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. Hating my career
2. Driving car “into the ground”
3. Buying citrus fruit in bulk
4. Good men’s walking shoes
5. Credit Karma and identity
6. Earning a 10% return
7. Making good times bad
8. Cheap stuff that’s better
9. Super aggressive investing when young?
10. Avoiding bad hotels
11. Why roll over a 401(k)?
12. Good books on self discipline
A long road trip family vacation. Roof damage caused by a storm that will cause a full roof replacement. A suddenly necessary vehicle replacement. A “destination wedding” that our family needs to attend.
2018 has been expensive so far, but thanks to our careful savings in advance for many of these things, it’s been quite tolerable. By simply choosing not to spend every dime we made, a year like this has been easy to handle without disrupting our financial future.
Our family vacation was a bit expensive, but it could have been far worse – we planned ahead carefully for it. Our roof replacement is covered by insurance and our emergency fund. We’ve been saving for a replacement vehicle for a while. We also had enough lead time for the destination wedding that we could properly save for that as well.
In other words, none of those things have disrupted any of our long term financial planning. Yes, we’ve had to tap some savings, but that money was put aside for the exact purposes we’ve used them for.
In other words, in 2018, we’ve seen our financial responsibility in the past really pay off.
On with the questions.
I am 41/F. I work as an accountant for [a well known accounting firm]. I loved accounting in college but now I find it utterly soulless. My job involves providing very similar accounting services for a number of clients that rotate over time. I will be doing this type of work for the foreseeable future unless I either go back for an MBA and move into management or slowly move up into more prestigious accounts. I hate the day in and day out work of not just this job but this whole career path, but I have invested so much money in getting here in college loans and it’s the only high paying career option for me.
I have started working hard toward early retirement and am saving about 45% of my income but I don’t see how I actually retire before age 55 or so. That means fifteen years of hell.
Do you have any advice for me?
Okay, let’s start by asking yourself what you might do for a living if a 50% pay cut were completely acceptable to you. Are you making $80K? What would you do if $40K were livable?
Right now, you’re saving 45% of your income. That means you’re living on 55% of that income. That means that, if needed, you could switch to a job that pays roughly half of what you make now (taxes would be much lighter after that kind of switch). What kind of work in that income range would make you happy? Nonprofit work? A completely different career entirely?
Spend some time thinking about that question, and when you figure out an answer, decide what it would take to make that career switch happen and put that plan into high gear.
You do not have to remain an accountant, especially if you’re able to save almost half your income.
What do you mean by driving a car “into the ground”? You seem to mean “keep driving it until the repair bills get high” but when do you make that call and move on?
That idea means something a little different for almost everyone. For us, we have a trusted mechanic who does most of our maintenance and all of our repair work on our vehicles, and he keeps an eye on upcoming major repairs and maintenance work. I stress that reliability is incredibly important for us and he’s always done a good job for us.
I keep an eye on the Kelley blue book value of our car and when our mechanic tells us that a major repair is imminent, I ask him how much it will cost and if the cost of that repair will exceed the blue book value of the car, then we start looking for a replacement car pretty quickly. We identify what kind of late model used car we’d want to replace our current vehicle with and start searching.
So, for me, “driving it into the ground” means “driving a car until the cost of imminent repairs exceeds the value of the car itself.” This does eventually happen with most cars, but I often get them well over 200,000 miles before we reach this point.
We live about 1/4 mile from a fruit stand that sells bulk citrus fruit mostly to tourists. They give out lots of coupons to locals so we can get big bags of oranges and other things really cheap. We can get a quarter bushel of oranges for $0.49 a pound which is much cheaper than anywhere else.
The catch is you have to buy the fruits in the big bulk bags and a quarter bushel is the smallest option. We literally can’t eat the oranges fast enough before they get nasty.
How can we take advantage of the cheap fruit?
If I were you, I’d just hang onto coupons and buy them when you actually have a need. For example, a big bag of oranges can be a great thing to have around when you have out-of-town guests, or when you’re visiting people out of town. You can also easily make large quantities of orange juice with a blender and a strainer – just put 1 1/2 cups cold water and 2 pounds of peeled oranges in a blender, puree, and strain.
Another option, if you’re looking for gift ideas, is to make candied orange slices or preserved oranges or orange marmalade. A quarter bushel of oranges can make large quantities of all of those things, which can make nice little gifts at an extended family gift exchange or another similar purpose.
If you can’t actually consume enough oranges for your family regularly, I wouldn’t buy the bags regularly. Just because something has a discount doesn’t mean that it’s a frugal choice.
Do you have any recommendations for good men’s walking shoes preferably under $100? I’ve searched online and gone to a few stores looking for walking shoes and all recommendations are super expensive often as much as $200.
If you can find a pair of Brooks Addiction Walker shoes for men under $100, that’s my recommendation. They’re great walking shoes that offer amazing support all over your feet.
In general, the best walking shoes under $100 are made by New Balance. I don’t keep up with all of the models, but I have used walking shoes made by New Balance for many years and they’ve always been wonderful, even for long days walking on pavement. I particularly like the walking shoe from New Balance.
A key thing to remember: shoes wear out. The bottoms of shoes do eventually lose their spring and they become harder and harder on your feet, especially if you do a lot of walking. If you wear a pair for years and then find that they are starting to hurt your feet, it doesn’t mean those shoes are “junk,” it just means they’re wearing out.
In your article in Reader’s Digest in July 2018, you advise to check your credit score for free on Credit Karma so I clicked on the address, and they require Social Security Number to process the information. Is it safe to give it to them? I am very hesitant to provide this info on line.
It’s impossible to get an accurate credit score without sharing your Social Security number (or, in some cases, an Individual Taxpayer Identification Number). Your SSN is the identifier used to gather together all of your credit-related information, which is then used to calculate a score for you.
While Credit Karma does provide a pretty solid credit score estimation number, your credit score is just a single number that’s calculated based on your full credit report. I don’t actually consider knowing your credit score to be all that meaningful or important other than as an indicator of your relative credit health in a single number.
If you’re hesitant to use your SSN for that purpose, then I’d just get a free copy of your full credit report from the federal government, a service they operate at . Go through that report, examine all of the entries, fix everything that’s wrong, and if you have otherwise good credit behavior (you keep your credit card balance low and aren’t late on your bills) your credit score will be good.
Can you please write an article on how to earn 10% on financial products? Because, I miss something: 1.- Historically, the average return is 4%. 2.- Today, with the QEs from central banks (in the US, Europe, Japan, etc), the “free money” and the negative rates in many countries, financial product have a very low return 3.- Because of (2), the only way to make money with money is to invest in your own business or speculate on asset inflatation (real eastate, stocks, etc) which is super risky. Hope you can give more info.
The average annualized total return for the S&P 500 index over the past 90 years is 9.8 percent. That’s where the 10% average annual return number comes from. However, it’s not a good number to rely on because it’s really hard to guess what the American economy will look like going forward. I do like using the 10% number for examples, though, because it’s clear and simple.
Warren Buffett suggests that a much more likely average annual return going forward is 7%. I often use this for realistic examples of planning.
Buffett’s number includes an assumption of low inflation; the S&P 500 number is based on historical inflation, which has been pretty high at times.
There is no magical way to lock in 10% a year in any investment. It doesn’t exist – to get that level of return, you have to take on some significant volatility and risk. There isn’t any legitimate place today where you can put aside $100 and earn a guaranteed $10 return in a year.
Been thinking a lot about your long term thinking article. It seems like you mostly just convinced yourself that having a good time is bad.
I don’t think that a good time that doesn’t cost money is a bad thing – I think it’s a really good thing.
The big change for me in terms of long term thinking was realizing that having an expensive good time has a serious drawback. It’s fun in the short term but it costs me significantly in the long term. I’m flat out going to have more money stress (in the medium term) and have to work longer (in the long term). That expensive good time better be a really good time to be worth it.
My solution to that is to budget for it. I have a “free spending” line item for hobbies and entertainment and spontaneity, from which I don’t begrudge any spending. I know I’m still on pace if I stick to that line item.
If I get outside of that, my fun needs to be cheap or else I know I’m spending money that needs to be used for other goals. I have to figure out how to make up that money in some fashion (which can cause stress and other difficulties) and it’ll probably slow down my big goals. Those aren’t things I want in life.
What store brand or dollar store things have you found that are actually better than the name brand?
For starters, there are a lot of simple food items that I’d rather make myself that cost far less than they do in the store but turn out far better than most of what I’ve bought. Sauerkraut is a great example of this – it’s probably my favorite condiment and I vastly prefer my homemade batches made with a couple heads of cabbage and some salt and about 15 minutes of labor.
For most food items, it really comes down to taste. NPR did a a few years ago about when doctors and chefs buy store brands instead of name brands and, while there was some consensus, a lot of it came down to personal taste.
For household supplies, I usually buy the store brand version for almost everything until it fails me (I switched to name brand trash bags and only recently gave store brand bags a chance again). I do the same for nonperishable foods, too.
The general advice for retirement savings seems to be that you should be aggressive when you’re younger by investing in stocks mostly and then move into things like bonds and cash when you’re in retirement to stabilize things. If you’re starting when you’re very young (I’m 22) should you be hyper aggressive and if so how should you do it?
If I were your age again, I would open a Roth IRA and invest in three index funds: a total stock market index fund, a small cap index fund, and a total international index fund. That’s a pretty aggressive investment without being incredibly risky – you’re putting all of your eggs in a really big set of aggressive baskets rather than one or two of them.
In other words, I’d recommend doing normal retirement moves, but choose investments that are very aggressive. At age 22, you’re going to be sitting on those investments for 30 or 40 years, which means that the many sharp ups and downs of those investments should balance out over that time scale to give you a very nice return.
You should still use the normal retirement vehicles available to you, however. Put money into your 401(k) to get every dime of matching, then if you have more to contribute, contribute to a Roth IRA.
My wife and I planned a weeklong vacation that involved a few nights in hotels. In order to save money I used hotels.com to find some cheaper places to stay. They sounded nice and had nice pictures but when we arrived they were dumps that were under remodeling and one smelled really bad and another one had what looked like blood all over the sink. I left bad reviews for these hotels but how do you avoid these dumps in the first place?
I don’t really trust the star reviews for hotels online. Instead, I go to sites like and read a bunch of the most recent reviews. If there are real issues with the hotel (and not just some malcontent complaining about everything or ranting about a personal problem), they’ll show up in consistent comments in the most recent reviews, at least in my experience.
I tend to trust the most recent reviews rather than the average star rating because hotel ownership can change hands as can the active management of the hotel. If a hotel decides to refurbish, bad ratings from 1-2 years ago can be irrelevant. Similarly, if a hotel is sold or a corner-cutting manager comes in, a hotel can decline pretty quickly.
This isn’t a perfect system. You can always have a bad experience at a well-reviewed hotel, or a great experience at a poorly reviewed hotel. However, this system has worked pretty well for us in terms of finding solid hotels to stay at on road trips.
29/M recently got a new job. During orientation I was signing up for the 401(k) plan and they asked me whether I wanted to roll over my old one. They said I had time to do it so I delayed it. Is this a smart thing to do? Why would someone do this?
There are two big reasons why people do this. First, the 401(k) at their new employer offers better investment options than the 401(k) at their old employer. For example, if all of your options were high-fee mutual funds at your old employer, whereas your new employer has a bunch of low-fee index funds, it might make sense to move your money over.
The other reason is to simplify things. Simply having one account to deal with every time you move or do your taxes or anything else will make things easier to manage.
For me, the second reason is pretty minor. What matters more is the first reason – is your new 401(k) better than your old one? Sit down and do a comparison of similar investments in your old 401(k) and your new one and see which has lower fees and better returns. If it’s in your new 401(k), roll over your money. If it’s not, leave your old 401(k) alone.
I am looking for books on financial discipline. I understand what I need to do to succeed financially but the discipline to actually do it is lacking. I tend to talk myself out of things I should be doing all the time. And then I find myself spending money or eating food or goofing off instead of taking care of things. Hate this about myself and looking for help.
My favorite recent book on personal discipline is by Benjamin Hardy. It mostly focuses on the idea that most people fail at self-discipline because they don’t bother to adjust their environment to encourage self-discipline. Rather, they surround themselves with people and situations that encourage them to make poor choices.
Another good option is by Roy Baumeister and John Tierney. I think this is actually a good pairing for the first book, because this one focuses a lot on internal elements of willpower and self-discipline, whereas the first book looks heavily at external elements.
Another good read that’s somewhat on the same subject – kind of a mix of a leadership book and a self-discipline book – is by Jocko Willink. While this isn’t strictly about self-discipline, it does put self-discipline in a powerful context in terms of how it affects the people around you. If you’re self-disciplined, it has a profound impact on the other people in your life – friends, family, coworkers, and so on – and that effect often becomes reciprocal.
All three of those books are excellent reads.
Got any questions? The best way to ask is to 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.