Reader Mailbag: Shortcut Fixing

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Higher salary or better benefits?
2. Cheap land lines
3. Moving in with parents
4. Prepaying student loans in forbearance
5. The Hindenburg Omen
6. Post-graduation financial independence
7. Mid-college personal finance advice
8. Cherry picking the past
9. Tracking passwords
10. Replacing cable with Netflix

As many of you know, a month or two ago, I changed the format of the reader mailbags so people could just click on the number next to the shortcut above to hop down to the question. On the “back end,” I simply named the questions 1 through 10 (or 11 or whatever), so that when you click on the shortcut for question 1, it hopped down to question 1.

There was a pretty nifty little problem, though. If you had two reader mailbags on the same page, there would be two questions and answers named “1” on the same page. Thus, depending on your browser, clicking on the “1” could send you to the right question – or to the “1” question in a completely different mailbag!

I solved this problem by simply changing how I numbered the questions on the “back end.” Today, if you click on the “1” above, you’ll actually be jumping down to “1826.” What’s that number? 1 (for the first question) followed by 826 (today’s date).

If I number all future mailbags in the same way, the problem won’t occur. In other words, if you happen to see a bunch of mailbags on the same page in a few months and click on a question, you’ll go to the right question.

I am 24 years old. I was recently laid off from a local government job (with all the benefits that come along with that) making around 60K due to a reduction in force. I was offered a job in the private sector making the same, but with all the lack of benefits and the longer hours that come along with that. I have also been looking around and have been able to go on interviews for several government jobs in which I would be making anywhere from 40K to 55K, but with good benefits. My main concern is the pension and the fact that I could potentially retire at 55 because I’m a veteran if I stick with the government.

I guess my question boils down to: should I shoot for the money or the benefits with lower pay? What do you think is best long term?

Note: I have about 16K in student loans from my master’s, which will probably end up around 24K. My yearly expenses are around 21K. And have a modest emergency fund of around 9K.
– Joan

It depends specifically on what benefits you’re gaining, but likely the benefit-rich job will be superior.

For starters, the salary difference isn’t as big as you think considering that the difference in salary will be taxed at your top rate – 25% or 30% or so will go to Uncle Sam, with some additional amount likely going to your state.

Another reason the benefit rich job will likely work better is that you’ll likely receive some form of compensation into your retirement savings. Many government jobs will match 5% of your pay and some will match 10%. So, if you have a 10% match job and make $50K, you can get $5K more just by investing properly in retirement – and that investment is tax-deferred, so you don’t have to worry about taxes right now.

Add on top of that the health insurance, life insurance, flexible savings accounts, and other benefits and you’ll likely get much more value out of a job with good benefits at $45K than you would out of a job with awful benefits at $60K.

We’ve been trying to cut down on our utilities, especially phones and internet. We have pay-as-you-go cell phones, but we still pay $50/month for our landline and our internet. I’m trying to figure out how to reduce this cost, because $50 a month seems like a lot to me. We currently have internet and phone through AT&T, our local phone company. I’m thinking if we switch the internet to something like DSL Xtreme, we could reduce the internet cost by about $10/month. But what about the landline? I’d like to still keep a land line, because this is the number I give out to anyone who’s not a friend, so I use it to field phone calls from businesses and potential telemarketers, etc. Is there a cheaper way to keep a land line than for $25/month?
– Mylinh

For your use, I would suggest just using a DSL and (I use Skype). You can use your cell phone for 911 purposes.

To have a phone number with Skype costs you about $3 a month, which also gets you unlimited calls in the U.S. All you have to have is a computer with a broadband connection, speakers and a mic or a headset and you’re good to go.

This would save you about $22 a month overall, based on the numbers you provided.

I was just curious about your opinion on moving in with parents. I’m not talking about newly graduated kids, I mean established couples that live with one of their parents “to save money.” Is this something new that couples like to do now? I’ve seen this happen with friends a couple times now (I’m 30, they are about the same age); each was saving for a house or wedding (good things to save for, for sure), and one had a child already. The thing is, neither of these couples are anywhere close to thrifty, to put it nicely. We see a lot of unneccessary spenditure, which if they controlled they could save a lot. So moving in with the parents just seems like a cop-out to me. I’m saving for a wedding that I have to minimalize just to afford, and can hardly save any more, and perhaps it’s only pride, but there is no way I would want to live at someone else’s house. The stress of dealing with in-laws in a less-than-ideal situation doesn’t seem worth it.

Any thoughts? Or is it just that I’m at an age where stuff like this happens?
– Alexandra

I think you’re looking at someone else’s life through the lens of some things you value (thrift, financial independence) and seeing others come up short.

If I’ve learned one thing from, it’s that not everyone values financial success. People find success in a lot of ways in their own life depending on their own definitions, and certain kinds of success dominate other kinds. Financial success and material success often oppose each other. Family success and career success often oppose each other.

I’m of the belief – like you are – that financial success creates the foundation for a better life. It doesn’t matter how deeply I believe it or how many times I say it, though, some people won’t buy into it. Or, they don’t buy into it now and will only come around when they fall over a financial cliff and see how scary it can be.

You can’t live other’s lives for them. However, you can pick and choose who your friends are and who you spend time with, so it’s usually worth your while to be selective with your friends if you are having a difficult time accepting their values.

I have placed all of my student loans on forbearance while I seek a full-time teaching position. I have 14 student loans with balances that range from $250 to $20,000 and total $76,000. I plan on taking a Ramsey approach, ranking them according to their balances and paying the smallest first until they are gone. However, since they are in deferment should I pay a small amount on each loan, like $25 which is all I can afford, and whatever remains on the smallest balance. Or, should I use all of my income after mandatory expenses for the smallest loan and make one large payment on the that loan? Thereby, taking full advantage of the forbearance on the larger loans. Basically, is it worth it to pay such a small amount on loans while they are in forbearance or am I just throwing that money away?
– Darren

Your best bet would be to pay against whatever loan has the highest interest rate, because those payments will save you the most interest over the long haul.

You also need to make sure that none of your loans have put their interest into forbearance as well. Most loans continue to apply interest to the balance while in forbearance, but some loan arrangements do not. If you have a loan that is not accruing interest, it still might be worthwhile to pay ahead on it, but only if it’s of a significantly higher interest rate than other loans.

Your best bet, though, is to consolidate that mess. 14 student loans? Just by sheer human nature, you’re bound to run into some sort of issue with one of them. With interest rates as low as they are right now, you should really consider consolidation.

I’ve recently been seeing a lot of references to the Hindenburn Omen on various financial and pf blogs and websites, along with many panicked questions about whether the market is going to crash in September. When I look at the many requirements that go into detecting the Omen, it seems quite technical with a lot of jargon that most regular American (including myself) wouldn’t understand. My questions to you:

* Can you simplify this concept at all so normal people like myself can wrap their minds around it?
* Does the Omen have actual technical merit or is it just an ominous-sounding, overly-complex financial Ouija board?
* Should I be worried and looking into moving my investments into more conservative choices? I understand that this is the kind of thinking that could turn the Omen into a self-fulfilling prophecy, but a crash is a crash regardless of what caused it. The effect of such a drop will be the same on my 401(k) regardless of whether the Omen actually caused it or if the thought of it just got a bunch of idiots panicked and in the mood to dump all their investments.

– Jessie

The Hindenburg Omen refers to a pattern in stock prices that is said to show up in advance of some stock market crashes based on historical data. To put it simply, the Hindenburg Omen occurs when a lot of stocks are reaching 52 week highs and another significantly sized batch of stocks reach 52 week lows on the same day.

If someone goes and looks at the historical data of the New York Stock Exchange, the exact parameters of the Hindenburg Omen usually pop up a few times before a stock market crash (a drop of 5% or more). However, the Hindenburg Omen sometimes pops up nowhere near a stock market crash and at other times a stock market crash occurs without a Hindenburg Omen.

What does that mean for you? If you have investments that are improperly balanced and weighted too heavy towards stocks, you should probably not have as much money in stocks as you do right now. However, that’s true no matter whether there’s an “omen” or not. You should always spend time figuring out how much you’re comfortable with in stocks, invest that much, and put the rest somewhere safer.

Do I believe in the “omen”? I think any time you have a pile of data, you’re going to see patterns in it. Some of those patterns actually mean something. A lot of them do not. I’m not sure which side of the line the Hindenburg Omen lies. I think it’s something that some stock speculators and doomsayers are hyping right now because, frankly, it gets them an audience.

I am a 10′ grad of a high school from my home of Phoenix, Arizona and will be going to Wellesley College (small, all-women’s liberal arts college in Boston, Massachusetts) this fall. My parents will be paying for all my school and basic living costs (room, board, food, books, basic clothes, etc.) for all four years. I will also be receiving an allowance of $250 per month for “fun” stuff (eating out, clothes, etc). I have about $2,500 saved up in an account from various things in high school.

I recently read an article in the New York Times about kids who are moving back home after school. I don’t want that to me be! My goal is to be financially independent by graduation. For me, this means having enough money to have my own place to live and pay all my own expenses. Basically, after graduation day, I don’t want my parents to be supporting me. What is the best thing I can do in my college years to achieve that goal?
– Erica

The best thing you can do is minimize every possible dime you spend while in college. If it’s an optional expense of any size, think carefully about it before spending it. Try to go “under” the $250 a month as much as you possibly can.

Whenever you can, sock money away in a savings account somewhere. Then, when you graduate, you’ll have some money with which to support yourself during your efforts to find post-graduate work or further schooling.

Kids that move back home after school often don’t have the opportunities you do (everything paid for with a $250 a month “fun” stipend) and often spend everything they have during their college career, coming out the other side with debt and no money saved up to deal with the immediate post-college expense. Don’t let that be you.

I’m 19 years old and will be graduating in two years. What should I be doing right now to prepare for my financial future? What personal finance info should I know?
– Kate

Read my answer to Erica, above.

Beyond that, I would strongly recommend educating yourself about personal finance. Hit your local library, take a look at these four books (all linked to my reviews of them), and check out the ones that seem to match your interests.

You’re So Money by Farnoosh Torabi
Please Send Money by Dara Duguay
Automatic Wealth for Grads by Michael Masterson
Your Money or Your Life by Joe Dominguez and Vicki Robin

All of these are excellent books that will get you on the right path.

10-12 years ago, conventional wisdom said to buy index funds for your investing. And conventional wisdom was right! The stock markets for the preceding years had marched in “lockstep” and indexes could outperform almost any actively managed funds. However, over the last 10-12 years, that wisdom had not been correct. For example, the bellwether S&P500 Index has lost somewhere around a 1% over the the last 10 years, where I can find many managed funds–load and no load–and many diversified portfolios–load and no load that far exceeded the S&P500, even after any loads or other management costs are calculated in. That being said, I humbly advise you to take a look at the statistics a little more carefully, as you tend to advise (and seemingly blindly?) investing in index funds without other thoughts.
– Marvin

Of course you can find funds that earned more over the past ten years than an index fund. Hindsight is 20/20.

The point of an index fund is not to be the best fund out there. It’s to have average returns with very low costs, which means it’ll beat about 60% of the funds out there.

“Well, I want the top fund!” If you can tell me with 100% certainty which managed fund will earn me a better return after costs than a marketwide index fund over the next ten years, I’d love to hear it. You can’t, though. Why? Because you can’t read the future. No one can.

It’s easy to look back and identify funds that beat the market. It’s impossible to look forward and do the same thing. Managed funds with a great record tank all the time. Awful funds start hitting hot streaks.

Index funds are just the average of all of these things, except that they have very low costs, something that managed funds can’t match. As a result, they’re at about the 60th percentile – but they’re always at that percentile, while other funds soar above and crash below.

If I wanted to take on more risk than that, I’d invest in individual stocks of companies I trusted.

Do you have any tools for keeping track of internet passwords and login information? Do you keep it in a safe? I realize this is probably not a question you’d want to answer very specifically (for safety and privacy reasons!). I’m also interested in your tips for constructing a safe password and login name that is secure but still easy to remember. I often get overwhelmed by the amount of internet passwords I need to keep up with.
– Emily

The best solution for most people is probably a program like . KeePass is a free open source software solution that stores all of your passwords together in a single heavily encrypted file. All you need to remember is one master password (and make it a very strong one).

Another great solution – and the one I use – is to have a “password system” rather than a single password. A “password system” is a way of coming up with and then remembering a unique password for any service that you might use.

It’s pretty easy to do. First, come up with a short, complicated password that you’ll remember – a sequence of five or so characters. I usually encourage people to have an uppercase letter, a lowercase letter, and a number in there. Maybe it could be three consecutive characters on a keyboard, the capitalized first letter in your name, and the number 9 – so for me, it would be sdfT9. That string, whatever it is, would be the start of all of your passwords.

After that, just have a method of including more characters that makes it unique based on the site that you’re at. So, for example, you might just tag on the first four letters of the domain name, but in reverse. Thus, at, with this system, my password would be sdfT9goog. At, my password would be sdfT9ohay. At, my password would be sdfT9zama.

I suggest that you come up with your own patterns, but it should use the same system – five letters or so of prefix that you’ll memorize, four letters or so of suffix that can be obtained from the website you’re at. If you’re required to use longer passwords for some of your essential services, make the prefix longer – use sdfT9wer or something like that. My own patterns are quite a bit different than these, but this gives you the idea.

That way, you have a tricky password that’s different for each site you use.

I love your blog and appreciate the honesty and thoroughness of your posts. My husband and I have taken a month off from television to re-prioritize, and in doing so, have become more interested in cutting the cable altogether in favor of Netflix and the streaming television option. (Of course- we don’t mind saving about 90.00 a month either- we recently killed our “debt snowball” with the Ramsey plan!) I can’t seem to find any type of listing of the television shows available on Netflix to watch- would you mind expanding on this? I know you’ve mentioned it before. Thanks!
– Elizabeth

It’s pretty hard to get a full list. You can get a bit of a preview by going to , clicking on “Browse Selection,” then clicking on “Television” in the Instant Streaming box.

Shows we’ve watched using it include Weeds, Arrested Development, Firefly, Doctor Who, Bones, and The Office. There are a ton of other series on there as well. Just use the search box to search for ones you’re interested in.

Given that we don’t watch all that much television to begin with, streaming is a great choice for us.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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