Questions About Vermont, Towels, Roth 401(k)s, Library Science, 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. Second job or frugal living?
2. Move to Vermont?
3. TPD and Social Security
4. Interest calculations
5. Online car auctions
6. Uses for old towels?
7. Long shift brown bagging
8. Regular versus Roth 401(k)
9. Handling unethical coworker
10. Your Money or Your Life
11. Child’s career as a librarian
12. Trade war?

As I write this, I’m sitting under a giant shade tree watching my children play in a swimming pool. I have a cool drink sitting next to me. I’m stretched out in comfortable clothes on a sunny June day that’s not overly hot. I feel good. I feel happy.

Let’s do this. On with the questions.

Q1: Second job or frugal living?

For the last 3-4 years my job has been handing out tons of overtime hours and I’ve been gobbling them up. Now my job is back down to 40 hours a week and will be for a while. I was doing good getting the house paid off and I want to keep it going. Am I better off getting a part time job or spending that time cranking down on my expenditures?
– Daniel

For the moment, I would crank down on the expenditures. Block off a certain amount of time a week (say, 10-20 hours) to take care of a bunch of things that will save you money over the long haul, like properly air sealing your home and making a bunch of meals for the freezer and replacing anything in your home that isn’t energy efficient and doing any minor home repairs that need doing and doing full maintenance on your home and car(s). The return on a lot of that stuff is really good, but it’s stuff that often falls through the cracks in a busy life.

Once you’ve caught up on all of that stuff and exhausted everything you can think of, then consider getting a part time job if the overtime hours at work haven’t come back online yet. It’s very possible that in a few months your workplace is humming again and there is plenty of overtime available for you. If not, get a different job.

Just don’t waste that extra time. Don’t get into a habit of watching Sportscenter every day or browsing the web for a couple hours each day. Do something with that time.

Q2: Move to Vermont?

Want to move to Vermont with us? Low cost of living, pretty good state tax rates, nice living, and $10,000 for you to get set up!
– Kevin

If I were in the market for a big move, I would consider this type of arrangement. I like living in northern states because I like the alternation of seasons and some really cold snowy periods in the winter, which Vermont has, just like Iowa. I’ve visited New England and like the area.

Honestly, if I were at a different point in life, it would be fairly tempting, as I can essentially work from anywhere. The biggest pull for us to stay here in Iowa is the social ties, to tell the truth. I can work anywhere and my wife can easily find work virtually anywhere. It’s mostly just the social ties that keep us in place.

However, if you work remotely, like a wide variety of seasonal weather, and are looking for a nice area to live with a low cost of living, Vermont is well worth considering. (Honestly, Iowa is, too.)

Q3: TPD and Social Security

My enquiry is whether to hire financial planner regarding a TPD payment and I am on a disability pension. How does it affect my social security benefits.
– Bill

I would probably contact an accountant, not because of an effect on your Social Security (I don’t believe there should be any), but because of taxes. You’re in an area where taxes can be fairly tricky and you want to make absolutely sure that if you are liable for any taxes, you are keeping out enough money to cover them.

I’m not sure a financial planner is necessary. A stop at a local H&R Block office should be adequate to figure out an issue like this at very little cost.

I don’t believe your Social Security benefits will be affected (given the very few details here).

Q4: Interest calculations

Can you calculate the correct interest rate owing in a default judgment on $3399.14 at 24%?
– Chris

It depends on how the interest is compounded, which means how often interest on the debt is calculated and added to the balance.

The easiest method is if the interest is compounded yearly. In that case, you simply multiply the balance by the interest rate. You’d just multiply $3,399.14 by 0.24 and you’d get $815.79. Pretty easy!

However, many debts are compounded differently. One method is to compound monthly, which means that you calculate the interest for the first month, add it to the balance, then use this new balance to calculate the interest for the next month, and so on. In that case, the monthly interest rate is 2% (24% per year divided by 12 months in a year, giving 2% per month).

So, you’d multiply $3,399.14 by 0.02 to get $67.98. You’d then add that to the original $3,399.14 balance, giving you a new balance of $3,467.12. That’s the first month. You’d then multiply $3,467.12 by 0.02 to get $69.34, and then you’d add $69.34 to $3,465.12 to get $3,534.46. That’s the second month. You repeat that process through twelve months. I ran the numbers here and your total interest rate if it’s compounded monthly is $911.79. (Notice how this is almost $100 more than compounded annually.)

So, before you can calculate this out for certain – and this is the kind of calculation you want to get right – ask what the compounding frequency is.

Q5: Online car auctions

Have you thought of maybe doing an article on purchasing a car through an online car auction? I was looking for a cheap car and bid $300 each, on a local online site, for 2 different cars. The first car I was outbid however I did get the second one which is a Honda CRV which had been a repo car which had been abandoned at a local apartment complex. I paid cash for it and it has saved me lots of $$$ as my last car I made payments on. I do not live in an area with public transportation. I did have to have it fixed which I had done at a local small mechanic shop. I am LOVING driving it.
– Tammy

That’s a great buy, Tammy, and I’m glad you’re able to have found a good car for the price. However, in my experience with public car auctions, you got quite lucky. Most of the time, cars in public auctions tend to be junk, and unless there’s some kind of inspection or certification provided, you have little hope that it’ll last long at all.

I tend to trust the advice of Popular Mechanics on buying a car at auction, which is to basically avoid public auctions unless you’re a skilled mechanic.

I do know some people who buy cars at such auctions for the purpose of dismantling them and selling parts and scrapping the rest, but, again, those people fall into the “mechanic” department. They know how to extract a few hundred dollars in value from a cheaply-bought abandoned car.

Q6: Uses for old towels?

What do you do with worn out towels? We use them for garage rags. Any other good use for them?
– Dan

One of my closest friends will cut up old towels (when they’re no longer as plush as they once were) and use them for drying rags and general kitchen rags. They don’t even bother to hem them, arguing that when they start to fray badly, they’ll just toss them. I’m not sure how many uses they get out of them, but they definitely last for a while.

There was a woman who lived near me when I was a kid who took about 20 old towels and sewed them together to make a picnic blanket. She kept it in a picnic basket all the time. It was kind of strange looking, but really soft to sit on.

We used to use old towels as a temporary “changing table” for our children. We kept an old bath towel in our diaper bag and would lay it out almost anywhere we were at and used it to change diapers.

The “rag bag” is the obvious choice for old towels, but there are more uses than just cleaning up messes!

Q7: Long shift brown bagging

I usually take my lunch to work and on days when I don’t I just eat some Pringles or whatever I can scrounge up but I am stuck when it comes to long days where I work 14 hours and have two meal breaks? There’s a Taco Bell across the street and that’s what a lot of us do.
– Arne

I used to have a really awkward schedule of three 12 hours days a week. My solution on those days was to simply bring a “double lunch” in a big bag. I’d use an ice pack to keep it cold and put 3-4 sandwiches and a bunch of other odds and ends in there. I’d eat about half during my noon break and the other half during my 5 o’clock break.

Use a lunch bag like this one and an ice pack like this one. Pack two entire lunches in the same bag. Eat half of it during your first break. Eat the rest during your second break. That’s all you need to do.

The initial cost of a bag like that and a few ice packs might be $20, but every day you fill up that bag and take it, you’re saving money versus a Taco Bell run, and it won’t take long for it to really add up.

Q8: Regular versus Roth 401(k)

My workplace allows me to contribute to either a Roth 401(k) or a regular 401(k) though their matching goes into the regular regardless of what I choose. Which one is the better deal for me? I tried to read up on this on other websites but it was really hard to read and figure out the difference.
– James

When you put money into a regular 401(k), the money comes out of your pay before taxes are calculated. This means that, say, a $100 contribution to a regular 401(k) will only impact your take-home pay by $80 or so. However, when you withdraw money from a regular 401(k) in retirement, you have to pay taxes on everything you withdraw.

When you put money into a Roth 401(k), the money comes out of your pay after taxes are calculated. This means that a $100 contribution will mean a $100 drop in your paycheck. However, when you withdraw money from a Roth 401(k) in retirement, you’ll owe no taxes on any of it.

I generally lean toward Roth contributions on the whole. I think that there’s more of an overall advantage in paying taxes now rather than later, for a number of reasons. I believe that tax rates will eventually go up, for starters, and I think that the peace of mind of having minimal tax worries in retirement is a valuable thing. If I were you, I’d contribute to the Roth.

Q9: Handling unethical coworker

I’m 28 years old, single, with a solid start to an accounting career. I work as a CPA for [a well known accounting firm] though I hope to be independent in the future.

I recently discovered that an individual in my office is taking fairly large quantities of office supplies. I’m not sure what they’re doing with the supplies. I assume they’re being resold. It’s a clever scheme that seems to have been going on for a while. I have zero doubt about it and have clear cut evidence that it is happening.

The two people I know are involved are senior to me and close friends with my own supervisor who I do not think is involved.

I am not sure what to do. Easy thing is to turn a blind eye to it. The “right” thing is to report it but there’s a good chance my career gets crushed in the process.

What do I do?
– Mark

My gut feeling is to report the theft as anonymously as possible. If your workplace has any sort of mechanism for anonymous whistleblowing, use that route. Based on some message board investigation I did into your company, I believe there is an anonymous whistleblowing mechanism. If there is no such route, I would gather as much evidence as I have that something is really amiss with the office supplies, make sure that what you have is clear cut, wait until a time where your boss doesn’t have a ton on his or her plate, and have a conversation with your boss. If at all possible, do not point fingers at individuals. Simply make the case that there are office supplies disappearing and let your boss decide how to deal with it – that’s what your boss is there for.

You’ve outlined the issues with being a whistleblower quite well. If there was no personal threat to you, then the obvious thing to do is to report the wrongdoing. However, there is a threat to you – this runs a serious risk of damaging your career. You could suffer consequences at work, damage your relationships, lose your job, or even face some level of industry blacklisting.

No matter what you do, do not talk about this with anyone else other than your direct supervisor or with an appropriate human resources person. No one else should hear about it. You should be as far away from rumors about this issue as possible.

Q10: Your Money or Your Life

I noticed that there is a new version of Your Money or Your Life out! It has a bright yellow cover! Is there anything new in the new edition that would make it worth picking up?
– Mandy

If you already own an earlier edition of Your Money or Your Life, there’s probably no reason to pick up the new one. It’s one of those books that’s fairly “timeless” in its advice. Very little of the actual advice has changed since the initial publication.

Having said that, if you’ve never read the book, the latest one is the one worth reading. The biggest change I noted throughout the book is a bit of a realization that today everyone needs to be a bit entrepreneurial in how they approach their professional life. Take on side gigs and consulting gigs, because if you’re skilled, those gigs are out there. Start a side business if you can. This was an angle that was less prevalent in earlier editions.

In terms of philosophy, the book is largely unchanged in the new edition. In terms of the few sections that deal with specific frugal tactics, some of those seem to be updated.

It’s really the same great book it’s always been.

Q11: Child’s career as a librarian

My daughter is 17 years old and really wants to become a librarian. She has worked as a part time helper at the local library for several years, at first unpaid, but now receiving minimum wage and some little perks. She loves it and wants to be a librarian. I have tried to persuade her to follow a path that won’t end up being a part time minimum wage job but she won’t listen.
– Meggie

First of all, if your daughter is really passionate about this, I wouldn’t discourage her from doing it. Instead, I would encourage her to work extremely hard to get into the field with the best resume possible. She’s obviously passionate about the work and has a good head start on the actual work itself and what needs to be done. If she’s sure about this, I would not discourage her.

I spoke to a friend of mine who is a librarian and she had several pieces of advice. First of all, she’d strongly encourage your daughter to get a Masters of Library Science instead of a bachelors degree. She would also encourage your daughter to work at libraries to build as much experience as possible while going through her studies. My friend also encourages your daughter to try to be fully in charge of a summer program of some kind if the library will allow this and then run it for a few years during the summers while going through school. My friend also suggested that your daughter consider taking at least some classes in marketing, because marketing is a big part of a librarian’s job – they’re actively marketing the library all the time. My friend says to not worry about the pay long term as long as your daughter is willing to relocate for a good position – there are always jobs for people with great resumes and MLS degrees.

I basically agree with my friend. I think you’re better off encouraging your daughter to be a great librarian rather than being mediocre at a somewhat higher paying field that she doesn’t care about.

Q12: Trade war?

Are you worried about the probable trade war between the US and many other countries? How will it affect finances?
– Darren

I don’t talk about politics on The Simple Dollar. However, I will talk about the impact of a trade war, if one were to happen, on the pocketbooks of individual Americans.

A trade war is basically any situation where two (or more) nations try to damage their trade with each other by imposing tariffs (basically, tariffs are taxes on goods that go from one nation to another) or sanctions on each other.

If the United States were to get into a trade war with some of its trading partners, most Americans would primarily see an impact in terms of higher prices at the store on all kinds of things and even on things like their energy bill. Most of the time, tariffs and sanctions are applied to basic goods, the kinds of things that are used to make other products, like steel or aluminum. Those items are then used to make all kinds of things, from underground pipes to construction equipment, from automobiles to silverware.

If the price of the basic commodities like steel and aluminum go up (thanks to tariffs and sanctions), then the price of the goods that are made from those things will go up. This will mean higher prices for you in the store on virtually everything, because higher steel prices will mean higher transportation prices. A big increase in the price of basic goods ripples out through the economy in all kinds of ways, but in the end, it’s mostly passed along to the consumer.

So, why get into a trade war? How does it help the average American? In theory, the purpose of a trade war is to convince the other nation to enter into a more favorable trade agreement. So, in the short term, prices go up, but, assuming that the United States wins any resultant trade war, the result should be a more favorable trade arrangement than existed in the first place, which would help prices.

Will that happen? Is this a good idea? Well… that’s where we start getting into politics, and I’m far from a political prognosticator. The thing you need to know is this: a trade war likely means some higher prices at the store and on your bills, but victory in a trade war likely means lower prices on a variety of things.

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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