Roth IRA: Use ShareBuilder or Vanguard?
Roth IRA is easy to set up immediately in ShareBuilder, but patience and Vanguard mean fewer fees in the long run for your Roth IRA. See question No. 7 in the reader 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. Budgeting with bi-weekly paychecks
2. Gross or net income?
3. Investing in this economy
4. Car trade-in time?
5. Blogging workflow
6. Using money before pay cut
7. Sharebuilder for Roth IRA?
8. What is a dependent?
9. Major car decision
10. Long haul relationship
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.
Subscribe Today to the Monitor
Most days, I spend some time working on a novel. It’s been an interesting experience.
The biggest thing I’ve found is that I can get sucked into novel writing for very, very long periods. With a post for The Simple Dollar, there’s a reasonable length I have to stop with. I generally try to keep the articles short enough so that they can be read in a quick burst.
With a novel, well… it’s a completely different story. I can get sucked in for hours and hours and the words just fall onto the page in a flood.
Q1: Budgeting with bi-weekly paychecks
My husband currently has a paycheck every 2 weeks, NOT bi-monthly, but every 2 calendar weeks. This is very frustrating when budgeting as each paycheck happens at a different time and different bills come out of each paycheck every 2 weeks (as the months aren’t arranged in 28 days, which would be nice). We also has extra income sporatically (he’s in the National Guard, so this is from training on the weekend and flying in the middle of the week) that we DO count on. Our main focus right now is paying off a loan that we used to pay for his truck (NOT an auto loan). Any help in getting us ahead in this would be awesome!
What I would do is have some bills come out of the first paycheck of each month and the rest of the bills come out of the second check each month. Pretend as though you only receive those 24 checks in a given year.
Now, you are going to receive a third check during two months out of the year. I would use those checks entirely for irregular bills – insurance premiums, property taxes, and the like.
I would probably pay all bills with a due date after the 15th out of the first check each month, then pay all bills with a due date before the 15th out of the second check each month. That way, you’re never running late on a bill.
I would never look at net income for the purposes of saving for the future, especially when saving for retirement.
In retirement, you’re going to be responsible for your own taxes. Unless something unusual is going on, a large portion of your income is going to be taxable income, which means that a chunk of it is going to go to Uncle Sam. Your calculations should always reflect that.
THe easiest way to do it is to just keep all of your calculations based on gross income, and assume that tax rates are going to be nice and high when you retire. You’re always better off having more money in retirement than less, after all.
Q3: Investing in this economy
I was wondering if you had a moment to give some advice on what might be good investment ideas at at this state of economy. I know that may seem like a loaded question, but I’am really curious what you might be thinking.
The best place to invest in an uncertain economy is to invest in yourself. Education. Training. A small business. An emergency fund. Debt elimination. Medical visits.
If these bases are well covered and you still have money to invest, I’d probably put it in very stable blue chip companies that have been around for a long time and are incredibly stable. These companies aren’t going to make you rich, but they will steadily pay you a nice dividend over time and they won’t go bankrupt. I’d look at companies like those in the Dow Jones Industrial Average.
Another option is to just invest in a very broad-based index fund, like the Vanguard Total Stock Market Index. Choose one with very low fees. It also won’t earn you a mint, but it’ll be pretty stable and pay you a healthy dividend.
Q4: Car trade-in time?
I’ve worked hard (after some hard lessons) and I have $5,500 savings toward whatever car thing might be needed next. We also have about twice that in joint savings and our only debt is a home equity mortgage that we can now comfortably pay off. We are not exactly wealthy but our financial life is in good working order and we continue to save some each month.
I drive a 2003 Hyundai with 104,000 miles on it. Runs great. Will do the extensive tune-up soon but my question is about the paint job. The paint is burning off from sun exposure so there are more & more ugly bare metal “bald” patches, and I wonder if I should invest in a paint job.
I’ve heard horror stories about terrible paint jobs that only look good for a year or 2, and the best deal I could find from someone recommended to me was $2,000 to just repaint the center of the car from hood & top to hatchback, leaving the doors untouched & just buffing them since they are not where the bald patches are. Any recommendation I can get just comes from my oil change place or other business; I’m sure everyone just recommends each other because they know each other thru business or socially, and the recommendation wouldn’t guarantee a great job. (Speaking of guarantee, it looks to me like repaint shops only offer 1, 2 or maybe 3-year agarantees on the work, which is not encouraging. I happen to know a couple of antique Porsche collectors/aficionados, who tell me you get what you pay for & it’s a mistake to get any car repainted for cheap. As if $2,000 were cheap, anyway…)
Is it worth the $2K for a repaint or should I look at trading my car in for something with similar mileage that looks better? I hate to get rid of what has been an awesomely reliable car.
Part of me says I shouldn’t care how the car looks, but when I go to an interview I kind of cringe hoping the potential employer won’t see what I drive. I do some freelance jobs that involve meeting new people on a regular basis, and I’m not sure *I* would hire someone if they drove up in a really beat-up car, as in some way it is a reflection of the person’s taste or lifestyle or something. In some way my car is like showing up in dressed cheaply & shabbily for an interview.
For starters, if someone drove up to a job interview with me and was driving an older beat-up car, but they paired that with a good resume, I’d be more inclined to hire that person. Someone who drives such a car tells me that they understand the concept of value and bang for the buck. One of my good friends who made a much better salary than I drove a 20 year old car with rust spots and a bumper made out of a discarded 2″ by 4″.
Now, if you’re asking yourself whether the paint job is worth it or not on your car, the people you’re talking to are telling you the truth. You get what you pay for when it comes to a paint job on your car. The cheaper you get, the more likely it is to quickly wear off and put you back in the same situation you’re in.
The problem is that if you buy a really nice paint job on a ten year old car with mileage into the six figures, the paint job will probably far outlast the usable lifespan of the car. I wouldn’t go down that route.
If I were you and I decided that a car with a decent paint job was a requirement, I’d either trade it in now for a replacement or get a cheap paint job that would last for a couple of years, then trade it in at that later time.
I’m usually constantly brainstorming post ideas. I write them down in a pocket notebook no matter where I’m at. I let inspiration come from anywhere, and whenver I even have the vaguest idea, I jot it down.
The first thing I do is filter these ideas. 90% of them get discarded before I do any research or write a word. The ones that survive that first test get a basic outline and/or a bit of research on the topic for notes. I usually kill about 50% more of the potential posts at this point, and this takes up about half of my actual work time.
The rest of the time is spent turning these nascent post ideas into posts. I usually have the key ideas in place already, so it’s just a matter of transforming that into something readable.
I just do this over and over and over and over again.
Making a Difference