Questions About Work Culture, Haircuts, Choosing Funds, and More!

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. Planning ahead for a child
2. Frugality and self-denial
3. 401(k) and multiple jobs
4. Work culture and telecommuting
5. Why don’t people save?
6. Figuring out credit card debt
7. Getting started with children’s haircuts
8. Picking funds in 401(k)
9. Parking ticket problem
10. Using Roth IRA contributions
11. Old canned items
12. Basic income? Really?

It’s strange how someone can be a regular part of your life for fifteen years and you just feel like they’ll always be there, then suddenly one day you find out that they’re leaving the area and moving far away from you.

We’ll miss you, Heidi.

Q1: Planning ahead for a child

I’m 29, my wife is 26. We just bought a house with the help of my wife’s inheritance and are now debt free. We want to have a child three years from now and my wife plans to be a stay at home mom. What are some strategies for planning ahead for this?
– David

The number one thing I’d suggest that you do is practicing on living on one income, the income you’ll have when you make this leap. Live on just your paycheck and bank your wife’s entire paycheck.

You’re going to find this challenging, and that’s the point. It won’t be easy to go down to one income, and it’s a good idea to work out the kinks now so that when you actually have to do it this way, it’s smooth sailing.

Plus, if you’re banking your wife’s salary, you’re building up a hefty emergency fund that will help you deal with whatever may come. You’ll definitely have unplanned expenses when you have that first child, trust me, and you’ll be glad that you have the savings.

So, just start by trying to live off of your income for a while and saving your wife’s income. See how it goes, and try to figure out how to overcome challenges without tapping your wife’s income.

Q2: Frugality and self-denial

I don’t see how it’s healthy to just keep denying yourself the stuff that you want all the time. You say that it leads to happiness somehow but all I see is misery in that lifestyle.
– Anna

The goal isn’t self-denial for the sake of self-denial. The goal is denying short-term desires and impulses because they’re genuinely less important to you than your big goals in life. The only thing that those short-term desires and impulses really have going for them is a sense of urgency that the bigger and more important things often don’t have.

If I see a book I want at the bookstore, there’s a sense of urgency about it. I want it now! I can have it now! Compare that to something that’s more important to me overall, like early retirement. I do want it now, but it’s not burning and urgent, and I can’t have it now – it’s something down the road. However, the desire for early retirement lasts for years and years and years, and the benefit from it will last the rest of my life. That book? I probably won’t even be very interested in it several days from now.

Frugality, to me, is about realizing that the thing that’s urgent and exciting right in this moment often fades really quickly into nothingness and regret, while the big important things might not be as strong right now, but they last and last and last and add up to far more value in life than that short term desire. So, I’m simply very careful about the short term desires that I choose to fulfill so that they don’t stand in the way of my big long term plans.

To me, that’s the opposite of misery. As each year passes, that big goal becomes more and more real. I feel less and less money stress. All I had to give up to have it was a bunch of completely forgettable short term things. That’s a trade I’m never going to regret.

Q3: 401(k) and multiple jobs

I am in law school and during the school year I have been working part time in the retail industry. The pay is $3 above minimum wage, hours are flexible enough that I can work with a law school workload, and they provide a 401k with immediate vesting (full match up to 3%, half match up to 5%).

For the summer I have secured a high paying legal internship, but this job does not allow me to contribute to a 401k. Luckily, I have been able to keep my retail job and will be working on the weekends. My thoughts are to contribute 100% of that money into the 401(k).

Is that a smart plan with the retail job (contributing 100% to the 401k)? Will that solve the tax problem of having two jobs, or does it not matter because I won’t make enough for the year?
– James

You are never, ever making a bad move contributing to retirement. Ever.

Having said that, two questions stick out regarding this plan.

First of all, is that 401(k) offering matching? If it isn’t, you might want to consider a Roth IRA for that money instead of a 401(k). If you make it as a lawyer, you will be very glad to have a pool of money for retirement that can be used tax free, which is what a Roth IRA provides, plus you have a much wider array of investment options to choose from. I’d consider a Roth IRA through Vanguard.

Second, are you accumulating any debt due to your legal education? If you are, what’s the interest rate on that debt? If it’s very high, you might get more value for your dollar by paying off some of the debt now rather than later, because the interest savings may add up to more than you could make in retirement savings.

Regardless of what you choose, the simple act of putting money aside for the future is the wisest choice you can be making right now. What exactly you do with it is very secondary to the simple act of putting that money aside at all.

Q4: Work culture and telecommuting

My understanding is that you have worked from home for ten years. Do you have any good connections with coworkers? Do you have any sort of work culture or work environment?
– David

Part of the challenge of working from home is building those kinds of relationships and work culture. It is fairly hard to do this when working remotely, but it’s definitely possible.

I have a good relationship with several people that I have contracts with. I’ve mostly built this through back and forth email and occasional phone call and extremely rare meetings for lunch when our paths happen to cross.

Much more important than that has been connections to local people who also telecommute or work from home. I have formed a small group of such people and we meet regularly for coffee and occasionally for lunch and sometimes for group work sessions. That’s been the replacement for my “office culture,” in all honesty, and it’s actually even better than that because our commitment there is to each other and not to the company or to getting a one-up on each other. We’re not really in any sort of conflict, so our purpose is in helping each other and getting help when we need it. If we help someone else in the group, there’s no real worry that they’re just going to get promoted over us or something.

My advice to anyone considering working at home, especially if your employer is far away, is to find a local group of people that you can work with regularly. Get together with them regularly just to chat about work issues and bounce ideas off of each other.

Q5: Why don’t people save?

You often link to that story about how 78% of Americans live paycheck to paycheck and to articles about how little people have saved for retirement and how much debt they have. I don’t understand why it happens.

I understand that some of it has to do with how you were raised. I was raised in a family where saving for the future was really important. My parents put money away for the future.

Why don’t people just do this as a matter of course?
– Dana

My honest feeling is that you have to consciously choose to focus on the long term in order to save consistently, and most people don’t have that long term focus. My experience has been that, for a lot of people, they don’t really think about the future beyond the next month or two and they assume things will just work out.

Some people have childhoods that really train them to look into the future. A few others just do it naturally. For most people, though, it doesn’t come naturally and they weren’t trained in childhood to do it.

For some adults, the value of that long term focus pops into their life at some point and they have a financial turnaround. That happened to me. It’s not impossible for it to happen.

Another challenge, of course, is that the short term distractions are really compelling and tempting. They make you want to focus on short term things. I think that many people who might have had a long term focus in another era might be distracted by the many short term temptations of today.

Q6: Figuring out credit card debt

I have debt spread across four credit cards and need help figuring out what to do next.

Credit Card A – $5000 balance, $8000 credit limit, 19.9% interest, good rewards
Credit Card B – $2200 balance, $5000 credit limit, 19.9% interest, all right rewards
Credit Card C – $1000 balance, $8000 credit limit, 24.9% interest, good rewards at one retailer
Credit Card D – $2000 balance, $5000 credit limit, 31.9% interest, no rewards to speak of

Obviously Card D is bad and I should pay it off first, but what about the rest? Should I pay off C next? Should I try to balance transfer off of A so that I can use the rewards program? I use A for most purchases.
– Anna

Carrying over $10,000 in credit card debt is a sign that you might not be good at staying within your means unless you very recently got a really good job or were using cards to stay afloat in between jobs or something. If you accumulated this debt with your normal salary, you should spend some time living entirely without credit cards and mastering living completely within your means while paying down these cards. Your first step in that situation should be to make minimum payments on these cards while building up a small emergency fund in your savings account, then paying down these cards quickly starting with D, then C, then B, then A.

If you accumulated this debt during a low income period and now you’re earning a lot more and paying this down rapidly, and you wish to use Credit Card A as your main credit card for purchases, I’d try to transfer some of the balance of A to B if possible, then focus on paying down D, then C, then B, then A, as stated above.

In short, clearing out D and C should be your highest priority, regardless of your situation.

Q7: Getting started with children’s haircuts

I have two young boys at home aged 4 and 2. I have taken them to get haircuts in the past but the process seems really simple and so I wondered why I couldn’t do this at home. I looked up a few tutorials on it but they seem to include buying expensive clippers. How does one get started on this on the cheap?
– Emily

Really, all you need is a comb and a pair of kitchen scissors, though hair clippers are pretty useful. This is probably my favorite tutorial on the subject. It’s really not very hard.

If you’re wondering about gear, kitchen scissors are fine as are any old combs you might find at the dollar store. For clippers, the best “bang for the buck” ones I know of are these sub-$30 Wahl clippers which will pay for themselves with just one cut.

The biggest suggestion I have is to give them a “long” cut the first time you do it. Cut their hair a bit longer than you normally would, so that if you mess up, you can cut it shorter to fix the problem (and hair clippers can really fix it if it gets too problematic).

Q8: Picking funds in 401(k)

I signed up for my 401(k) at work in January. The women who walked me through the form said that it didn’t matter what investment I chose and they just kind of pointed me at one. It is a Total Stock Market Mutual Fund. Is this the best choice?
– Alex

Without knowing your age, the year you hope to retire, and what options are available to you – and that means knowing the exact funds they’re talking about – it’s hard to tell if that’s the best option available to you.

From just the name alone, it sounds like it’s not going to be entirely bad. It’s most likely a very diversified stock market investment, which means that if one company goes bankrupt, it won’t hurt your investment very much. You’re actually invested in the stocks of a lot of companies at the same time, owning just a little bit of each. So, if one company does really well, it only helps you a little, but if one does really bad, it only hurts you a little. There are definitely worse things in the world!

I usually nudge people toward Target Retirement Funds if they’re available in their 401(k) package. Those types of funds are ones that are optimized for the year you plan to retire. So, there might be a Target Retirement 2040 Fund or a Target Retirement 2050 Fund. Just choose the one that has a year close to the year when you turn 70 and you’ll be in good shape.

Again, it’s really hard to give specific accurate suggestions without knowing a lot more information than this. I would say that your current choice is probably a reasonable one and that a Target Retirement Fund is probably a good choice, too.

Q9: Parking ticket problem

I have received repeated letters in gradually more aggressive language about a parking ticket that my car apparently received in a city I’ve never been to. I’ve never even been to that state. I am single and no one has ever driven my car but me. Not sure what to do.
– Nigel

This ticket is probably due to an incorrect VIN in a database somewhere, or possibly an incorrectly typed license plate number. At some point, someone registered a car with a similar VIN as yours and it got typed in wrong.

Just go through your bank records or credit card records or other records and make sure you have some clear evidence that you weren’t in the area at the time of the supposed ticket, then contact them. Simply state that you’ve never been to that area and have records showing that you were in another part of the country on that date. That should clear things up in a jiffy.

I’m almost certain that this is due to someone typing in a VIN or a license plate number wrong somewhere.

Q10: Using Roth IRA contributions

In my late twenties I got super serious about saving for retirement and maxed out my Roth IRA for several years while also contributing 15% to my 401(k) and getting 5% of that matched. I am very well off for retirement now.

Given this do you think it is a good idea to use Roth IRA contributions to help pay for my son’s college education? I am a single mom with only one child. He’s going to a state university and living at home while doing so for at least the first year or two. My Roth contributions can cover his tuition for three years or so. Good idea or not?
– Brenda

Again, it’s really hard to know the right answer without seeing a full picture of your finances. It does sound like you are in good shape for retirement, but I would consider it more important that you’re in great retirement shape than paying for his college tuition.

Unless you are extremely sure that you are in absolutely great retirement shape, I wouldn’t pull out my Roth IRA contributions to help. Instead, I’d have him take out some student loans to pay for the tuition. If you can help a little out of pocket, make some payments on those loans when they’re in forbearance to keep the interest in check, but don’t tap your Roth IRA for it.

If you’re dead sure you’re in extremely good retirement shape and helping your son emerge from college without debt is very important to you, then it’s a reasonable choice, but be absolutely sure you’re in good shape first!

Q11: Old canned items

My parents used to do a lot of canning until they got sick. They have a lot of older canned stuff in their pantry. How old is too old for canned foods?
– Amy

I’d generally stick to USDA guidelines on this. They recommend that high-acid foods like tomatoes are eaten within a year and a half, and other items within five years. Canned foods are sterile – if they’re not, the lid will pop up and you should discard them. The reason for those guidelines is that beyond them, the foods really start to break down and become mush.

If the lid is still sealed and it hasn’t popped up, the food is still safe to eat, but it may not be a pleasant experience as it may all be mush.

Q12: Basic income? Really?

Are you really in favor of a basic income?
– Daniel

I’ve made this offhand comment several times, but I haven’t really addressed it in detail, so let me clarify.

I’m not in favor of a basic income today. I don’t think that in a situation where there are lots of employment opportunities that basic income is helpful.

Rather, I’m looking forward to a future in which there aren’t jobs available. Like it or not, most entry-level jobs are going to be automated in the next ten to thirty years. The pieces are in place already to automate a lot of jobs – the only reason it hasn’t happened in a lot of industries yet is because the initial investment is high. As developers of a lot of the technologies that make automation possible start lowering the price (and they will), companies will start looking at their balance sheet and start automating a lot of jobs. Tens and even hundreds of millions of jobs. Truck drivers, cabbies, farmers, vegetable pickers, construction workers, and on and on and on. Those jobs will be automated in a few decades.

The time to start thinking about how society will handle that is right now. How exactly do we handle a situation where the vast majority of the population don’t have the skills needed to be employed? There will be jobs left in this future, but there won’t be many and they’ll require a rather strong technical skill set. What about everyone else? What about a situation where people who want to work literally can’t do anything that a machine can’t already do better?

Solution A is to let people starve. I’m not on board with that. Solution B is to force companies to employ people. I’m not really on board with that, either, but that’s closer to the solution. I think simply providing everyone the means to meet their basic needs is the solution, actually, and paying for it via taxation of companies that use widespread automation (in this future, that’s most companies).

Our challenge is going to be finding things for those idle hands to do. I honestly don’t know how to solve that problem, but it seems more humane than letting people starve if they don’t have a Ph. D. in robotics or computer science.

It’s a sticky problem, and there is no wonderful, perfect solution. We have thirty years or so to figure out a solution. Basic income is the best solution I’ve found so far, though I’m definitely open to better ones. It’s not a problem that I know how to solve; it’s just that basic income makes the most sense to me in a world where the vast majority of people don’t have the skills and natural talents necessary to produce things that machines can’t produce more efficiently.

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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