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. 30- vs. 15-year mortgage
2. How can you recommend TurboTax?
3. Cheap protein after exercising
4. Handling financially disastrous brother
5. Beginner info drawn by hand
6. Organizing items on a receipt
7. Possibly over Roth IRA limit
8. Are used kitchen appliances safe?
9. Drawing the frugal line
10. Frugality as a game
11. Early Roth IRA withdrawals
12. Leaving a socially supportive church
Here in Iowa, spring youth soccer typically starts in late March and early April. All three of my kids are in youth soccer, so this is a busy time of the year, usually.
But not this year.
So far, every single game and most of the practices have been cancelled due to inclement weather, mostly due to snow on the practice fields, excessively muddy conditions due to melting snow, or freezing rain. The weather we are experiencing right now is more typical of late February or early March rather than mid April.
April snow brings May… water flow?
On with the questions.
Q1: 30- vs. 15-year mortgage
My future husband and I are looking into buying a house. What are you thoughts on getting a 30-year mortgage, but pay it off like a 15-year mortgage?
The only drawback of this plan is that a 30-year mortgage will come with a higher interest rate than a 15-year mortgage, thus you’ll be paying more if you pay off a 30-year mortgage in 15 years versus just having a 15-year mortgage.
Right now, as I glance at current interest rates, it appears as though a 30-year mortgage has a 4.5% interest rate and a 15-year is right at 4%. If you pay off a $200,000 mortgage at 4.5% in 15 years, your monthly payment will be $1,530. If you pay off a 4% mortgage in 15 years, your monthly payment will be $1,479. In other words, you’ll save roughly $25 a month for every $100,000 of your mortgage if you go with a true 15-year mortgage versus paying off a 30-year mortgage in 15 years, at current rates.
Now, the advantage of a 30-year mortgage is that you can make “normal” payments over 30 years. The monthly payment for a 30-year mortgage for $200,000 at 4.5% is $1,013 per month, which is a lot lower per month than the above option, but you’ll be making payments for twice as long.
The choice here is between minimum monthly payments. The higher the minimum monthly payment you accept, the lower the interest rate and the less you’ll end up paying overall because of the much lower total number of payments you’ll make.
What did we do? We took out a 30-year mortgage, but we paid it off in about four and a half years of huge payments. Some months, we made triple payments; other months, even more (and, yes, a little less than that a few months).
Q2: How can you recommend TurboTax?
How can you recommend TurboTax to anyone knowing that they lobby for more confusing tax laws? They literally spend their money trying to make sure that people can’t file their taxes without them!
Several people have sent me this ProPublica article entitled Filing Taxes Could Be Free and Simple. But H&R Block and Intuit Are Still Lobbying Against It or similar ones.
It’s worth noting that it’s not just TurboTax/Intuit that’s doing the lobbying here. A lot of tax software companies are in the same lobbying group, known as Free File Alliance. They basically lobby Congress in favor of bills that are good for the tax software industry and against bills that are bad for it, and, frankly, pre-filled tax forms would be awful for the tax filing industry as it would push them out of business.
While I agree that pre-filled tax forms would be good for all, I can’t really blame the tax preparation businesses, either, for wanting to protect their business. In an ideal world, our congresspeople would evaluate both sides of this and come to the conclusion that would bring the most overall benefit to Americans. As an individual without any investment in the tax preparation business and without any close friends or relatives in the business, having pre-filled tax forms would be a benefit – it would certainly simplify my filing each April.
On the other hand, if I refused to work with any company who has ever lobbied Congress for legislation that benefited them more than me, I would basically refuse to work with any company.
To me, I write this off as “this is how our system of government works.” As I said above, if this got me up in arms and refusing to use a company’s product, I would have to apply the same standards to all companies, and virtually every large company (and many small companies through industry groups) lobby Congress for bills that I don’t necessarily agree with. Honestly, for that matter, if I ran a sufficiently large company, I would probably spend some money lobbying Congress for legislation favorable to my company. To me, that’s just how America works, for better or worse.
Q3: Cheap protein after exercising
My MIL bought me a year’s worth of a personal trainer for Christmas, three sessions a week. (Yes, in-laws are very wealthy, and I basically asked for some sort of fitness help at Thanksgiving.) My trainer suggested that I start eating some protein right after a session because we always incorporate bodyweight exercise or weightlifting. He suggested a really expensive powder. What are some cheaper options?
Peanut butter. Eggs. Canned tuna. Dairy products that are on sale, like milk or yogurt. Beans (lentils and black beans, especially). All of those options are pretty cheap and have a healthy amount of protein in them, plus they’re basically raw protein straight from a plant or animal source.
My personal favorite options are the first two. I’ll often just get out a tablespoon, scoop out a big spoonful of peanut butter from the jar, and gobble that down after exercise, or, if I have some, I’ll eat a hard-boiled egg straight from the fridge.
Another thing I often do is pre-cook a bunch of beans early in the week by soaking dry beans and then cooking them in the slow cooker until done, then straining them and keeping the beans in a container in the fridge. That way, I can assemble a simple bean burrito or bowl whenever I want – it’s super convenient.
Q4: Handling financially disastrous brother
My brother is a financial train wreck. I love him to death but he might be the worst person alive with money. We have always been each other’s confidants and talk through problems together (I am his older sister by 18 months). He is making so many money mistakes! I am trying to lead him to some kind of financial sensibility but I don’t know really how to help him at all. I tell him what I do (mostly just automate everything as you suggest and try to avoid debt) and he nods but then he just goes and does the same things again.
Whenever I hear stories like this – and it’s surprisingly often – the best advice that I have is that you should actually back off with the nuts and bolts money talk. That’s not going to reach people if they don’t really see the point of it, or the point is really nebulous and vague. No one wants to make financial changes without a reason to do so, or a reason big enough to counter what they see as the perks of their current life.
So, I’d suggest stepping back and talking about goals. Don’t talk about how to achieve them, just goals. Where do you want to be in five years? Ten years? Ask a lot of questions about that. Then, start heading down the road of asking how he’s going to get there. What’s the game plan for getting from point A to point B?
Don’t tell, just ask and listen actively. Don’t lay down a bit of financial advice unless he asks. Just try to get him to grind out some answers and some realizations on his own. Send him away from one of your conversations with a lot of food for thought and see what happens.
I’ve found that giving financial suggestions to people who are really bad with money is almost always a lost cause. They need to see a purpose in it first, and if they don’t see that purpose, it’s all going to go for naught.
Q5: Beginner info drawn by hand
What I’m hunting around for (to be able to send to my daughter, long story…) is that image from years ago which was so inspiring to me when my husband came across it. I believe it was called the Financial One-Page, and I think it was from you folks. It was a handwritten, back-of-an-envelope type image, with a few basic rules. Am I nutty? I do remember it quite clearly but cannot seem to Google it into existence so I thought I’d run it by you.
I’m almost sure you’re referring to Everything You Ever Really Needed to Know About Personal Finance on the Back of Five Business Cards, a post from a long time ago when a friend asked me to summarize what The Simple Dollar was about and the only convenient thing to draw on was a handful of business cards.
Later, I turned it into a free e-book that summarizes that info down to one page, then offers a ton of additional details and links to even more information, allowing you to dig deeper into each idea if you so wish. I have seen that e-book turn up in all sorts of places over the years.
I’m almost sure that you either saw the original “five business cards” post or the resultant e-book. Both are really good financial resources, though I am honestly tempted to have my daughter help me revise the business cards one, as she’s becoming an exceptionally good artist, far better than my own stick-man fumbling.
Q6: Organizing items on a receipt
Sometimes I feel like I am making improvements in my spending, but right now I am frustrated that I spent way too much money in 2017. I would like to get a better grip on where my money is going. I’ve been using Monefy, an app you can enter expenses into, but it’s very general. Ideally I would like to take a picture of my receipt, and have every item entered into a spreadsheet. I would like to see, oh I spent x $$ on laundry soap last year etc. The problem with simply categorizing a receipt as “groceries” is that many stores are not simply grocery stores. For example, we bought groceries at Aldi, but also a shovel and hose for our garden. Also, it would be nice to see how much was spent on vegetables vs. Ice cream or chocolate (luxury food) etc. Do you know of an easy way to do this? I was thinking I could scan my receipts with google drive, then copy paste somehow into excel. I have a toddler and baby at home though, so if it is too complex I will never do it.
Before I get into this, be aware that there is no app that does this perfectly. There is so much variation in receipt formatting that no app could actually completely master. Any app like this that you use is going to require some touching up of the data that it scrapes from receipts.
The best all-around receipt manager that I’ve found is Receipts. It enables you to simply take a picture of the receipt and it scrapes most of the information off of the receipt. Depending on the format of the receipt, you may have to enter some metadata (where the receipt’s from, what the date is) and you may have to categorize some of the items, but this is done with quick taps and swipes.
There are other receipt managers out there that do things similarly, but this is the best one I’ve found so far in terms of all around ease of use. Whether the threshold of effort is too much for your needs is something I can’t guess, but it’s not too much effort in my experience.
Q7: Possibly over Roth IRA limit
My husband and I should make right around the Roth IRA contribution threshold in income this year (I make 86K, he makes 90K), but we can’t know for sure until he receives his bonus at year end. We’ve both been contributing to Roth IRAs for the past couple of years when we were making less money and clearly under the income threshold, but we’re unsure how to proceed this year. We don’t want to keep contributing on a regular basis in the event that we go over the income threshold, our taxes will become a nightmare because we’d be breaking the rules? My question is – should we just focus on our 401(k)s for our retirement savings and forget about the Roth?
If I were in your shoes, I would contribute to the Roth normally. If it turns out that you’re over the threshold, you don’t immediately drop from full contributions to nothing; instead, there’s a gradual reduction in your contribution cap. Your tax software will help you figure out exactly what that is.
So, what if you did contribute more than you should have? All you have to do is withdraw the contribution overage and any gains you earned and then do something else with it. You may owe a tiny amount of taxes (it will be small, most likely less than $100) on any gains earned while the money was in the account. The IRS doesn’t penalize you provided you withdraw the extra money promptly.
Given the relatively minor consequence, you’re probably making a good move by simply contributing to the Roth as normal this year.
Q8: Are used kitchen appliances safe?
How can you tell if a used kitchen appliance is safe? If I buy a Crock Pot or a rice cooker at Goodwill how can I tell that it’s OK to leave it plugged in overnight or when I’m not home?
The number one thing you can do is visually inspect the cord and look for any fraying. If you see even the slightest bit of fraying and aren’t familiar with electrical work, don’t buy the device and don’t use it at home. Fraying doesn’t strictly mean unsafe, but it does mean that some repair is absolutely in order as frayed electrical cords are a fire hazard. The cord should be 100% intact from the base of the appliance to the plug.
If that’s the case, then there’s very very little risk from a used small kitchen appliance. You should always plug it in and run it for the first time or two while you’re at home with it and can check it regularly to make sure it doesn’t get overly hot, but you should do that with a new one, too. Both have some small likelihood of having a defect, but if they run fine for a few times, you’re fine using them according to their intended use. You can never reduce the odds of an unfortunate event to zero, but there are far bigger risks to your life than leaving a rice cooker on while you go run an errand when the rice cooker has worked perfectly fine in the past.
I have seen so many of these questions in the last few months that I have to assume that the big “reveal” on the popular TV series This Is Us has affixed the idea in a lot of people’s heads that used small kitchen appliances are a raging fire hazard. Such an event as depicted on that show would be exceedingly rare.
Q9: Drawing the frugal line
How can you tell when you’re cutting back too much? I seem to be lacking some sensibility that others have because my sister and dad keep saying I am becoming a cheapskate but I’m pretty happy with things now. Don’t want to be a cheapskate but how can you tell if you’re not bothered with cutbacks?
First thing: you shouldn’t be cutting back on the very basics unless you have no other choice. You should be eating a healthy nutritionally sound diet, have clean clothing, be keeping yourself clean, and have shelter over your head. If you’re letting any of those things go, then there may be problems.
Second, most people tend to view you as a “cheapskate” if you’re making frugal choices that adversely affect them. For example, if you’re refusing to go out with people when they ask because it’s too expensive without even attempting to compromise, or you’re inviting people over and giving them very cheap things when they’re your guest, you’re probably going to be labeled a “cheapskate.”
There’s also a factor of closeness here. Your sister and father may be more familiar with the details of your life and be paying a lot more attention than others will be simply because they’re your immediate family and care deeply for you, even if they tease you some. They may just be noticing minor changes that other people wouldn’t notice, like the fact that perhaps you’re wearing less expensive clothes or are eating out less than before.
In short, if you’re taking care of the things listed here, there’s no real problem to worry about. If you’re letting those things slide, you’re probably getting a “cheap” reputation.
Here’s another perspective on frugality that is an interesting contrast.
Q10: Frugality as a game
I find that frugality is a fun game for me to play in my spare time. I actually enjoy trying to meet personal objectives as inexpensively as I can. How can I get a gym membership at the absolute lowest price? How can I stock up on rice at the absolute lowest price? And then I will think about all of the costs involved in that, like driving around to places, and include that in the calculation. It really is a game to me, and it’s quite fun!
Honestly… it’s a game to me, too.
I do similar calculations as you’re doing all the time. I’m constantly trying to find the best “bang for the buck” solution for almost everything in my life, finding the point where I get the quality I want for the lowest price.
I also incorporate time into that calculation a lot – I won’t spend an hour saving a dollar, for example. At the same time, I don’t mind spending fifteen minutes doing a bunch of calculations to figure out which option saves me a dollar right now because the calculation is fun (it’s like hobby time), I can sometimes use the result in a post here, and I can often reuse the result in the future, saving more than just that initial dollar.
It’s that kind of calculation that taught me to drive just a slight hair over the speed limit unless I’m on a 70 MPH or higher road, at which point I drive exactly at the speed limit using cruise control unless there are hills or curves. I mathed this all out very carefully, maximizing fuel efficiency, time efficiency, and the risk and cost of traffic tickets, and that’s what I concluded, so now that’s what I do whenever I drive anywhere.
To me, this is the fun part of frugality.
Q11: Early Roth IRA withdrawals
Should I take out Roth IRA contributions to pay for child college education?
It depends entirely on how the rest of your retirement planning looks. Is this your only source of retirement savings? Do you have a 401(k) or 403(b)? Do you have a pension?
In general, it is a bad idea to tap your only retirement savings in order to pay for your child’s college education. Doing so substantially increases the chance that you will be a financial burden on your child down the road, and if your child happens to either be unable to or unwilling to care for you at that point, you’re going to be in a very tight financial position. There is substantial financial risk in helping your child with college if you do not have a very secure plan for your own retirement, and the downside of that risk is far more devastating than your child dealing with student loans in their twenties.
Help with college if you really don’t need that Roth IRA money. If you do, hold onto it and then help your child a little out of pocket if you can to keep their loans low.
Q12: Leaving a socially supportive church
I am a 26 year old female, widowed with two kids. I married a wonderful guy whose family is members of a very tight knit church that offers a lot of social structure and help to families. They have free child care for members who tithe, lots of organized social events (many with child care), and so on.
My husband passed away last year in an automobile accident. I have remained a member of the church and they have been very wonderful to me in terms of social support and child care support.
However, since day one, I have strongly disagreed with the theology of the church. They have many religious and social views that I disagree with strongly and find extremely upsetting. I considered leaving the church when my husband was still alive. After he died, I stuck with it because everyone was so supportive and they still are but I am really really bothered by many of the tenets.
So here’s the deal. To become members you have to go through a lengthy review process that involves financial checks and so on. I would not be a member of this church had I not married into it. I remain a member, however my income is now quite low. Because I am a member “in good standing” (i.e., I tithe and go to church at the required frequency and yes they do count this) I get all of the benefits (the free child care and so on). There is no way I could ever afford this level of child care outside of the church. I can also do church events with others my age with free child care if the church hosts it and my in-laws will always watch the kids if asked. They also have a lot of meals and other things that really make it possible to make ends meet.
Without that support I am lost. I don’t think I can make ends meet without it. Dollar for dollar the value I get from my tithe is just enormous. But I feel genuinely uncomfortable going to church there and I worry about what my kids are learning at daycare and after school care and Sunday school.
I am trying to figure out how to leave this church. It is not cult like – they are fine with members leaving and don’t try to corner them. I just don’t agree with the teachings, to the point that I am really uncomfortable.
I rewrote some portions of Lana’s letter to remove specific references to her church and location because I don’t wish this to turn into a discussion of the merits of a particular church or faith tradition. All that needs to be said is that Lana has a very different set of beliefs than the church she married into and is struggling with that versus the benefits of remaining a member.
The first question I’d address is how flexible the doctrine of this church really is. I reviewed this church’s web presence and mentions of it on social media and there was very little specific mention of doctrine in any of it. I couldn’t honestly tell much of anything other than they’re definitely a flavor of Christianity, really like music, and have a communion practice. There seems to be specific elements of their doctrine that you disagree with and you find upsetting; how inflexible are those elements? Also, are these differences hills that you’re willing to die on? Are the true differences between where you’re at and where the church is at worth leaving the church, the financial value you’re getting, the familial connection with your former in-laws, and any other social connections?
I think, before you make the full choice to leave, that you seek out the most understanding and flexible member of the clergy at this church and have some frank conversations. Don’t go at it from the perspective of “I am right and the church is wrong,” go at it from the perspective that you’re trying to really understand this church’s doctrine and how it contrasts with other popular prevailing viewpoints. In other words, ask for some one-on-one meeting time and come with lots and lots of questions, and ask follow up questions, and ask more follow up questions.
You need to make absolutely sure that you fully understand their doctrine, which parts of it are inflexible, and what you actually believe as well and whether it’s in direct disagreement with the inflexible parts.
It may be that your perception of the church’s doctrine may be altered by a speaker who is speaking from the edges of their actual views or other factors. I think that, given the familial situation and the amount of personal support they’ve given you and the fact that they’re not holding you in place, you owe them at least enough rope to figure out your specific disagreements and how accurate they are.
If this were a typical church situation, without the social support they have offered and the familial connection, I would be much more encouraging of you leaving quickly, and if it were cult-like at all (which I get no sign of from reviewing the church online or from your comments) I would tell you to get out. However, given the familial and social ties and the financial benefit of your continued membership and the seemingly benign nature of membership, I would give this some time and really figure out where your differences lie. This is a situation that’s very supportive of you in many ways; make sure you’re absolutely sure on the differences in doctrine before you walk away from the enormous financial and social value that you’re receiving here, because it is a rough road without it.
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.