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. Retirement plan fees
2. Career in expensive city
3. Market timing issues
4. Supplies for college
5. Net worth and home value
6. Best single tip for success
7. Lacking motivation for financial independence
8. Best free stuff to do
9. Balancing care for elderly parent
10. Little Free Library questions
11. Process for reading challenging books
12. Daily goal setting advice
One of my favorite things about parenthood is the conversations I have with my children. I love just tossing a question out on the dinner table and seeing how they answer it, and then using further questions to tease apart their thinking and perhaps get them to follow their own thinking to new conclusions.
For example, one recent debate in our family has been over whether or not to buy a new television. A while back, some roughhousing occurred in our family room which caused our home’s single television to have a noticeably faded stripe in the middle of it. You can still watch programs on it, but there is simply a vertical stripe in the middle of the screen that has a strong white tint to it, obscuring about a quarter of the screen.
Our children have thought that we should unquestionably be replacing this television – and soon. So, recently, we took apart this thinking at the dinner table. Was the television non-functional? No. Was there anything that we want to do with it that we cannot do? No.
If we bought a new television, what are we actually gaining? Is it worth paying hundreds of dollars just to eliminate a white tint stripe?
Obviously, the answer was no, but we learned through the conversation that the children’s intent was not to just replace the television, but to move the old one into the boys’ bedroom in our house. (That’s a non-starter, by the way; we don’t allow televisions in any bedrooms as they distract from good sleep.)
This then turned into a conversation about why we don’t have televisions in bedrooms, the value of sleep, and other topics. By the time the conversation wound up, we had been at the family dinner table for an hour and a half and were looking at diagrams of optic nerves when we had started off with a discussion about the television in the basement.
That, to me, is one of the best parts of parenting – the free-ranging conversations that provoke thinking and association of ideas. I relish those conversations.
Q1: Retirement plan fees
I keep reading that I should contribute to my 401k enough to get my employer match, then max out my IRA then return to my 401k and contribute what I can. Currently, I am contributing 18% to my Fidelity 401k, to keep things simple I opened an IRA with Fidelity as well. I keep most of my money in their Fidelity 500 Index Fund, it seems to have the same fee’s on both the IRA and the 401k from what I can tell. So while I have access to other funds now I am not sure I really understand why I opened the IRA and didn’t just continue to throw everything at my 401k. Side note: I am 40 years old and making 95k annually, I don’t expect to make much more then that so I opened a traditional IRA instead of a Roth.
– Andrew
The traditional advice to alternate a 401(k) and a Roth IRA is in part intended to balance out a number of things. By putting some money in a 401(k) and some money in a Roth, you’re balancing pre-tax and post-tax savings, which means that you’re getting some of the tax benefit now and some of it later on (when tax rates are uncertain at best).
Another advantage of using a different company for one’s Roth IRA is that you can choose a company with low investment fees. Many 401(k) plans are operated by investment firms that have only very high cost investment options within their 401(k) offerings.
Neither of those really apply to you too much. You’ve decided that you prefer pre-tax savings exclusively, so the Roth has no benefit. You’ve also decided to put all of your chips in with Fidelity, which is a solid choice because they’re very good in terms of keeping their fees low.
As long as you understand why you’re diverging from typical strategies, then it’s okay to diverge from them. You seem to largely understand the why, so you’re fine.
Q2: Career in expensive city
I’m currently interning at a law firm. The office I’m at right now is not in New York, though our headquarters are in New York and NYC does have a certain amount of prestige. The city I’m currently in has a much lower cost of living than NYC. However, even though I’m not in NYC, I’m making NYC salary (since salary is standard in every city). I’m also living at home during my internship, since the office is close to where I live. I am looking for advice on whether I should return here after law school, or make the leap to an expensive city like New York. I want to keep my career options broad, which is the appeal of NYC (although I really dislike the thought of living there.) I do not have student debt, but still, want to maximize my savings as much as possible and that’s really difficult to do in NYC, even with $180K (which is not a lot after taxes and NYC living expenses).
Texas is also an option for me since I did undergrad there. Texas doesn’t have an income tax, which is obviously helpful, but I don’t know if that’s worth it to go there. Texas has a really small market for NYC-based law firms and have a niche focus on oil & gas, and I’m not totally sold on pigeon-holing myself this early into a niche field like that.
– Alex
If you’re looking strictly at finances, you should choose to live in the area that has the highest salary adjusted for cost of living. Look at your salary options, then use a cost of living calculator to adjust those salaries based on the relative cost of living in the area. The best option is the one you should take, strictly in terms of dollars and cents. You’ll have the most financial breathing room in that area.
Now, that doesn’t take into account career options, which usually point in different directions. It sounds like your career path gives the most options to those who work in New York. At some point, you have to make the decision how much career flexibility is really worth to you. What is your career ambition? What are you willing to sacrifice for that ambition?
In other words, do you want to be a big fish in a small pond or a small fish in a much bigger pond? That’s much more of a question of personal ambition.
Now, how do you balance the two desires if the purely financial option is pushing you one way and the career ambition is pushing you in another direction? That I can’t answer for you. What I can say is that there is no dollar amount that makes a miserable daily life worthwhile. If you’re choosing a life that’s going to be miserable day in and day out without any end to the tunnel in sight, there is no wage that is worth it. If you’re going to choose a life you don’t like, make it a short term plan and make sure there’s a clear light at the end of the tunnel.
Q3: Market timing issues
So I was one of the jerks that thought the market might drop or be volatile after Trump’s election. So the bit of money I received from my ex’s retirement accounts to even us out after 20 years sat lying in wait. Of course now I’m really upset because it’s making nothing. (The money In my name alone is invested in index funds and reaping the benefits.)
I keep saying I can’t invest this new money now; it will drop as soon as I do. What should I do?
This brings up my second question. I don’t own any real estate. I don’t have any money invested in bonds or annuities because I don’t understand them. Heaven knows CDs have no return and haven’t for so long I’ve written them off forever.
Quite literally, I’m relying on the stock market almost exclusively. Should I put this money somewhere else? Is that even possible given that it needs to stay in a retirement account?
– Nina
To put it bluntly, market timing does not work for individual investors. It can work to a small extent with very large scale investors with billions to play with, but for small investors, there’s just not enough information available to make it work.
Your investment strategy should solely be centered around your personal goals, not where the stock market happens to be at the moment. If your goals are long term – longer than ten years or so – you should probably be invested in things with some volatility that have higher long term returns, like stocks. If your goals are shorter term – less than ten years – then you shouldn’t be invested in volatile things as there’s a decent chance you’ll lose money over that term, and that chance grows as the goal grows closer.
So, your first step is to figure out your goal. When do you intend to start drawing that money? When do you intend to tap the last drop of that money? Use those timelines to figure out where to put your money, and then just sit on it and wait patiently.
Q4: Supplies for college
My daughter set aside $100 of her graduation money for college class supplies and we’re struggling to spend it. We went to Staples and to Target and there is such a huge variety of stuff. In the past we just followed a list from school that was pretty specific. Should we just buy the cheapest stuff and stretch the money over several semesters? Are expensive Five Star notebooks and pens worth it?
– Dana
It depends on how heavily the pens and notebooks are going to be used, which directly relates to the student herself.
Is your student the type that takes a lot of notes naturally? Did she fill up many pages with notes in high school? Or did she use notebooks minimally, mostly for quizzes and the like?
If she uses notebooks or seriously plans to use them in college, then the better ones are worth the extra money. They hold together better over lots of openings and closings and generally have better paper that holds up to lots of front-and-back writing.
Her major will give you a strong indication of this. Some majors, such as science and mathematics and English and philosophy and history, involve a lot of note taking. Other majors involve a lot of practical learning and less note taking.
In the end, it comes down to use. Are these notebooks going to be heavily used? If the answer is truthfully yes, then the better notebooks are worthwhile.
Q5: Net worth and home value
When calculating net worth, how do you figure the value of your home? Do you use property tax assessments? Or some real estate site like Zillow?
– David
Honestly, I just look up the sale price of recently sold homes (in the last three years or so) of similar quality in my area and use an average of those prices. Many areas have a property database online that you can examine.
I don’t make a big deal out of keeping the price perfectly current or accurate in my net worth calculations. Instead, I simply trust that the number is approximate and move on from there.
The thing to remember with a net worth calculation is that it’s meant mostly to be a financial motivator for yourself. Perfect accuracy for the value of your assets isn’t too important until you’re trying to sell that asset.
Q6: Best single tip for success
What is your one best tip for career success? Like your equivalent of “spend less than you earn”? I love those super simple statements that just kind of sum it all up and give you something to live by.
– Cara
My one biggest strategy for professional and personal success is show up. If you want something, actually go to the events and the meetings related to it. If you want to meet people, don’t sit at home and twiddle your thumbs – go on Meetup, find some interesting things to do, and then actually show up. If you want to build a professional network, find professional events, and then actually show up to them.
When you get there, show up again. Don’t stand in the corner on your cell phone. Don’t sit at the back table, say nothing, and then leave as soon as possible. Be present in the moment. Turn off your devices. Talk to people that are there. If you don’t know what to say, ask questions about them or about the subject at hand. Be involved with whatever the activity is.
Make yourself go to the events. Be in the moment. Talk to people. Put yourself out there a little. That’s 90% of professional and personal success.
Q7: Lacking motivation for financial independence
My problem is this: I feel some motivation to save money when I am thinking about my finances, but when I’m actually living my life, that motivation seems tiny compared to the desire to go out with friends or buy a new tablet or something. I can feel my motivation to save but it’s like a candle next to a bonfire.
How does one switch the two without becoming some kind of antisocial hermit weirdo? If I cared that much about saving money I would have to reject my friends and live like off the grid or something.
– Kevin
I have a pretty large social network, and I spend almost no money on social events. We have potluck dinner parties. I go to lots of community events. I have a couple of dozen local friends that I’d happily invite to an event at my house almost any night in any combination, and a substantially larger roster of remote friends and family. I don’t feel like I’m lacking socially just because I spend almost no money socially.
As for buying stuff, I tend to translate that question into what I would actually do with that stuff that I can’t do now. For example, I, too, am tempted by the idea of buying a new iPad Pro. I would certainly use it as a replacement for my old Mini, but what would I actually use it for that isn’t met right now? The truth is that the uses for a new iPad that aren’t already met are pretty limited. In truth, I’m just paying for those new uses, so if I think instead about just those new uses versus all of the uses of an iPad (most of which I already have met in my life), I realize that I’m not really getting much for my dollar.
I tend to think of most purchases in that regard. What will this thing do that I can’t already do? If the list isn’t obviously worth the dollar amount, I’m not buying it.
Q8: Best free stuff to do
What is the best free stuff to do?
– Dana
I get a surprising amount of reader mailbag questions like this, questions that are effectively impossible to answer. The truth is that there are so many free things available to do that there is no easy answer here, because the best free things to do really depends on the interests of the person.
For me, I enjoy going on hikes in state and city parks near me. I love reading library books, especially ones that really push me to think about the world in a different way, but I also love page-turners, too. I’ve come to really enjoy riding my bicycle around town as of late, and sometimes on the long trails that connect adjacent towns around here. I enjoy working on my novel. I enjoy making homemade food items, like sauerkraut and preserved lemons and beer. I enjoy going to community game nights. To me, those are the best things – I tried them, liked them, and do them again and again.
Those are not necessarily going to be the best things for you. My suggestion for you is to try a lot of free things and see what you enjoy. Go to some community activities. Go to the library and see what’s free there. Check out what’s available at nearby parks or through local parks and recreation departments. I can’t tell you what’s going to click for you, but if you try lots of things, at least one or two things will probably click. Those are the best things for you.
Q9: Balancing care for elderly parent
I am 51 years old, my husband is 50. My mother is 75 and in slowly declining health. She lives by herself after my father passed away two years ago. I can’t motivate her to take care of herself very well. She keeps her house reasonably clean but doesn’t seem to do much but watch old movies on TV and talk about how things used to be and go to the doctor.
My husband says that he is fine inviting her to come and live with us and staying in the guest bedroom. She would be a super reliable babysitter and would probably prepare some meals for us, but there would be strains, too. My husband is being very kind in saying this, but I know that it would be a big stress for him.
On the other hand, my mother has given me a lot in life. She has always been there for me and I feel really selfish not being there for her when she needs me now.
I am not worried about the financial cost so much as the time and energy and relationship cost. If anything, her presence will probably be a financial help, at least for a while.
What I am worried about are hidden stresses that I’m not seeing yet that could cause problems down the road. I have written to several websites that I read asking for input from different angles. Hoping you will offer financial thoughts and life wisdom!
– Nora
I think that the number one worry of having a parent move in with you is the relationship stresses that it may cause. Every family is different, but many families would feel some stress from that change. However, such a change would relieve other stresses – as you mention, it probably would resolve some child care stresses.
My suggestion to you is to sit down with your husband and talk through some scenarios with him. What would life be like if she moved in? What stresses would it cause? What would really bother each of us? What can we do together to minimize those concerns?
Then, if you do decide to go through with it, have lots of open conversations about it. Understand that it is going to be stressful and there are going to be things that might seem minor to one of you that’s really stressful to your partner, and work together to deal with them.
Q10: Little Free Library questions
Our new neighborhood has a bunch of Little Free Libraries. I have read their website but I have some more questions that I thought you could answer.
Is the cost of building one for ourselves tax deductible? It looks like donating books is but not sure about building one.
How much time does it take to manage one?
What are the upkeep costs like?
We are considering building one but want to have the facts straight first!
– Danielle
My wife and I have talked about building a Little Free Library for years, but have never actually done so. During our process of figuring out whether to install one, we asked many of the same questions that you are.
First of all, as far as we can tell, building a LFL is not tax deductible. I’m sure you could claim it as a deduction, but if you were to be audited, it would almost assuredly be tossed off. There are ways around this, such as launching a separate charitable organization to manage the library and then donating to that, but it would be a lot of paperwork.
I asked a friend of mine about upkeep on their LFL and he says he probably checks the books in there a few times a week and there’s a minor issue with it maybe once a month (something that takes maybe a minute or two to fix) and a major issue about once a year (something that takes an hour or so to fix). He says that the upkeep costs are maybe $10 or $20 a year on average. I assume it’s for things like fixing minor vandal or bird damage.
The costs were reasonable, at least in our eyes. The thing that’s kept us from building it was the initial build time. We just never found a window of time when our passion for the project was high.
Q11: Process for reading challenging books
Would you mind sharing your process for reading difficult books? I have tried reading philosophy and I usually end up getting lost surprisingly quickly.
– David
I actually love reading books that are right at the limit of my understanding. It pushes me to think differently and to learn new things.
My process is to read such books very slowly and to take notes on them when I read. I’ll often just read one or two pages a day when tackling such books, and I don’t mind as long as I’m getting worthwhile thoughts out of those pages.
I take notes when I read like this – yep, just like I was in school. I try to write down new ideas in my own words as I go and I also write down questions I want to think about.
Whenever I hit a word I don’t know the meaning of or a concept I’m not fully understanding (at least well enough to keep going), I stop right there and figure out what the word or the concept means. I write down that definition or that concept in my own words before continuing.
Yes, this process is slow, but I’m okay with that. When I’m done reading a book like this, I genuinely feel like my understanding of the world has expanded and I feel ready to tackle new challenging subjects.
Q12: Daily goal setting advice
How do you go about establishing and keeping daily goals in your life? For example, right now I am trying to get a better grip on my unplanned spending so my daily goal is to either spend nothing that wasn’t planned or to keep unplanned spending under a certain cap (on weekends). What sort of process do you use to review daily goals like this?
– Madeline
I use an app called Strides for this. In Strides, I set up every habit that I’m currently working on. Each day, early in the morning, I review all of those habits and then visualize myself absolutely nailing them with excellence that day – this takes a few minutes. I often review them again during the day, and mark those habits as complete when I finish them.
Yes, some of them aren’t really a strict “do this and then you’re finished” kind of thing, and I review all of those at the end of the day, just before bed when I’m plugging in my phone, and I mark down any habits that I feel I executed successfully.
The key parts, I think, are the morning review and visualization and also the quick reviews during the day. This keeps the habits I’m working on right now front and center in my mind.
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.
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