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. College textbooks
2. Pay down mortgage or IRA?
3. Rent payment and credit scores
4. Where does the money go?
5. Handling food waste
6. Manufacturers that have fallen
7. Filing taxes with disabled spouse
8. Socially responsible investing
9. Professional conferences and conventions
10. You Need a Budget worthwhile?
11. Not “mattering” after retirement
12. Student loan follow up
I’m utterly amazed at the speed of technology innovation and the spread of new ideas and how that causes a ripple effect of smaller innovation and ideas.
For example, a company called Bird that launched just last year allows people to rent motorized electric scooters. There’s an associated app that locks and unlocks these scooters – you pay within the app, ride the scooter around until it runs out of charge or you don’t need it any more, and then you secure it wherever you happen to be. It’s actually a bundle of good ideas all together.
The ripple effect? People have started earning money on the side simply charging Bird scooters. They go around, find the scooters, take them home, charge them up, and put them back out in various places.
Ideas are how we build the future. Great ideas or combinations of good ideas can create a big splash in the water, and those ripple effects bring even more good ideas. It’s happening everywhere, constantly. The world is getting better, whether we see it every day or not.
Q1: College textbooks
How do I get the best return on my textbooks from last semester?
– Sam
It really depends on how much work you want to put in. If you want to put in minimal effort, the best route is probably textbook buyback through your local campus bookstore.
If you don’t want to deal with shipping, putting up fliers near the classrooms of classes for which you’re selling the textbook next semester. Price it comparably to online prices but just a bit cheaper. This can have a low success rate, but it’ll get a return comparable to online sales without the cost of shipping.
You can always sell your used books on Amazon or eBay, but then you have to deal with shipping which costs a bit of additional time and money.
Q2: Pay down mortgage or IRA?
Collectively, my wife and I will probably bring in around $75,000, this year. So, we are able to do the things we want to do but still have to live within reason. Our income and flexibility will likely grow for the next couple of years, until we have children. I don’t have any plans or desire to retire early but would definitely like to retire one day. However, personally, I am averse to risk and, in the past (I’m only 26), this has kept me from investing my money. I do fund my 401K at work (7% total, with match), but that was about it for my first 2.5 years of employment.
I have been saving money all along but not really doing anything with it. Part of this was due to the fact that we were planning to purchase a house, which we did in September, and needed money for a down payment. We ended up needing less than we had saved up, and now there is a good chunk of cash still sitting in the bank. Since the start of the year, I have opened a Roth IRA, maxed out 2017 funding on that account, and contributed another $1,500 for 2018.
I currently have about $19,000 in the bank. About $9,000 of that has been saved up for something specific (vacation, new tires, home maintenance, etc.), but the other $10,000 or so does not have a true purpose. In my mind, it is a cushion, in case of emergency. But, is that too big of a cushion? Would it make more sense to go ahead and fully fund the IRA? (I plan to do that regardless but can go ahead and fund now if better.)I could essentially use the IRA as an emergency backup savings account and still access the contributed funds in the case of an emergency, correct?
Also, I am currently paying mortgage insurance, because of the lower down payment on the house. As far as the total payment, our mortgage is comfortable enough that it doesn’t impact us, but we are essentially throwing away about $80, each month. I would love to pay that down as well but don’t know whether to prioritize that guaranteed return over the IRA, particularly considering it is not as liquid. Just wanted to hear your thoughts.
– Joel
Yes, you can withdraw your Roth IRA contributions whenever you like. The catch is that you can’t put the money back in later.
Let’s say, for example, that your contribution for 2018 is $5,000. You make that contribution. In 2020, you decide you want that $5,000 for some other use, so you withdraw it. The catch is that the 2018 contribution opportunity is gone. If you put that $5,000 back, that’s now your 2020 contribution.
That’s why it’s usually a pretty bad idea to take out Roth contributions early.
Over the very long term of your life, Roth contributions are probably worth more than early mortgage payoff, but the difference isn’t big enough to really stress out about it. You should choose the option that leaves you feeling less stressed about your finances.
Q3: Rent payment and credit scores
Just heard about an app called Pinch. They report rent payments to help improve scores. What do you know about the service and the company? Pros? Cons?
– Frank
Pinch is a new smartphone app that allows you to upload your lease agreement and pictures of your rent check each month and, when you do so, they update your credit report at the three credit bureaus. If you keep updating Pinch and keep up with your rent payments, it will, in theory, help your credit score.
My main objection to Pinch is that I cannot figure out how they make money from this service, and when I can’t figure out how they make money, I usually assume they’re making money from selling the information I share with them. Since it is unclear how exactly that is done, I’m pretty hesitant to recommend this service.
If they were more open about what they were actually doing, I might recommend it more thoroughly. My most optimistic guess is that this is a service that they hope to someday sell to the credit bureaus, but that’s a pure guess.
Q4: Where does the money go?
What do people do for money? I gross $66k, but after paying retirement, health insurance, child support, etc. my take home is only $1100 biweekly. With $900 for rent/month, the rest disappears fast paying for bills and student loans.
There are subsidies (income based rent, things of that nature) but $66k is far too high to apply.
Of course one can have roommates, but I’ve done that before and I can’t imagine going back.
I had a night job, but the extra income after taxes was eaten up by added costs (gas for the car, buying frozen lunch instead of having the time to make some good food). Plus the odd hours and the extra stress will absolutely shorten your life.
– John
Welcome to the reality of life in America these days! It is not easy to make ends meet and save for the future.
You did mention a few expenses that others don’t always have. You’re paying for child support. You’re not considering roommates. You’re buying convenience foods. Add up how much all of those things cost.
The way out of this is to cut lots of corners and then use that extra money to eliminate debt. Try to make your own convenience foods and freeze them. Buy mostly store brand things.
I’ve also found it really useful to seek out low-cost things that reduce stress. For me, meditation and journaling and going for long walks outside are invaluable.
Q5: Handling food waste
As Chef Jacques Pepin once said, “In a well-run kitchen, very little goes to waste.” I try hard to be conscientious about using our perishables and leftovers before their time comes, but even so, I am acutely conscious that sometimes food gets thrown out. You seem conscientious about food waste as well. Could you please share some of your ways of minimizing or preventing it? Thanks in advance.
– Brenda
Whenever I have any vegetable scraps, I always throw them into a gallon bag in the freezer. When that bag is full, I empty the contents in the slow cooker, add water until it’s three inches or so above the vegetables, add some peppercorns and some salt, and let it cook on low for 24 hours or so. I strain off the pieces and save the liquid, which is now stock and can be used in all kinds of dishes. It is an amazing backbone for soup.
Probably twice a week, we have a “leftover” supper where we pull everything out of the fridge that needs to be eaten soon and make a “buffet” of sorts where everyone can fill their plates as they wish. I usually go through last and clean up what’s left. This takes care of the remnants of a lot of dishes.
We freeze many leftover meals. If there’s leftover soup of any quantity at all, we freeze it in small containers to be reheated later. This does work better for some soups than others.
It’s pretty clear that this could turn into a full-fledged post, so I’ll add it to my “list of ideas to write up in detail” in the future.
Q6: Manufacturers that have fallen
A couple months ago you wrote about L.L.Bean items that “they no longer stand out above the crowd and are now a part of a large crowd of very solid clothing manufacturers.” What other brands fall into the crowd?
– Lenny
Usually, what happens is that a brand that is exceptional decides to cut a few corners and they fall back into a crowd of good brands rather than the absolute best of breed. A few examples come to mind.
Craftsman tools have definitely declined in quality. They used to last forever; recently, I witnessed a practically new Craftsman ratchet break under normal use, and I’m not alone in this. They’re still good, but they’re not the indestructible brand they once were.
I think that Carhartt items are still very good, but have slipped a little since I was younger. I’ve heard similar reports about Duluth Trading Company clothes. Both are still excellent, but not utter standouts.
Maytag used to make borderline indestructible appliances, but now, again, they’re merely one of a group of brands that are “good but not outstandingly great.”
Q7: Filing taxes with disabled spouse
I am marrying a 100% service disconnected veteran. He is not required to file taxes on his disability check (totaling approx $35,000). After marriage, will we be subject to a “marriage penalty” when filing taxes? How does one file?
– Anna
It really depends on where the disability check is coming from. As you state, the disability is not connected to his service, so where is the check coming from?
Is it a Social Security disability check? In that case, getting married won’t affect the benefits.
In general, there really isn’t a “marriage penalty” any more, except in some cases where both members of the couple are earning roughly the same salary. If there’s much of a gap at all, it quickly turns into a “marriage bonus” where you actually save money by filing taxes together rather than separately.
Q8: Socially responsible investing
My question is, can you comment on socially responsible investing? My wife and I are in our late twenties and just getting started. We have deeply held values and religious beliefs that guide our behavior, including commitments to nonviolence, social justice and environmental sustainability. We are concerned about investing our money in things that are harmful. Right now we’re just opening a Roth IRA. I know Vanguard offers a “socially responsible” index fund but I’m not clear on quite how it works and what are options are. We’re also looking at Wealthfront as we want something easy to use/friendly to newbies. What’s the deal here? What are the options and what do you recommend?
– Anna
“Socially responsible” funds are ones that hold investments that subscribe to some set of social, moral, and ethical standards. What exactly these standards are vary a lot from fund to fund. There is no standard definition of “socially responsible.”
In order to figure out what each fund means when they say “socially responsible” and how they judge it, you have to read the prospectus for that fund. There’s usually a summary available that summarizes what the fund invests in, however.
I think what needs to happen first is you need to figure out what elements of “socially responsible” are important to you and then seek out funds that match those standards. What does “socially responsible” mean to you?
Q9: Professional conferences and conventions
Do you think it is worthwhile to go to professional conferences? I have gone to one each year for the last four and I mostly just sit in talks where people talk about stuff that doesn’t really apply to me.
– Annie
In my previous career path, I attended conferences and conventions avidly, three or more a year. I felt like I had a very strong foundation of professional connections in that career path mostly due to the conferences and conventions, and I chose to change careers for other reasons.
I have gone to a few small cons in my current career path, mostly to network with other writers. In my current career, however, I’ve built more relationships online than through cons, plus there’s the added factor that current life circumstances make professional travel pretty difficult, so I’m probably only attending local face to face events in the immediate future.
Conferences and conventions and other meetings can be a great way to expand your professional network and look for opportunities, but you need to have a game plan before you go. Why are you going? How are you going to maximize that reason while you’re there? Don’t just go in blindly.
In your situation, it seems like you’re mostly going for sessions and not really getting value out of them. Consider going next time with a focus on building professional relationships instead.
Q10: You Need a Budget worthwhile?
Is You Need a Budget still worth it now that it’s a subscription? You recommended it in the past.
– Dave
While I think the You Need a Budget software is really good, I honestly can’t recommend it as subscription software at a price of $84/year. I’m honestly still using an earlier version (YNAB 4) that’s no longer for sale.
The best free tool I know of for budgeting is probably the Pear Budget spreadsheet. It does require a little bit of knowledge about how to use a spreadsheet program, but it does the job quite well.
In the past, I’ve been hesitant to recommend Mint because of security, but they’ve been around for almost a decade with no significant security breaches, so I’m starting to come around on them. I still don’t use it, but I’m pretty careful about my personal identity information online.
Q11: Not “mattering” after retirement
I am 61 years old. My wife is 58. I have enough in 403(b) and PERS that I will more than fully replace my salary. My wife has encouraged me to retire if I want to. I have some things I want to do when I retire.
But at my job, I matter. I have a job that is important to getting things done. A lot of people rely on me and I have a lot of good relationships. All of that goes away if I retire.
How do I handle this if I retire? Any best practices?
– Adam
My honest suggestion is to start getting involved at something outside of work. Find a charitable organization or a social organization of some kind in your community and dive in while you’re still working.
In other words, find somewhere else where you can be a part of something bigger than yourself, and do it while you’re still a part of your current career.
There are bound to be lots of opportunities in your community. Check out civic organizations like the Lion’s Club. See whether or not the local food pantry needs help. Ge involved in a church. Join a local theater.
Q12: Student loan follow up
I’ve written in to the mailbag before about the fatigue I was feeling after paying student loans for what seems like an eternity and I have an update that makes me so happy I want to shout it from the rooftops: THEY’RE GONE!
My wife and I had a combined $88k in student loans, to which we had been sending up to $1000/month for eight years. Thanks to some careful budgeting and planning, we had been stockpiling extra money in our emergency fund, and when it hit a magic number, we sent a huge lump sum payment to the loan company wiping them out once and for all.
The sense of accomplishment and freedom that we are feeling right now are something I wish for all the readers of this site! The $1000/month savings allowed us to drastically alter our budget and make major increases to our retirement accounts and mortgage payment. After so many years of staring into the abyss that was student loans I finally feel like I’m truly building wealth.
– Alex
This, right here, is the reason for this site. This is life-changing stuff.
Personal finance itself isn’t hard. The principles are really easy. It mostly just boils down to spending less than you earn.
Sticking with that is the hard part. In a world filled with infinite temptations and distractions, keeping your eye on the ball is hard.
If you manage to do it, though, it changes your life. The sense of freedom that comes from getting rid of the debt around your neck is incomparable. The feeling that you have your future finally under control and you’re heading to places that you’re excited to go and you can actually see the path from where you’re at now to where you’ve always dreamed of going – it’s just amazing.
Thanks for writing, Alex. It is a perfect reminder of the path that almost everyone reading the site finds themselves on.
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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