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. Money focused only at work
2. Peak of the stock market?
3. Emergency fund or Roth IRA?
4. Home security system thoughts
5. Figuring out next career step
6. 401(k) or 403(b)?
7. Handling social spending with grace
8. Feeling deprived
9. Cheap roommate; is this stealing?
10. Found $50
11. Struggling with daily gratitude
12. Car search update
Since the start of the year, what one thing have you done that you’re most happy with in your life and why? It’s an interesting question to think about, particularly at a moment when many of us might be struggling with our resolutions for the new year.
For me, I’m probably happiest about establishing a strong and much better morning routine. It takes time but it is actually making me a lot more efficient in everything else I do during the day and ends up saving me time.
What does my current routine look like? I get up, drink a big glass of water, and do some stretching to limber myself up (mostly, I just lift my foot up on the back of a chair and stretch to touch my toes). I pour myself a cup of cold brew coffee and read for a little while, then I write a bit in my journal until about fifteen minutes before my children wake up. At that point, I go into a quiet room and try to meditate by focusing on the in and out of my breathing, to get myself into a calm mindset, and then I make breakfast and eat with my children.
I’ve stuck with this routine almost every day so far and I find it to be really effective at starting my day off right. After breakfast, I feel ready to tackle whatever’s on the docket that day.
What about you? What are you most happy with so far? What can you do to keep that thing going or to build on that success?
Q1: Money focused only at work
I have an interesting problem that I thought you might help me with. When I am at work I find that I am very money focused. When my thoughts drift to my life I think a lot about how I could save more money etc. and how dumb a lot of my spending is etc. But it’s like a switch flips when I leave work for the day and it’s like my ability to be smart with money just dies. I do the stupidest things with money even though I was just thinking about how dumb this was just an hour ago. What is going on and how can I fix it???
– Jennifer
Right now, you have a mindset that strongly connects your work to your financial state. You’re spending your day on efforts that you don’t want to go to waste, and you view wasting money as being equal to wasting your time at work.
When you’re not working, that connection isn’t there (or, at least, it’s not nearly as strong). You’re focused on connections to other things – free time, relationships, and so on.
What can you do? On each side of that coin, put some “locks” on the other side. For example, when you’re at work, put some “locks” on your ability to spend money easily when you’re not at work. Do things like removing your credit card from online accounts or withdrawing money from an ATM while you’re at work. That way, when you’re not at work and less in tune with your money, you’ve already set up some paths of least resistance that guide you away from reckless spending.
Q2: Peak of the stock market?
I’m starting to feel like the stock market is overpriced and is pretty close to the top. I have 80% of my 403(b) and Roth IRA in Vanguard Total Stock Market Index. What is the best move? Bonds or cash?
– Bill
The best move is to stay put.
The truth is that market timing doesn’t work. It’s not that you can’t correctly intuit when the market is doing well or when it’s doing poorly, but that you will virtually always miss the top and the bottom of the market, which eats up a lot of the advantages of trying to “time” a move. It’s very likely that you’ll miss the top of the market by a number of percentage points and miss the bottom by a similar amount, and those moves, along with the transaction costs, will eat up most of what you might gain by making those moves. You also miss out on dividends paid out by your stocks while you’re invested in something else.
If you feel truly nervous about your portfolio, then the question isn’t timing but whether it exceeds your risk tolerance. If you are strongly tempted to switch around your portfolio based on what the market is doing today or this month, to the point where you’re actually making moves, you need to never again have so much of your portfolio in stocks. If you’re managing to hold off that temptation but barely, switch to making contributions to something safer for a while until you’re less worried about the ins and outs of the market.
Spend some time assessing whether or not you just have too much risk exposure for your tastes and, if so, permanently move away from so much stocks by making further contributions in the form of bonds or cash.
Q3: Emergency fund or Roth IRA?
Should I take money out my emergency fund to max out my Roth IRA for 2017? I have about $9,500 in my emergency fund (with a goal of getting it to $10,000) and in order to max out my Roth IRA in 2017 before tax day, I’d have to move $2,500 out of my emergency fund, leaving me with $7,000. One of my goals for 2018 is to max my Roth out by making steady bi-weekly payments and would love to have also hit that goal for 2017, but I focused 2017 moreso on paying down my student loans — and successfully paid off $10,000! Knowing that I can withdraw contributions from my Roth should I need to (though I have no intention of doing so), makes me think I should go for it. The excellent returns I’ve gotten on what’s already in my Roth also make it so tempting to deposit the money. I would also rebuild my emergency fund to $10,000 throughout 2018. What do you think?
– Kris
If you’re single and $7,000 would cover a month or two of living expenses, I’d make this move. You’re pretty safe from most of the emergencies that would befall you and you have a big enough window to be able to find some form of employment before your funds would run out.
If you have a number of dependents and $7,000 wouldn’t cover a few months of living expenses for everyone dependent on you, I wouldn’t do it. Again, it comes down to employment and the fact that your dependents likely can’t earn an income for themselves. Children change things, as do dependent parents and relatives.
You want to make sure that your emergencies are handled before you save. If you have dependents, that becomes even more important and you should be able to cover living expenses for everyone for even longer.
Q4: Home security system thoughts
My wife and I are debating about a home security system and I want to know your thoughts. We live in a pretty low crime area but several months ago there was a home robbery about a block from us. My wife says she doesn’t feel safe leaving the house because she thinks we will get robbed. She wants a really expensive security system. My thought is that you need just enough security to not be the low hanging fruit on the block. What do you think?
– Eldon
My thoughts on home security are summed up in this article from the New York Times. A few key quotes:
“Mr. Martin said that most thieves wander neighborhoods looking for an easy entry point, like an open window. Your security system would have told you to close that window when you tried to turn it on.”
However, “Wealthier people, though, need another layer of protection since burglaries to their homes are not as opportunistic. Chances are the person who steals your Picasso when you are away did not happen upon your house by chance.”
If you have fairly ordinary possessions, you mostly just want to make sure that your home is not the low hanging fruit on the block. Don’t leave windows open or doors open. Keep things shut and locked when you leave. A simple security camera or two might be okay, too.
If you have a lot of expensive individual possessions, particularly if they’re visible from the street, you may want a better setup.
There’s also the insurance factor – insurance rates are better if you have an alarm system. Often, burglars won’t bother or if they do they’ll strike fast and take fewer possessions.
If I were you, I’d assess your house from the street. Is there anything of notable exceptional value that can be seen walking by your home? If yes, then get extra security. If not, just make sure that your home is not obviously easy to gain access to and a burglar is likely to move on to the next one. It’s not a cost-effective move to spend time breaking into a home with common possessions when there might be a house with a window open down the block or a house with expensive items right inside the window.
Q5: Figuring out next career step
I am 31 years old, single, no kids, not even really dating. For the last six years I have worked for a startup that was purchased by a larger company. I was paid a very nice lump sum during that process that isn’t enough to retire on but close. For the last seven months I have worked for this larger company but I hate it. It is very corporate and there are lots of pointless meetings and no candor and everyone seems practically scared to be themselves at all. Pretty much everyone from the old crew has quit and I am considering it too.
The thing is I don’t know really what I want to do next. I honestly miss the old startup, but I don’t know if I want to jump into another one as the lifestyle is crazy at times. I don’t have enough to retire on unless I move to a small town somewhere. I feel stuck. How do I get un-stuck?
– Devin
If I were in your shoes, I’d quit my current job or take a sabbatical if your employer will allow it. Take some time for yourself to figure out what you’re passionate about, and gear yourself up for that.
The key thing with a sabbatical or a period of planned unemployment is that you should not spend the time idling. Spend the time trying lots of things and see what really clicks with you, then figure out work that involves you doing whatever that is. Treat it almost like a work day, where your goal is to intentionally fill your day with possibilities.
What can you do? Make things. Work for charities. Learn about topics. Exercise. Fill your day as though you were working with all of that stuff. See what clicks. Just. Don’t. Idle. Fill every day with your search for personal meaning and passion. Days like that are never wasted.
Q6: 401(k) or 403(b)?
I am graduating in May. I plan to contribute a lot to retirement right off the bat so I am ahead of the game. I am not sure what the difference is between a 401(k) and a 403(b) or which I should choose.
– David
401(k)s and 403(b)s are similar accounts. 401(k) plans are offered by for-profit employers, generally, while 403(b) plans are offered by non-profit employers, generally. You will almost always have just one or the other available to you unless you’re in a highly unusual situation.
So, your decision isn’t between the two types of accounts, but in the employment opportunities available to you.
What if your employer doesn’t offer either? In that case, you have a number of options, the most straightforward of which is to open up a Roth IRA for yourself through an investment firm of your choosing. Most investment firms offer Roth IRA accounts. Such accounts enable you to save for retirement using money from your take-home paycheck, but the growth in the account is tax free provided that you use it in retirement.
Q7: Handling social spending with grace
How exactly does a person go about telling a friend that they don’t want to spend money? Like, if a friend wants to go do something expensive, what exactly do you say to that? I don’t know how to handle this. I am trying to spend less in 2018 but my friends all want to go do expensive stuff.
– Kathy
Simply say, “I am trying to spend less money in 2018 and that is pretty expensive. I want to do something with you, though, so could we choose something less expensive?” It’s a good idea, if you do this, to have a suggestion in mind if they want one. What would you rather be doing.
After that, you can try suggesting some free things when the option comes up for a social event together, like a movie night or a dinner at your house or something like that. Try to find things that you enjoy doing that you think they’ll enjoy that don’t involve shelling out cash.
Don’t always reject everything that involves spending money, though. It’s okay to do something that costs money once in a while. Demanding absolute perfection won’t do anyone any good and will probably have a big social cost. Just work on balancing things.
This next question touches on similar themes.
Q8: Feeling deprived
I have made some great strides in paying off debt since October but I kinda feel deprived, like there is no longer anything fun in my life. How do you deal with this?
– Lacey
The sense of “feeling deprived” usually comes from completely cutting out something meaningful in your life. It means that you’ve gone too far in an area or two and it’s causing a backlash of negative feelings.
If you’re feeling deprived, you’re probably going to eventually give up being “frugal” because you’ve equated “frugality” with a big negative feeling. That’s silly. Frugality is a positive thing – it’s about finding ways to spend less while enjoying your life, not depriving yourself of joy. Sure, you should try cutting things when being frugal, but if that cut brings misery, you should rewind and find a new approach.
Figure out what’s making you feel deprived, backtrack on that, then find a different approach. I don’t know what’s making you feel deprived, but I do know that if you’re having that feeling, you need to rewind a bit. Frugality should never be about cutting out meaningful things.
Remember, the perfect is the enemy of the good. If you’re trying to be a “perfect” frugal person and you’re feeling deprived, then it’s not worth it. Instead, try aiming for being “good” at frugality and feeling abundant in your life rather than deprived.
Q9: Cheap roommate; is this stealing?
In August, I found a new roommate for my 2BR apartment. I knew this person as she was a friend of a friend and figured we could get along, and several people vouched that she was good with money.
So far she hasn’t missed paying a bill or anything, which is great, but she has to be the cheapest person I’ve ever seen.
We have entire drawers full of ketchup and hot sauce and mustard packets that she grabs by the fistful whenever she eats anywhere. She’ll go to Taco Bell and get a single cheap soft shell and grab like 50 packets and take them home and use like two of them and put the other 48 in a drawer.
Her room is entirely furnished by what she calls dumpster diving and what I call practically stealing. If she sees something out on a curb or even just out in a yard anywhere near our apartment she’ll go and grab it and bring it up to our apartment. She has found a ton of lamps and her mattress (YUK!) and a desk and some chairs that way. She uses this cheap Walmart side table thing as a clothes dresser that she found by the dumpster.
She seems to pretty much subsist on ramen with hot sauce packets dumped in it. She buys like 50 packets of ramen at once when it’s on sale and she’ll sometimes add like a can of tuna to it or a hard boiled egg or something.
I don’t mind being frugal but this is ridiculous. I don’t know how to handle it.
– Kerry
To be honest, most of this stuff seems like a non-issue. Why do you care what your roommate eats as long as she’s not messy about it? A steady diet of ramen isn’t particularly healthy, but it shouldn’t cause a personal problem for you.
I might object to the mattress, but only out of fear of bedbugs. If it’s been there for a while, there likely isn’t any problem.
If you think that your roommate has hoarded an excessive amount of hot sauce in a shared kitchen drawer, talk about that specific issue and ask that she cut back on collecting more until this gets used up. That’s a space usage issue, first and foremost.
The things that should actually matter in your relationship with your roommate are things like whether she makes a mess or causes a lot of social awkwardness or doesn’t pay the bills. I don’t see anything like that here. It mostly sounds like you’re worrying too much about what your roommate does personally. If eating ramen means that your roommate keeps paying the bills, then welcome the ramen! It doesn’t mean you have to eat ramen.
Q10: Found $50
The other day I was at a bookstore that has some tables in the back where people can sit and meet and drink coffee and read. I sat down with a cup of coffee and noticed that on the ground under the table there was a $50 bill laying there. I picked it up and tried to decide what to do with it. I decided that just giving it to the barista would mean that she would probably just pocket it. I would like to give it back to its rightful owner but I don’t have the first idea of how to do this. I feel kind of bad just pocketing it though. Suggestions?
– Chad
I don’t think it’s possible to find out who left it with a high degree of certainty. You could contact the store and say that you found something the other day in the coffee area and would return it to the owner if they could identify it, but it’s very likely that the person who lost it has chalked it up to a loss.
If you feel bad about just keeping it, consider using it for some form of charity. Hold onto it and wait for a situation where someone is really struggling or in need and put that $50 into their hand. A good example is if you see a parent at a grocery store struggling to pay for the food they bought, or if you see a particular local charity that really needs help. That way, you’re passing along the money to someone who could really use it.
I don’t think there’s anything wrong with just keeping it, however, as long as you made some sincere effort to figure out the original owner of the money. The problem with cash, though, is that it’s hard to track in that way.
Q11: Struggling with daily gratitude
I took inspiration from one of your recent “pieces of inspiration” articles and started doing a daily gratitude journal. I find that it is helping me feel more appreciative of how good my life is. I have a problem though and that is that I am always writing down the same things. Like half the time I write about my morning coffee. I have a hard time coming up with other things to mention. Thoughts?
– Melanie
Whenever I’m stuck like this, I have several techniques at my disposal.
The first one I like to call the “zoom in.” What is it specifically about the coffee that I like? The warmth? The flavor? The feel of the coffee cup in my hand? The buzz from the caffeine? The aroma? What specifically am I appreciating?
There’s also the “zoom out.” I like my coffee, but where is it that I like drinking it? Do I like the beverage itself, or the process of making it? Do I like my morning routine as a whole? Is it because I just feel good and healthy right now as I drink it?
Another trick is to try writing my gratitudes in a fresh situation or at a fresh time of the day. Try writing down five gratitudes at lunch or in the early afternoon or when you get home from work and see what other things come to your attention.
A final tactic is to write gratitudes after having a new experience of some kind, and then make a conscious effort to try new things. For example, if you find yourself rolling around in the grass with your niece, the next time you sit down for a minute with your journal, write some gratitudes. You’ll have fresh ideas.
Q12: Car search update
I’d love to hear about your upcoming car search. I have a 2008 uplander with 90,000 miles that I’ve had since 2009. Its been a great car and hopefully will continue to be for a number of years. There are areas that are starting to rust and am therefore starting to think about saving for another car so I have the money when a new purchase is necessary. I’d love to find a decently priced used car that will last me another 10 years or more with minimal hassle and repairs. I’d also like something with all wheel drive if possible. I know that the subaru outback has done well for a number of friends. Honestly my chevy has done very well for me. What kinds of cars are you looking for and why?
– Tessa
We are evaluating our needs now. We want a vehicle that can drive two adults and three teenagers around comfortably for short trips. It will not be used for commuting. We would like to occasionally be able to tow a small trailer.
Our solution is a large minivan or large SUV that has a towing package and ideally can drive well in Iowa winters. Prefer to stick with Toyota, though other makes are acceptable. Aiming for late model used sweet spot.
We’re looking primarily at a 2015 or so Toyota Sienna with a towing package, but we haven’t locked in yet. Once we do, we are just going to submit exactly what we want to several dealerships and see what they can come up with for us in the next month or so. We have no interest in going to lots and test driving cars and hearing pressure sales tactics.
It’s also worth noting that we have saved enough for this purchase so that we can pay for it in cash without skipping a beat. Since we have been driving a fully-paid-for Honda Pilot for about 9 years and saving slowly during that time, it’s not hard to pay for it. If you do the math, you’ll see that we had about 80 months to save for this purchase, and if we’re spending about $25K on the purchase, that’s about $300 a month. Basically, we simply made a car payment each month to a savings account so that we could buy this vehicle now in cash. That way, we’re not paying interest to a lender and are instead retaining that cash for us.
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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