Questions About CD Ladders, Pay Schedules, Jewelry Safety, Gift Cards, 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. Changing pay schedules
2. Thoughts on Credit Parent
3. Protecting expensive jewelry
4. Consolidating retirement savings
5. Thoughts on sous vide cooking
6. Really bad 401(k) options
7. Uncertain about gift card
8. Missing Spotify Premium
9. Password suggestions
10. Which credit card first?
11. Rescue dog destroying carpet
12. Is CD laddering back?

Last week, my wife went to visit her sisters and my children went to visit their grandparents, leaving me home alone for several days.

I did my normal work tasks and got some work done in advance. I had a few friends over a couple of times, and visited a few friends. I did some reading. I got a bunch of tasks done on my to-do list.

By the end of the week, though, I missed Sarah. A lot. She’s my best friend and the love of my life. Things are better when she’s here.

I also missed my kids. A lot. I realize that ten years from now our house is going to be this quiet and it’s not something I’m particularly looking forward to.

The last week was enjoyable. I got a lot of little things finished up. Yet, at the same time, I’m very glad it’s over. I’m glad my family is home.

On with your questions.

Q1: Changing pay schedules

I am a new mom switching gears in my career (going from a position with a 2 hour daily commute to one 5 minutes from home). The pay cut will even itself out factoring in commute costs, but I will be going from a biweekly pay schedule to monthly. Any advice for making that change easier? Planning tips?
– Ella

During my professional career, my pay schedule has changed several times. I’ve been biweekly, monthly, twice monthly, and a few other schedules as well over the years.

If you have a good system in place for keeping the bills paid on a biweekly pattern, my suggestion would be to have your new paycheck go directly into a new checking account, then have biweekly (or twice monthly) checks moved automatically from that new checking account to your old one.

So, let’s say your old biweekly check was $1500, and your new monthly check is $3500. You could move to a twice monthly transfer of $1,750 and everything would work out quite nicely, or you could just transfer $1,500 every two weeks (though you’d want to be very careful for the first couple “three paycheck months”) or $750 every week. This would allow you to keep all of your current bill paying systems in place just like they are.

This was the best system for us as we transitioned to mostly receiving monthly income before we had a strong enough financial foundation to keep a healthy buffer in our checking account.

Q2: Thoughts on Credit Parent

What do you know about a firm called Credit Parent (mentioned in the NYT’s column by Ron Lieber) that offers to freeze a minor’s credit with all 3 credit reporting agencies for a small fee. We would like to use it if the firm is reputable.
– Tamia

Tamia is referring to this March 8 article by Ron Lieber that discusses using Credit Parent to freeze their child’s credit reports to avoid any illicit use. This was actually a follow-up to Lieber’s earlier article, You Should Freeze Your Child’s Credit. It’s Not Hard. Here’s How., that got more into the reasons for why you should do this.

It turned out that actually freezing your child’s credit through one of the credit bureaus, Equifax, was harder than they expected. Lieber pointed to Credit Parent as a service where, for $35 per child, they’ll handle freezing your child’s credit at all three credit bureaus.

The thing is, you’re largely just paying Credit Parent to fill out a few online forms for you, and you still have to fill one out to give Credit Parent enough info to make requests for you.

Rather than paying for that service – which seems fine, but it’s mostly just paying for something you can do yourself – you might as well just fill out the forms directly with the credit bureaus.

Here’s the child credit freeze form at Equifax, the child credit freeze form at Experian, and the child credit freeze form at TransUnion.

It’s a minor hassle to get it done. I don’t see any obvious red flags with Credit Parent, so the real choice is paying them $35 to do this or just doing it yourself with the links above.

Q3: Protecting expensive jewelry

I recently received some very nice jewelry as a gift from a relative. An appraisal indicated that the pieces are worth quite a bit of money. I’m not sure what I do with them now–insure them? Safe deposit box? I’m not really excited about taking on a recurring payment in order to be a responsible caretaker of these pieces, so I’m looking to minimize costs.
– Brittany

You have a decision to make, and it’s one I can’t make for you. The safest place to keep that jewelry is in the safe at the bank, but that comes with the annual fee of renting that safe deposit box. You can keep it pretty safe at home, but it’s going to almost definitely be less safe than that bank vault.

My decision process would center around the neighborhood I live in. Is the crime rate low? Are there burglaries with any frequency? Have you ever been broken into? Have there been break-ins near your home? The safer your neighborhood, the more I would feel okay keeping the jewelry at home.

If I did keep it at home, I would hide it in an unorthodox place. There are a lot of places to keep jewelry hidden that are hard to find. You could freeze them in an ice cube tray and leave that tray in your freezer. You could put them in the bottom of a coffee cup in the back of your cupboard. You could literally bury them in a small container in the soil of a potted plant. There are many, many places to hide something small in your home.

You might want to also check your renters insurance or your homeowners insurance to see what theft coverage is like in case it would be stolen if you kept it at home. It’s likely that unless this jewelry is incredibly valuable that your insurance would cover the loss. Unless the piece is a family heirloom, this would be an angle I would definitely investigate.

Q4: Consolidating retirement savings

We just entered retirement at the beginning of 2019. We are consolidating my spouse’s three separate 401k plans into a single IRA account at Vanguard, where she currently has a Total Stock Market Index Fund account, a Total Bond Market index Fund account and a Total international Stock index Fund account. She also has a Money Market account for parking cash short term. Do we need additional mutual fund accounts, to further diversify? Any suggestions or comments.
– Eric

I think that is an extremely diverse portfolio, and I’d leave it just like that.

Within the IRA, I would probably keep all of the money you expect to take out in the next three years in the money market fund, the money you expect to withdraw in the following seven years in the bond fund, and the rest of it split in some fashion between the two stock funds – 50-50 is probably fine. I would withdraw from the money market as needed and rebalance everything in the same fashion annually.

The reason is that I would use the money market for short term savings, the bond fun for intermediate term savings, and the stock funds for long term savings.

Rebalancing would mean that you just move money around so that, again, you have enough for three years in the money market, enough for seven more in the bond fund, and the rest is split 50-50 between the two stock funds. I’d do that annually.

Q5: Thoughts on sous vide cooking

A friend of mine has a water bath system where he puts steaks and other things into Ziploc bags and then puts them in a big water bath and cooks them slowly for hours. This water bath has a little heating device on it that keeps the water at a specific temperature. The steak is mostly cooked when it comes out and then he just sears it on both sides for supper. Is this a good alternative to a slow cooker?
– Adam

I’m almost certain that you’re talking about some kind of sous vide setup. Sous vide is basically what you describe – it’s water bath cooking with a device that carefully controls the temperature of the water. This technique is often used in restaurants for precise temperature control and flexibility. I believe a similar method is also used in hospitals to prevent food borne illness with temperature control.

Sous vide cooking has the advantage of being pretty flexible in terms of timing. I’m not sure about having a steak in one all day long, but I know that a thick steak would have a multi-hour window where it would be perfectly cooked when you pull it out of there and then sear it.

I have an Anova sous vide device that I received as a gift a few years ago and I’ve enjoyed using it. In my experience, though, a slow cooker is more flexible in terms of the variety of things you can easily make cooking them all day long. Rather, it works well for weekend cooking, when you can start something at 11 AM or 3 PM depending on the needs of the recipe and just go on about your business and eat supper flexibly between 5 PM and 7 PM.

It does make many dishes really well, though. I absolutely love the eggs it produces, whether scrambled or not. Steak works really well. Some vegetables work well if you put some butter in with them while cooking – carrots come to mind. You can also make some amazing cheesecake in a jar in a sous vide system – I’m not kidding, it’s truly amazing for the effort involved. In general, anything with a bit of fat in it works fine, and if there isn’t any fat, you’re going to want to add a bit of butter or some other external fat.

I wouldn’t use it to replace a slow cooker, though, as slow cookers are just more versatile. I wouldn’t consider it a necessary kitchen investment at all, though it can be fun to play with and it does a few things really well.

Q6: Really bad 401(k) options

I have been looking at my 401(k) and man the investment options are really bad. All of the investments even the supposed index funds have investment fees of at least 0.6% and most are over 1%. Vanguards funds are all like 0.1%. I have been comparing them. My employer does a match on your first 6% contributions but is it still worth it with investments that bad?
– Terry

I did the back of the envelope math on this and I’m pretty sure that any contributions you make that get a full employer match are still well worth it, even with these terrible investment fees.

To clarify, a 1% fee means that each year, 1% of the value of that investment is eaten up by the investment house. They usually don’t do it all at once – they’ll gobble up a tiny tiny fraction of it each day or week or whatever, depending on their policy.

But let’s say you have $100,000 in an investment that has a 0.1% fee and another $100,000 in another otherwise identical investment that has a 1% fee. Both return, say, 7% a year. After 40 years, the 1% fee investment will be worth about $1.01 million, and the 0.1% fee investment will be worth $1.44 million.

That seems like a huge difference, and it is, but it doesn’t make up for the literal doubling in value you get from snagging that employer match. You’re better off with the 1% investment with the full employer match than the 0.1% investment without the match, even with the terrible fees.

Still, I’d avoid anything with a fee above 1% like the plague. Just don’t put your money in there.

Q7: Uncertain about gift card

I won a $100 gift card to REI in a raffle drawing last month. I was unfamiliar with the store so I looked online and it looks like good but high priced outdoor stuff. Looked around for a place to sell it but it looks like you lose $20 of value everywhere I’ve looked. Suggestions for good use?
– Suzan

Do you ever go camping or hiking? If so, wait until you know you need a particular piece of equipment, then head to REI with your gift card and get it there. While the item might be expensive, you’ll be happy with it. REI usually sells good stuff, though fairly pricy as you noted.

If you are just not an outdoor kind of person, you might want to consider using it to buy gifts for people or, even better, to gift it to someone you know who does use outdoor stuff. Do you know a couple who does outdoor stuff that’s getting married soon? Do you have any family members who enjoy camping or hiking? Save it and gift the card to them, or else use it to buy something they’d like and give them the item as a gift.

If you really want to sell the card, you can turn it into about $86 in Amazon credit pretty quickly at Cardpool.com, which I’ve used in the past to sell gift cards. As you noted, however, it does sell for about $80 in cash.

One of those options should work well for you.

Q8: Missing Spotify Premium

In an effort to cut down on monthly spending I cancelled my Spotify account. I haven’t had it for three weeks but I have found that I really miss it and I can’t find a decent free alternative. Tried to listen to free but I hate the ads and the shuffle play and how I can’t skip anything. Tried listening to Youtube videos and it works okay at my desk but awful on my phone. Suggestions?
– Emily

Honestly, I think the $9.99 a month for Spotify Premium is probably justified for you. It is pretty evident from this email that you actually use Spotify a lot and actually value it. That is something that often isn’t true. Many people subscribe to services like Spotify and rarely use them while forking over the $9.99 a month.

You clearly use it a lot. You clearly value it. Unless your budget is so tight that this would make the difference between eating or paying rent or something, I think it’s justified.

Pay for it by eating at home a couple of nights a month when you might otherwise go out or get delivery. Make some spaghetti and take the rest as leftovers to work or to class or whatever. That will more than pay for the Spotify.

The key to frugality isn’t to deprive yourself of stuff you really value. It’s to cut back on the things you don’t actually value that much and not get into anything new without a lot of thought and research. I don’t think that applies to Spotify – it’s something you value.

Q9: Password suggestions

My son knows a lot about internet security and he says that I should have different passwords everywhere and that I should change them every three months. I am trying to figure out how to practically do this.
– Marcia

There are a couple of ways to do this.

One is to use a password management tool like 1Password that will store all of your passwords for you. It will create complex passwords for each site and all you have to do is copy and paste them over. When you want to update a password, you log onto the site you want to change, have 1Password make a new password for you, and copy it over. It’s pretty easy once you get used to it.

Another strategy is to have a “password system” that you remember in your head. For example, you might choose to have a password that’s the month of your son’s birthday followed by the third letter in the name of the site you’re using followed by your birthday followed by the fourth letter in the name of the site you’re using. So, if your son’s birth month was November and your birthday is the 3rd and you wanted a password for Google, your password might be 11o3g. To make a longer one, use a longer system – maybe you put your father’s middle name at the end so the password is 11o3gJeffrey. That password would be unique at almost every site you visit and all you have to remember is the formula.

Then, just change that formula every three months. Maybe your new formula is your mom’s birth month followed by the first letter in the site followed by the first zip code you remember followed by the fifth letter in the site followed by your sister in law’s name. So your new password might be 6g32135lMary or something like that.

The trick is to have a formula you can always put together using something distinct about the site combined with distinct information from you, and to change that formula occasionally when you reset your passwords.

Q10: Which credit card first?

I got a big raise and promotion at work which results in me bringing home about $115 more per weekly paycheck. I have been slowly paying down credit cards over the past year so I want to kick payback into high gear. I have three cards and I know the default method is to pay them off by interest rate.

However one of the cards has an offer on it where I can cash advance once for 0% interest for 12 months but then that money turns into the cash advance interest rate which is high.

So my thinking is that I do the cash advance and pay off the high interest card. But then I don’t know what card to pay off next.

Advice?
– Jeremy

You haven’t given me enough information to really give you an accurate answer. What really matters is how much debt is on each of those cards and, to a lesser extent, what their interest rates are.

Without knowing that, my best advice to you is to pay off whatever card has the highest interest rate right now. That will probably get you pretty close to the optimum route, though it might not be perfect depending on the interest rates on each of the cards.

So, do the balance transfer, examine the two remaining cards, and put your extra payments toward whichever card has the highest interest rate among them. If you still have that 0% balance transfer when it expires, switch to that one immediately for your extra payments.

Q11: Rescue dog destroying carpet

We have a new rescue dog that’s wonderful most of the time. But whenever we leave, he goes to a spot on the carpet and starts chewing on it until we get home. He has actually ruined a few spots on the carpet with hours of chewing. The Rescue League thinks it is a way to deal with fears of abandonment and I love the dog and feel so bad for him but I don’t want our carpet destroyed. We have tried giving him chew toys and other things and spraying down the carpet but he keeps going back to the spot on the carpet. At this point the carpet probably has to be replaced anyway. What would you do?
– David

If I were in your shoes and I really loved the dog, I would probably just leave the carpet damaged and assume that he would damage replacement carpet, too. You might want to consider replacing it with flooring that he can’t damage, like wood or laminate.

I would focus on working with the dog’s abandonment issues and not sweat the carpet too much. I’m not a dog expert – I know you’re looking for suggestions on how to minimize the cost of all of this – but I would simply try to teach him that you are not pleased with the damaged carpet. You might also want to leave for short periods and return and compliment him if he didn’t damage the carpet. At the same time, I think a doggy like this one needs a lot of love, so I would make sure the dog feels secure and loved.

I probably would keep the carpet for a while until it’s so bad that you don’t want guests around, then replace it with something he can’t chew or destroy. I think at this point that’s probably your minimal financial cost in terms of fixing this situation, but that will stay pretty much the same regardless of whether you keep the dog or not at this point. I’d definitely do what’s best for the dog.

Q12: Is CD laddering back?

In some of your earliest articles before interest rates dropped several years ago you wrote about CD laddering as a strategy. You said that it wasn’t a good move any more after interest rates dropped a lot so I forgot about it but I recently saw that some money managers are recommending CD ladders again. Thoughts?
– Adam

I actually saw the same thing, mainly in this New York Times article by Ann Carrns.

First of all, what is a CD? A CD, or certificate of deposit, is a way of depositing money at a bank. You’re basically giving the bank a certain amount of money and pledging not to withdraw it for a certain period of time. If you don’t touch the money, you’ll earn a very nice interest rate over that period, better than a savings account; the interest rate is set when you deposit the money and is higher with the longer you’re agreeing to leave the money there. If you do have to touch it, you can, but you’ll pay a penalty and often wind up losing a little money on the deal.

What is CD laddering? The idea of a CD ladder is that you go to your bank and buy multiple certificates of deposit from them that expire at different times. This ensures that at least some of your money is about to come out of a CD at any given time, which can be good if you might need to use some of it in the future but you’re not sure when.

So, you might buy a 12 month CD each month, for example, and then in the twelve months following that, you always have a CD maturing so you can get the money out. You might use that money to just buy another 12 month CD, or you might actually have another purpose for that cash.

I personally feel interest rates are too low to really use CD ladders right now. I don’t have any of our money in one. If you start to see interest rates on CDs in the 4-5% range again, then I’ll be interested, but as of right now, it’s not of interest to me. I don’t want to lock up my money for the relatively small gain over what I’d get in a savings account.

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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