Tuesday, 2 May 2017
Finances Without a Direction in Life
During the first few years of marriage, my wife and I were largely directionless. We both had jobs that paid fairly well that we enjoyed and we had a vague sense that we wanted to have children someday and wanted to have a nice house someday… and that was about it. I had really vague dreams of being a writer at some point, but I envisioned myself being a lot older when I thought about it.
We drifted. We went out a lot. We traveled a lot. We basically just lived for the moment.
I could look back on those years, when we were in our early and mid-20s and were simply drifting through life, and say that I regret them, but I don’t, not on the whole, anyway.
There are really only two things I would change, looking back. One, I wish I had chosen to spend more of our time doing things that would have helped me figure out what I wanted from life. Two, I wish I had saved a little more and spent a little less. Neither one of those changes would have radically shifted how we spent those years, but they would have done a lot to change my life as it is now.
To me, those two principles are really the answer to one key question, one that comes up quite a lot in questions I get for the reader mailbag: How do I not make my life into a train wreck as I find my direction in life? People ask that question in some indirect way at least once a week.
Today, I’m going to give my best general answer to that question, and it’s somewhat encapsulated in the two changes I’d make above. In general, there are two things you really need to do if you feel directionless but are scared of wasting your life just wandering through it. Let’s address them in turn.
Finding Direction and Meaning Without Losing Freedom
One of the big realities of personal finance success is that it’s really hard to motivate yourself to make good financial moves if you’re not doing it for any reason that benefits your life. Once you get beyond some basic steps (which I’ll talk about below), it’s pretty difficult to convince yourself to take on meaningful financial initiatives because doing so eats into other aspects of your life. It’s pretty hard to buy into the idea of saving for a very unclear goal in the future if it takes away money from enjoying life today, in other words.
Thus, one big part of the equation for finding financial success in a life without direction is taking some basic steps to figure out that direction. It all boils down to a single question, really:
Where do you want to be in the future?
It is completely okay and completely normal to have no good answer to that question. If you see that question and draw a complete blank, there’s nothing whatsoever wrong with you. You’re not a failure. You’re not a weirdo. I’ve been there, as have most people that I know.
The first question, really, is do you need a direction in life? I think the answer is yes, but that “direction” doesn’t always mean the same thing for everyone.
What do I mean by that? I think having some anchors in life – good reasons to get out of bed in the morning and feel some excitement about the day ahead – is really useful for everyone. Without that, life does feel pretty empty. You can quickly find yourself in a cycle of things that are pleasant but not meaningful.
The one single meaningful anchor I had in the first few years of my marriage – and the one thing I built that really lasts from those years – was a strong relationship with my wife, and that’s all I really have from years of living. As much as my wife means to me, a full and rich life means having more anchors than just her (and I think she’d agree and say the same thing about herself – in fact, I know she would because we’ve had these kinds of conversations).
However, those anchors don’t have to lead anywhere in particular. Sure, some of them lead to big things. You might be anchored by a career you love that you want to build to a certain level (but you don’t have to be). You might be anchored by children and you want to raise them to be successful and independent adults (again, that doesn’t have to be your anchor). Or, on the other hand, you might just be anchored by something as simple as learning new things every day.
All that an anchor really is, then, is an area of your life that you want to improve about yourself or about the world around you, or something that you want to explore with more depth. That’s it. It really can be anything, as long as it’s something that you want to be better by the end of any given day. What do you want to be better about your life?
For me at that time, my one main anchor was my wife, and I wanted to constantly improve and strengthen my relationship with her. At the time, I didn’t really see it as a direction in life, but looking back, it obviously was.
Today, I have lots of anchors. My relationship with my wife is still a big anchor, but it’s now joined by the anchors that are my three children. Each day, I want to do what I can to be a supportive parent and help build them into functional adults to the best of my ability. Writing is an anchor – each day, I want to write (or conceive of ideas for) things that will help improve people’s lives. Learning is an anchor – I devote time literally each and every day to learning. And those are just some of the anchors I have, and together they provide a real sense of direction in my life. Some of my anchors have big destinations at the end. Others don’t. All of them, however, convince me to spring out of bed in the morning.
My sole piece of advice to anyone who feels directionless is this: Find some anchors. They don’t have to be big directions in life. They just have to be things that you’re excited to grow in each and every day. What do you want to dive into today? What do you want to be stronger when you go to bed tonight? Figure those things out.
How do you find those anchors, though? Try things. Try lots of things. If you don’t know how to do that, one way to start is to go to your city’s community calendar on the city’s website and go to as many of those things as you can possibly schedule just to see what they are. Do the same thing with your local library. Do the same thing with Meetup. Make a list of everything about yourself that you’re unhappy with, then try to find a couple of ways to correct each one, then do those things enough times so that you can get some actual feedback on whether they’re working. Make a list of things you want to learn about and try learning them, whether from a book or a deep dive into Wikipedia (to start) or a class or something else. Just try stuff.
What you’ll find is that a lot of that stuff just flows right by you. It’s not particularly interesting or exciting, and that’s fine. What you’re looking for are the things that resonate. Those are the things that you find yourself deeply enjoying in the moment, or you find your mind flicking back to constantly, or you find yourself thinking about when you go to sleep or wake up. Those things are potential anchors. Start digging into them. Do more of them. See how deeply that burgeoning interest goes.
What if you don’t feel like you have time for trying things? Well, for one, I’m not sure how you can feel directionless and also feel like you have zero time, but if you do find yourself there, drop some things. You’re clogging up your life with stuff you don’t find to be meaningful, so clear it out. Divest yourself of responsibilities, starting with the ones that have minimal effect on other people.
What you’ll find is that once you have several anchors, things you’re really excited about and want to dig into every day, your sense of directionlessness starts to fade. You do have a purpose – in fact, you have a lot of purpose. Sometimes, you’ll find that several of those anchors have a lot of synergy – they build on each other. You may also find that some of them point to an end goal or two – that’s a long-term goal, right there. You might even call it… a direction in life. At this point in my life, I think that a “direction in life” simply means that you have a lot of anchors with some synergy between them that call you to fill a significant portion of your day on things that fulfill multiple anchors.
You may also find that you really wish you could find ways to open up more of your life to these anchors, and that’s when we start getting into the financial part of things.
Anchors and Finances
Early on in this journey, you may not have any life anchors, or you may not have very many. You still feel directionless. What do you do?
At that point, the best thing you can do is to simply keep your options as wide open as you possibly can. You do not want to find yourself mired into a situation where you’re stuck in a job or stuck facing a lot of debt payments (thus requiring you to only be able to take certain jobs).
In other words, if you’re directionless, live as lean as you can. If you have debt, pay it off. If you don’t have an emergency fund (meaning you don’t have at least a month or two in living expenses in your savings account), build that up. Try to avoid taking on any more debt. Keep up to date on all of your bills and if you happen to be behind on any of them, make catching up a priority.
If it’s available to you, saving a reasonable amount for retirement is also a good move. Even if you don’t have anchors in life, you’re going to get older, and eventually it’s going to be more difficult and less compelling to work. If your work offers a 401(k) – especially if they offer any matching funds – put aside some money into there. If you don’t have that, start up a Roth IRA and contribute around 10% of your take-home income. If you’re making over $100,000 a year, you may not be eligible for a Roth, so learn more about Roth IRAs if you’re in that boat.
At the same time, live reasonably cheap. You don’t need to live like a miser, but you should be spending enough less than you earn so that you can save for retirement and build up an emergency fund without building up more debt. Learn how to prepare food at home instead of eating out constantly. Ditch cable unless you watch it a lot. Either find an apartment or a house close enough to work that you don’t have to drive there (and can maybe then ditch a car) or else find a cheap apartment or house. Look at smaller ones than you expect. Don’t replace your car until it’s in bad shape, not just because your lease is up or you’re no longer making payments. Those steps alone will get you there without really interfering with the things you do for enjoyment.
That’s really all you need to be doing if you don’t have a direction in life. It’s simple.
Now, as I mentioned above, if you feel directionless in life, the best thing you can do is to start finding anchors, and the more you find, the better your life will be. Anchors are simply things that make you want to get out of bed in the morning and things you genuinely want to improve at in some capacity each day. I want to improve my relationship with my wife and kids each day. I want to be healthier each day. I want to help people each day. I want to learn some things each day. Those are anchors for me because they’re meaningful enough for me that they push me out of bed each morning out of pure zest for making them happen.
Once you have enough anchors, you’ll find that one of two things start to happen. You’ll find that either your anchors are synergistic enough that they start giving you a clear single direction in life, or you’ll find that you have so many anchors that you want more time and energy to devote to them. Let’s address them separately.
What if you find yourself with a burgeoning “direction in life”? If that describes you, then you should orient your finances – everything you spend, everything you save, and so on on – around that direction. What kind of financial support does that direction need? Where is it leading and how will I have the money I need when I get there?
For me, my general direction in life pushes me toward helping my children become independent as they enter their twenties and then being prepared to fill in that empty time at that point. Thus, I’m saving for their college educations using 529 plans and I’m also saving for what will likely amount to a major career shift at that point. A lot of the anchors in my life synergize as I approach age fifty, so my financial plans are all about making sure everything launches at that point.
What if you just have a bunch of seemingly unrelated anchors that you’d love to be able to cultivate more? If that’s your situation, your financial planning should orient toward removing responsibilities and requirements from your life that aren’t anchors.
For many people, that means finding their way out of their current job, and thus they’re talking about either a major career switch or early retirement. In either case, you suddenly have a ton of incentive to really tighten your spending so that you can either amp up your retirement savings so that you can retire as early as possible or clear out all of your debt and other regular bills and perhaps save enough money quickly so that you can easily make a career switch.
A meaningful life is one where you have plenty of anchors to fill your days with joy and adequate resources to support those anchors. It may be that those anchors do form an overall “life direction” for you, and that’s great, but they don’t have to. They just need to give you meaning when you get out of bed each morning, and the financial role in that is to ensure that those anchors are well supported and secure.
We really need to talk about frugality’s role here. The areas of your life that aren’t anchors should draw as little of your money as possible. If you’re pulled out of bed with excitement each morning by the kind of soap you use in the shower, that’s great, but if you’re not, you shouldn’t be using anything more than the best “bang for the buck” soap bought at the best sale price you can find. Store brands and discounts should be your friend.
The real trick, though, is distinguishing between anchors and “perks.” Many people find themselves in a nonstop flood of “perks” in their life, where they buy high-quality and expensive versions of things that aren’t really anchors in their lives. Take coffee, for instance. Many people love their morning coffee, but is it one of the reasons they get out of bed with excitement in the morning? For some, sure; for many, probably not. If that’s not you, there’s nothing wrong with a morning coffee to wake you up, but you should be focused on finding a decent cup of coffee at a great price.
I have one friend who is an absolute coffee connoisseur – he absolutely loves it. He roasts his own beans and can wax at length about different bean types and roasting techniques. He has thousands of dollars in coffee brewing and coffee making equipment. Coffee is his anchor and that’s awesome – I don’t begrudge him investing his money in it.
If that’s not you, then coffee is a perk at best. Sure, enjoy a great cup as a treat, but don’t make it a daily thing. Find a way to make a decent cup as cheap as possible each morning and roll through life.
Final Thoughts
The recipe here is simple. Find your anchors. Invest in them. Don’t invest in things that aren’t anchors. That’s the secret to financial success in a life that feels directionless.
Your first step is to start seeking anchors without doing anything to disrupt your finances or bury yourself in a corner while seeking them out. Sure, that might mean working at a job that doesn’t excited you for now, and that’s okay. Focus your money on keeping as many options open as possible for you and focus your time and energy on exploring more avenues of life so that you can find the things that excite you.
After that, once you’ve found some anchors, hone your financial plans around those anchors. Trim the money and energy you spend on the things that aren’t anchors so that you can adequately support your true anchors. That might mean ditching hobbies or even cutting things that other people consider essential (like cable, for instance). Follow your anchors. Trust them. Support them. Sure, they may not collectively give you a direction, but what they will do is give every day meaning.
Good luck on your journey.
Related Articles:
- Making Today Part of Your Meaningful Life
- Setting Attainable and Exciting Financial Goals
- ‘Wealth Is Doing What You Love to Find Joy and Fulfillment’
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Time for an Upgrade? Here’s How to Sell Your Old Cell Phone
The average American upgrades their cell phone every 29 months, but I have a friend who goes through phones much more quickly than that. He likes to get the latest model every year.
During a recent hangout, he startled me by opening a desk drawer to reveal what can only be described as an electronics graveyard. It contained six iPhones, an old flip phone, chargers, cables, cases, and every dongle imaginable. There were arguably enough in there for him to open his own mall kiosk and sell phone parts on the side.
He told me how his drawer was filling up because he didn’t know what to do with the old phones. He knew he shouldn’t toss them, but he also didn’t want to go through the hassle of selling them. I offered to sell them for him and we agreed to split the profits.
Then, I had to dig into all the options for selling a used phone. What my I found was that there are always going to be tradeoffs. You won’t find a solution that is fast, easy, and lucrative. In general, the less sweat equity you want to put in, the less money you’ll earn.
Here are some of the best options for selling a cell phone:
Highest earning potential: eBay
After conducting my research, I chose to sell the phones on eBay. It’s the largest online auction site, with a robust used cell phone marketplace, so it allowed me to quickly get my listings in front of millions of potential buyers.
The downside of using eBay is that it takes a bit of effort to create an attractive listing. You need to understand how to take crisp photos, how to write a good description, the ideal days of the week to list, and at what price to start the bidding.
You also need to potentially deal with scam buyers and answer all the questions that come in from potential buyers.
Another thing to keep in mind when using the eBay auction method is that there’s a chance you sell the item for much less than it’s worth. That’s because, in order to attract bids, it’s generally recommended to start the auctions at an artificially low price. But, due to timing and listing issues, or any complex combination of factors, you might end up with very few bidders and a final sale price that will make you want to cry.
A few years ago, back when I was an eBay amateur, I convinced my girlfriend to let me sell her slightly used shoes on the site. Let’s just say she was less than pleased when I had to sheepishly mail off a pair of heels worth at least $75 for a whopping $5. My argument that we should just look at it like charity did not go over well.
For some people, learning the ins and outs of eBay and dealing with the hassle won’t be worth it. But, if you have the time and energy, you’ll usually sell your phone for a higher price on eBay than if you use the other options.
I was able to sell my friend’s phones with relatively little hassle. All the buyers paid on time and were very respectful. To me, the extra effort was worth it.
eBay also has a quick sale service, where you mail in your phone and eBay then pays you a price determined by their staff. If you take this route, you’ll sacrifice profit for convenience. For instance, if you’re selling an iPhone 6 in good condition, the current trending price on eBay for auctions is $225 and the “eBay quick sale” value is $150. For some people, the convenience may be worth sacrificing those $75.
Keep it simple: Trading in with your carrier or cell phone retailer
Any big U.S. carrier or cell phone provider will happily take your old phone off your hands via their buyback programs. Best Buy, Walmart, Target, Apple, Amazon, and all the major cell phone carriers offer this service.
The offerings of these companies are much like the eBay quick sale. You mail in your phone and get paid a fixed price in return. The difference is that they each make their payouts in the form of online gift cards or credits toward a new purchase. While credits are obviously not as fungible as cash, they can be useful to the person who’s simply upgrading and wants to keep things simple and minimize transaction costs.
If you’re particularly loyal to a certain company and you don’t want to deal with selling a phone on your own, this isn’t a bad deal. But, all things considered, you’re likely to get less money (and in a less liquid form) using these sellers than if you go elsewhere.
Keep it local: Craigslist
Craigslist, the free online classified site, is similar to eBay in that you’re in charge of creating a listing for your item. It differs from eBay in that there is no bidding system. You’ll receive direct offers from potential buyers, and sometimes people will try to lowball you.
But, if you’re patient, a Craigslist sale will usually result in more cash in your pocket as compared to doing the carrier trade-in option, or often even eBay. That’s partly because there are no shipping fees and no transaction costs (eBay takes 10% of every sale, and even a simple PayPal transaction carries a 2.9% transaction fee), and you can set your desired price without worrying about getting enough bidders. Plus, you’re almost always going to be paid in cash. As long as you know the fair market value of your phone and you’re willing to be firm, you should be fine.
Also, Craigslist is good for those who want to build social capital in their neighborhood. There is something nice about having personal interactions and potentially getting to know people in your community.
That being said, some people are wary of meeting up with strangers. The meetups also take time to coordinate, and sometimes people flake out at the last second. As with eBay, the time and effort needed to make the extra money might not be worth it.
Easy and flexible: Dedicated buyback companies
Gazelle, Flipsy, NextWorth and BuyBackWorld are all dedicated electronics buyback companies. They’re not affiliated with a particular cell phone provider or carrier. Like the giant corporations mentioned above, they’re targeting consumers who want to get money for their phones with minimal hassle.
They each operate on the same general principle: You mail your phone to the company and they take care of the rest. Some, like Gazelle, even offer to wipe your phone of all personal data so you don’t have to (I wouldn’t trust a third party to do this, but for the less tech-savvy it can be an intriguing option). Payments come in the form of a check or a PayPal deposit.
These companies also offer a 30-day price lock. If you upgrade every year like my friend, this could save you quite a bit of money. That’s because the resale price of a cell phone drops by 15% to 20% in the month leading up to a new release. If you know you’re going to upgrade every year, then you can sell your old phone the month before a new release. That way you can use your phone in the month leading up to the release without having to worry about it losing value when you want to sell it.
Flipsy is a particularly intriguing option, as they act as a sort of clearinghouse for all the authorized buyback companies. They vet and verify buyback companies who can then make competing offers to buy your phone based on the age, make, and condition of your device. These companies are likely to multiply as cell phones become more and more popular, so it could be nice to use a service that consistently assures you that you’re getting the highest offers.
A note about electronic waste
Most people selling used phones are doing it to make some extra cash from what would otherwise become a lifeless rectangle in a junk drawer. And that’s great. But, it’s also important to keep in mind that there are compelling environmental reasons to resell — or, at the very least, properly recycle — your old cell phones.
Far too many people simply discard old phones without thinking about the environmental impact of that choice. And as cell phones grow in popularity, the problem will only get worse.
In 2017, more than 50 million tons of e-waste are expected to be generated globally. While that’s just a small fraction of the total trash generated, electronic waste is particularly toxic. Phones are full of heavy metals that tend to leach into the local water supply if not recycled properly. For instance, a single lithium battery can contaminate 60,000 liters of water.
This is a particularly bad problem in China, where most of the world’s e-waste is processed. Lead levels in children are dangerously high in villages that process the most electronic waste.
By reselling rather than discarding, you’re earning money and helping to combat the global e-waste problem. If your phone is too old or damaged to be worth anything on the resale market, you can find a responsible recycling program near you on e-stewards.org.
Summing up
Every situation is unique, so the make sure to explore all of your options before selling a used phone. Keep in mind that nothing will be perfect. If you want to get rid of a phone quickly and easily, you likely won’t get as much money for it. If you want to maximize profit, you’re going to have to work a little harder.
It all comes down to how much free time you have and whether the benefits of earning extra money outweigh the opportunity costs of your time spent.
Related Articles:
- Beyond eBay: Six Better Ways to Buy, Sell, and Trade Stuff Online
- Fed Up With Verizon and AT&T? Try One of These Cheap Phone Plans Instead
- We Haven’t Paid for TV in Four Years: Our Real-Life Experience Cutting Cable
The post Time for an Upgrade? Here’s How to Sell Your Old Cell Phone appeared first on The Simple Dollar.
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Monday, 1 May 2017
Questions About Phone Coupons, Pyrex, Airbnb, Car Safety, 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. Phone coupons and security
2. Life crossroads question
3. Car safety GPS devices?
4. Telling significant other about wealth
5. Escaping poverty
6. Retirement savings when loving career
7. Reusing water bottles?
8. Pyrex question
9. Uses for cheap cabbage?
10. Airbnb and spare bedroom
11. Stop measuring myself by others?
12. Big savings making life miserable
This past weekend, we hosted a birthday party at our home for our seven year old. He invited seven of his friends to the party, which meant that we had 10 children between the ages of six and 11 running around our home for a few hours.
We had a homemade birthday cake that we decorated ourselves. We made homemade pizzas. We decorated our house ourselves with handmade decorations. We came up with party activities that involved making Cartesian diver toys out of used plastic water bottles and making “putty” out of glue and Borax. We made an obstacle course in the upstairs hallway.
Our total cost for everything was maybe $30. The kids – both our own and our guests – seemed to universally love the party. Our seven-year-old said it was hands-down the best birthday he’s ever had and our two older kids agreed that the whole thing was fantastic.
We live in an area where parents often seem to just throw tons of money at children’s birthday parties, but it’s often the simple ones that they really love. You don’t have to do anything too complicated – in fact, they often love just being able to do something simple and new with their friends. Don’t drop hundreds on some sort of “amazing” party. Just have a simple one at home and they’ll probably appreciate it just as much or more.
Q1: Phone coupons and security
I see a lot of information about coupons that you can download to your phone. How do I know my Android phone is secure? Is security even a concern for these apps? I have a passcode for the phone, but I only use it to make calls, text, and look up information on the internet (like when the next train to Boston is expected.). Can you advise?
– Colleen
On Android, it depends on the app. When you put a new app on your phone, it will inform you as to what aspects of your phone that it wants access to. If you’re uncomfortable with that access, don’t put the app on your phone.
I generally don’t allow apps to have access to things like my contact lists and so on. There’s no reason for an app to have that kind of access.
While I haven’t tested coupon apps on Android extensively, I can’t conceive of why they would want access to most kinds of shared information. If it’s requesting that access, just deny it and delete the app. Easy as can be!
Q2: Life crossroads question
I’m a single 31-year-old man with no kids. I live frugally in a large but affordable Midwestern city. In my early- to mid-twenties I was pretty irresponsible with money and wrecked my credit and finances. I’ve spent the last two years working on getting things reset and paying off debts. I’ve got no credit card debt, but I do have about $30,000 of student loan debt from my first stint in college immediately following high school (I dropped out after my sophomore year). I decided to go back to school a couple of years ago and earned an A.A. from a community college, which I paid for out of pocket. I was fortunate enough to get a full-ride scholarship from a local university, where I’m finishing my B.S. I’ve got an emergency fund of $4,000 and recently started putting money into a Roth IRA – I work as a bartender and put 10% of the tips I make every night in an envelope to fund that account – I’ve amassed a little over $1,000 over the last couple of months! I make about $65,000 a year.
I am applying to medical school next year and am unsure what the best path is to balance my immediate, short-term, and long-term goals is. I have a separate savings account I’ve been funding to cover the costs associated with applying (testing, prep, and application fees as well as costs of travel and lodging for interviews) and should have enough that I won’t have to charge anything to a credit card or move money out of any other accounts. Once I start med school, I won’t be able to work very much (if at all) and I will pay for tuition and living expenses with student loans (5.31% is the rate for this year). I want to be prepared for all possible outcomes, so I am trying to consider every angle.
Should I stop saving money for retirement and instead put that money in an account that I can tap into if I run short while I’m still in school? I estimate that I’ll be able to save another $8,000-$12,000 for retirement before I start med school. Saving that amount now, in my early 30s, could be worth as much as $245,000 in retirement according to Betterment’s calculator, assuming average market performance. That’s a pretty significant amount. However, having that money in a low-risk account (versus my IRA which is invested in 90% stocks/10% bonds) might be more helpful to me while I’m in med school than it would be to me in retirement given the fact that my income will increase dramatically after I’m finished with my education — I’ll be able to save much larger amounts, aggressively.
On the other hand, there is no guarantee that I’ll be successful as a medical student, or that I’ll even get into any of the schools I apply to. I’m confident that I will, but I want to be prepared. If I’m not successful, it’s important to me that I’m being responsible. I know that he money I save will be worth less in retirement every year I put off saving, and I don’t want to gamble with my future self’s security.
I’m also on track to beef my emergency fund up to $20,000 by the time I start med school. I’m not sure if there’s conventional wisdom for someone in my situation – is that too much money to have saved for emergencies if I’m living on student loan money? Should I use some of that for living expenses and reduce the amount that I borrow?
– Gary
If you’re going to go to medical school, you’re already making a major life wager that you’re going to be successful in medical school. There’s no point in even going if you’re thinking there’s a significant likelihood that you won’t be successful.
That’s why I would encourage you to treat this endeavor under the assumption that you will be successful. Start making choices right now as though you’re going to be fine in medical school. Adopt that as your full mindset. You will be successful there, period.
So, what can you do to maximize your success there? Having a $20,000 emergency fund is amazing. That’s a great first step. If I were you, I’d focus on keeping my student loans low after that as opposed to saving more for retirement at the moment. I’d leave your retirement as is and start putting away money to cover housing costs when you’re in school, which will enable you to take out smaller loans as you won’t need as much for housing. This will reduce your burden that you’re carrying when you graduate, which will recoup what you’re “losing” from not contributing to retirement savings, and it’ll make your day-to-day life after graduating much easier to manage and give you a wider array of reasonable life options at that point. You won’t have to just take the highest-paying job and can consider what’s best for your career and best for your sanity.
Q3: Car safety GPS devices?
I am a Verizon customer, mostly because no other service reaches our coastal town. But that is not the question of the day. Verizon is pushing the “Hum” a device for ‘car safety’ that tracks your location, calls for emergency help when needed, connects you to a mechanic that provides a quote of what possible repairs should cost, then interfaces with your local mechanic to insure that the correct work is done, and other reportedly delightful interfaces. At $10 a month, is this service worth it? My car is newer, still under warranty, I have AAA, and my auto insurance covers towing. Is the Hum worth my money?
– Ellen
Given that you already have those services, and given that you can install an app like Honk on your phone for free that covers even more aspects of Hum, I don’t see the benefit of Hum adding up to the cost.
That being said, Hum is one of those “peace of mind” purchases. It’s intended to alleviate a particular worry that a person might have. Some people feel significant personal stress about being in those kinds of emergencies or worry about their loved ones being in those situations.
My wife has an Automatic in her car (she received it as a gift) and is glad it’s there for peace of mind, but when I asked her if she would buy it for herself, she said she probably wouldn’t as it doesn’t provide enough peace of mind benefit for her to be worth the cost.
Q4: Telling significant other about wealth
I’ve been following your advice since the mid ’90s! Just kidding – kind of. I’ve been saving about 40% of my income since I graduated college in 1994 and I have really enjoyed The Simple Dollar over the years.
I have been single my entire adult life and never dated anyone seriously. I am now 46 and have been dating the same woman for more than a year. Her income is a little more than mine but we have never really talked about our respective finances seriously. She lives in a nice house, perhaps slightly nicer than mine and with a higher Zillow value. However, based on some experiences, while I don’t get the sense she’s foolish with her money in any way, I do not think she has significant savings beyond a reasonable 401(k). On the other hand, I am pretty close to retiring right now.
I am wondering when I should tell her about this. We have had some tentative conversations about getting married in the next few years and moving in together, probably into her home. Do I wait until we’re married? Do I consider a prenup? I really don’t know what to do here.
– Caleb
A prenuptial agreement makes sense in situations where either partner is bringing significant assets into the marriage and want assets to be distributed non-equally (because they brought in different asset amounts) if a separation or divorce occurs. The question you have to ask yourself is this: If you married her and then divorced her, how exactly would you feel walking away with a roughly equal split of your combined assets? If that deeply bothers you, then you should strongly consider a prenup. Most of the time, when people get married, their assets are roughly similar to begin with, so a prenup doesn’t make a ton of sense, and other couples don’t mind walking away with an equal split in that situation.
At some point before you would be married, you should talk about the financial facts of your respective lives, but I don’t think it should probably occur before there’s a strong mutual commitment to marriage. Without that kind of deep life commitment, I don’t think it’s the other person’s business, honestly. They don’t need to know.
So, if I were you, I’d keep my finances to myself for now and let the relationship play out a little more. If you find yourself engaged to be married, then you should start having serious money conversations and put your cards on the table. If you then feel a prenup is in order, have that conversation then.
Q5: Escaping poverty
Want your thoughts on this article:
Escaping Poverty Requires Almost 20 Years With Nearly Nothing Going Wrong
– Cherie
This article almost entirely agrees with my life experience involving poverty. I grew up in an area where many of the people I knew and my parents knew did not have much wealth at all, and digging out of that situation was very difficult. Most people just accepted it and did the best they could do with what they had without any real hope of building any wealth without a huge amount of luck.
The exception to this is children. Most of the families I knew that escaped a cycle of poverty did so via their children, where the parents committed to going the extra mile to ensure that their children had a real chance at a better life. They did everything humanly possible to get the best job they could possibly get, then continued to live lean lives to ensure that their children had opportunity.
My parents did that for me. There were many periods in my childhood where our sole income came from my father’s side gigs, yet they always ensured that I had educational materials that I needed. I never wanted for a book or supplies for school, ever. That was beyond question. My parents made some serious sacrifices and commitments to making sure that I would have opportunities that they never had, and I appreciate that every single day of my life. If they had not done that, I would likely be working in a factory for little more than minimum wage at this point.
If you have very little income, it takes incredible willpower over a long period of time and a healthy amount of luck to start climbing out of it. Most people I know of in low-income situations basically accept that they themselves will never really escape it and either find what joy they can in that acceptance or channel all of their energy into helping their children escape it – and even that requires some good fortune and hard choices and willpower. That’s just the reality of things.
Q6: Retirement savings when loving career
I am an “x-ray” technician (haha, don’t actually use x-rays very often these days) and have been doing so for the past 17 years. I really like my job. I interact with people all day and get to comfort people sometimes. I like working with the machines and know how to repair some minor problems. I feel like I’m constantly doing different things, too – different imaging has to be set up completely differently.
I actually dread the thought of retirement and want to keep doing this until they kick me out the door!
I have been saving for retirement but I am considering cutting back my savings. I am ahead of the pace that CNBC shows and I don’t want to retire until I have to.
Why should a person save extra for retirement when they don’t want to retire?
– Jana
I’m assuming that, when you refer to the “CNBC pace,” you’re talking about the guidance in this article.
If you like your job, then you should keep working at it until you either don’t like it any more or they push you out the door. You should think of your retirement mostly as a safety net so that you’re not in a difficult situation when you do get pushed out or if you do grow tired of that job. Staying ahead of that retirement pace just ensures that you can keep having the life you currently have if you walk out the door starting at around age 60 or so. It’s a nice safety net to have.
Some people fret about having money left over when they die. I don’t consider that a worry – just set up a will that gives your estate to something you care about. That way, even if you do die early, that money goes toward making someone else’s life better and, at that point, you don’t need it anyway.
Q7: Reusing water bottles?
Is there a problem with just reusing plastic water bottles? Like if I buy a bottle of Aquafina at the gas station or something and just reusing it a few dozen times?
– Jim
Most beverage bottles you buy from the gas station are made from “plastic #1,” a shorthand name for polyethylene terephthalate. While such bottles are fine for one-time use, repeated use causes them to start leaching DEHP (diethylhexyl phthalate), which has a number of known negative health outcomes. DEHP seems to start leaching into the water through micro-scratches in the plastic surface, which start building up through repeated use.
Finding the “safest” water bottle, though, is a rather difficult endeavor. There seems to be general consensus that reusable water bottles made of stainless steel and glass are safe, and stainless steel in general isn’t going to break, so many people point to using a Klean Kanteen. If you decide to use a plastic bottle, it should definitely be BPA-free and shouldn’t be made of plastic #1.
For me personally, I probably wouldn’t reuse an Aquafina bottle unless I were in a pinch. Instead, I have a few reusable water bottles, including one I keep in the car and another I keep with my camping supplies, and I just thoroughly rinse them and reuse them and then clean them regularly. It ends up being cheaper in the long run.
Q8: Pyrex question
I read recently that Pyrex is junk because they changed their glass formula. Do you still think Pyrex bowls are good buys for kitchen use?
– Alex
The whole “Pyrex changed their formula and is now junk” idea came from a change in Pyrex formulation about 15 years ago, in which Pyrex changed their glass slightly so that it was less resistant to rapid temperature changes (aka thermal shock) and more resistant to being dropped. This became big news when Popular Science reported on the change and discussed how illegal drug manufacturers had to switch to lab-grade glass equipment instead of just buying Pyrex at their local department store.
In a typical home kitchen, you’re not going to thermally shock Pyrex enough to cause it to shatter unless you’re trying to do so. You’re not going to sit a Pyrex bowl on top of an open flame or something like that, thus the change in temperature resistance isn’t going to be noticed at home. What you will notice, though, is that you’re less likely to have Pyrex shatter if you drop it compared to Pyrex from 20 years ago.
So, I actually view today’s Pyrex as safer and longer-lasting in a typical home kitchen than old Pyrex. That’s because it seems to me to be way more common to drop Pyrex than it is for a person in a home kitchen to apply enough thermal stress to Pyrex to cause it to shatter.
Q9: Uses for cheap cabbage?
My local store tends to have sales on cabbage for as little as like $0.10 a pound. Looked online for recipes and none of them sound appealing. What can you do with cabbage?
– Jerry
I use cabbage to make homemade sauerkraut. The only catch is that you need a large container in which to do it, like a gallon jar or something, as well as a couple of food-safe weights. This Old Farmer’s Almanac article explains the basics.
I like cabbage slaw made with it, which is basically just a salad made of finely shredded cabbage and a dressing. I like to stir fry cabbage. My wife likes eating cabbage cooked with corned beef in one pot.
I think there’s usually something interesting you can do with almost any vegetable, and cabbage is no different. Just surround it with flavors you like. I like things that mix savory and tart, so it’s unsurprising that I love sauerkraut.
Q10: Airbnb and spare bedroom
We have been thinking of renting out our spare bedroom on Airbnb. How do you protect yourself and make sure you’re not renting to a criminal or a thief?
– Dan
For starters, you can choose to not rent to guests who haven’t been reviewed or that have any negative reviews. That will generally keep undesirables at bay.
However, the odds are that you will eventually have a bad experience with a guest. From what I’ve read, about 1% of guests provide some kind of problem, most of them relatively minor, but on occasion requiring a police call.
However, you’re going to make good money from those who are not questionable in their morals, and that’s honestly most of the people who will rent from you. If we had a spare bedroom, I’d do it, but I would consider it a cost of doing business.
- Related: How to Make Money as an Airbnb Host
Q11: Stop measuring myself by others?
I am constantly measuring myself by what others are doing. I do it unconsciously all the time and I know it’s not helpful for building anything good for myself but I keep doing it. Whenever I step back and see the pattern I get frustrated but then I find myself doing it again. How do I stop doing this?
– Mark
My number one suggestion for you is to start finding ways to directly measure yourself and put those measurements as front and center in your life as you possibly can so you focus on them as a comparison point. In other words, turn that need you have to always compare yourself to something else into something that’s actually useful.
Let’s say you’re trying to get ahead financially. Figure out your net worth, and then put that net worth front and center everywhere. “My net worth on May 1 is $48,000. Can I do better?” Write that on a note and glue it to your credit card. Put it on your lock screen on your phone. Put it in so many places that you see it all the time and it burrows into your head.
Then, on June 1, sit down and calculate your net worth. Are you ahead of where you were a month ago? Right then and there, you have a comparison where you’re ahead of the person you’re comparing yourself to, and that’s going to build confidence.
A final tip: remember that you are always seeing only one part of the story when you compare yourself to someone else. They may be succeeding in one area of life, but they might be utterly failing in a few others, ones that you don’t see. Don’t view someone as a complete success because they succeed in one area because you don’t know what they’ve sacrificed for success in that one area.
Q12: Big savings making life miserable
I started working here at age 22 and decided I wanted to retire as early as possible so I started saving about 40% of my income in my 401(k) plan which was fine for a long time but now I am 34 and I am miserable. I resent all the money in there and how I feel like I wasted my 20s sitting at home and now everyone around me is marrying and having kids and I am single and have nothing to show for my 20s.
– Caleb
First of all, saving 40% for retirement doesn’t mean you have to sit at home. There are tons of things you can do outside of your home that cost virtually nothing at all other than the cost to get there. For starters, just go to Meetup and see what’s going on in your area. If you’re sitting at home, that’s by choice, not because of your savings rate.
For another, if you’ve been saving 40% of your income since age 22 and you’re now 34, you should have several years of salary in your 401(k) at this point and it should be growing like a runaway train (unless you made some extremely unproductive investment choices). You’re not that far from being able to just walk away from your job. You can probably pull it off somewhere around age 40 or so, at which point you can do whatever you want with your time. Even if you decide to entirely stop saving for retirement, you can probably walk away before age 50.
I’m just not sure what you feel like you’re missing. You mention that people around you are getting married and having kids and you seem to still be single. If that’s bothering you, focus on dating. If you feel like you can’t afford to do it, cut back on your savings rate for a while. Right now, you are way ahead of 99.9% of people your age in terms of retirement savings and you’re almost a mortal lock to retire early. Don’t feel bad about cutting back a little right now and doing things that are important to you in other areas of your life.
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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How to Choose the Right 529 Plan to Save for College
A 529 plan is a great way to save for your child’s college education, but it can be challenging to figure out which plan you should use.
529 plans are a little strange in that they’re run by individual states, but there’s no requirement that you use your home state’s plan. And given that almost every state offers at least one 529 plan, and some offer multiple plans, there’s a lot of information to sort through.
So, how can you choose the right 529 plan for your needs? Let’s break it down.
Four Factors to Consider
There are four main factors to think about when evaluating 529 plans:
- State income tax deduction: While you don’t get a federal income tax deduction for contributions to a 529 plan, some states offer a state income tax deduction if you contribute to your home state’s plan.
- Fees: Cost is the single best predictor of investment performance, so you’ll want a plan that minimizes fees.
- Investment options: Ideally, you’d like to find a plan that offers a solid lineup of index funds, given that they’re low-cost and have been shown to outperform actively managed funds over most time periods.
- Ease of use: Your 529 plan should be easy to use, all the way from opening the account to making contributions, choosing investments, and eventually using the money for education expenses.
With those factors in mind, here’s how to choose a 529 plan.
Step 1: Check for a State Income Tax Deduction
Before you do anything else, you’ll want to understand whether your state offers an income tax deduction for contributions to your home state’s 529 plan, and, if so, what the terms of that deduction look like.
The website FinAid offers a good starting point for your research here: State Tax Deductions for 529 Contributions.
You can scroll through the list, find your state, and see what kind of deduction it offers. Here are a few of the variables you’ll come across:
- No deduction: Some states, like California and Massachusetts, don’t offer a state income tax deduction. Other states, like Florida, don’t even have an income tax to begin with. If your home state doesn’t offer a deduction, you can skip to Step 3 below.
- Deduction limits: Most states that do offer a deduction have an annual limit on the amount of money you can deduct. There may be a separate limit per beneficiary or there may be a single limit per household.
- Carryforward ability: If you contribute more than the limit in a given year, some states – like Connecticut – allow you to carryforward the excess contribution to be deducted in future years. In other states, that excess contribution can never be deducted.
- Tax credit: Some states – like Indiana and Utah – offer a tax credit instead of a tax deduction. This could be more or less valuable depending on the specifics of your tax situation.
- State plan requirement: While most states require you to use your home state’s plan in order to get the deduction, a small number of states – like Arizona and Pennsylvania – offer the deduction regardless of which state’s plan you use.
You should also look up your state’s income tax rates so you know exactly how much money you’d be saving with a deduction. Bankrate has a good resource for looking that up here: State tax rates.
It will usually make sense to contribute to your state’s plan up to the maximum deductible amount, but there are a few more variables you’ll want to evaluate before making that decision. We’ll look at those in Step 2.
And remember, if your state doesn’t offer an income tax deduction, you can skip right to Step 3.
Step 2: Check Your Home State’s 529 Plan Fees and Investment Options
An income tax deduction is great, but there are situations in which it can be outweighed by high fees and the lack of good investment options.
North Dakota is a good example of this. Married couples filing jointly can deduct up to $10,000 of contributions to North Dakota’s 529 plan each year, which is a lot. But there are two factors working against that:
- North Dakota has a relatively low state income tax rate, ranging from 1.10% to 2.90%. This reduces the value of the deduction.
- The investment options within North Dakota’s 529 plan are relatively high-cost. According to the plan description, their portfolios have expense ratios of 0.55%. Compared to New York’s 529 plan that has investment portfolios charging just 0.16%, North Dakota’s 529 plan could cost you hundreds or thousands of dollars after 10+ years of investing in those higher-cost funds.
The bottom line is that you want to make sure your home state’s plan offers good, low-cost index funds before deciding to take the deduction. If it doesn’t, you’ll have to run the numbers to see if it’s better to put your money elsewhere.
The most reliable way to find your plan’s fees is to go directly to the 529 plan’s website and search for its program description. This is a long document that tells you everything you could ever want to know about the plan.
There will always be a section in that document on fees that spells out exactly how much you’d be paying. There will also be a section on the investment options so you can make sure they match what you want.
Step 3: Find the Best Out-of-State Plan
If your home state doesn’t offer an income tax deduction, or if your home state’s plan is high-cost, you’re free to choose from an entire country’s worth of 529 plans.
And while that gives you a lot of options, it also puts the burden on you to sift through those options and make a good choice while evaluating a number of competing variables.
You can certainly do that work yourself, but to make it a little easier for you we’ve compiled a short list of 529 plans that offer high-quality investment options at a low cost:
- New York: If you want simplicity and low fees, New York’s 529 plan is hard to beat. They offer a solid lineup of Vanguard index funds, a good mix of age-based options, and all of their funds cost just 0.16% per year.
- Utah: Utah’s 529 plan costs slightly more than New York’s, but it comes with more flexibility. There are more funds to choose from – including DFA funds that are typically only available through a financial planner – and you can even create your own customized age-based fund.
- Michigan: Depending on how you want to invest, you may be able to create a slightly cheaper portfolio with Michigan’s 529 plan, where fund costs range from 0.12% to 0.24%. Michigan’s funds are offered through TIAA-CREF, so if you prefer them to Vanguard then this would also be a good choice.
Making the 529 Choice Simple
In the end, choosing a 529 plan really comes down to three things:
- Does your state offer an income tax deduction for contributions to your state’s plan?
- If so, does the deduction outweigh the possibility of getting higher-quality, lower-cost investments through one of the stand-out 529 plans mentioned in Step 3 above?
- If you don’t get a deduction, you’re free to choose one of the three 529 plans mentioned above, or any other plan that you find meets your personal needs.
And take heart in the fact that no matter what you decide, the fact that you’re saving for college expenses means that you’re ahead of the game.
Matt Becker is a fee-only financial planner and the founder of Mom and Dad Money, where he helps new parents take control of their money so they can take care of their families. His free book, The New Family Financial Road Map, guides parents through the all most important financial decisions that come with starting a family.
Related Articles:
- Roth IRA vs. 529 Plan: Which Is Best for College Savings?
- Six Biggest Myths About 529 Plans
- How to Save for Your Child’s College Education
- The Best 529 Plans in America
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How To Use The RRSP First-Time Homebuyer’s Plan
Home ownership is still a cornerstone of the financial plan of most Canadians but with the average house price in Canada nearly $500,000, it’s not always easy to get a foothold in the real estate market. One of the ways the Government of Canada has made home ownership more accessible is through the RRSP First-Time Homebuyer’s Plan. But how do you actually make use of this great tool to buy your first house? What is an RRSP? The Registered Retirement Savings Plan (RRSP) is a tax-advantaged saving or investment account for your retirement. Your individual contribution room is proportional to your taxable income and works out to be approximately 18% of your gross income earned. Unlike the Tax-Free Savings Account (TFSA), money in your RRSP is simply tax-deferred, not tax-free. This means you won’t pay taxes on it the years you make your contributions, but your withdrawals from you RRSP in […]
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