Reader Mailbag #94

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 24 years old. If you combine all my accounts..checking, savings, investments, etc, I have about $20,000 to my name. $25,000 is about what I make in a year. I have absolutely no debt, not even a car payment. I want to buy a house at some point, but due to some other things that need to fall into place, this will be at least a year off. Other than that, no (expected) large expenses.

Before the rates fell, most of my savings was in CDs. Now that 5% CDs are a thing of the past, I’ve been investing a lot of my savings in Vanguard mutual funds. Here’s the question: right now, literally half my money is in mutual funds. They’re some of the lowest-risk funds they had, but still, is that…insane? How much scratch should I put in a regular ol’ savings account and how much should I invest? I just hate my money sitting there not making interest.

It seems that your primary goal for this saving is for a home purchase that is more than a year off at the bare minimum. If that’s the case, I see no problem having some of your money in mutual funds.

If I were you, I would probably treat about three months’ worth of that money as an emergency fund and keep it in cash in a savings account somewhere where I could easily reach it. After that, I would view the rest as savings toward that house goal.

Given that the goal is nebulous and at least a year off – and it sounds like much more than that – I’d probably have some significant portion of it in some investment that had more risk than cash, because cash isn’t earning much right now. What you’re doing right now sounds completely reasonable.

Of course, when your plans begin to become clear, I’d get that money into cash pretty quickly so that you have a strong sense of where you’re at and you’re not at risk due to a big unexpected event (like another 9/11) which could devastate your savings and plans.

Recently, I’ve decided to start a video blog about personal finance, but I don’t know what I would need to start. Any ideas?
– Jim

The most basic tool would be a simple webcam that you could attach to the top of your computer monitor. I would start with a very inexpensive model, like the , or a solid Logitech web cam that you find at an after-Christmas sale. This shouldn’t set you back more than $25 or so.

Use that to figure out if you really have what it takes to do such videos. It’s really not easy, to tell the truth – it takes a ton of practice and careful development to make videos people want to see.

If you find that it’s working for you and want to make videos on the go, look at a or something similar. That’s what I have for such uses.

My brother has finally turned his life around after several years “in the wilderness.” I really want to help him out, but my brother won’t accept any form of charity. Do you have any suggestions on what I can do?
– Callie

Sit your brother down. Tell him straight to his face that you’re really proud of him. Give him a big hug. Then tell him that you know he does not want any charitable help, but that you truly do want to help him out as he turns his life around. Offer up a few suggestions of how you could help. Make it very clear that this is a pure gift and that you want nothing in return – you’re doing it because you’re so happy to have him back after his “wilderness years.”

If he turns this down, so be it. My guess is that he’ll probably think it over some and has at least some chance of accepting it. Even if he does not, though, remember that you have already given him a huge boost simply by telling him how proud you are of him and how glad you are to have him in your life. That can mean a lot to a person.

Don’t force a gift on him. He may have a lot to prove to himself yet, let alone to anyone else. Let him do it, but be there for him if he needs it. Some life crises are very hard to recover from.

It is not racist to observe that a particular community has a particular ethnic makeup. Nor is it racist to observe that that community has certain cultural characteristics that you’re looking for. Where you’re edging toward racism is in asserting that the one is the cause of the other.

For example, if people of Scandinavian descent are inherently less inclined to crime and violence, that implies that people of certain other ethnicities are inherently more inclined to crime and violence. Which ethnicities are those? Actually, don’t answer that.
– Johanna

Saying that one ethnic group has a positive trait is not an implication that another ethnic group has a negative trait. If you have twenty ethnic groups and one of them has a propensity towards low incidences of violent crime, that doesn’t mean another group has a much higher propensity towards violent crime. If you remove that low propensity group, the average crime rate goes up a little, but that has nothing to do with any specific ethnic group at all. It just means a positive has been eliminated.

Some ethnic groups do have a propensity towards lower crime rates. If a particular culture puts a strong value on courtesy to others, law and order, and so on, the people in that culture are going to be ingrained all throughout their lives to be more anti-crime than people in another culture who receive different cultural messages. Another culture may have different messages that they value that promote different things as a primary focus – perhaps they promote entrepreneurship, stewardship of resources, artistic endeavors, tight community bonds, or pursuit of pleasure as central cultural ideas. An ethnic group that promotes stewardship of resources won’t necessarily promote resistance to crime as strongly as another group – does that make one group better than another? I don’t think so. In fact, I think there’s a lot of value in people from each of those ethnicities spending time together and bouncing ideas off of each other. And that’s why diversity is awesome.

Obviously, there will still be individuals who commit crime on an individual basis – we’re looking at an aggregate of a large number of people. There are many factors at work when it comes to social behaviors – socioeconomic conditions, to name just one. However, ethnicity and culture are another factor, too.

Racism comes from the idea that one set of ethnic elements is so inherently superior to the other that people from one ethnic group are inherently superior to people from another ethnic group. Simply stating that one ethnic group has a propensity towards low crime doesn’t make any sort of judgment call against any other ethnic group and doesn’t imply any sort of general superiority.

I prefer to live in an area with a low crime rate. If there is an ethnic group with a low propensity towards crime, I’ll bet that you’ll find a higher proportion of that ethnic group in the area with low crime. I prefer to live in the Midwest – preferably in Iowa – so my children can have access to their grandparents and there’s a diversity in the seasonal weather, which I really enjoy. There are some ethnic groups that have higher proportions in the Midwest and others that have lower proportions. If there are ethnic groups that have a tendency towards lower crime and a tendency to inhabit the upper Midwest, I’m likely to wind up living near them.

Perhaps you prefer to live in an area with a strong artistic community. I’d love to visit it to see some of the art festivals and the street art going on there. Maybe you’d like to come to where I live, sit on the front porch, and strike up ten conversations in an hour with people walking by, and perhaps get up and stroll down the street to someone else’s house without worrying about dead-bolting your door.

They’re both cool. And I think they’re both needed in a healthy, vibrant world.

Ethnic demographics can say a lot about a community without being racist in the least. It’ll just tell you what kind of interesting stuff you might find there and what kinds of social norms you might expect. Racism only comes into the picture when you start using such definitions as a way of stating that one group is superior to another group.

I prefer to live in a small community in northern Iowa with a low crime rate. Those two factors likely mean I’ll be living in a community with a lot of people of Scandanavian heritage – just look at the demographics of small towns in northern Iowa with a low crime rate. Will I find vibrant artistic communities, intense religious and spiritual diversity, or passionate political debates? I very well might, but probably not nearly as much as I would if I lived elsewhere (say, the south Bronx). That’s a tradeoff that I choose, for better or worse. You might choose differently, and that’s cool by me.

The sad part about talking about real issues like this – issues that affect all of our lives – is that some people will always find something that makes them believe that it’s all racist, and they accuse people of being racist. False attacks of racism are just as pernicious as real racism – they both seek to bring good, well-meaning people down.

When is a good age to teach children the idea of helping those children that are less fortunate? I was thinking of taking my four year old daughter with me to buy toys for “Toys for Tots” or “Angel Tree Ministries”, but then I thought she might question why.
– Cindy

Shouldn’t you want her to question why? Just let her know that there are a lot of people out there who are less fortunate than her and that you can spend some of your good fortune to make their day a bit better.

We gave our son a Money Savvy Pig for his fourth birthday. It includes a slot for money that is intended to be donated and now, at the two month mark, the slot has about seven or eight dollars in it. He’s intending to save it until next Christmas, then give all of the money at once to Jump for Joel.

We’ve talked quite often about how there are children in the world who don’t have money for toys and, in fact, often don’t have money for food or water. I don’t know how much he understands of it, but it’s something that we’re already talking about.

Because of the increasing volatility of most careers, I’ve been encouraging my son to think seriously about taking up a trade after high school, like becoming an electrician or a plumber. He’d be able to go to trade school and get quickly into the workforce with a set of skills that will always be in demand and he’d also have a lot of potential of becoming his own boss down the road.

A lot of my family has been telling me – in front of my son, even – how horrible this advice is. What do you think?
– Elliott

I actually think it’s very good advice, particularly if your son is not a student from the top 5% or so of the academic heap.

I know many people in such trades who are doing quite well for themselves. My wife’s first cousin is a very successful electrician, for one, and I have a cousin who has built a very good business from his carpentry skills. Both of them make quite a lot of money each year and have never faced a student loan bill or a skill set that’s out of date in their lives.

Don’t let the prevailing wisdom that your child has to go to college guide you. Yes, it can be a great experience. Yes, a lot of people cherish their college memories. Yes, many careers basically require a B.A. or a B.S.

Those things don’t mean that it’s a path for everyone, though. It doesn’t have to be a path for your son. The trades are a perfectly viable path for anyone.

Is there a good rule of thumb for how big your emergency fund should be? What do you use?
– Sal

My general rule of thumb for emergency funds is pretty simple. I usually tell people to have three months’ worth of living expenses on hand in cash, an additional month for each dependent they have. So, if you’re married, you should have four months of living expenses for the household. If you have two kids, shoot for six months.

In truth, though, human psychology plays a big role in how big your emergency fund should be. If you’re a person who finds yourself worrying a lot about bad scenarios, you should have more than that, because it will help you sleep better at night.

Don’t get caught up in the idea that money sitting in a savings account or in CDs is somehow a bad investment. It’s not. It’s a very stable investment that earns a steady but small return, which is exactly what you need for money you might need to completely rely on. Other investments might earn more, but they also have the risk of losing a lot – and the time when you might most need your emergency fund is when the economy is down, and that’s often when many investments are down as well.

Linking and referring between personal finance blogs seems to be very common. Obviously, when you link from your site to another, there is an implicit endorsement of the other blog and its contents. Recently a very successful PF blogger I read suggesting owning a gun as a “cheap home security option”. That advice really horrified me for a number of reasons and I will now not return to read again.

Totally leaving aside any sort of gun control debate – just imagine it was any sort of issue about which you felt strongly – how do you make the decision that you are willing to link to another blog? Do you feel it necessary to check up on the blog to make sure you’re still endorsing content in which you believe? Have you ever had to make a call when you would not link to another blog any more?

I’m interested to see you take on this.
– Marcella

For starters, I only link to blogs that are currently in my – in other words, the blogs I’m currently reading. There’s usually about 60 blogs in there, with probably five rotating in and five rotating out in a given week. I tend to discover new blogs through links from the blogs I currently read and respect.

What makes me stop reading a blog? I stop reading if the blog stops making me think over a long period of time. So, for example, the blog you mention above probably wouldn’t leave my reader any time soon, even though I don’t agree with the statement. Such a statement would make me step back and think a little, and that’s what a good blog should do.

I also stop reading if the amount of posting of the blog drastically goes up – from a post a day to ten posts a day or something – or if the topic in general drastically changes. I stop reading if a blogger is obviously becoming a paid spokesperson for something that’s not their own work (I relish the success of bloggers who write about their book they just invested time in or their new video series or something like that). I stop reading if I see blatant hate speech or obvious disrespect for others or blatant trolling for traffic or something like that.

I don’t care about grammatical errors or other such things. Blogs are places for thought-provoking first drafts and sincere thoughts from the heart, and so I’m not looking for published polish. I don’t care about occasional errors, either, for the same reason. If you want finished perfection, go read The New Yorker (which I do also read, but I get something very different out of it than I do out of blogs).

What about linking? I usually only link to an article that makes me particularly think. I don’t really worry that much about a “track record” because everyone has a few good ideas inside of them. If I’m made to think or reconsider what I’m doing, it’s probably linkworthy.

I don’t believe my link to a blog is an implicit endorsement of the entire archives of another blog. I’m willing to bet that I would find something I disagreed with strongly in the archive of any blog out there. I just link out because I found something interesting and want to share it.

Recently I ordered a book on how to make money at home with Google. The cost was only $1.99. so I thought I had nothing to lose. Suffice it to say, I never received a book and almost immediately had money taken from my Visa card until i finally had to cancel my card. I think this was a shameful attempt to take advantage of those of us needing work. Are there any ways to make money on the internet that are not scams like this, or should I just forget it and remain poor?
– Kathy

Here’s a very simple rule of thumb for buying online: never give your credit card info or any other personal info to to any company that you’ve never heard of before. Just don’t do it, period. It’s not worth the risk.

As for whether it’s possible to make money online, there are lots of ways to do it, but there are no easy ways to do it. The ways that require little time investment are ways that don’t earn you a great deal per hour, like . The ways that can earn you a lot per hour take a ton of start-up time, like creating your own blog, before you earn much at all.

If anyone is promising to show you an easy way to make a lot of money online quickly, they’re selling you something that I would stay far, far away from.

Trent, I have been a reader for over 2 years. I liked when you posted frugal tips and not your opinions about the number of children one should have and about why Nordics make better neighbors. I will no longer be reading your blog and will not be referring people to it anymore.
– maria

I hope you find a blog that suits what you’re looking for. might be right up your alley, as she posts plenty of “deal” lists and other such things. I sincerely hope that any reader who stops finding value in finds another site that meets whatever needs they have in life.

Maria’s complaints come solely from the reader mailbag, which I started because people wanted a forum in which other things besides strictly money issues were discussed and people could ask me things of any nature. Often, these questions are spawned from an exchange in the comments of a post or from a simple reference to some other aspect of life. It has proved time and time again to be one of the most popular parts of

My judge of whether works is whether or not I’d enjoy it as a reader, and if I just posted nothing but frugal tips, I’d probably unsubscribe. I stick with the blogs that I read on personal finance – and many other topics – because the people who write them are real, interesting people who I’ve come to disagree with, be entertained by, and respect over a long period of time. That’s what I keep in my feed reader, and that’s what I want to keep being. Part of the cost of that is that I sometimes lose readers and I certainly hear a lot of insults, both from people with genuine concerns and from trolls. That’s a cost that I’ve learned to live with.

If that type of stance means I lose all my readers, I’m fine with that. I’d rather speak from the heart to an empty room than read a list to thousands.

Got any questions of your own? Ask them in the comments and I’ll get to them in a future mailbag.

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