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. Is HELOC the best option?
2. UTMA and UGMA
3. Second job or career advancement?
4. Buying scissors
5. Fresh vegetables and grocery shopping
6. Financially responsible television?
7. Disposing of old financial papers
8. Realities of job applications
9. “Financial independence” scam?
10. Physical tracking of Triggers questions
11. Thoughts on secular Buddhism
12. Financial advisor
One of the strangest things about exercise, at least to me, occurs when you work a muscle that hasn’t really been worked in a while. You’ll finish and you’ll feel fine for the rest of the day, but then tomorrow you’re really sore in a bizarre place in your body and, often, you’re even more sore the following day.
I spent most of this weekend walking around with my arms in an awkward position because it hurt to swing them as I normally do when I walk. It was uncomfortable, but it was a reminder that I had worked hard and improved myself.
I think this is true of any meaningful improvement in your life. Yes, it will probably hurt a little. Yes, it might leave you feeling a little sore in some way or another.
The question is what you take away from that soreness. Is it a sign that you’re on a good path? Or is it something to be avoided?
On with the questions.
Q1: Is HELOC the best option?
I live in one of the most expensive areas in the country, in Northern California. My husband and I have an almost-4 year old, and now our second baby due in August. Moving out of the area is not an option for a number of reasons, most importantly that we want our kids raised near family, all of which live in this immediate area. We both have full-time jobs that pay decently well, and are trying hard to eliminate any non-essential expenses. However, just the cost of the mortgage on our small condo, childcare for two kids, and health insurance will be more than we’re earning. So, we need a way to pay the bills until both kids are in public school, at which time we’ll again be earning more than we’re spending. Our home has accrued a decent amount of equity since we purchased it two years ago, so our mortgage consultant recommended a Home Equity Line of Credit. What are your thoughts, though? Would any other type of loan be a better option for us?
Without a fuller picture of your financial state, I can’t guarantee you don’t have other options. However, a HELOC is probably the best option available to you with a reasonable interest rate attached to it.
I’m sure you’re aware of the core problem with this situation: you are riding a financial and professional tightrope. If anything happens to either of your jobs, you are almost immediately falling into a seriously perilous financial state.
My suggestion, along with the HELOC, is to leverage your family as much as possible right now to help with this. Accept every possible family invitation you get to share a meal or for free/cheap babysitting. Ride-share with them as often as possible. More than probably any point in your life, you need to be very careful with your spending. Any situation in which you’re spending more than you earn is one that is fraught with risk.
Q2: UTMA and UGMA
My wife and I had our first son a couple weeks ago, and are trying to figure out the best savings options for him. He has started to receive some gift checks written out to his name, so we need to set up some type of bank account for him. Can you help explain the difference between at UTMA and an UGMA? He has separate 529 plans already being set-up by his grandparents, but we wanted him to have some experience with a regular bank and interstate’s that we’ll be able to teach him with once he gets old enough.
They’re very similar. There are two big differences between the two that really matter and which one you choose depends on which factors you care the most about.
With a UGMA, you’re restricted to paper assets – cash, stocks, bonds, insurance policies, and so on. A UTMA can hold other kinds of assets in addition – the one that most people care about is real estate.
A UTMA allows the account custodian to control the assets up to age 25 (depending on specific state rules), while UGMA accounts mature at age 18.
If you anticipate your child ever having to apply for financial aid for college, I probably wouldn’t use a UGMA or a UTMA. The FAFSA assumes that 20% of the balance of the UGMA/UTMA will be used for college education each year, whereas it only assumes that about 6% of a 529 balance will be used in that way. In other words, they’ll be able to receive more financial aid if their college savings is in a 529 rather than a UGMA/UTMA.
If you think that paying for college is fully in hand without paying for student loans, a UGMA/UTMA can be a very flexible tool that enables you to gift money to a child while still keeping a hand on the wheel until they’re reasonably mature.
Q3: Second job or career advancement?
I currently have M-F job in a research lab. On the weekends I work for my uncle’s construction company that I have worked for since I was 17. He has encouraged me to use the weekends in other ways but I always felt like I needed the money. Lately I have been wondering if I would be better off long term spending the weekends building skills, going to conferences, and building professional relationships. Short term I definitely lose income but long term? I can’t decide.
Your uncle sounds like a good guy, and he’s probably correct that you can be using the weekends in better ways.
If you’re in a situation where you’re financially stable and able to keep paying off any debts and saving for the future with just your M-F job and you’re pretty confident you want to be in that career for the long haul, I’d lean toward spending weekends building skills and going to conferences and building relationships and such. Take it seriously, though; don’t fall into a rut of using that time for idle things. (There’s nothing wrong with thoughtful leisure, though.)
If you’re not sure what you want to do, then I’d keep the construction job and give some serious thought to your future while getting rid of debt just a little faster.
In either case, I’d loop your uncle into the decision and use him as a mentor. Not only does he seem like a sharp guy, you may want to keep that door open for the future in case things go awry and you need to go back to construction work.
Q4: Buying scissors
Whenever I buy a pair of scissors they always seem like they get so dull they can’t even cut through paper after like 20 uses. Where can I get a decent pair of scissors that aren’t junk in three months?
Rather than just buying new scissors all the time, just sharpen the ones you have. It’s not a hard process.
Get some coarse sandpaper at the store and then cut through a sheet several times with the sand side down. Then, take a piece of aluminum foil, fold it in half four times so it’s 16 layers thick, then cut through it several times with the scissors. Then, take a piece of steel wool and cut through it several times with the scissors. Your scissors will be sharp after doing that, probably sharper than when you bought them.
You just need to do that every several months or whenever you notice the scissors getting dull. Even super cheap scissors will be quite good if you do this.
Q5: Fresh vegetables and grocery shopping
How do you balance trying to not go shopping as much with buying fresh vegetables and fruits? On the one hand frugal advice is to minimize your trips to the grocery store but on the other hand healthy fruits and vegetables can go bad so quickly.
I can’t speak for everyone, but here’s what we do.
First, if something requires genuinely fresh ingredients, we make those meals within a few days of our grocery store visit. They become a priority.
Second, we treat flash frozen vegetables and fruits as being the equivalent of fresh for most purposes. We buy quite a lot of frozen vegetables and fruit.
Third, we often do a lot of meal prep, meaning that our fresh vegetables and sometimes fruits make it quickly into meals that are popped in the freezer. I’ll buy a ton of fresh spinach, for example, but a lot of it will go into four pans of frozen lasagna.
Fourth, a lot of fresh fruits and vegetables don’t go bad all that quickly. Most root vegetables last and last. Many fruits last for a long time, too.
Finally, we store some of the most perishable stuff in the fridge, following directions on how to best store them to maximize life. If we can stretch something that should only last a few days into lasting for a week, that’s a big win.
Those steps enable us to buy a ton of fruits and vegetables without them going bad. If we notice something starting to become overripe, to the point where we don’t want to use it but it’s not quite inedible, we’ll throw it in the freezer and use it for making stock or for making fruit bread in the near future.
Q6: Financially responsible television?
It seems like everything on television outside of a few hokey reality shows is centered around people living way beyond their means or else rich people. Everyone is just spending tons of money and living in fabulous houses and buying tons of stuff. I never really noticed this until you pointed it out. It’s such a strong subtle nudge to do the same. What can a person watch that isn’t about spending money?
I completely agree. Depicting expensive lifestyles on television seems to be the norm everywhere, and knowing the the median American household income is around $60,000, the truth is that most Americans can’t live like that.
It either becomes something to try to emulate, which is a road to financial ruin, or something to try to ignore, which is hard, or else you’re watching shows that revel in values that run in opposition to your own.
To tell the truth, I don’t watch much television at all any more. What I do watch is generally fantasy or sci-fi or documentaries. I mostly read or play tabletop games instead of turning on the television.
Q7: Disposing of old financial papers
I’m following standard advice and keeping old papers for seven years, but what do you do with them after that? The advice seems to be to shred them but the idea of shredding a box of papers seems like a lot of work with a home shredder where you have to unfold everything and it only takes a few sheets at a time.
One thing you can do is see if there’s a community paper shredding day or one sponsored by your bank. They’ll bring in a HUGE industrial shredder that can shred your whole box of documents in a few seconds – you literally toss things in there by the fistful and they get utterly decimated by the blades.
Another option is to burn them. Just go camping, use those documents for kindling, and then toss them in there while you’re getting a few logs burning.
One of my friends likes to rip them up by hand, then put them in a big tub of water so that they turn into this giant paper pulp chunk, then he dries that out, then he takes that big paper pulp brick on his camping trips and breaks off pieces for kindling.
Q8: Realities of job applications
I am a hiring officer for a Fortune 500 company. There are some popular misconceptions floating around about getting a job at a large corporation. I hope you will be able to share this with your readers.
You’ll often see media reports that open jobs get hundreds and hundreds of applications for a single job. That is true but it is not the whole story. What actually happens is that if we list a job opening, we will get 500 or so applications, but 480 of them are garbage and irrelevant. Probably 400 of those applications don’t meet any of the requirements for the job. Another 60 or so only meet one or two of the requirements. Another 20 might be viable for the job but they’ve presented themselves so poorly that we can easily disqualify them. This covers things like resumes with several misspellings or cover letters that use offensive language. That leaves 20 people that are legitimate candidates.
Do not be intimidated out of applying for a job that you’re completely or even mostly qualified for. Just put in enough effort to submit an accurate resume without spelling or grammar errors and a respectful cover letter that actually addresses this specific position. That’s probably enough for you to make it through the cut of 480 applicants to the final 20. It doesn’t mean you’ll make the next cut, but you’ll be in that discussion.
This is really good advice and it’s something I’ve told many people applying for jobs.
Make sure your resume is well edited and matches the job you’re applying for and also make sure your cover letter actually addresses the position in question. That’s usually enough to make the first big cut because the vast majority of applications don’t even make that threshold.
Remember, many job applications are just tossed out there like email spam, just sent to anything even vaguely close. Many other people don’t have any idea how to present themselves as someone you might ever want to hire. If you can beat those thresholds, you’ll probably find some success.
Yes, some jobs are filled internally and some others are filled thanks to personal recommendations, but there are many that are filled via open job searches. Don’t give up.
Q9: “Financial independence” scam?
I was at a store in town minding my own business when this guy in a suit comes up to me and starts chatting. I knew him vaguely as I had seen him a time or two before. He eventually starts talking about “financial independence” and at first I thought he was talking about financial responsibility but then he really wanted to meet me for coffee to talk about it and gave me a business card. Is there a “financial independence” scam out there? What was going on?
This seems way off to me and I wouldn’t follow up with it.
There’s a very high likelihood that this individual is involved with a network marketing or a multi-level marketing business – think Amway or something like that. Part of the “pitch” to many people centers around the idea of being financially independent because you “run your own business,” when you’re mostly just trying to sell unwanted stuff to family members.
I would in general be wary of a person I barely knew coming up to me, striking up a conversation about something like my finances, and then trying to get me to go get coffee with them. I’d simply decline the offer and walk away. If I ever did end up accepting an invite and then someone started mentioning anything like that, I’d politely get out of there as fast as possible.
Q10: Physical tracking of Triggers questions
As per your recommendation from late last year I read the book Triggers in January and am excited to dig into these questions. I spent some time thinking about some personal behaviors I wanted to develop and curb and came up with a list of 12 questions to ask myself each day.
How do you physically do these twelve questions and record the answers? Could you walk me step by step through exactly what you do?
I use a grid-paper notebook (this one, to be specific, though any grid paper notebook would do just fine) and a black pen. I devote a two page layout per month to this.
On the left page, I write out the questions I want to answer as a numbered list. So, it might look something like this:
1. Did I do my best today to be an involved parent with my oldest son?
2. Did I do my best today to be an involved parent with my youngest son?
3. Did I do my best today to be an involved parent with my daughter?
4. Did I do my best today to build a lasting and loving marriage?
5. Did I do my best today to create and write meaningful material for my readers?
My current list of questions for this month numbers 22. It varies month to month. At the end of each month, I give some careful thought to what I want to work on in the next month, and that might mean deleting some questions and adding others.
At the start of each day, I review the questions for that month and think about each one for a bit. I try to visualize what I can do today to make that habit happen.
On the other page, I simply have a big grid. Each row is simply numbered with the number of the question – 1, 2, 3, 4, and so on. Each column is a date – 1st, 2nd, 3rd, and so on.
At the end of each day, I score each question from 0 to 10 based on how I felt about my effort for the day, not the results. So, if I sat down with my daughter and had a really good conversation with her and then later on also did something fun with her, I’d probably score that an 8 or a 9. Some people find it hard to give an exact number here, but I just trust my gut on it. I find it hard to give myself a 10 – I do occasionally, but not very often. (The individual numbers are fairly arbitrary – just find a system that is meaningful that works for you.)
I record that number in the square where the row for that question and the column for that date intersect.
Then, at the bottom of each column, I average the day’s scores. For me, a day where I have an average of a 7 or above is a pretty good day (and I usually know it – it has felt like a good day). Anything below a 5 average is usually a bad day unless something really unusual and disruptive has happened (and I usually know that, too).
At the end of a month, I will average all of the scores for that month. Questions with an average score of an 8 or above are usually removed as I view that as something I’ve firmly adopted and am doing well. Questions with an average score of 4 or below are often removed, too, as it’s obviously not something I’m committed to – sometimes it comes back as a refactored question. The other questions usually stick around unless I decide I need a priority change.
The whole point of this is to keep new habits and behaviors in the front of my mind all the time and to really keep an eye on my efforts to improve those behaviors. It really seems to work when I take it seriously. However, it’s worth noting that you won’t see giant transformative life effects from changing a few behaviors. It takes time for those to build up in your life. It’s like a quarter of a degree difference in an airplane flight – it only seems like a big change after a lot of time.
Q11: Thoughts on secular Buddhism
I can’t believe you would share information about Buddhism. I thought you were a Christian. Disappointed.
I don’t see them being in much conflict at all. I find far more conflict with Christianity in many of the articles I write on strict financial issues than I do in secular Buddhism.
Buddhism has absolutely no reference to a singular, personified deity like the Abrahamic God. None. As far as I can tell, Buddhism basically puts the idea of a deity into an area of “beyond human understanding” and really doesn’t worry about things in that category. I would describe Buddhism as non-theist.
My understanding is that Buddhism is basically a set of tools to make your own character and values stronger, which is literally how the Dalai Lama describes it. The tools that Buddhism provides can strengthen one’s Christian beliefs, or whatever beliefs they might have. To me, it’s little different than reading about any school of philosophy and using what it can teach in one’s life.
If you want to dig into this more, I suggest this article.
Q12: Financial advisor
Do you use a financial advisor? Why or why not?
I do not use a financial advisor.
Sarah and I met with one once, partially because I wanted to actually interact with one and also partially because we hoped that a financial advisor could address or at least reaffirm our answers to a few financial questions we had. I felt like the advisor was not explaining anything to me that I didn’t already understand from reading a few good books on investing and he was also trying really hard to sell me on products that did not seem like good investment options to me. This was a fee-based advisor; he wasn’t even getting a commission from this sale. We just ended up trusting our own research and did things on our own.
I would far rather spend several hours reading up on a financial topic and understanding it myself than paying a financial advisor to explain it and recommend options that I may or may not even want. I’m going to end up making a lot of money from that invested time.
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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