Questions About Bagels, Airline Credit Cards, Mobile Homes, Refinancing, 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. Perfect life, and I’m miserable
2. Refinancing scam?
3. Thoughts on airline credit cards
4. Savings account with high balance
5. Day old doughnuts and bagels
6. Cars and net worth
7. Happier working at home?
8. Mobile homes not frugal?
9. Cryptocurrency opportunity?
10. “Filling up” 401(k)
11. Dave Ramsey and religion
12. Standing desk update

Over the last couple of weeks, winter has turned into spring here, with all of the snow melting away rapidly and temperatures consistently in the sixties and seventies. I’ve switched to wearing my sandals as my primary footwear, away from my much warmer winter shoes, and I’ve gone on a lot of walks in the last few weeks.

I understand sometimes why people like to live in coastal climates where the weather doesn’t vary too much. Where I live, a calendar year will see a temperature range of -20 F to 115 F. There are usually three or four months with temperatures that rarely peek above 30 F, and then the summer months often see temperatures scraping into the triple digits.

I don’t really like either extreme all that much. I prefer days in the seventies or eighties with nights in the fifties. I love spring and autumn.

On with the questions.

Q1: Perfect life, and I’m miserable

Theoretically we are living the dream. We have a 4000 sq. ft. beautiful house with a great view in the back. We have new/newish cars in the driveway. We have three kids and a dog. But I am miserable. Both my husband and I work 60+ hours a week with more than an hour of daily commute for each of us. We get about an hour of overlapping waking time each weekday and maybe two or three on Saturday and that’s if one of us isn’t traveling. I do a lot of evening routine child care. My husband does morning child care but then doesn’t get home until 10 each night.

We had a conversation last Sunday and agreed that it’s not sustainable but we’re both at a loss as to how to start changing things. We can’t afford for either of us to quit. Where do we even start?
– Alexandra

If I were you, there are two things I would look at first.

One, I’d start looking at lifestyle downgrades. Part of the reason that you “can’t” consider career changes is that you’re tied into a rather expensive lifestyle. I shudder to imagine the property taxes and mortgage on that 4000 square foot home and the car payments and insurance on those cars. That adds up to a “requirement” that you stay at your current income level, so you’re basically trading your misery of 60+ hours of work each week and 10+ hours of commuting on top of that for a few hours each day of exhaustion at home where you can’t even fully appreciate it because you’re so worn down. Consider a move to a smaller and less expensive house. Consider driving those cars until they’re worn down (especially if they’re mostly paid off) rather than trading them in quickly.

Two, I’d start looking at a job switch. Stay within your career path, obviously, but start looking for a new job in that path, one that might have lower time demands. Look for one that might be closer to where you live. Look for one that might even pay a little less in exchange for less stress and constant time demand (because if you’re not dead on your feet, you won’t be as prone to spend money for convenience).

Or do both at once: find a less stressful career opportunity in a lower cost of living area and just get out of there.

To upset this apple cart, you’re going to have to make some significant changes, and those are the biggest ones you can make.

Big changes like this can feel impossible, so just break them down into daily pieces. What can you do today in, say, five or ten minutes that would be a step forward in either of these areas? Maybe spend ten minutes contacting a few people in your career path about other employment opportunities. Spend ten minutes browsing the real estate listings.

Also, remember that having a lot of stuff does not make for a “perfect life.” A big house doesn’t mean much if you’re too exhausted to enjoy it. A spouse and some kids don’t mean much if you can’t spend time with them.

Q2: Refinancing scam?

Do you think refinancing student loans is a scam? There is so much hype for them recently and I hear about it everywhere so it makes me suspicious.
– Brian

I don’t think refinancing is a scam. It’s just lending institutions hungry for business.

You have a student loan at 6%. A bank thinks they can make good money lending to you at 5% instead. So, they offer to buy out your 6% student loan with a 5% loan instead. They make money because now your payments (with interest) are going to them instead of your old lender. You save a little by dropping from 6% to 5%. Theoretically, you both win, with the “bottom” being the lowest interest rate at which a bank thinks it can make money.

Right now, I think a bunch of lending institutions think there is money to be made for them in doing that kind of refinancing, which is why there is “hype” around this. There is probably an opportunity out there based on student loans that were given out in the 2010-2016 timeframe. It’s not a scam, just a bunch of hungry lenders who see an opportunity.

Brian had a second question.

Q3: Thoughts on airline credit cards

What are your views on airline credit cards? I currently have the southwest card that I am a fan of but wondering if it’s smart to have or not. I pay $69 for the annual fee. I pretty much put most of my shopping and some bills on the card and pay it off each month in full to rack in points. I get points on my anniversary and also complimentary drink coupons to use during flights. I originally got the card to be able to gain points and fly home free to see my family over the holidays. So I would maybe fly 2-3 times per year. I live closer to my family now so now any flying is for vacationing. I have been able to fly to a new place I’ve never been to for free every year since graduating college. So I understand that if I use the card wisely there are great benefits. I am just sometimes wary about living off of a credit card. What are your thoughts on this?
– Brian

A rewards credit card can be a useful tool if you keep the balance paid off. That’s the trick, though – keeping the balance paid off.

By their very nature, credit cards encourage people to spend with some degree of recklessness. Usually, it’s in the form of not really keeping track of your spending and thus spending more than you should, which leads to a running balance on the card, which results in finance charges going straight to that credit card issuer.

The way to get around that is to be careful with your spending and/or to not use a credit card unless you have enough in the bank to always pay it off in full. Sarah and I use rewards credit cards of various types, but we pay them off in full every month, so it’s not an issue.

Q4: Savings account with high balance

I have a question for you on what to do with your savings account money if a considerable amount. I have about a year and a half worth of expenses saved in my bank account. 50% in CDs, 32% in a savings account, and 18% in checking (Ally provides a higher interest in checking with balances over 15k). I try to keep it close to 15k as much as possible. So the question if this is saving that is needed in just over a year should I be happy with not investing any of it. Or should I take 50% and put it in a conservative fund such as a target retirement fund. say 50% of it (i.e. what is currently in CDs). i feel good that it is in CDs and savings but I know most people would be shocked at how much I have in the bank except maybe a millionaire. I have as much in our ROTH and direct stock purchases. 5x in my 401k. smaller amounts in HSAs and 529 plans. which I do not think about…
– Rory

I don’t think there’s a “best” way to do this. This is really a question that puts the “personal” in personal finance.

How stable is your job? If it’s a rock-solid government job, you can probably get away with a bit smaller emergency fund. If it’s a job with a startup that might go under any day now, you might want to have a really big emergency fund.

How many dependents do you have? The more you have, the bigger your emergency fund should be. If it’s just you, it can be a little smaller as you’re just looking out for yourself.

How is your health? How strong are your job prospects? Where do you live? Where would you live in an emergency? Do you rely on a car to get to work? How’s your health? How far away from your family are you? Do you have a big social circle or a very small one?

All of those questions play a role in how much you should have in your emergency fund. The more risk factors you have, the more you should have set aside for those things.

Q5: Day old doughnuts and bagels

When I get to work at about 3:30 AM the doughnut and bagel shop down the street is rotating out yesterday’s doughnuts and bagels for today’s stuff. They will basically give me all I want of the old stuff for a pittance if I buy new stuff and since I usually buy a dozen for my workplace each morning that means I can get as many free bagels and doughnuts for myself as I want but they’re all day old. I don’t mind them too much but I wonder what else I can do with them.
– Jerry

I actually prefer day old bagels, as they have a bit more crunch to them. I actually don’t like doughnuts that much, but my family doesn’t seem to mind day old doughnuts.

One great way to use old doughnuts is to cook them like French toast, slicing them in half, dipping them in a sweet egg-cinnamon mixture, and frying them. They turn out really well.

If you have a bagel that’s crustier than you would like, put it on a microwaveable plate, put ten or so drops of water on the plate, and microwave it for 30 seconds. This will immediately soften the bagel.

You can also freeze day old bagels. If you flick a few drops of water in with them when you defrost them, the bagel will be pretty soft when it thaws.

If I had a shop near me that offered me dirt cheap day old bagels, it would not be a healthy situation for me.

Q6: Cars and net worth

Do you include the value of your car in your net worth calculations? If so, how do you estimate the value of it?
– Daniel

I do not include the value of our cars in our net worth calculation. When we need to buy a new car, it’s just a straight hit to our net worth.

The reason for this is that the car depreciates so quickly in value. Even if you’re buying a late model used car, there’s still a ton of depreciation in value that occurs over the next several years after buying a car. You lose the vast majority of the car’s value as you use it.

At the same time, there aren’t many life situations where I’m just going to sell off an eight year old used car and go carless. It’s not like I’m going to liquidate that asset in almost any life scenario I can think of.

Those two factors combined are why I don’t include cars in our net worth.

When I calculate net worth, I just use items that (a) has significant value to begin with and (b) retains most of its value and ideally increases in resale value. I include my trading card collection in our net worth calculations (valued at somewhere around $15K), but I don’t include our cars. Our cars will depreciate massively over the next ten years. The trading cards will almost definitely appreciate in value.

Q7: Happier working at home?

Do you think you are happier working at home than in an office environment? Why or why not?
– Stephen

It’s honestly a mixed bag. Working at home has some advantages that bring me happiness and some disadvantages that bring me frustration.

The advantages include no commuting and quite a bit of schedule flexibility. My “commute” is a stroll down the stairs. It is incredibly convenient to do chores or other tasks around the house when I take a break.

The disadvantages include no coworker interaction at all during the day (except for digital communication), the ease of distraction, and the ease of interruption when people aren’t at school or work. Those things can be really challenging. For some people, the ease of distraction makes working from home practically impossible.

I miss coworker camaraderie. I don’t miss office politics. I miss the focused environment. I don’t miss not being able to handle small tasks during breaks. I miss being able to separate work and home life. I don’t miss commutes.

It’s really a mixed bag.

Q8: Mobile homes not frugal?

Did you see this story [Note there is some adult language in that linked video] about mobile homes and how they’re not really frugal? Thoughts?
– Jeremy

I listened to this in the background while doing some early morning tasks and I think the story brings up several good points.

The big “trap” of a mobile home is that most mobile homes require lot rental and as property values go up, so do the rental costs. There’s also the issue that they’re often poorly made – you get what you pay for. Such homes often need repair quite quickly, and thus they go down in value quickly. Almost everything about a mobile home rapidly depreciates because they’re not built to last.

On top of that, mobile homes are often sold with rather oppressive loans, often as much as 15% or more.

A mobile home should only be an option if it’s the only way you can afford to get a roof over your head, but your goal should be to get out of one as soon as possible.

Q9: Cryptocurrency opportunity?

Do you think now is a good time to buy Bitcoin and other cryptocurrencies after the 90% drop in value over the last year?
– Kellen

No. Let me repeat that: no.

Cryptocurrency is a really good idea. Blockchain is a really good idea. Cryptocurrencies as they exist right now, as something that doesn’t have the backing of a national government as a major currency, isn’t worth investing in. It’s a commodity with no physical value. Avoid it.

That doesn’t mean that the idea behind crypto won’t lead to some very worthwhile things over the next several years. It’s a genius idea. It’s just that the translation of that idea into cryptocurrency in its current form isn’t something that anyone other than pure speculators should be putting their money into.

If you want to own a bit to play around with it, go for it, but do it with spare money, not with any money that you’re relying on in any way for your future. This is entertainment spending, not investing.

Q10: “Filling up” 401(k)

The HR person at our office keeps telling people that they should be careful not to “fill up” their 401(k). I tried Googling this and can’t figure out what she’s talking about. I asked her and she told me that if you contribute too much to a 401(k) you’ll be taxed. What is she talking about?
– Nathan

My guess is that she’s talking about the annual contribution limit, which is $19,000. That is the annual contribution limit for a 401(k), 403(b), 457, and TSP. That’s the limit on your contributions; employer contributions can go well over that.

For most people this is a complete non-issue. The average American employee with a 401(k) would have to be contributing something like 30% of their salary to be bumping that limit.

My guess is that your HR person had someone in the company bump up against that limit and had to deal with some paperwork, and is now carefully on guard against it. That’s just my best guess, though.

Q11: Dave Ramsey and religion

I tried reading Dave Ramsey’s book and listening to his radio show but I find the religious overtones overwhelming and off-putting. I think his core advice is solid but I would like to find someone who offers similar advice without the overbearing religious overtones. Suggestions?
– Aiden

Dave Ramsey does wear his religion on his sleeve rather unabashedly. I am able to largely tone out his more zealous moments, but I can understand why some people might not be able to do so.

Honestly, Dave’s advice is pretty standard debt repayment advice. His skill is in the “coaching” aspect, which is where I think he’s really strong. He’s great at “coaching” someone through a situation, nudging them with a brand of “tough love” that feels pretty familiar to anyone who’s ever been in a team sport with a coach. That’s his “secret sauce,” not his actual advice.

If you’re looking for just the key points of his advice without religious overtones, I’d suggest looking into a summary of his book The Total Money Makeover. I wrote a multi-part series covering the details of the book that probably has just what you’re looking for.

I don’t know of anyone who does the Dave Ramsey style of debt reduction coaching without religious overtones in the form of free podcasts, though there is probably someone out there.

Q12: Standing desk update

Looking forward to hearing more updates about your standing desk and how it is working for you. I have considered one at work for my health as sitting isn’t good for you over the long term.
– Shawn

My experience has been mostly positive. The first week or two were pretty rough and I found myself working at the desk about four hours a day on average, with the rest of my work time at a laptop. I started alternating between laptop periods and standing desk periods with a goal of gradually lengthening the standing desk periods and slightly shortening the laptop periods and this seems to have worked well.

As a refresher, a standing desk is just an ordinary desk that’s tall enough so that you can stand in front of it to work rather than sitting at it. It just looks like a tall desk or work table.

The last full work day saw me working at my standing desk for about six hours, all told. This was in four stretches of roughly ninety minutes each, with the first one edging closer to two hours and the last one closer to an hour.

The biggest issue with me is lower back strength. It’s very obvious that this is strengthening my lower back, as I feel the good kind of muscle soreness at the end of a work day in my lower back. It does get fairly uncomfortable after a long standing session, so I generally listen to my back when it’s time to go sit down for the most part.

My goal is to be able to do eight hours in a day at my standing desk over five to six sessions, with breaks in between where I do other things.

It’s worth noting that I don’t just stand at the desk. I often fidget, move back and forth, stand on one foot, lean a little one way or the other, and so on. It’s not just dead standing. I think that dead standing would not be a good choice.

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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