Essays

Reader Mailbag #48

Each Monday, The Simple Dollar opens up the reader mailbags and answers ten to twenty simple questions offered up by the readers on personal finance topics and many other things. Got a question? Ask it in the comments. You might also enjoy the archive of earlier reader mailbags.

As usual, we’ll start things off with a few links to older articles that directly answer questions I’ve heard recently.
Debt Reduction and Debt Elimination Programs: What’s the Catch?
The Big Debate: Pay Off Debt or Save for Retirement?
One Big Way to Get Intense About Financial Independence

And now for some reader questions!

One of my goals is to learn more about home repair so I can be ready for some DIY projects (currently live in an apartment but am preparing to buy a house in a few years)… Hands-on experience is the best, so I’m sending out some queries to family/friends to do some things for them in exchange for an education, but I’m also a very reading-oriented learner. To that end, can you recommend any DIY home repair books that go into sufficient detail for a newbie?
– Aristotle

Personally, I’ve loved the Reader’s Digest Fix It Yourself and Do It Yourself manuals. They’ve helped me with tons of different tasks over the past few years. The focus of each book is a bit different – the “fix it yourself” is more focused on repairing problems, while the other one is more focused on doing upgrades.

I also wouldn’t overlook internet resources for specific tasks. You should always check YouTube and Instructables if you’re trying a new project. Some of the “how tos” offered by those sites are tremendous and even exceed some of the published versions I’ve seen.

When you originally asked the question, several readers recommended the “1-2-3” books available at your local Home Depot. I’ve glanced through these and found that they go really in depth into specific areas. I think they’re good if you’re really interested in mastering a specific topic (like plumbing), but I’d start off with a more general book.

Trent, how is the iPod Touch? What do you use it mostly for? Music? Internet? No wait, I know – Twitter!
– the weakonomist

I mostly use it for web browsing (mostly checking blogs when I have some time to burn), checking the weather, and Remember the Milk. I’ve started using it as a pedometer, too, with the Nike+ iPod kit – I figured out how to tie the little pedometer sensor onto any kind of shoe.

I have a few games on it that I’ve played while waiting for appointments and on long car rides, but most of them are overly simple. The best iPod Touch game I’ve played (by far) is Rolando – an action puzzle game where you have to tilt the iPod to get balls to roll into certain places.

We are getting ready to come into a sum of money due to a death in the family a few months ago. However, we do not know how to best put the money to use. Should we pay off our unsecured debt (we have a lot) or create a larger emergency fund (we only have about one month’s worth of bills)?
– Chris

It depends on whether you’ve got children or not, honestly. If you have kids, I’d make sure my emergency fund was larger. If it’s just the two of you, I’d probably focus on paying off the debt.

Why? If you have kids, the last thing you want to do is radically disrupt their life because of a job loss or some other financial event in your life. Having a large emergency fund provides some security against such a scenario.

If you’re merely a couple without kids, you’re much better positioned to deal with abrupt financial changes – you don’t have dependents, after all. I might still buff up that emergency fund a bit, but my focus would be on reducing that big mountain of debt, which is sucking you dry via finance charges.

Trent: Off topic from the coversation but I appreciate your honesty on sometimes feeling the urge to quit blogging. My question is how much different is blogging for fun compared to doing it for a living? I mean I could quit right now and nobody would care nor would anybody be affected. If you were to quit thousands of people would be upset and I’m sure you’d quickly look for new work to support your family.

For me I feel like quitting everytime I put a lot of effort into an article and only 50 people read it. When you’re making zero money and have few readers the urge to quit is greated. How does one overcome this urge?
– Studenomics

I do feel a certain “push” to keep writing because of the expectations of the audience, something which doesn’t exist if you don’t have much of an audience. There’s also a financial need to keep writing, too – it provides a portion of our household income.

But those aren’t the reason that I continue to write – for the most part. Sure, there are times where I feel like I have to come up with an entry, but most days I simply enjoy writing. I simply love coming up with ideas and finding ways to frame them so that they can potentially provide a positive impact on a reader’s life. That, to me, is incredibly exciting, and it’s why I keep writing so many articles for The Simple Dollar. My real motivation is to have an article out there so that when a person who really needs that advice is searching for answers on Google, they might come across it, be inspired, and make a positive change in their life.

That’s an internal motivation. Expectations and income are external motivations, and I’ve come to find that external motivations aren’t particularly good at keeping me motivated over the long term. It sounds to me that blogging is largely filled with external motivations for you. Perhaps you should seek out internal motivations.

Interest rates have dropped to the point that it makes sense for DH & I to refi our mortgage. We are six years into a thirty year loan. DH just turned forty years old. Our two options: 1)refi to another thirty-year loan (effectively tacking on six years) and reduce our payment by $400 monthly (helpful considering we have a large & growing family and don’t necessarily expect enormous income growth relative to expenses growing with the kids) or 2) refi to a twenty-year loan at a cost of only about an additional $25 monthly. The first has the appeal of more cash on hand, the second gets us out of mortgage payments slightly sooner. This is our “forever” house, btw– I fully intend to move out of it when they carry me out in a box.
– Margaret

When are you planning on retiring? If you fully plan on working until you’re seventy or older, the thirty year mortgage makes a lot of sense. It provides you plenty of breathing room as your kids are growing up, allowing you to provide great experiences for them in their childhood. However, you’ll effectively “pay” for that later on.

Alternately, you may want to retire at sixty two, giving you more years of health in retirement – years to spend with grandchildren, traveling with your partner, and so on.

I think you should consider which of these two paths sounds most appealing to you. When you know, then you’ll have a good idea as to which mortgage plan you should choose.

I’ve enjoyed a couple of your “Dowloadables” products and am curious about how many you sell per month? Of the four you have listed, which title is the most popular?
– Frugal Dad

I have four downloadables available for $2 each, which appear on the right hand menu:
31 Days to Fix Your Finances: A series of exercises helping you center your financial life around your own core values.
The One Hour Project: Thirty one-hour projects you can do to improve your financial situation.
Twenty Great Ideas: Twenty personal finance and development books, boiled down to three to five pages each.
Building a Better Blog: A collection of all of my blogging techniques – great reading if you’re thinking of starting a blog of your own.

These are actually collections of earlier Simple Dollar posts, formatted into a downloadable PDF that you can share freely with your friends.

I sell between 60 and 100 of these in a typical month, about half of which are “31 Days to Fix Your Finances.” This has made me believe the effort is worthwhile, and I’m thinking of making a few more of them.

What type of cellular phone provider do you use? what kind of phone and services do you opt for?
– Louie

I use a regional service provider, U.S. Cellular. Given that I spend 98% of my time in the upper Midwest, which is the area where U.S. Cellular provides great coverage and service, they’re a natural fit. There happens to be a tower not too far from my home, so I get extremely good service from home all the time.

Their phone selection isn’t particularly great, though they do have a wide selection of Blackberries. Quite honestly, though, I tend to stick with cheaper cell phones. I’ve had my current phone for a few years now and it’s looking awfully worn.

We have a limited minutes plan that’s actually pretty cheap each month. We’ve looked at other services and not found a compelling price-based reason to jump ship, especially since we’re happy with the service.

Have you heard of anyone ‘diversifying’ their emergency fund into multiple currencies? Given the current financial chaos, and uncertainty about where deflation/inflation might go, I’ve been wondering if having 100% of my emergency fund invested in dollars is the best idea. Holding other currencies seems less efficient (due to fees and lower interest rates), and certainly carries its own risks, but do you have any thoughts on it?
– spautz

I would not worry about having my emergency fund in multiple currencies. An emergency fund is intended to be just a few months’ worth of cash to get you through a short term situation. I would always keep that in my local currency.

Beyond that, you’re beginning to ask an investing question with regards to how to handle the cash portion of your portfolio. In that case, I think it’s completely reasonable to diversify into different currencies – and if I were doing that, I’d go far beyond the euro and buy rubles and yuan as well, just for starters.

Just avoid the Zimbabwean dollar. Trust me.

Do you speak any foreign languages? Do you believe it is worth it for Americans to spend time to learn a foreign language?
– Frugal Bachelor

I do not speak any foreign languages. I can understand limited amounts of Spanish and can piece out bits of other language, but not enough to even attempt to speak them.

Having said that, I think learning a foreign language is a valuable skill for anyone to learn. Not only does it provide you with a new and valuable skill, it forces you to work with your overall communication and language skills, improving you in other ways as well.

If you’d like to learn a language but don’t know which one, consider one that would have a clear overlap with your career. Without that, consider a language used in a nation that you would enjoy visiting (particularly for a long term visit).

I’m a college student with limited income. I commute to both work and school (about 35 miles one way, 5 days a week). I usually just break even every month, though lately I’ve been working more hours, I make $8/hr. My car will be needing some work done, it just went over the 100k mark, but I don’t have the money to have it done. however, I just received a citi dividends credit card, I applied to take advantage of the cash back rewards.
I’m wondering if I should get all the maintenance done on my car and charge it to the card then slowly pay down the balance while the 0% APR still applies for the first 6 months. What are your thoughts on this?
– Brian

Putting a large amount on a credit card is a risk, particularly if you’re not sitting on the cash to pay it all at once. Having said that, if your car requires work and you don’t have the money on hand to cover it, you will most likely be using credit to pay for that bill. In that case, your 0% APR card is probably your best option.

My suggestion would be to start cutting your spending right now in any way you can. Can you carpool with someone for that commute, even just a day or two a week? Are there other expenses you can reduce? Look for things that will consistently reduce your bottom line (like carpooling or being more energy efficient) rather than one time savings (like selling DVDs). Good luck!

Got any questions? Ask them in the comments and I’ll use them in future mailbags.