海角大神

What鈥檚 inside? Here are the questions answered in today鈥檚 reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
Mint and privacy
401(k) distribution issues
Small emergency fund?
College student planning for future
Helping people in need
Old debts
Finding new ideas
Mid-20s career crossroads
Tracking versus controlling
Publishing concerns

I met with a new personal trainer yesterday to come up with a very detailed plan for exercise over the next several months. My goal is to be in the best shape I can be in by July 1.

The first trainer I met with, early this year, seemed utterly disinterested and gave me a very standard plan which was awful. I didn鈥檛 understand half of what was in it and the trainer basically didn鈥檛 answer any calls I made to him when I had questions.

This new guy gave me what amounted to a book he had written, and then he sent me the entire thing as a Word document afterwards. Everything is explained.

Not only that, he wrote a fifteen page personal plan for me after I did a basic test with him.

I don鈥檛 really need a trainer every day to keep motivated. I just need one to occasionally make sure that I鈥檓 going in the right direction, especially at the start. I want to make sure what I鈥檓 doing is right and whether I need to change anything.

The right person makes all the difference.

Q1: Mint and privacy
Have you heard of Mint.com? I was wondering if you had, what you thought of it. To me it looks like a very good way to see your finances all sorted out, and it鈥檚 free and has a cool iPhone app to go with it.

I tried it out and provided it with info for just one credit card, immediately afterward I felt a panic ensue, wondering what I was exposing myself to and if there was any real danger in doing so. So, I changed my password on my credit card account and deleted the app. I鈥檓 sure whatever mint.com learned about my from that one transaction will be there info forever, but they won鈥檛 be able to access info in the future.

Still, I鈥檇 like to keep using it. I have friends that really get some use out of it too, but I feel pretty uneasy about it at the moment.

If you have any opinions on it I鈥檇 like to hear them!
- Kevin

Much like you, Kevin, I don鈥檛 use Mint because of privacy concerns.

Now, this is not a criticism of Mint 鈥� let鈥檚 make that clear. I have confidence that Mint is as secure as it can be and handles data with a high level of security. That鈥檚 not my concern.

My concern is that no system is perfectly secure, no matter what you do. It still comes down to human error. Every time you trust your personal information to yet another company, you鈥檙e adding a little bit more risk for identity theft to the equation.

Whenever I鈥檓 in a situation to add another company to the list of those that have my key personal data, I ask myself whether the product they鈥檙e providing is worth that additional risk. Simply put, Mint doesn鈥檛 add enough on top of the tools I already use (Excel and Quicken) to make that additional risk worthwhile for me. Other people might feel differently about that risk/reward balance.

This is not a particular concern about Mint. It鈥檚 a concern about any company that I would give my data to.

Q2: 401(k) distribution issues
My previous employer mailed me a 鈥淧articipant Distribution Election鈥� form from my 401K. I have $7,561.47 balance (100% vested). I quit this job on 5/14/2010.

I am now working independently for a local physician. I received a 1099 misc form (non-employee contribution) for the last six months of 2010. This year, I plan to pay quarterly the self-employment tax (15.99%) that I will owe for 2011.

I want to put my $7,500 in a retirement plan. Do I use traditional IRA, ROTH IRA, or SEP IRA? I can鈥檛 believe how unbelievably hard it is to open up an IRA account with my current bank.

I feel lost, what do I do?
- Marissa

I would suggest opening a traditional IRA with an investment house that wants your business. I use Vanguard for my own retirement savings.

In my opinion, if a business makes giving them your money difficult, then they must not really want your business.

So, why a traditional IRA? For starters, there are no tax implications with that change, which there would be with a Roth. For another, SEP-IRAs have a that I鈥檓 not a fan of.

You might end up choosing to convert a traditional IRA to a Roth IRA at a later time, but I wouldn鈥檛 do that unless I was quite able to handle the taxes out of pocket, and I鈥檓 not sure that you are right now.

Q3: Small emergency fund?
Is there ever a situation where a smaller emergency fund is adequate? Here鈥檚 our situation: my husband and I are tenured faculty at a public institution of higher education. While finances are not great at public universities these days, our jobs are very secure; layoffs of tenured faculty have never occurred in the history of public universities in our states and even if that were to happen, there are people below us who would be laid off before us. We have short-term disability as well as long-term disability coverage. We also deposit money regularly into our savings account (outside of our emergency fund) for unexpected expenses (like a recent car problem) in addition to our emergency fund of about 10K (which would cover about 2 months of employment for both of us or 4 months for one of us). The typical recommendation is to have an emergency fund that鈥檚 equal to 6 months of living expenses, but I鈥檓 wondering if that makes sense in our situation. Right now, we put about $250 a month into our emergency account (in addition to about $200 per month into our savings for unexpected expenses), and our only outstanding debt is our mortgage and student loans. Should we continue funding our emergency fund at the same level each month or should we instead make larger payments to finish paying off my husband鈥檚 outstanding student loans (we pay ~$300 per month with a balance of approximately 25K)? Given my aversion to debt, I鈥檇 like to get rid of those student loans, but I don鈥檛 want to jeopardize our current good financial standing.
- Shannon

Assuming that these debts are low-interest (say, 8% or lower), I鈥檇 vote for the emergency fund first.

Simply put, when you鈥檙e in a situation without an emergency fund and something like a serious car breakdown occurs, you鈥檙e stuck having to cover that major expense on credit. Credit comes with a high interest rate. Murphy鈥檚 Law dictates that unfortunate things tend to happen at the worst possible time.

The only reason to be overly concerned about paying off the debts immediately is if they鈥檙e high interest debts. Even in that case, it鈥檚 good to have a $1,000 or $1,500 emergency fund first.

Q4: College student planning for future
I鈥檓 a Junior in college and work about 30 hours a week to support myself. Since I鈥檓 going to be graduating soon I鈥檝e really wanted to start planning for the future. I have two things I鈥檇 like to do eventually- but I don鈥檛 think I can do both now. Which should I focus on?

1. I work an hourly job so my income is sporadic. If I have an exam one week I鈥檓 going to work less, therefore my paycheck is going to be less. I鈥檝e been thinking about getting my first credit card so I can spread out payments for food, airfare, and other bigger purchases.

2. But I also want to start putting money away for an emergency fund (aka student loan repayment) so I鈥檝e been thinking about a savings account. I鈥檇 plan to put away about $50 every two weeks in this savings account.

My worry is that if I put away $50 a week I might not be able to afford those unforeseeable expenses in the future that a credit card would be able to cover. I never have more than about $700 in my checking account at a time.

Do you think that with such a small checking account I could manage both a savings plan and a credit card?? If not, which one should I go for?
- Margie

Using a credit card to finance your life, as described in (1), is a slippery slope that causes people to wake up one morning with thousands in credit card debt. If you鈥檙e spending more than you have on hand, you鈥檙e in a dangerous place because that鈥檚 the place where unfortunate events happen 鈥� a job loss, car problems, and so on.

I would focus instead on the savings plan.

If you sign up for a credit card, which you may want to help with your credit score, I would use it for one normal purchase a month 鈥� say, gas 鈥� then pay off the bill in full at the end of the month. Nothing more, and I鈥檇 never use it in situations where I didn鈥檛 have enough cash to cover what I was charging.

Q5: Helping people in need
Almost every week, I read a reader mailbag letter from some reader of yours and feel terrible for their situation. I even want to give them money. Do you do that? How do you decide which ones to help out of the many stories that you see?
- Shane

When I first started receiving such emails, I would occasionally help out the people who wrote in with a bit of cash to solve their immediate problem.

One day, though, I discovered that someone had left a note on a messageboard stating that if they had a good enough sob story, they could write to me and I鈥檇 send them money. In other words, people were trying to make up heartbreaking stories in order to get some quick cash from me.

Since then, I鈥檝e decided that the best way I can help is to give good answers to people and save my actual dollars for known charities and situations I could address face to face.

Q6: Old debts
I recently have gotten 2 collection agencies calling me about past due balances on a phone and elect bill I had at an apt. 6 yrs. ago. I know that in the state of TX, the statute of limitations is 4 yrs. I pulled my credit report, those 2 along w/ many other companies are already on my report. Should I pay them to get them off my credit report? Should I try to pay on any of these other amounts and get them off my credit report? I鈥檓 following you and Dave R. to get my finances in shape, but not sure if these are included as my debt.
- Lisa

If you pay those debts now, they will appear as 鈥渃urrent鈥� on your report, which also means that all of that information will stick around for another seven years.

In pure terms of your credit report, the best solution is to ignore these people. Is it the most ethical in terms of being honest about your debts? Of course not.

Right there is the problem with the current credit situation. Once you鈥檙e sufficiently late on a debt, it makes less sense in terms of your credit to be honest with your bills than it does to just ignore them for a while longer. That鈥檚 backwards, in my eyes.

Q7: Finding new ideas
How do you find new things to talk about all the time?
- Robert

I keep a notebook with me (a little spiral one in my hip pocket, along with a pen) at all times and whenever an idea pops into my head, I write it down immediately.

I usually end up generating more ideas than I can ever use. I throw out a lot of them because I鈥檓 not sure how to turn them into good articles.

Mostly, I just constantly look at my life from the perspective of whether or not something would make a good Simple Dollar article.

Q8: Mid 20s career crossroads
I am 26 years old, work full time, go to school full time, and still live at home with my parents. I was 3.5 years through an electrical engineering degree when I was preemptively hired to do such work. However, once I started to work and subsequently forecast the rest of my working life, I quickly realized this was not a smart idea. What I realized was that I simply had no idea what I wanted to do for work. Thus, I went back to school to finish (since it was convenient) my BS in mathematics. This gave me a degree that enabled me to be more general in my job search.

However, the wrench in that plan is that somewhere in between all of that I started to visit a semi-famous physical therapist in a city close by. This was tremendous exposure to highly talented people, in a field that I had no previous knowledge of. As you can guess, this fit absolutely perfectly into my personality and my individual abilities. The most important thing of all is that this is the first time that I am genuinely interested in a specific field of work.

Now I have come to conflicting conclusions:

1. I decided to finish my BS in Mathematics to maintain a certain level of generality. In the process I am debt free, have a 2 year old car which is paid off, and have a good amount of savings/retirement.
2. However, at the same time I have had exposure to a new field which has really sparked my interest. Going into this field would require quite a financial investment.

This is an extremely difficult decision for me (and I鈥檓 usually fairly decisive). If I follow through with #1, then I simply transition out of full time school (this summer) and into full time work in various different jobs. I would also probably move several states away (or at least attempt to). If I follow through with #2, I鈥檇 most likely have to quit my full time work to complete prerequisites and apply to graduate school (and the various financial implications that would need to be considered). Basically, my life turns in complete different directions depending on which one I choose.
- Sean

If I were you, I鈥檇 throw yourself (part time) as deep into this field as you can, working as an intern or an assistant to people who really excel in the field.

Give yourself a lot of time with this so you can figure out if it鈥檚 just a passing interest or something deep that you really want to pursue.

I would not change all of my career path based on a short-term positive encounter. Give it a bit of time and make sure that it鈥檚 the right thing for you.

It鈥檚 very financially dangerous to start career hopping (and re-training).

Q9: Tracking versus controlling
I鈥檓 struggling with balancing my requirement to track money with my requirement to control its outflow.

Basically I鈥檓 a pro money tracker 鈥� I have a spreadsheet into which I download every transaction during the month, reconcile it, categorise it, and flow it through to a monthly summary P&L and Balance sheet (yes overboard!). I like knowing what鈥檚 happening with my money.

The trouble is, this often conflicts with my requirement to control it鈥檚 outflow. This has mainly become a problem recently because we have gone down to one, part time, income so there is no longer money to buy what we want (or think we need), when we want it 鈥� we have to only spend what we have and save up to buy what we need. We have a certain amount of money to live on, and if we exceed it we eat into our home loan, which we DONT want to do. We used to be earning well and saving well, but on our current income saving is not even an option 鈥� just trying not to eat up all our past savings is what I鈥檓 aiming for. I.e. living within our CURRENT means.

The problems I鈥檓 finding are because the best way, I suspect, to only spend what you earn, is to operate largely in cash. If the cash runs out, there鈥檚 no more to spend. But the downside of this is that it鈥檚 unhelpful for tracking 鈥� on the credit card everything is itemised and I know what it鈥檚 been spent on, whereas with cash we are terrible with tracking it (and frankly, although improving is a possibility for me, it鈥檚 not for DH, he鈥檚 just not got that sort of mind). I also have lots of bank accounts for different purposes, in an attempt to control spend, like for putting aside money for annual expenses. But again the downside is that this doesn鈥檛 allow me to know what we鈥檝e spent till I get to the end of the month and do all the numbers. There鈥檚 too many sources of spend to look at, to get a quick view of how we are going for the month. The more I try to control it through more designated bank accounts, the more complicated it gets and again the harder to know how we鈥檙e going.

My fear is, if we don鈥檛 track it, we don鈥檛 know where it goes. Even with the cash part of the system we have now, there鈥檚 always money unnaccounted for, and we have no idea what it鈥檚 been spent on. It makes it hard to set a budget.

But setting a budget is less important than keeping to it, and it鈥檚 interfering with my ability to do that. Is there a better way I can manage this?
- Susan

Automation is the key that I think you鈥檙e looking for.

If you have required parts of your budget, automate them. Set up automatic payments out of your checking account towards the bills you need to pay or towards savings accounts set aside for these specific goals. Have these automatic payments trigger on your payday 鈥� or the day after your payday 鈥� so you don鈥檛 have time to fritter away that money.

This both makes it easier to track and easier to stick with your budget and your goals.

Q10: Publishing concerns
First of all, thank you for sharing your knowledge and thoughts on all areas of life. Your recent comments on being paid to promote is what prompted me to contact you. I鈥檓 paid to write for a local monthly magazine. It鈥檚 a side job. Even though I have a column, I usually throw in photos of a local event or another short article. I also help with resources when requested as I live in the area and know people.

The last issue, my long article was split into two articles. The part that gave praise to how I saw a local company鈥檚 website as being 鈥渃hock full of useful information鈥� and related examples was fairly informative. That portion was positioned above a half page ad of said business. I鈥檓 torn 鈥� the editor can do whatever he wishes as he paid for it, but I felt the article gave an impression of paid advertising, which definitely was not the case. I feel that my reputation could be affected now as I don鈥檛 want people to think pieces I write are influenced by paid advertising. Would you say anything or is it part of doing business?
- Sam

This is a challenge for anyone who writes. Simply put, the business of presenting writing will always conflict on some level with the art of writing.

I have this same conflict myself. I usually focus on accepting ads that match my genre or, at the very least, don鈥檛 conflict with the things I鈥檓 writing about. The problem, of course, is that I end up accepting ads sometimes from the very companies that I use and write about, like ING Direct, for example. I use ING Direct and, sometimes, they buy Simple Dollar ad space.

The best thing you can do 鈥� in my opinion, at least 鈥� is to just ignore it. Write what you find to be true and don鈥檛 worry about how publishers choose to format it to make a buck. If it鈥檚 good, the genuine nature of the writing comes throguh.

Got any questions? Email them to me or leave them in the comments and I鈥檒l 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 hundreds of questions per week, so I may not necessarily be able to answer yours.

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