海角大神

What鈥檚 inside?聽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.
1.聽Long term life insurance
2.听Social Security and taxes
3.聽Dental challenges
4.聽Fear of switching careers
5.聽Money from selling household items
6.聽Haircuts and appearance value
7.聽Considering purchases again
8.聽Emergency fund and future
9.聽My business partner is lazy
10.聽Children and television

I鈥檓 often blown away by other people鈥檚 definitions of fun. For some, you have to have alcohol to have fun. Others seem to require spending lots of money.

I鈥檓 usually pretty happy doing almost anything as long as it鈥檚 with people I like. I鈥檓 always taken aback by people who loudly announce that the current event is boring and that booze or spending need to happen in order for them to be placated.

Q1: Long term life insurance
I have had life insurance through SBLI and through my employer for a long time. My questions aren鈥檛 about how much or what kind to have. My children are now young adults, so I don鈥檛 need to worry about providing for them, but I would like to leave them and any future grandchildren a good sum when I die. The only way for me to do that would be through life insurance, as I have no money saved or invested and no time left to accumulate even a small fortune. So my questions are, is it possible to continue a life insurance policy into old age? Would it be very expensive? How is a life insurance benefit taxed when it is paid to the beneficiary? Is there any way to reduce the amount of taxes the beneficiary will have to pay? Would it be better to leave money to minors than to adults?
- Chris

There are lots of different varieties of life insurance policies out there. Generally, ones that last a person for their entire life tend to have rather high premiums 鈥� after all, the insurance company isn鈥檛 in the business of paying out more than they鈥檙e bringing in. Benefits of most life insurance policies are free from income tax.

If I were you, I would probably hang onto a very small policy 鈥� enough to cover your burial expenses 鈥� and instead start putting money directly into college savings funds for your grandchildren. After all, you don鈥檛 seem to have any direct dependents besides yourself.

In terms of bang for the buck, this is probably going to give them the greatest benefit unless you were to die exceptionally young.

Q2: Social Security and taxes
My hubby and I were married last September. He鈥檚 been receiving retirement income for the last two years and started receiving Social Security benefits in August of last year. We were hit hard when figuring our taxes for last year. Because we鈥檙e filing as married, his SS benefits were taxable since his other income was over a certain amount. Should we have known about this? I鈥檓 wanting a way that we can prepare for the hit next year, as he will have received a full year of SS by next time. Should we just put a portion of that back each month for the tax bill?

Additionally, hubby cashed in some savings bonds last year and those were on our taxable interest statement. It seems that it kind of defeated the purpose of having them if we鈥檙e going to get hit with a huge bill because of cashing them in. Is there a way that we can make use of them without taking that huge hit?聽
- Olivia

For starters, you鈥檙e not going to get hit with a huge bill for cashing in the savings bonds. Let鈥檚 say you bought bonds for $500 and are now cashing them in for $1,000. If you鈥檙e in the 20% tax bracket, your tax bill for that $1,000 you just stuck in your pocket is only $100. You鈥檙e only taxed on the聽gains, and even then, the highest federal tax bracket is 35% (and most people are far, far below that).

Whenever you earn income that doesn鈥檛 already have taxes taken out of it, you should put half of it in a savings account designated for taxes and forget about that money. When you do your taxes, pay your bill using the money in that account, leave behind a little bit for the following year, and withdraw the rest to do with whatever you want.

That鈥檚 how I do my own taxes. All of my income requires me to pay my own taxes in this way.

Q3: Dental challenges
I usually go to this great dentist, Dr. C., but this time around she was not available on the day that I needed to do the appointment so I went to a new dentist, Dr. L. Last time I saw Dr. C, in summer 2010, she told me specifically that I do *not* need to get my wisdom teeth out (I鈥檓 26 and still have all of them. They鈥檝e never hurt). Dr. L told me I absolutely *need* to get them out sometime this year. She referred me to a local oral surgeon.

I looked this surgeon up and he has horrible reviews鈥�literally not even one review says anything positive about him. He does not work with my insurance so the estimated $3000 bill would fall on me. I called my insurance company and found out that they鈥檒l only cover up to $1000 of any dental surgery鈥�and the closest oral surgeons they work with are 60 miles away, in another state. So I鈥檒l still have to pay estimated $2000, plus find somebody willing to take the day off to drive me because I won鈥檛 be able to drive myself back.

Dr. L had mostly good reviews but people did mention that she tried to do a lot of referrals for wisdom teeth, veneers, teeth whitening etc, and tried to push extra services on medicaid people. And looking back on it, she didn鈥檛 mention anything about wisdom teeth until after I had said I was a federal employee (USPS). What I did not mention, because this never comes up in conversation, is that I鈥檓 classified part time, and therefore don鈥檛 get all those sweet federal benefits. I just bought myself some cheapo dental and health insurance on my own because I鈥檓 paranoid. I鈥檇 think that if my wisdom teeth were so bad, she鈥檇 mention it right off, not wait until 10 minutes into the consult.

If Dr. L was my only dentist, I would鈥檝e booked that oral surgery appointment today, but since the other dentist said I didn鈥檛 need it, I鈥檓 confused. Maybe my teeth have changed, and I do need it, or maybe I鈥檓 being ripped off! Or maybe it鈥檚 just a difference in opinion. I鈥檓 suspicious of Dr. L because she referred me to such a bad surgeon. My current plan is to make my next appointment with Dr. C and see what she says鈥�if she thinks I need it now then I鈥檒l do it. Plus she is very low-cost so maybe she knows a surgeon that is cheaper.

My question is, am I reacting rationally to this, or am I cheaping out on my health? Have you ever heard of a dentist trying to upsell? This is more money than I make in a month. I have the cash in the bank to cover it, but it would make a huge dent in my downpayment-on-a-house fund, plus surgery always has risks, complications, etc.

When I was a kid (7 or 8), my parents took me to a dentist that said I needed *all* of my teeth removed. The idea being that if all my baby teeth were removed, my adult teeth would come in straighter b/c nothing would be in the way. My parents could not afford this, plus they thought it was weird, so they took me to another dentist. He said that was totally crazy and I didn鈥檛 need that at all. Maybe this is the same situation?
- Chloe

Every time a medical professional suggests a significant procedure, you need to get a second opinion on it. In this case, your original dentist seems to be against it.

If I were you, unless there was an ongoing problem, I鈥檇 leave your wisdom teeth alone. I鈥檇 talk it over with my primary dentist, but it seems like there are other issues going on here outside of your teeth.

I鈥檓 not sure what鈥檚 going on in this story, but there are certainly some strange signs coming from the second dentist. I would not make major decisions based just on the words of this person.

Q4: Fear of switching careers
My husband would like to quit his unfulfilling job to spend some time working on a new business venture. Our only debt is $65,000 remaining on our mortgage (monthly payment about $1000), but it鈥檚 a little scary to think of cutting off our reliable source of income. Do you have recommendations or advice for us? We have three children and another on the way, and I feel a little overwhelmed about where to start looking for new insurance etc. We do have about $20,000 saved and will have a little more by the time he would quit his job.聽
- Melinda

Unless he has a direct and very clear path to a steady income, he should not make this leap.

The only way I would ever recommend someone making such a leap is if there is going to be enough income coming in from the other person in the relationship to cover all of the bills or if the business is already earning enough income to pay the bills due to building it in one鈥檚 spare time.

If I were him, I would try to get the ball rolling on the business in his spare time before quitting the primary breadwinning job for the family.

Q5: Money from selling household items
My partner and I are currently working full time in well paid jobs. We are planning to leave New Zealand in six months for an indefinite period of time as we are going to travel around South America for 6-9 months, and then move to The Netherlands (where my partner is originally from) and try to live there for a year or two so that we can spend more time with his family and friends, and I can learn Dutch.

My question is to do with the money that we get from selling our joint house hold items. We have started to sell some stuff (mattress, garden tools, desk, etc) and so far have raised $400. Over the coming months we鈥檒l sell pretty everything except for a few items needed to make a house a home, and the bare necessities needed to get started with which we鈥檒l store at my parents house here in NZ. Aside from that most of our stuff will be sold via the NZ site TradeMe. We think that by the time we sell most of our household items we鈥檒l raise about $3-4k. (This doesn鈥檛 include the car, or motorbike which is my partner鈥檚 so he鈥檒l keep the money from the sale of that (fair enough!)).

I wanted to get your advice on what to do with the money we raise from selling our stuff. Our first idea was to put it towards our trip 鈥� so that we have to put in less money ourselves. Then I had an idea this morning that we could put it in a rolling term deposit, and use the money for set up costs when we finally come back to NZ. Another idea was to put it to one side, as we want to buy a house eventually and that could be the first bit of savings for us鈥�

Anyway, what do you think? Should we just put it in the 鈥楽outh America鈥� pile, or maybe towards something else?
- Linda

I would keep it as an emergency fund that you would be able to access from New Zealand if necessary.

My first step, if I were you, would be to talk to my bank about international access to accounts. If that money were in a U.S. checking or savings account, could you access the funds easily in New Zealand? If not, I would seek out a bank that聽could聽make such funds available if necessary.

Given that, I鈥檇 just let the money sit until I returned. Ideally, you won鈥檛 have to touch it and you鈥檒l have a cash reserve that will make your return to the United States quite easy.

Q6: Haircuts and appearance value
Almost since I鈥檝e known him my husband has kept his hair cut very very short. He owns clippers and cuts his hair with the shortest setting about once a week all over his head. He works as a salesman. I am concerned that the haircut makes him look perhaps too aggressive to his clients and may be costing him sales and hurting our income. I鈥檓 not sure how to handle this situation.
- Emily

颁濒别补谤濒测,听something聽must have led you to this conclusion. I鈥檇 spend some time digging deep and figuring outexactly聽why you feel this way.

Then, talk to your husband about it if it concerns you. As his spouse, you do have a vested interest in the strength of his career. Be sure before you bring it up, though, that you truly understand where you鈥檙e coming from with this.

That being said, as long as his hair and appearance are kept, I think you鈥檇 have a hard time finding concrete evidence that short hair is damaging to the sales output of a competent salesperson.

Q7: Considering purchases again
Almost exactly a year ago I started reading your website while undergoing chemotherapy. At that time I had $4,000 of credit card debt and no savings. I have an excellent job as a scientist, but have had a hard time staying afloat after becoming a single mom about 5 years ago. After reading this site for the past year, tracking expenses, selling stuff on eBay, forgoing a few trips, and reducing spending I am happy to report that I am debt free, have $2,000 in an emergency fund, $500 in a vacation fund, and about $500 in an account for furniture! My question is on purchasing a couch. I鈥檓 at the age (35) where I鈥檓 starting to realize that replacing a couch will be a regular thing. The fabric couch I bought new from the store lasted 5 years with regular cleanings, the fabric couch I have now I bought off of Craig鈥檚 list 3 years ago and is increasingly uncomfortable/driving me crazy. I have wanted a leather couch for some time as I find them comfortable, easy to clean, and beautiful. They also seem to last longer (I would estimate 10 years+ instead of 5). However, I鈥檓 not sure if it鈥檚 a wise purchase and it鈥檚 a little ostentatious. 90% of my furniture is hand-me-downs / yard sales/ thrift stores. Another consideration is that as a single mom, obtaining couches second hand and getting rid of the last couch takes a lot of coordination and help from others. Is buying a leather couch wise or foolish? I have located a mid-price local furniture maker that seems to make quality products and has a few clearance centers for items with a little damage/imperfections. Also, is there a time recommendation after one finally escapes debt before one should start purchasing items again: a debtors 鈥減robationary period鈥�?
- Billie

I鈥檒l speak from experience with a leather couch that we bought ourselves from an 鈥渋mperfection鈥� store that they certainly do show clear wear and tear over time. We do have three young children, but our leather couch is certainly showing some significant wear at about the four year mark. The level of wear is comparable to and perhaps slightly more than the wear on the microfiber couch in our family room over the same period.

I don鈥檛 think a relatively wear-resistant couch is a bad purchase for a single mother. Just make sure you know what you鈥檙e buying before you do so. I would stick with either leather, vinyl, or microfiber with children in the house. Do your own research聽before聽you talk to a salesperson.

As for a 鈥減robationary period,鈥� I don鈥檛 think that鈥檚 truly necessary. You just need to make sure you鈥檙e not buying things that will put you further in debt or reducing your ability to repay debt. If you have the cash in hand for this purchase and have been planning for it, then it鈥檚 a reasonable move.

Q8: Emergency fund and future
I have a really tight budget. Very little wiggle room and I don鈥檛 have much in the way of savings. However, I have finally managed to save $1,000 and, with my upcoming tax return, I will be able to pay off all of my credit card debt. However, I have one credit card that has 0% interest for 1 year. I have about 9 months left on this one year term. So, I was thinking about keeping the balance of what I owe in my ING savings account so I can collect interest and then pay the credit card off before I start getting charged a interest. What would your advice be on that?

Now that I am able to pay off all of my credit cards debt, the only debt I will have is my car loan. The interest rate is 8.24% and I still owe about $13,000. My question is, since I have my $1,000 emergency fund, should I:
1. Continue building my cushion. $1,000 won鈥檛 even cover my rent ($1,100) or daycare ($1,200) expenses. I am the single, full-time working mother of a three year old. I really have done my research and I can鈥檛 get a better deal for the hours I need.
2. Start investing. I haven鈥檛 started any savings for my daughter or for my retirement and I know how important both of those are.
3. Should I start saving for a house. It sounds far-fetched but I qualify for the VA home loan and would really like to provide my daughter with a home to grow up in.
4. Or should I do some combination of all of the above?

Here are some things to keep in mind:
1. I am currently working on refining a budget. I have one but I鈥檓 working on collecting receipts and such so I can track exactly how I am spending my money for the next couple of months and try to be even more responsible.
2. I am hoping to go back to school in the fall but it should only alter my income slightly as I will be receiving the post 9-11 GI bill which pays for school and gives me a monthly stipend.

My instinct is that I should continue building my cushion. However, I feel like it is very irresponsible for me to not at least consider to begin investing so I think I should start there. Then there鈥檚 also the fact that a good portion of my furniture is falling apart and will likely need to be replaced in the near future so I will have to figure out how to save for those items as well. I guess this is a lot to dump on you but I would really appreciate your help with setting my financial priorities.
- Kelly

Having money in a savings account聽is听颈苍惫别蝉迟颈苍驳.

The idea that 鈥渋nvesting鈥� is this magical thing that will somehow make your money multiply like rabbits is foolishness. Investing simply means devoting one鈥檚 time, effort, or energy to a particular undertaking with the expectation of a worthwhile result.

When you invest in stocks 鈥� which seems to be what you鈥檙e pining for 鈥� you inherently take on some risk. Let鈥檚 say the next 12 months go like 2008 did and you lose 40% of your investment over that period, then you find yourself needing the money, then it was an awful investment.

An investment in a savings account, on the other hand, returns about 1% no matter what the economy is doing. If you find yourself needing your money back after a terrible year in the stock market, your savings account is a far better investment than the stock market.

You shouldn鈥檛 put a dime in anything besides cash unless you鈥檙e quite confident you鈥檙e not going to need that money at all for quite a few years. Most investments outside of cash are very volatile and shouldn鈥檛 be attempted unless you鈥檝e got a strong cash supply to get you through emergencies聽and聽an understanding that there will be periods where you鈥檙e going to take an absolute beating on it.

Q9: My business partner is lazy
I work 40 hours per week at a regular job and also have a flourishing side business 鈥� so flourishing that I frequently make more money from it than from my regular job!!! My roommate lost his minimum-wage job several months ago so he is helping me out in exchange for room, board and cash here and there. We split up my profit evenly and that covers his share of the the rent, bills, some spending money etc. The problem is that he is not particularly helpful. There is no question that I couldn鈥檛 run the business 鈥� at least not to this extent 鈥� without his help, it鈥檚 just that he only does the bare minimum of work. I did the math one time and for the amount of work he鈥檚 doing it comes to something like I鈥檓 paying him up to $50/hour!

I am so swamped and have been working days 4 a.m.-9 p.m. while he works from about 2 p.m.-4 p.m. complaining the whole time! I want to start cutting back the side business as I am not ready to give up my full-time regular job. But taking fewer clients means that my roommate will have less of an 鈥渋ncome鈥� and might begin to fall behind on bills and rent. And like I said I really do depend on him to keep growing my business. There are just some things I can鈥檛 do because of my 40-hour/week office job and he is available to do those things. (This has been why I鈥檓 so willing to give up so much of my profit. Because it was worth it to me.) If he had a regular job then he wouldn鈥檛 be available to help me. Although honestly he鈥檚 so lazy that I don鈥檛 think he鈥檇 even get another job. So I might have him falling behind on bills and rent anyway. Sometimes I wish that I could just start over with a new roommate/helper, one who really wants to work and would appreciate the opportunity (it鈥檚 a really fun job) but I have been friends with this guy since high school and I really care about him. He鈥檚 been my roommate since college (10+ years.) And I think I am too old to go back into the old Craigslist roommate pool.

Will you help me sort this out? I am so tired and angry. I love both my jobs and also my friend so much.
- Al

This is a prime example of why friendships and finances rarely mix.

Your roommate is a freeloader. That person might be a wonderful long-time friend, but right now that person is leeching off your efforts.

You have to decide whether or not you鈥檙e okay with that. If you are, then swallow your displeasure and continue the arrangement. If you鈥檙e not, then you must have a talk with this friend about the business, and you need to separate your friendships and your business relationshps. I鈥檇 tell your friend that if I were in your shoes.

Is this person an employee/partner first or a friend first? That鈥檚 really the question here.

Q10: Children and television
My husband and I both have salaried careers that eat up at least 50 hours a week. We also have three children, like you and your wife.

How do you get anything done around the house without allowing your children to watch a ton of television? It seems like the only time we make significant progress on housecleaning, laundry, and home projects is when the children are focused on something that doesn鈥檛 undo the housecleaning.
- Fiona

For starters, we just accept that our house isn鈥檛 going to be perfectly clean while our children are young. With both parents working and with multiple young children, it is almost impossible to keep up with the wave after wave of chaos at all times.

Our solution is to allow them to watch limited television. We DVR programs that we鈥檝e pre-screened and our children are allowed to watch thoes and nothing else.

During the week, we don鈥檛 watch any television. On the weekends, they鈥檙e allowed to watch a few programs, during which Sarah and I get caught up on things.

As the children get older, they do become better at finding ways to entertain themselves. They also become more useful with regards to the household tasks.

Got any questions?聽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.