for each of them. Name them as the beneficiary and stock it with whatever you feel is appropriate. Keep it quiet and only present that account to them when they reach college age so as to not disrupt other savings that their parents might be doing for them.

For the older kids, I’d meet with each of them individually and help them form a solid financial foundation. Wipe out some of their student loans or their mortgage. If they’re debt free, help them with a major purchase that they need, like a car purchase or a house down payment.

Keep in mind the tax rules for gifts. In general, gifts over $14,000 per year are taxed or count against your lifetime gift allowance (you can read the details here) so you may want to spread out any significant gifts over a number of years.

A gift of cash can easily be misspent, but it’s a little harder to misspend those kinds of investments. Yes, they might individually take the money that would have been directed toward a debt payment or savings and use it in other ways, but that’s going to be true no matter what kind of help you provide to them.

Q2: Sharing costs for summer party

Several of us are planning on having a fourth of July party with fireworks and food and beer. In the past some of us have been ripped off by having to shoulder most of the costs while others spend very little. Like some of us spend $200 on fireworks and other people spend $30 on meat. There have been arguments in the past. What’s the best way to get around it?
– Carla

The easiest way to get around it is to have one of you sit down and figure out a budget and then have everyone contribute an equal portion of that budget. If a person is handling just the fireworks, for example, they might pay for their portion but they should get some money from others to make up the difference.

So, let’s say you had eight people contributing and your budget was $200 for fireworks, $150 for food, and $130 for beverages (I’m just making up numbers here). That adds up to $480, so that would be $60 per person ($480 divided by 8 is $60).

If one person goes to get the fireworks, they need to get $140 from the others to pay for the fireworks (and then their $60 out of pocket covers the rest).

I wouldn’t freak out about being absolutely dead even on a thing like this, but everyone enjoying the festivities should be within $10 or so of each other in terms of expenses.

Q3: Making games for camping

Looking for cheapest way to have some yard games for camping to keep with camping gear. Is it cheaper to make your own corn hole set or just buy one? Backyard Jenga?
– David

If you have the woodworking equipment and a few other tools, most backyard games like corn hole and “backyard Jenga” can be made pretty cheaply. After all, corn hole is just two elevated boards with holes in them and backyard Jenga is just 48 identically sized wooden blocks. It’s not complicated stuff.

The thing is, the equipment that makes it easy to make games like that is expensive itself. It’s not worth buying a table saw just to make a game like this if you have no other real purpose for it. You’re better off just pricing out and buying it from somewhere.

Another approach, of course, is to make a copy with a friend who may already have some of this equipment, maybe in exchange for sharing some other skill that you have. Perhaps your friend might cut boards for backyard Jenga or corn hole while you sand and finish the pieces.

Q4: Career advice for financial success

I am a high school senior. I found your site through Google searches for career advice. I am trying to choose a major that will give me the best opportunity to retire early and earn enough from my investments to live the rest of my life on about $40K income. My parents did this in their early forties but they did it on the back of being early employees at [a large company] and getting out early too. It was kind of a “right place at the right time” thing. I’m looking for a career that lets me retire in my early forties like them. Suggestions?
– Stephen

The key to retiring early is to spend significantly less than you earn. There are a lot of factors in that equation – a big one, of course, is having a salary large enough that you can manage to live and still sock away a large portion of your salary.

Starting at age 25 and hoping to retire at 45 is a lot like starting to save for a typical retirement at age 45 – or even a bit later. Why? You’re essentially giving yourself 20 years to put enough away that you can live off of 3% of the balance.

So, let’s say you decide you need $30,000 a year to live. That means you need to have a million in the bank within 20 years (and actually more than that, given inflation). The only way to get to that number is to bank at least $35,000 a year. Assuming that you are also living on $30,000 a year, and also assuming that you pay taxes, you need a salary of at least $80,000 as a single person to make it. (The only way you reduce those numbers is to choose to live on even less than that, both now and in retirement.)

So, you have to look at career paths with very high starting salaries or else look at entrepreneurship and hope that you can start a company or get in very early with a company that grows quickly. You’ll probably want to be looking at engineering, computer science, or business school for salaries of that size, and you’ll want to match up those choices to your personal skills and your willingness to work in the field (because if you want to earn that kind of salary, you’ll be expected to bring some passion to the table – I’ve seen a lot of dispassionate engineers and business graduates working at gas stations).

Learn to live as frugally as you can in college and stick with those lessons after graduation. If you don’t, your lifestyle will inflate and all of these plans go up in smoke.

Q5: Americans have no savings?

Can this be for real?

http://ift.tt/2iNFukv
– Jon

I absolutely believe that statistic. It matches almost everything I’ve seen in terms of personal finance.

For those who don’t want to click through, that article references a study that says that six in ten Americans (approximately) have less than $500 in savings. A quote: “Only 41% of adults reported having enough in their savings account to cover a surprise bill of [$500].”

Sometimes, the reality of how others live their lives can be absolutely shocking, but consider this: the average American household brings home only about $60,000 per year. That means half of all American households are operating on less than $60,000 a year. Many of them are operating on a lot less than that. When you start considering the cost to own a home, the cost to own and maintain a car, and so on, it’s not surprising that many, many Americans are walking a financial tightrope.

Unfortunately, for many, there isn’t really a way out of the mess. The option to quit your job and get training for something better doesn’t really exist if you have people depending on your income for food, and there simply isn’t any support out there for that kind of retraining.

There is no easy answer to that statistic. Many ignore it. Some propose pipe dream solutions. Others mostly spend their time criticizing those solutions. Meanwhile, I have friends with four children and a parent with a severe illness that had to use GoFundMe to keep food on the table this spring. They don’t live extravagantly – never have, never will – but financial reality has them in a death grip.

My only advice to people in that situation is to rely on family and take advantage of every tiny breadcrumb of opportunity that you have.

Q6: Cooking in a cooler?

Any thought on cooking in a cooler? My brother does this a lot. He will get out a cooler and heat up some water and dump it in there with some food in baggies and let it sit for hours.
– Matthew

Matthew wrote to me a couple of months ago and I honestly had no idea what he was talking about, so I put this question on the back burner until I could look into it more.

Matthew is actually talking about a style of cooking called sous vide. The idea is that you put food into a sealed Ziploc bag and then put that in a heated water bath at a consistent temperature for a long period of time to cook the food. The Ziploc bag holds the moisture of the food inside, making the food really moist.

The reason Matthew’s email came out of mothballs is that I actually tried this at a friend’s house. He used this method to make French fries. Seriously. He cut a bunch of potatoes into strips, put them in a baggie, tossed them in a cooler with some hot water at a temperature that he’d measured, then closed up the cooler and waited for most of an hour. He then heated up some oil, tossed in the fries for a very short cooking, and then pulled them out. They were downright amazing.

My friend told me that he’s done the same thing with chicken breasts and steaks before and it always turns out well. He cooks them in baggies sitting in hot water in a cooler for a long period of time and then throws them on a very hot grill at the end for a searing, then serves them. He claims it’s the best thing he’s ever tried.

So… I guess it works? It seems like something fun to try that wouldn’t cost very much. There are appliances that help with sous vide cooking that are quite expensive, but if you know how to measure volume and trust some basic calculations, there’s nothing going on that couldn’t be done in a cooler.

This is a great beginner’s guide to sous vide, if you’re curious.

Q7: Electric tea kettle thoughts

So my husband and I were talking to another couple. One of them drinks coffee in the mornings and the other drinks tea. According to them all they ever do is heat up a kettle of water in the morning by flipping a switch when they get up. She uses the water for pour over coffee and he makes tea. Why don’t people do this? Seems way cheaper than a coffee pot.
– Terry

Well, it may be cheaper, but it’s also more work. For pour over coffee, you’re putting coffee grounds in a coffee filter that inside of a special sieve. You then pour the hot water and let it drip into a cup or a pot. It’s a lot easier for most people to fill up a water reservoir on a coffee pot, hit a button, and wait for hot coffee.

However, I do have a friend who uses a tea kettle in the morning for her coffee. She uses a French press, which is basically a pitcher with some coffee grounds in the bottom. She puts the coffee grounds in, dumps hot water on top, then screws down a fine sieve on top (her French press has a large screw in the middle). At the bottom, this pushes down on the ground and forces the liquid coffee up through the screen. She swears by this and never buys coffee filters or anything. She just fires up a big electric tea kettle each morning and makes a few cups in her French press.

I think that the “typical” way of making coffee in a drip coffee pot is just one option among many.

Q8: Starting a Roth IRA

I understand conceptually how a Roth IRA works and I think I want to start one to supplement my work 401(k). I contribute enough at work to get the full employer match but I want to start saving about $50 a week more for retirement and I think a Roth IRA makes a ton of sense. But how does one go about actually STARTING one?
– Kevin

You can actually do it online. You just choose an investment firm that offers Roth IRAs, go to their website, and sign up. If you want someone to work with you on this, you can go to a local investment advisor, but you’ll be paying for something that’s really not very hard.

This means, of course, that your first decision is which investment firm. There’s a lot of variety out there. Some tend to have a lot of customer service and tools, but they usually have higher fees. Some pretty much just open the doors and let you dive in and sink or swim on your own and they charge lower fees. Some focus heavily on managed funds and have a lot of investors working for them – more fees. Some use algorithms or other tools to do most of the work – lower fees.

I use Vanguard. They definitely fall into the “low fee” end of the equation. They are not as hands-on as other investment houses in terms of helping you with every step (in my experience with Vanguard and with a few other firms), but they’re not “unhelpful” either. They tend to focus on index funds, which basically means the investments you get there are intended to match the market with as little risk as possible. They don’t try to “beat” the market. They do this by just buying a little of everything and riding the ups and downs of the overall market. I have also had good experiences with Fidelity. I can’t specifically recommend other investment firms for personal use, however, as I honestly don’t have personal experience with them.

Once you decide on an investment firm, opening an account is pretty simple. You just go to that firm’s site and follow the links and fill out the forms. It’s not too different than signing up for a 401(k), honestly. You’ll eventually have to enter your checking account information and set up an automatic direct deposit ($50 a week, in your case).

Q9: Bank password security

Worried about my bank account being hacked. I signed up for online banking but I am worried all the time about my account getting hacked into and all of my money stolen. Tips?
– Shana

Honestly, the greatest risk to your accounts comes not from your online banking account, but from transactions such as writing a check or using an ATM or from your bank’s mishandling of data. Those are far easier tools for hackers to use than to simply attack your online account.

The best procedure you can follow with your online account is to keep virus protection running on your computer at all times and to use smart password guidelines. Make sure that your password isn’t a common word or phrase, that it has a mix of uppercase and lowercase letters and numbers and symbols, and that you can easily remember it. You should also change your passwords on your important accounts regularly.

Once you’ve done that, you’ve essentially done everything you can to secure your account. It’s a good idea for everyone to keep an eye on their accounts and make sure that bogus transactions don’t start appearing.

Q10: Toastmasters

Do you think Toastmasters is worthwhile? Saw you mentioned it before. Seems like a scam to me.
– Dennis

I think Toastmasters is a very good organization that’s great at helping people get their feet wet at public speaking and learn some of the mechanics of public speaking in a friendly environment.

Having said that, I think there is a limit to how useful and effective that it can be. There’s a cap, in other words, on what you can learn there, and to go beyond it, you have to start public speaking in “real” situations and learning from the feedback you get from there.

In other words, look at Toastmasters as a social club and as a tool for learning how to speak well in public. It can also help build some leadership skills. However, it won’t push you directly to situations where you’re earning thousands of dollars per speech.

Q11: Busy hours and lifestyle inflation

My work hours have jumped from about 40 hours a week to about 70 hours a week without salary bump yet (grumble grumble). Anyway my real challenge is lifestyle inflation. I find myself with a lot less time and I am falling back on paying people to do things for me that I would otherwise do myself like buying takeout and using the landlady’s laundry service (she owns three properties and will do laundry for a fee). Sometimes I Uber home from work instead of taking the train because it’s faster (but a lot more expensive). Looking for some suggestions on balancing lifestyle inflation and these crazy hours so that I’m not just working to stay in place.
– Ken

First of all, you need to decide if this commitment to 70 hours per week without any sort of salary increase is going to be a lasting thing or not. If you’re receiving additional pay for it, then paying for a few services to give you back some of that time is sensible, especially if you’re paying less than your salary increase and the job is actually building your career. If you’re not getting paid more, you should consider shopping around for new work.

Let me be clear: I don’t have any direct problem with people working that much. My problem is with an employer essentially doubling someone’s workload without compensation. That means you’re effectively getting a 50% per hour wage cut and that’s unacceptable.

In the short term, until you either get a higher wage, go back to more normal hours, or get out of there, such services might be sensible. My number one tip for you is to get a slow cooker and use it to prepare foods for yourself. Leave it out on the table with a soup or something delicious in there and let it cook slowly for several hours while you’re gone. Given your long hours, a timer might be appropriate.

This way, you can eat meals at home at your convenience, meaning you have lower food costs and more time at home.

If the laundry service rate is reasonable in price, that’s not the worst idea in the world. Even I might consider a well-priced laundry service that dropped off and picked up clean folded clothes at my door.

Q12: Expensive hobbies

How do you let go of expensive hobbies that you love dearly?
– Jenny

It depends on how exactly those hobbies are expensive. There are different types of “expensive.”

For example, I dearly love many kinds of tabletop games that are unquestionably expensive. I stay in those hobbies by budgeting my money, rolling over older items that I no longer want into newer items, and trying to enjoy what I have as much as possible. This works well for many hobbies where the expense is heavily tied to “stuff.” For other hobbies, where the expense is tied to paying for experiences, like golf green fees, it’s a bit harder. It involves a lot of bargain hunting and, generally, they’re just hobbies to drop or to indulge in rarely if you’re trying to stay on budget.

So, how does one let go of a hobby based on expensive experiences, then? Things like golf or going out to restaurants or eating fine cheeses or drinking fine wine? My honest advice, based on my own experience, is to drop them cold turkey for a while and then indulge in them only rarely. I used to golf on an almost weekly basis, but I dropped that hobby entirely for several years and now go only once a year or so (and usually at a low-cost course). I used to go out to eat at expensive restaurants fairly often, and now it’s an extremely rare event.

What I found is that burying myself in other interests helped a great deal. My financial turnaround turned me on to a lot of new hobbies that I find really fulfilling. So, instead of just sitting at home and brooding, try all kinds of things. Go to Meetups and dabble in all kinds of hobbies, especially stuff you would have never considered before. You might be shocked as to what clicks with you. I mean, I’ve played tabletop RPGs with people of all ages – I mean literally ranging from 6 to upper 70s – for example. Don’t cut yourself out of new hobbies. You might just find something unexpected that really clicks with you.

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 Summer Parties, Tea Kettles, Cooler Cooking, Lifestyle Inflation, and More! appeared first on The Simple Dollar.



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