Questions About Local Banks, Weight Loss, New City Challenges, 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. IRA contribution and rollover questions
2. Saving for next home
3. Using banking to “buy local”
4. Figuring out where to live
5. Turbo Tax difficulties
6. Retirement and general savings planning
7. Where can I live happily?
8. Why work so hard?
9. Weight loss wardrobe issues
10. New city social changes
11. The Great Courses?
12. Solitaire board game question

The human mind constantly amazes me.

The other day, I was able to recite the entire FFA creed from memory. I was a member of the FFA in high school (I grew up in a rural school where the vast majority of students were in that club) and entered the creed recitation competition as a freshman in high school, when I was… fourteen? I’ve had no reason to even think about it since, and yet here almost twenty five years later, I was able to recite the entire thing.

Yesterday, a person with headphones on was doodling in a notebook and singing a song. I’m pretty sure I haven’t heard the song since college, but the lyrics latched onto something in my head and I found myself singing along with almost the entire song. (This was the song, by the way.)

Yet, there are times when I desperately want to remember things that are actually important and in that moment nothing comes out of my mind. It’s simultaneously frustrating and comical.

On with some questions…

Q1: IRA contribution and rollover questions

if I have a 401k and 457 at work and I max them both out to 36000 per year, can I still contribute to a traditional ira account ? Second question is I have existing money in traditional ira account, how do I go about converting it to a Roth IRA account? It has been sitting in there since 2010 and I have a feeling I will have to pay taxes on them when I do the Roth conversion. Do I just need a CPA or a CFP??? Or both . My husband and I make over the limit per year to contribute to a Roth IRA.
– Maxwell

First of all, when you convert from a traditional IRA to a Roth IRA, you have to pay income tax on the contributions when you convert. In general, the best time to do this is in a year where your income is much lower than normal, so you can pay a low tax rate on that money. If you do it in a “normal” year, it’s probably not going to save you much money unless tax rates grow rapidly over the next few decades (I think they’ll go up, but not substantially; however, that’s just a personal guess).

As for the 401(k), 457, and a traditional IRA, it appears from the IRS FAQ on the subject that you can contribute to all of them at once without any trouble.

It looks to me like you’re in very good shape!

Q2: Saving for next home

My wife and I are saving a down payment for a new home to buy. Our current home has $158,000 left to pay off and is worth around $180,000-189,000 We currently have $23,000 saved up just sitting in a savings account, since this makes around 1% what would be the best place to put this money to grow for eventual purchase of a $300,000 home?
– Kevin

It depends on your timeline. If you’re ten or more years out from buying that home, then investing everything in stocks makes sense. If you’re just a year or two out, the risk of investing in stocks makes no sense and you’re better off in that savings account (because the risk of a 40% drop in a year, like 2008, makes stocks not a good option).

The challenging area is in that five year range, which is where you appear to be. For that range, a balanced approach mixing the two is probably better. The more you have in stocks, the more volatile your annual return will be.

Let’s look at 2000 to 2009, for example. The annual return of the S&P 500 in those years was -9.03%, -11.85%, -21.97%, 28.36%, 10.74%, 4.83%, 15.61%, 5.48%, -36.55%, and 25.94%. In four of those ten years, you would have lost money in the stock market, and thus in those years, you’re better off with money in a savings account. In the other years, the gains were nice. If you’re only going to be in for a few years and you hit a negative year, you’ve got a good chance of losing money over that period, but if you stay in for a long time, you’re probably beating the savings account significantly.

What I would do, assuming you’re somewhere between five and ten years out, is split that money. I’d take most of what I have saved, put it in an index fund like the Vanguard Total Stock Market Index, and let it sit there. You can sign up for an account with Vanguard directly to do this kind of investing. Then, I’d continue to save straight into a savings account. As time goes, the percentage of your savings in the stock market will go down, which means that the volatility of stocks will affect you less and less. Then, when you’re ready to buy (or close to it), sell the stocks and put it back into savings.

Q3: Using banking to “buy local”

I’ve been hearing that if you disagree with some of the things big banks are doing or supporting that you should open accounts with local banks or credit unions. I like the ease and convenience of big banks, such ATMs everywhere, and online banking. I also wonder if big banks offer better interest rates and other deals. But I would also like to show my support by stepping away from big banks. What are your thoughts and advice on this if an individual chooses to step away from using big banks?
– Janice

We’re almost exclusively local bankers. Our main checking and savings are with a local credit union and a small local bank with just a few branches in the area.

Our reasoning is mostly centered around the fact that these two organizations are locally owned and operated. The money that these banks earn stays in the community. Both of those organizations support a ton of local events and employ a ton of people in our town, and even the people owning the organizations are local. They and their employees spend their money locally, too.

That, to me, makes a huge difference in terms of where my money goes. I’d much rather support a business run by local people where the money largely stays local than support a business that sucks all of the profits right out of the community.

I don’t feel as though “big banks” offer much additional convenience, either. Both local organizations offer great online banking and are part of large ATM networks.

Go local!

Q4: Figuring out where to live

As a current law student, this August, during interview season for next summer, I will need to decide where I want to live full-time post-graduation. I have no real ties anywhere particular in the US. My family is on the East Coast and I grew up on the East Coast. But I also went South for college, lived abroad for a year for work, and am now on the West Coast for law school.

So my question is: Given the chance to live anywhere, should I account for cost of living and taxes in my decision? I have family in New York City and NYC is a major legal market. However, NYC is incredibly expensive. My law school is in the Bay Area, another major legal market, and another very expensive area. I went to college in Texas, which had no state income tax. But that seems extreme to pick a location just because of tax purposes (rather than live near family). What do you think?
– Alexa

If you’re single and intend to stay that way, living away from family doesn’t have that much of an impact. Yes, you’ll have to travel to see them, but you’ll be buying one plane ticket, so it’s not that big of a deal, and their support is a little less important.

If you’re married and have children, the equation changes. Being near family allows you to participate in family events and ensure that your children know their family. Traveling to family events is much cheaper – if you’re flying three or four (or more) people across the country for a family event, your cousin’s wedding becomes a very expensive proposition, for example.

Not only that, living near family while you’re raising children can really help with the financial burden. Having family available for occasional babysitting and for potluck dinners and dinner parties and other such things can help a ton with expenses, enabling you to use your money for other things. Yes, you get some of those benefits if you’re single, but they’re amplified if you’ve got a family of your own.

I guess my recommendation to you centers around the other aspects of your life. If you’re single, I’d chase your career for now. If you’re in a long term relationship and children are remotely an option at any point in the foreseeable future, I’d definitely think heavily about family proximity.

Q5: Turbo Tax difficulties

I am considering for the first time in 33 years to file my own taxes(my tax guy retired). I want to use Turbo Tax but admit I have reservations as it seems all so confusing. My BIGGEST QUESTION is if I buy Turbo Tax, I have multiple filers(Mom in nursing home, disabled adult daughter and of course my wife and I) Can I do it with one purchase or would I have to buy the program three times? Seems would get expensive.

I must say I appreciate your review but also, Turbo Tax must have the absolute worst customer service I have ever seen online. I cannot find a number, email or chat to contact them with this question. From all I can see, you must have purchased the program first. Who ever is heading their Customer Relations/CEO needs a knot jerked in them, to me that is unbelievable that someone cannot email, chat or call with a question.
– Hugh

The desktop version of Turbotax allows you to do multiple returns and up to five e-files. This is answered here.

They have a contact form which I have used in the past and received a pretty prompt response. Many businesses use forms like this to avoid giving out their email address to keep spam at bay. They’ll answer general questions about their product with that form pretty efficiently.

Once you have the product, they have a lot of help tools available.

I’ve been very happy with Turbotax in the past and intend to use it again this year.

Q6: Retirement and general savings planning

Have a few questions regarding retirement and general savings. Firstly, I am 31 and have currently served on active duty for 6 years. I contribute 20 percent of my income to the TSP (10% traditional and 10% roth). I would like your thoughts regarding my contribution allocation. I put 70% in the T2050, 20% in the S fund and 10% in the C fund. Do you see any issues with this investment strategy? I got a late start towards investing and only have around $8K in my account at the moment. The military is coming out with the Blended Retirement System program soon and I am considering switching up my strategy a little once the program takes effect (putting 5% in traditional to get the match and 15% in the Roth). Any thoughts on the new Blended Retirement System? To me it sounds like a solid option for someone, like me, not planning on making a 20 year career out of the military. Any insight on issues or red flags you might see in how I am approaching my retirment savings would be greatly appreciated. Another topic I would love your advice on is my personal savings. For two and a half years I have saved vigorously off of E-5 military pay and currently I have about $37K in my savings account, which I primarily intend on using to purchase a home in 4-5 years once I depart the military. Given the VA home loan options, do you think it is wise to continue putting such large chunks of my income in my personal savings, when I could probably get a great home with little to no down payment through the VA home loan program?

I have no debt and would like to put more in retirement savings but I am fearful that I will be cutting my personal savings short. I have few short term savings goals as well, but nothing that is going to “break the bank”. Lastly, I would like to get your thoughts on money anxiety. I ask this because I feel it is something I have been experiencing for the better part of the last few years. I grew up in a household with very little money and in fact joined the military with 23K in debt and a low 500s credit score.

Through frugal approaching, most of which I attribute to your blog, I have cleared all my debt and have seen my credit score rise to 640. The issue I am having is now that I am more financially sound, it seems that any time I spend money, even on essentials like food and gas, I get a depressed feeling. I feel as if any money spent that is not going into either my personal savings or retirement is negatively affecting my future finincial picture. Any ideas, aside from a budget, that you could recommend for dealing with this negative feeling when spending on essentials and non-essentials. Sorry for the long post, but I truely value your opinion and hope to one day have “all my ducks in a row”.
– Dennis

I think your current retirement plan sounds quite good. It’s basically just a slightly more aggressive version of Target Retirement 2050, which seems completely reasonable.

I looked into the Blended Retirement System and it seems like a solid program that gives individual savers more control over their money to be more or less aggressive as they wish. I have no problems with that program, at least from what I can read about it, and your suggested split makes sense, too.

The thing to remember with down payment savings is that it will allow you to have a smaller mortgage than you normally would. That either means you’ll be buying the same house you would without that savings and have smaller mortgage payments for the next 15-30 years or you’ll be able to buy a larger house than you would otherwise consider. That’s where your savings will return some real value to you. It’s up to you as to how valuable that is.

Q7: Where can I live happily?

I live in Ames Iowa which is constantly listed as one of the best cities to live in in America. Yet I hate it here and all I can think about is moving away and getting my family out of here. But here’s my question. If this is one of the best places to live in America where exactly should I go from here?
– Carrie

I live in a rural area near Ames and it’s the nearest city of any significant size. I quite like Ames. It’s far better than other cities I have lived in or near in my past.

I think any city you live in is what you make of it. People can love anywhere they live and people can hate anywhere they live. I also think there is a strong tendency in people to see the grass as being greener on the other side of the fence. They focus on the good things about other areas and the bad things about where they currently live and that causes them to overlook a lot of features.

I’m a firm believer that happiness comes from inside, not outside. A person can be happy or sad no matter where they are. Outside of clinical depression and similar mental health concerns, most people decide whether to be happy or not.

You might want to spend some time looking for things you like about Ames rather than things you hate, and you might also want to think about what you’re looking for elsewhere that you don’t already have. That statement applies to anyone living anywhere who is unhappy with where they’re at.

Q8: Why work so hard?

You write a lot about starting a side gig to earn more money and about how The Simple Dollar was your side gig while working full time. That sounds horrible to me. Why would anyone want to work 80 hours per week? I see the usefulness of earning more but what good is life if 90% of your waking hours where you’re not eating or doing basic life chores is spent working?
– Mark

First of all, I have always deeply enjoyed writing for The Simple Dollar. I love the research and reading that goes into the articles, the conversations with people (where I collect a lot of the personal stories and anecdotes that I use), the brainstorming of topics, the transformation of those topic ideas into an outline, and the writing of the articles. That’s fun for me.

I generally think that side gigs that are not fun for a person are going to end up in failure. I think the same thing (to a large degree) about a person’s main job. If you hate your job, you’re not going to perform well there.

I don’t think it’s good for anyone to work 80-90 hours a week, unless a lot of that work time is actually “play” and it’s fun A lot of what others might consider work that I’ve done in my life are things I view as “play” – I find them quite fun. There were huge swaths of every job I’ve ever had that I personally enjoyed. If I’m spending most of my time doing stuff I enjoy, I don’t mind “working” more than 40 hours per week (provided I’m compensated, of course).

If you’re spending your “work” time in complete misery, you should find another job or career path. Period.

Q9: Weight loss wardrobe issues

I’ve lost about 60 pounds over the last several months Clothes that used to fit me well are really baggy. So I need to buy a new wardrobe which seems expensive as I need lots of professional clothes. Also, should I hold onto old clothes that are too big for me now?
– Nina

You should definitely hang onto your old clothes for a while – a few years at least. You don’t want to find that this weight change isn’t a permanent change and then have to buy yet another new wardrobe.

If I was you, I’d simply replace a piece at a time. Take the one or two items of clothing that you have that are the baggiest and straight-up replace them. Put the baggy items in storage and add the great-fitting new items to your wardrobe. Repeat this regularly as long as you’re losing or holding your weight.

When you shop for “new” clothes, take your time with it. You don’t need to replace immediately or replace everything at once. Look for bargains and clothes sales to do replacements.

Just save your old clothes for a few years.

Q10: New city social changes

I grew up in the Midwest and went to a college near my hometown so I have more or less had the same social circle since I was six. I just started graduate school in Boston and for the first time in my life I don’t know anyone and I’m realizing quickly how lonely it is. A lot of my fellow students are from other countries and prefer to hang out with others from that same country and the only two people in my group that are from the USA seemingly have zero interest in hanging out. I feel really alone but am trying to put up a brave face for people back home. Writing to you about this because you offered some great advice about scholarships and college stuff a few years back. I don’t know what to do.
– Andy

What you should do is find some social events related to things you’re interested in. You live in Boston, so tools like Meetup are chock-full of things to do that match your interests. Go on there and start browsing around what’s available in the Boston area. I went and looked – there are literally hundreds of meetups in Boston and the surrounding areas.

Find a few groups that look interesting, join them, and actually go to their meetups. Go there with the intent of meeting people.

I’m guessing from your email that you’re introverted like me and this sounds a bit intimidating. My advice to you is this. Just go. It’s going to seem a bit scary. That’s okay. When you go, just make it your goal to meet a few people there. If you don’t know what to do, just say hello, introduce yourself, and ask questions. If you don’t know what to say next, ask a question. You’ll find that conversation blooms when people are given prompts about what to talk about. You’ll quickly figure out that there are some people that you click with. Those people are potential friends. Swap social media info with them, then follow up in the next day or two. I usually like to jot down a reason to follow up with people.

Good luck! This is the exact recipe I’d use if I were new to an area. I’d look for philosophy groups, board gaming groups, book clubs, hiking groups, homebrewing groups… I’d find friends, for sure.

Q11: The Great Courses?

Any thoughts on The Great Courses? Good deal? Ripoff?
– Stanley

They’re really good if you put the time into them. That’s the key.

Buying one of the Great Courses packages isn’t going to do much for you if you don’t actually listen to / watch the lectures, take notes, do the suggested reading or practice, and think about the material. If you do that stuff, you’ll get a ton of value; if you buy it and watch / listen to one lecture and then toss it in the corner, it’s not worthwhile.

My suggestion is to borrow a few from your local library and see if they click for you. See if the library can get any others that you’re specifically interested in. There’s also a surprisingly robust secondhand market for these sets, as people like to swap them and sell them once they’re done with them, so check Craigslist or Meetup to see if there are any places where people might do this.

Q12: Solitaire board game question

You talked recently about solitaire board games. How does that work? Is it like playing solitaire with a deck of cards? But don’t board games require at least two people? This seems interesting as a hobby.
– Orrin

You’re on the right track with the idea of playing solitaire with a deck of cards. Klondike solitaire – the solitaire variant most people think of as “solitaire” – is a nice example of a simple solitaire board/card game. They ramp up in complexity to whatever level you desire.

Some games are designed only to be solitaire experiences. Friday is a good example of that. Other games are designed to be played solitaire or against other people, depending on what you want – Agricola is a good example in that category, though a complex one. Any cooperative board game also works as a solo game, like Pandemic.

I generally like the really complex stuff if I have a good window of time for it. I like it when tabletop games feel like they’re making my brain melt and I can actually feel my brain at work. My favorite games as of late in this vein are Liberty or Death and Mage Knight. They’ve both given me a lot of hours of enjoyment as solo games, but they both work with other players, too. Be aware – these games are complex. I would not buy either as your first attempt at a solo game or you’ll just be scratching your head.

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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