Questions About Tips, L.L. Bean, Disasters, Diets, 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. Finding a mortgage lender
2. Disaster survival bag
3. Spouse won’t tighten belt
4. Healthy and cheap diet concerns
5. Transforming Debt into Wealth?
6. L.L. Bean options
7. How much to retire?
8. Talk me out of it!
9. Cash tips and taxes
10. Books like The Simple Dollar?
11. Fast food after work routine
12. Dealing with the 10% drop

On Saturday, I went to a place that I expected to be a quiet retreat where I could camp out in a side room and get some work done after a long week that involved lots of snow days and child sickness and other unplanned events.

Of course, an old friend happens to wander in, who immediately insists that I go get a drink and chat for a while. She picked up the tab on both of the drinks, but we found ourselves talking about various things for over three hours, largely deleting the time I had set aside for a project. I am absolutely thrilled that I got to see her and have such a good, long conversation with her.

This led me to a very stressful Sunday, which is when I’m typing this. My to-do list for the next six days is long and incredibly intimidating.

It was great to see an old friend, and I don’t regret it for a second. This to-do list, however, is less than great.

Time to get efficient, Trent. Time to get efficient.

Q1: Finding a mortgage lender

My question for the reader mailbox has to do with searching for a mortgage lender. We’ll be buying our first home in the next couple of months and we just don’t know where to start. We’ll be moving to a small town in the Midwest (where there will probably only be a couple of banks/credit unions in town) and I’m not sure how to go about finding the best rate. Our credit scores are 774 and 734 and we plan on putting 20% down. Is there a way to (a) search for a competitive price without physically being in the area we plan to move to and (b) search for a price without having 20 companies run credit checks (and thus further lower our credit score)?
– Maria

Your best approach is to contact specific lenders rather than doing a big batch search. I would strongly encourage you to spend some time investigating specific lenders, starting with ones that operate in the area you’re considering moving to, and find out about their reputation, their customer service, and whether they just repackage and sell off your mortgages to other bigger banks.

So, your first step should be to get a big list of banks and credit unions operating in the area where you’re considering moving and then start investigating them first. What kind of rates do they offer on mortgages? If you can find reviews of them, are they positive or negative (don’t let one or two negative reviews chase you away, though, as there are lots of reasons for that beyond what the review says)?

Once you find a few that seem to match what you’re looking for, call them up individually and ask about their lending process. Do they do manual underwriting? Do they keep the mortgages themselves or repackage them and sell them off? What are their current rates?

At this point, you’ll probably have one or two standouts. Get pre-approval through them and go with the one that seems like the best fit.

Q2: Disaster survival bag

My family were victims of Hurricane Maria. This awful event got me thinking and I want to create a disaster survival backpack to have in the basement of our home. What do you recommend me to have in our backpack?
– Alex

The checklist offered by Ready.gov, which you can see here, really covers it. I think the “Basics” list is really good, which I’m sharing here along with a few of my own notes:

* Water – one gallon of water per person per day for at least three days, for drinking and sanitation (you probably wouldn’t have this in your backpack, but having a few water bottles in there is smart and having a few gallons of water outside of that is also smart)
* Food – at least a three-day supply of non-perishable food (stuff you don’t have to cook and could subsist off of with ease, like nuts and crackers and tuna packets)
* Battery-powered or hand crank radio and a NOAA Weather Radio with tone alert
* Flashlight
* First aid kit
* Extra batteries for the flashlight and radio
* Whistle to signal for help
* Dust mask to help filter contaminated air and plastic sheeting and duct tape to shelter-in-place
* Moist towelettes, garbage bags and plastic ties for personal sanitation (you don’t want to bathe in flood water, trust me)
* Wrench or pliers to turn off utilities
* Manual can opener for food (if your food supplies contains canned goods)
* Local maps (do not trust GPS)
* Cell phone with chargers and a backup battery (this can be a super-cheap pay-as-you-go phone, but make sure you have numbers that you may want to call available on a printed sheet)

You’ll also probably want a change of clothes for everyone in the family and a few very basic toiletries and sanitizing gel.

Q3: Spouse won’t tighten belt

I am a freelancer and with that comes some pay variability. In 2015-2016 I went on a long run of having more work than I could handle and I was able to charge some pretty high rates to boot. We were flush with cash and splurged a little during that time while also paying off a lot of debt. Right now, I’ve still got some work but not as much as I once had and not at the same rates, so my income is down a lot from that peak but still good. The problem is my wife wants to continue to spend like we did in 2016-2017. She did things like buying a season pass for all of us at a ski resort and giving her sister a $5000 wedding gift without even talking to me. We had a big argument about it the other night and she told me that “there was no point in living” without being able to spend like that. We simply can’t afford it and I don’t know what to do.
– Marcus

Your spouse likely feels that the changes in spending from 2016 to now are an attack on her and her choices. My suggestion is to sit down with her and make a budget based on your actual income. Just make a list together of what’s “required” spending and see what’s left over and figure out where that goes, together.

Honestly, this story sounds less to me like a spouse that refuses to buckle down but one who feels like they have a parent/boss telling them what to do. That rarely works well in a marriage.

You need to sit down together and work out a better solution together, and this has to be centered around both of your inputs, not just one person telling the other what to do. If your spouse won’t sit down at all for this process, then you have a problem, but it doesn’t sound like you’ve even tried yet to sit down together and budget as a team.

Q4: Healthy and cheap diet concerns

You can’t make a healthy diet out of just cheap foods. You can’t just live off of rice and beans!
– Adam

Of course you can’t, but you can fill an awful lot of your plate with rice, beans, pasta, and whatever produce is on sale in your grocery flyer. That can make up the vast, vast majority of your diet.

The goal isn’t to eat nothing but rice and beans and cheap produce, but to make those the backbone of your meals, which you can then supplement with smaller amounts of whatever works.

For example, we prepare a lot of Indian dishes in our home. We serve rice with all of them as rice goes wonderfully with sauces and curries.

We just look for things that happen to center around low cost items rather than deciding on a particular expensive item and then trying to jam inexpensive things in alongside it. Rather than saying “what goes good with this $11 cut of meat,” we start by asking “what goes good with rice or with beans or with these super-cheap carrots” and then move from there. If you let the cheap stuff lead, your meal will be far less expensive on average.

Q5: Transforming Debt into Wealth?

I keep hearing about a “Transforming Debt Into Wealth” system on the radio. Can you tell me about it? Is it worthwhile?
– Tammy

“Transforming Debt Into Wealth” is a program promoted by a man named John Cummuta, often on talk radio stations. At its core, the system is extremely similar to most other debt repayment plans, the basics of which I describe here. In fact, the main difference between Cummuta’s plan and any other one out there is the promotional style and the cost of it – “Transforming Debt Into Wealth” is rather expensive.

All debt repayment plans boil down to the same principles – organizing your debts, cutting back on spending, seeing if you can reduce the interest rates on those debts, and then paying them off rapidly. They all offer their own little tweaks that can help motivate you, but the foundation is just that basic debt repayment plan.

Cummuta talks about paying off mortgages in three years, which is possible if you do some extreme cutting and some hardball negotiations on your debts, but that’s true of any debt repayment system.

There’s nothing wrong with it, per se – it’s just a pretty standard program of debt repayment strategies that you can find in lots of other places for free or for minimal cost (depending on the kind of coaching you want). My only real criticism of it is the relative expense, especially since it’s targeting people who are already struggling financially.

Q6: L.L. Bean options

Is L.L. Bean still a good place to buy clothes not that they have ditched their lifetime guarantee?
– Adam

I received several questions about L.L. Bean this week after they announced that they’re ending their lifetime guarantee after, in their words, “a small, but growing number of customers has been interpreting our guarantee well beyond its original intent. Some view it as a lifetime product replacement program, expecting refunds for heavily worn products used over many years. Others seek refunds for products that have been purchased through third parties, such as at yard sales.”

I can understand that perspective, even if it does mean ending a program that set L.L. Bean apart from other clothing lines. However, their replacement program is somewhat limited. “Customers will have one year after purchasing an item to return it, accompanied by proof of purchase. After one year, we will work with our customers to reach a fair solution if a product is defective in any way.”

I think they could have sought out a middle ground, where they track the original owner of the item and allow that person alone a guarantee with the item, then have that policy start in a year or so. To me, that would have been the best “compromise” solution.

So, should a person no longer buy L.L. Bean clothing? I think some of the value came from their guarantee, so I can’t wholeheartedly recommend them any more. They are now on a similar level with a lot of other relatively high quality clothing manufacturers – it was their guarantee and strong return policy that set them apart for me. That doesn’t mean I’d never buy a L.L. Bean item, but that they no longer stand out above the crowd and are now a part of a large crowd of very solid clothing manufacturers.

Q7: How much to retire?

How much money would it take for you and Sarah to retire? Let’s say you were to inherit big money. How much to just stop working?
– David

I would want us to inherit enough to match our current take-home salaries, plus enough to pay for health care costs, plus enough to pay for taxes, and have that only be 2% of the value of our inheritance. That way, we could just invest all of it, withdraw 2% each year, and live off of that, which would be less than the annual growth of the investments, so we’d stay well ahead of inflation.

I’d have to run some numbers on this, but let’s say that I calculated that out to be $100,000 a year. I’d want that to be 2% of our inheritance, so we’d want about $5 million in inheritance to just quit our jobs.

So, yeah, I think $5 million would do it, at least right now.

Q8: Talk me out of it!

I am really really tempted to buy an iPad. I have one of the very first ones and I used it a lot but not quite as much as I might have because it was pretty heavy, about twice as much as it weighs now. I made the mistake of picking one up and playing with one a month ago and now I’m obsessed over getting a new one! But it’s like $600! Talk me out of it!
– Jane

What exactly would you do with that iPad that you can’t already do with the devices you have? What truly different use case do you have that isn’t already met by your phone or by your computer or by your Kindle (or by whatever other devices you have?)

Does the iPad truly do something distinct? If not, there’s absolutely no reason to buy it.

If it does do something distinct, are those distinct things really worth $600 of your hard earned money? If not, there’s absolutely no reason to buy it.

I’ll be the first to admit that an iPad is a cool device, but it honestly doesn’t fill any use case in my life that isn’t met by other devices. It might do a few uses a little better than what I have – for example, setting it up in the kitchen to show a recipe or something – but I have other devices that can actually do that already. Those minor improvements aren’t worth $600.

Q9: Cash tips and taxes

I started working at a restaurant for 20 hours a week. I get paid a low wage plus tips. My boss says I am supposed to report tips on my taxes but how will anyone know what I make in cash tips that I stick in my pocket? I mean with the credit card tips there is a record but with the cash tips, why would I pay taxes on it?
– Kelly

You’d pay taxes on it because the government considers tips to be taxable income. They just require reporting on what amounts to the honor system because it’s basically impossible to really track it.

So, you can just pocket cash tips and not report them because it’s extremely difficult for the IRS to trace it down, but that doesn’t mean it’s not tax evasion. You’re still earning income and not paying taxes on it.

How might the IRS catch you? Well, if they ever get suspicious, they’ll audit you, and if they can determine you’re spending a lot more than you’re reporting, they’ll keep investigating until they have answers. Now, in reality, they probably won’t go after a part-time waitress who mostly receives credit card tips, but the reality is that they might, and by not reporting, you’re leaving that opening.

You’re legally obligated to pay the taxes on your tips. However, it’s hard to easily prove that you’re not doing it, though it can be done. It’s up to you to decide what to do in response to that knowledge.

Q10: Books like The Simple Dollar?

I love your blog and read it daily. My husband prefers books so I wonder, do you guys have a book out that I could buy for him to read? Preferably NOT an online book.
– Alicia

If you want something similar to The Simple Dollar, I’d perhaps first point to my 2010 book The Simple Dollar. While I think that the book is largely good and is actually my own work, I learned some lessons about the publishing industry from that experience. The book was heavily edited and reorganized in ways that I didn’t fully approve of, but there are pieces that I am quite proud of in that book.

This is probably the right place to “soft announce” that I’m writing a different book that I’m intending to self-publish so I can retain more control over the editing process. I’ve been working on it for about three years now and I hope to talk more about it soon. The focus is more on timeless personal finance approaches, in that it will be a valuable read when it’s published as well as twenty years after it’s published. I have zero interest in discussing the hot new investments or the strategy that works right now and doesn’t mean anything in three years.

The book that inspired me the most in my own journey is Your Money or Your Life by Joe Dominguez and Vicki Robin. It really helped me figure out my relationship with money early on in my financial turnaround, and most of the principles have stuck with me.

Q11: Fast food after work routine

Do you have any suggestions for breaking a fast food addiction? I stop for a box of chicken nuggets after work each night because I’m usually famished after work, and I munch them on the way home. It’s expensive as all get out and not particularly good for my health so I tried to cut it out but now I spend the whole drive home absolutely starving both because I really am hungry and because my head is kind of conditioned to think about the drive home as a time to eat nuggets. Ideas?
– Charlie

Stock your freezer with some protein-rich convenience foods that you can microwave as soon as you get home, whatever it is that you like. This is a really good recipe for making your own nuggets that you can freeze, and they’re pretty cheap and definitely healthier than the fast food ones.

You can also (possibly) take a small bag to work and microwave them just before you leave if you find that you really want them on the way home.

I would also suggest exploring other protein-rich foods for this purpose. You don’t have to stick with just chicken nuggets! Consider keeping some nuts in your car, for example, or some beef jerky. Both options are going to be cheaper than a box of nuggets on the way home (and probably healthier, too).

Q12: Dealing with the 10% drop

So I like to check my retirement accounts once a week just to see how things are going. I looked this morning and I had lost $80,000 in a week. I am sitting here having a hard time processing that. Help.
– John

The key thing to remember is that an investment in the stock market is a long term investment that, over the long term, should go up by an average of about 7% or 8% a year. Over the last decade, it’s exceeded that substantially every year, and this is just a correction back down to that average.

Here’s how I look at a stock market drop. First, I go back over the last ten years or so and look at the annual gains. Are they way over 7% each year? If so, then there should be a losing year at some point, and maybe 2018 is that year. It’s hard to predict, but it will eventually happen.

Second, I recognize that the contributions I’m making now are now buying 10% more shares than they were a week ago. A share that cost $100 a week ago now costs $90, so if I invest $1,000, I will now have 11.1 shares, whereas if I bought them a week ago, I would have only bought 10 shares. Shares are on sale right now!

Together, those two thoughts usually undo any negative feelings that I have. In truth, I very rarely check my balances at all. There’s no benefit I can find in doing so, because it’s not really going to cause me to take any action whatsoever. It just causes me to worry with no reason.

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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