Pay off school loans, or build up savings?
Debt priorities, size of emergency funds, and recommended board games are all topics in this week's mailbag
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. Saving for multiple housing goals
2. Children sharing bedrooms
3. Staying positive in volatile markets
4. Early childhoold illnesses
5. Board games as gifts
6. Student loan payoffs or savings?
7. Master limited partnerships?
8. Bigger emergency funds?
9. Upromise credit card
10. Fringe thoughts
The Simple Dollar is a blog for those of us who need both cents and sense: people fighting debt and bad spending habits while building a financially secure future and still affording a latte or two. Our busy lives are crazy enough without having to compare five hundred mutual funds – we just want simple ways to manage our finances and save a little money.
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Recently, my son’s school had a “parent’s day,” where a parent was encouraged to come to school and eat with their child. I packaged up a lunch at home and took it with me to eat with my son. We ate together in the lunch room of his school, then he showed me his classroom and I met several of his friends. Afterwards, he gave me a big hug. I think it meant a lot to him.
This is something that would have been difficult to do at my previous job. I might not earn money like I once was earning it, but I have something else that’s worth a lot more.
Money isn’t everything.
Q1: Saving for multiple housing goals
[My question is] specifically about your current house and future dream house–how are you managing holding the two in tension? Are you paying as much as possible on your current house with the hope of using that principal for the dream house or are you diverting some savings to a future house goal (even though you lose the guaranteed return of your interest rate?)? If you had to do it all over again, how would you sequence your house purchase?
It would be very easy to simply make extra payments on our mortgage instead of saving ahead for a future home. There are two reasons we don’t follow that route.
One, the interest rate on our mortgage is very low. If our mortgage rate was 7 or 8%, we would have a good reason to just wipe out the mortgage first. However, our rate is a lot lower than that. Over a sufficiently long period (the period that we’re looking at for these savings), we should see much better returns on other investments.
Two, putting money into our home mortgage isn’t very liquid. Putting the money into an investment account is much more liquid if we were to need to access it at some point.
At some point, we may empty out our savings and just pay off our entire mortgage at once. We’ll cross that bridge when we get there, however.
Alison has a second question.
Q2: Children sharing bedrooms
Somewhat relatedly, I’ve noticed that you mentioned have all your kids sleeping in the same room and yet also talking about having lots of extra space–what’s your philosophy for having them all in the same room? I would think they would wake each other up? But I know nothing about children.
When I was little, I shared a bedroom with my two older brothers. In fact, I shared a bed with them until I was five or so.
This is actually one of the best memories I have of them from when I was little. I remember us all being jammed in there, joking around a bit, jostling for position, someone passing gas, lots of laughing, and things like that. It was probably the best bonding I had with them.
Similarly, my wife shared a bedroom with her sister for many years and she had a similar experience. It really built a bond between them.
We have two rooms we could easily convert into bedrooms if we so chose. For now, though, I think our three kids are getting a lot of value out of sharing a room.
Q3: Staying positive in volatile markets
I was wondering how you stay positive when there are times of wild market volatility. I sometimes see losses pile up for several weeks and I get worried like so many other investors do. Do you have any advice on how to ride out the doldrums of the bear market or a recession?
I just don’t look at my balances. Seriously.
Every goal for which I have money in the stock market is a long term goal. I don’t expect to have to touch that money until at least ten years from now. Between now and then, I expect that there’s going to be rough patches, but the consequences of those patches don’t bother me.
The only events I’m really worried about are events that would cause me to lose a lot of money no matter what I was invested in, such as a rapid devaluation of the U.S. dollar.
Q4: Early childhood illnesses
I have a 6-month old. Our first child. I constantly worry about him! He’s had a few health issues, but nothing serious. He seems to catch everything, a product of taking him to daycare I suppose. But I worry about all things–health, development, happiness, eating, etc. I know this is very new and overwhelming, and that the worry never goes away. But does it become manageable at some point?
You’re probably going to keep worrying for a long while. Wait until your child starts walking is capable of wandering off and then when he/she starts climbing on things.
The best thing you can do is just let your child do as much on his/her own as he/she reasonably can and watch. You’ll soon realize, step by step, that your child can do a lot on his/her own. For me, that was incredibly reassuring.
At this point, my five year old can wake up in the morning, pick out his clothes, take a shower, get himself breakfast, get his backpack together, and leave for the bus without a single bit of help from me. I can’t think of a better sign that he’s doing well than that, and it reassures me.