Reader Mailbag #69

Each Monday, opens up the reader mailbags and answers ten to twenty simple questions offered up by the readers on personal finance topics and many other things. Got a question? Ask it in the comments. You might also enjoy the archive of earlier reader mailbags.

I’m 22 and I’ll be starting grad school in the fall. I have almost enough cash in the bank to pay tuition for my two year program (including the mandatory summer semesters), but I don’t have any additional cash for housing, food, textbooks, etc. I plan to work a lot of overtime this summer and save what I can from that, and then work as much as possible while I’m in school to help cover expenses. Because of my assets, I can’t currently get student loans, but I will probably become eligible later as my assets decrease, hence my question:

Should I contribute to my Roth IRA these coming two years, or should I keep my earnings as cash and put them toward expenses? If I contribute to the Roth, I’d become eligible for low interest student loans fairly soon. Would it be a better deal to have student debt and have the corresponding amount of money in a Roth with two more years of compound interest, or to graduate debt free?
– Ariel

There really is no “best” answer here, as both paths are good ones to financial security. It’s really a matter of personal preference.

The “no debt” person will clearly argue for avoiding the debt and getting out of college without anything on your plate. That affords you a lot of life and career freedoms that might not be in place otherwise.

The “save for retirement” person can argue quite well for putting money into the Roth IRA, because the younger you are when you invest, the more years you have for compounding to work in your favor.

What would I do? I’d probably sock money into the Roth and take on student loans. The student loans are usually low interest and that interest is tax-deductible, they have flexible repayment that stops if you’re jobless. Sure, you’ll have some debt after college, but you’ll also have a healthy start on retirement, which will be a big advantage down the road.

Questions like this are what financial advisors feast on, because there’s reasonable logic no matter which way you choose. Thus, they can make a good case either way and will focus on whichever one will net them the most commissions.

We are dealing with a huge credit card debt that both me and my husband has piled. I have curbed my indiscriminate spending habits, have built some emergency fund. I also have a regular retirement savings and seperate savings for my kids education.
Unfortunately my husband is struglling with his debt and I am failing to help him with it. It is creating a lot of tension in our family.
As we are Indians I have a sizeable amount of gold jewellery that is lying unused in my locker. Should I sell off a part of it to help my husband and end the tension between us?

– Sudipta

Will selling the jewelry make you resent your husband?

For me, that’s the biggest factor in your story. If it will not, then by all means, find a reputable dealer and unload that gold – it’s an asset, after all, that is probably best used elsewhere right now.

However, if you’ll resent him for “making” you sell the jewelry, don’t do it. That’s the kind of sand in the oil that can destroy the engine of a good marriage over time.

Another key piece: you need to talk about this, just the two of you. Talk about all of the anger and hurt feelings and mistrust and angst about the debt. Get it all out there on the table.

As an older graduate student, I am finding that I am racking up quite a nice debt ($20-30K) in student loan money. I am working p/t while I am in school, so that I finish faster. What do you suggest I do with the debt once I start paying it? Should I try to pay it off in as little time as possible, or to hang onto it and pay it off over more years. I already have a good credit history. But, I have barely any retirement money saved, and will be 40 in a few years. I am wondering if money is better off split between the two, favoring the retirement fund. Thank you.
– Marie

There’s no reason to accelerate payment on student loan debt, particularly if it’s taking away from retirement savings. Student loan debt is usually low interest and has some of the most forgiving policies one can ask for – forbearance if you’re out of work, for example, and the interest is usually tax-deductible.

If you’re nearing 40 and have no retirement savings, I would “split,” as you word it, and start saving for retirement instead of making extra student debt payments. You’ll never again be this young – and that means you’ll never again have this good of an opportunity to maximize the compounding of your retirement savings.

How do you make a resignation letter look respectable, but not ramble? Where is the happy medium?
– Mol

Keep it simple – don’t ramble at all. Most of the reasons for your resignation will be revealed in conversation, not in the letter.

Simply state the date of your planned departure, offer your assistance during the transition, and make a short statement that you valued your time with the company – something like “Thank you for the support and the opportunities that you have provided to me over the last eight years. I have greatly enjoyed my tenure with the company.”

Don’t worry about any other details. If they need to be discussed, they will be discussed in other venues. There’s no need to actually include any of that in a resignation letter. Just keep it short, sweet, and respectful.

What are your feelings on a writer that plagarizes? For example, from Wikipedia for his latest book.
– Elvis

First of all, I do understand how someone can plagiarize in the way described in the article linked above. As I’m writing my second book – a much more complex work than the first one – I find it littered with notes, clippings, and material of all sorts. It’s a lot of work to keep proper attribution straight – and then when you add in an editor who doesn’t understand fully what your notes are referencing, it’s easy for a piece or two to wind up without proper annotation – which seems to be what happened here.

I enjoy works that call upon lots of different sources to create a fresh new conclusion.

That being said, plagiarism is theft, period. If you take someone else’s work without any form of credit (unless they’ve allowed you to do this), you’re stealing from them, no different than if you walked into their garage and took their lawnmower. Material items and intellectual items are both the result of a serious time investment and stealing either one is wholly wrong and should be punished.

As for a writer, I tend heavily towards a “fool me once, shame on you – fool me twice, shame on me” approach. If a writer makes a mistake once and owns up to it, I let it slide, knowing as I do how things like this can happen inadvertently. However, I would then expect extra care from the writer to avoid similar mistakes in the future. If it happened again, though, I would no longer trust the writer, believing that the person has a serious problem.

How many monitors do you have for your main computer that you work on?
– Sandra

I currently have one – a 24″ Dell monitor that suits my current needs.

I am currently considering a second monitor, exactly the same size as the first, to sit over to the right. The big advantage of a second monitor is that it would allow me to see things at a glance that I currently have to either switch windows for or use a keyboard shortcut to see, breaking my train of thought. Having a second screen would allow me to glance quickly without such interruption.

At my previous employer, I had two screens on my desk, and such quick switching was both intuitive and useful for me.

You’ve talked many times about how you follow individual stocks for kicks. Why don’t you jump in and actually clean up on this rebounding market?
– Shane

I largely believe individual stocks are essentially investment gambling and I don’t have an interest in putting a large portion of our money at risk. If I just put a small portion at risk, it would be eaten up by brokerage fees.

So, for now, I sit on the sidelines. My intent, over the long haul, is to learn more by watching and studying, then eventually move to something like the “Black Swan” investment model. Basically, I’d have 80% or so of our money in something really safe, then I’d actively invest with the other 20%, attempting to hit investment home runs with it.

I’ve been doing well on my own lately. For example, in March and April, I was following Spartech closely and I couldn’t figure out for the life of me why it was staying so low. Since then, it’s doubled.

After seven months of unemployment, I finally found a job and I start next week. I’ve completely used up my emergency fund and had to live on my credit card for a while. Should I use my first check to start paying down the credit card or start rebuilding my emergency fund?
– Andy

Rebuild the emergency fund, at least to $1,000 or so, before you focus on knocking down those debts. Just because things are going well at the moment doesn’t mean your car won’t break down next week.

You’re obviously living pretty lean now. Don’t undo that because you have a job – keep sticking with the things that are working for you in your leaner life. Many people have a tendency to let their lives expand to meet their paychecks. If you can avoid that, you’ll be in good shape.

Did you take your kids to see Up? What did you think of it?
– Yan

We had planned a family excursion to see Up the day after Father’s Day and my son was really looking forward to it. Unfortunately, on the day we were planning to see it, my daughter got really ill. After some discussion, my wife and I made the decision that one of us would take our son to see the movie and the other would stay home.

So, my son and I went to see Up last Monday and we both loved it, for drastically different reasons. My son kept talking about the dogs, particularly Dug, and the balloons. I was far more captivated by the relationship between Carl and his wife as well as between Carl and Russell.

It was really a movie that both a three year old and an adult could get something really enjoyable out of – and that’s a pretty high compliment. It’s something that Pixar simply does well.

Why aren’t you on LinkedIn?
– Jeff

Why don’t you comment on FriendFeed?
– Louise

Why are you ignoring my invitation to Facebook?
– Andy

To put it simply, I don’t have time to participate heavily on all of these services. Instead, I tried them all and followed the conversation – and it led me to Twitter. I think Twitter’s the best “social media” service for actually carrying on conversations with like-minded people – and finding new ones. Facebook and LinkedIn (beyond the basic signing-up and getting your info out there) are good for keeping up with people you know – but that doesn’t get me heavily involved over the long term.

FriendFeed basically combines all of these together, so I signed up there as well and created a single feed for my site, Twitter, and anything I put on Facebook. If you , and I occasionally jump into discussions there.

However, . I post links, chat with people, and share interesting stuff on there all the time. It just fits me better.

Got any questions? Ask them in the comments and I’ll use them in future mailbags.

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