Questions About Passive Investing, Credit Cards, Rice Cookers and More!

Questions About Passive Investing, Credit Cards, Rice Cookers and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Financial success and unsure footing
2. Advice on buying a smartphone
3. Handling inappropriate comments from coworkers
4. Feeling guilty about all spending
5. Cheaply cooking rice when busy?
6. Standing desk thoughts
7. Celebration upon achieving money goals
8. New tax laws?!
9. Passive investing question
10. Called “cheap” behind my back
11. Credit card closing
12. Office Secret Santa ideas

Once or twice a week, someone sends me a link to an article from a really sketchy “financial” site and asks my thoughts on it. Usually, these sites seem to be barely disguised fronts trying to encourage you to invest in gold or Bitcoin, services they’re happy to get you to invest in. The articles usually talk up how great of an investment gold and Bitcoin are and how terrible everything else is.

I don’t link to those articles. In fact, I usually write back with a brief note that says, “These people are in the business of selling you on gold/Bitcoin. Take what they say with a grain of salt at best.”

I have one simple point of advice if you’re ever not 100% sure about a piece of financial advice: go elsewhere. By that, I don’t mean go from to I mean that you should go to completely different types of investment resources. Look at general investment guides. Go to the library and get some well rounded books on investments. Are other people actually saying the same thing?

Another clue: if someone is “letting you in on a secret,” then it’s not a secret. In fact, if it were actually a great investment strategy, they wouldn’t be telling you about it. They’re trying to sell you a product. Keep that in mind.

Q1: Financial success and unsure footing

My wife and I are in our mid 50s. We had two kids very young and they have both been out of the house for more than 10 years. Over the last ten years we have really kicked our careers into high gear and made a lot of money. We made more in 2016 and 2017 than we made during the entire 90s.

We haven’t inflated our lifestyle too much. We like to travel within the US and visit US cities and national parks. We tried traveling abroad but didn’t enjoy it. We have nice furniture and when we want something we usually can just buy it.

At the same time we spend about half of what we make and have a lot in retirement and in checking and savings.

We could easily retire tomorrow and live just as well as we do now for the rest of our lives. I like my job, though, and my wife says she likes hers well enough and will probably just retire whenever I do.

My question is: what do we do with this money? Charitable giving? Doesn’t it make more sense to do that in our estate planning? Maybe give some of it to the kids? I don’t know what’s next.
– Charlie

That’s the nice thing about where you’re at right now. You have options with what to do with your money, and there is no real “right” or “wrong” answer.

Sarah and I have talked about this very issue. I suspect that at some point in the next 12-15 years, we will be in a fairly similar boat, with all of our children moved out, our financial state extremely healthy, and with a lack of desire to retire.

The thing is, I can’t tell you the magic answer to your question. I wish I did have a magic answer, but the truth is that you’re going to have to sit down together, talk through your options, and commit to something.

One thing Sarah and I are considering doing at that point is contributing to college savings for our grandchildren at a rate similar to that of our own children. We intend to do it quietly and privately and give it to them as a graduation gift. Most of our estate will go to charity, at least according to our current plans. We don’t plan on having a particularly lavish retirement.

Q2: Advice on buying a smartphone

I have been shopping around at a few different cell phone companies and looking at lots of phones. I just want a smartphone to take a few pictures and send texts and make calls and look at Facebook. What is the difference between the cheap $50 phones and the $300 phones and the $1000 phones besides the bigger screens? The salespeople talk about how the expensive ones are more “powerful” but what difference does that make?
– Connie

For your purposes, there isn’t a giant difference between the phones, at least not today. Several years back, when budget smartphones first started appearing on the market, they used processors that barely kept up with basic use, and thus cheap phones had a reputation for being very slow, with long delays between touching the screen and anything happening. They were frustrating to use, in short.

Over the last few years, that complaint has largely gone away. These days, the biggest difference between cheap phones and expensive ones is the size of the screen (as you noted) and differences in screen resolution that are approaching imperceptible for most people. There’s also a difference in camera quality, but for most normal non-photographer quality casual shots, the cheap phones do a perfectly good job.

Inexpensive smartphones today function really well. You shouldn’t hesitate to use one unless you have a specific reason to have an expensive one.

Q3: Handling inappropriate comments from coworkers

Your advise to Alice is excellent! Too many people take religio/politico/ethnico comments too personally. A single comment is best overlooked. If the remarks continue, they do need to be reported – but less as a personal ‘attack’ and more as a bad representative for the business. Managers have an easier time responding to that reason and it helps them save face in what can potentially be very awkward.
– Jesse

This comment was in reference to a question from last week’s mailbag about handling political comments from coworkers.

Jesse makes a very good point. One has to consider the fact that most businesses are largely amoral – they follow the laws because it’s financially beneficial for them to do so, but they are generally in pursuit of profit above all else. For a business to take notice of an issue like inappropriate comments from coworkers, they have to recognize that such comments are actually costing them money by driving away customers and talent. If “doing the right thing” is going to cost a business money, you shouldn’t just assume that they’re going to do the right thing. It’s not that they don’t recognize what the right thing is, but that the purpose of a business is to make money, not to enforce perfect behavior amongst employees.

If you observe bad behavior amongst employees, such as political or other kinds of talk that you find repulsive, don’t address it from your angle. The company probably won’t care that much, because dealing with it is likely to cost them money. Instead, address it from the perspective of a customer, because customers driven away by bad behavior of the employees will cost the business money. This is harder to do with a fully internal department that doesn’t interact with customers in any way, of course, but not impossible.

You always have to think like a business in cases like this – what’s going to be more cost-effective for the business? Is that single comment’s negative impact more than the cost of training a new employee and dealing with possible legal blowback from the firing of that employee? Probably not. The business probably does agree with you that the loudmouth is being inappropriate, but they’re not going to do much until it is financially beneficial to do so.

So, when you hear talk like that, think about the organization’s bottom line and what the impact of that talk really is to the customers and stakeholders outside the organization. If it’s not causing any sort of outward problem, you’re going to have to make it clear that it’s a pattern of behavior and that it really is costing the business in terms of dollars and cents, because replacing a rude coworker that isn’t affecting customers is an expensive proposition.

Q4: Feeling guilty about all spending

I am a single 43/f, no interest in dating. I spend a lot of time with my outdoor club, hiking, reading, canning, and cooking.

I have a good federal job and make about $52K per year. I put a lot into TSP each month so my retirement is very safe.

I’m writing in because I feel guilty every time I spend money, even on necessities but especially on anything that isn’t strictly a low cost way to cover a need.

Yesterday was kinda the last straw. I bought a big bottle of liquid castile soap for cleaning and I felt guilty for hours because of the price of it. I’ll use that jug for a good year and it will end up not being much different in cost than the cleaning stuff it replaces, but I felt really guilty buying a $30 bottle of soap when I could have just bought cheap soap.

This morning, I feel utterly ridiculous and ashamed that I moped around for hours yesterday because I bought soap in bulk.

I don’t know what to do any more. I have plenty of money in the bank but in some ways it feels like a prison.
– Jenny

First of all, having money in the bank (and, I assume, no debt) is not a prison at all. It’s freedom, actually. You have the ability to retire without much worry at all. You can probably make a big career leap if you want. If you’re fired – it’s not a disastrous problem for you. That’s a lot more free than most Americans. You should be glad of that.

Your main issue is that you are very upset at anything you perceive as wasteful spending. You seem to be very tied to the sticker price of things – if something is cheaper on a store shelf, then it’s a better buy and the more expensive option is wasteful to you and you feel bad about it. You also seem to be bothered by items that you perceive as having relatively low utility.

I have a few suggestions for battling those things.

First of all, something that has a high sticker price isn’t necessarily a bad buy. One big thing to consider is price per use. I know from experience is that it does not take much castile soap at all to clean almost anything, and for most purposes you want to actually cut castile soap with water. How much use are you going to get out of that big jug of castile soap when you consider the cost of all of the things that it’s replacing? You’re probably replacing several bottles of hand soap, several bottles of dish soap, maybe even some laundry detergent or dishwashing detergent… add up the cost of all of that stuff and you’ll see that the castile soap is probably saving you money over the long run.

Second, you have to consider how well something works. I like to use trash bags as an example here. We do not buy cheap trash bags – when we bought some store brand trash bags in the past, we either had to just fill them halfway full or else they would rip open practically every time on our kitchen floor or in the entryway or in the front yard. Yes, they were cheaper per bag, but when you consider the time wasted having to clean up messes and the fact that those rips meant having to use an additional bag and the fact that we couldn’t fully fill the bags, the cost per square foot of trash was actually pretty close and the time investment was higher with the cheap bags.

Third, you really have to consider the value of your time. One of the big traps of frugality is that you can sometimes let it devalue your time. You can always spend time to save money – there are infinite opportunities to do so. However, the more you do it, the more of your time that’s spent on activities that return a pretty tiny amount per hour. Things like washing sandwich baggies by hand and drying them for later reuse has a very low return per hour of effort. The trash bag example above is another example of this – the extra effort invested cleaning up a couple of torn bags per month is a real time cost. How much is your time worth to you?

A final suggestion – remember that you are working to live, not living to work. What is the purpose of your economic success if you’re sitting at home miserable about every dollar? If you’re concerned that spending on enjoyable things might upend the cart, sit down and do a monthly budget, but add a line item – say, $100 – for things you enjoy. Look at that budget and remind yourself that the $100 is completely accounted for and does not upset the cart in any way. Another thing you might want to consider is $100 for bulk and reliable buys – money spent on buying things in bulk for the future and for buying reliable and long lasting versions of things you use regularly (in the long run, that $100 will save you money, but it can be hard to actually spend money in that way).

Good luck!

Q5: Cheaply cooking rice when busy?

I eat rice with dinner 3-4 times a week. I used to just cook some when I got home but now my schedule has changed and that’s harder to do because I come home late and hungry.

My mom suggested making lots of rice and keeping it in the fridge but rice without anything mixed in it is terrible out of the fridge.

Is a rice cooker with a timer my best option here?
– Steve

Given your constraints, I’d probably go for a rice cooker with a timer feature on it. However, I wouldn’t just rush out and buy yourself a Zojirushi. Instead, I’d head to local secondhand shops.

Rice cookers are items that often show up in secondhand shops, often for just a few bucks. They wind up there because people buy them, use them a couple of times, then put them aside and forget about them until three years later when they come across them in the back of the closet and immediately toss it in the Goodwill pile.

Take advantage of that. Stop by a Goodwill or a Salvation Army store and see if they have a rice cooker on the shelf.

I have tried using a slow cooker for cooking rice and it works well if you time it right. Unfortunately, it’s really easy to overcook the rice in a slow cooker, especially if you’re not around to watch it. A good rice cooker switches to an appropriate temperature when the rice is done.

Q6: Standing desk thoughts

What is the purpose of buying a standing desk? First of all why would you want one? My friend has one and I don’t get the point.

If you do buy one why not just buy a much cheaper sturdy ordinary desk and put it up on blocks?
– Jeff

The big reason for a standing desk is health, with a secondary benefit of alertness. It’s actually not very healthy to sit in front of a desk all day long, in terms of your heart and circulatory health in particular. It’s much healthier to stand. For many people, it’s a rather effective weight loss strategy, provided they don’t couple it with more food intake. Plus, standing is more likely to keep you from feeling sleepy at work.

The big reason people don’t just toss an ordinary desk up on cinder blocks is because of aesthetics. It doesn’t look particularly classy, especially when you have guests viewing the desk.

Personally, I just don’t care. I’m thinking about converting my own desk into a standing desk and I intend to just use my current desk and add cinderblocks and pine boards to get it to the right height for me.

Q7: Celebration upon achieving money goals

Did you guys celebrate when you reached your financial goals? What did you do when you paid off all of your debts?
– Dana

We didn’t really celebrate in any crazy manner. I remember that on the night our debts were paid off, we split a bottle of fairly inexpensive wine, each having two large glasses of it, and watched a movie together.

I don’t ever really feel the need to celebrate achieving a goal. I don’t succeed at goals very well unless they’re internally driven, and if they’re internally driven, I don’t feel the need to externally celebrate at all. I mostly just feel really good about the achievement.

This is probably even more true when it comes to financial goals, as a big expensive celebration would typically undermine the success you’ve achieved.

Q8: New tax laws?!

Are you going to write a post about what we need to do with all of the tax law changes?
– Andrew

Not for a long while, if at all.

First of all, the tax changes don’t affect 2017 taxes, which is what you’ll be paying in early 2018. The tax changes don’t go into effect until 2018.

Second, it’s really hard to tell what exactly will be the tax laws at the end of 2018. Part of the problem of a rushed bill like this is that some of it may not even last. It may be replaced by later bills or thrown out by court challenges.

Acting right now based on what’s currently in the bill is a bad idea. Be patient and see what happens.

The only advice I might consider is that, if you itemize already, you might want to do most of your 2018 charitable giving now rather than in 2018. This is because it looks very likely that there will be some cuts to charitable giving deductions in 2018 and beyond. Even if that doesn’t happen, the worst case scenario is that you’re just deducting in 2017 rather than 2018.

Q9: Passive investing question

What are your thoughts on this article?

Is Passive Investment Actively Hurting the Economy?, from The New Yorker, by James Ledbetter
– Troy

The argument of this article is that, as more and more people buy index funds, companies with large valuations will remain valuable regardless of their behavior because index funds typically buy into stocks based on the total valuation.

So, let’s say a company is worth $30 billion because there are 100 million shares on the market and each one is worth $300. Almost all of those are owned by index funds. The company starts to not perform as well, but because almost all of the stocks are owned by index funds, there won’t be a big selloff of that company’s stock. This isn’t a problem without index funds, where individual investors might decide that a good company just became a lemon and would choose to sell it off.

The article argues – and I think the point is really good – that index funds should buy into companies based on their price-to-earnings ratio. For example, an index fund might just own stocks that had a price-to-earnings ratio of 10:1 or better in the last year. That way, if a company begins to underperform, the index funds sell it off.

I don’t think the problem is really dire but it is interesting to think about. This is a great article to read if you’re interested in the reasoning behind and effects of index funds.

Q10: Called “cheap” behind my back

I found out that several coworkers have been criticizing me really harshly behind my back for being frugal since I started at my job in June. They make fun of how I shop at Goodwill and how I usually eat leftovers most days. The term “cheap basic b****” has been used.

I don’t want it to bother me but it does bother me. I feel cut off now because those coworkers were most of the people I talked to at work and now I know they hate me. I don’t want to start spending money on waste just to please them either.

I really like my job other than this and I don’t know what to do.
– Jill

Here’s the truth: people who say negative things about you behind your back will find something negative to say about you regardless of who you are.

Right now, they ridicule your cheapness. If you “correct” that, they’ll just find something else to ridicule.

There are negative people in life that can never be pleased or impressed. Stop trying to impress them. They will say meaningless negative things no matter what you do, so don’t do anything different than you would if those people didn’t exist at all.

You might also want to zoom out your vision of who you can become friendly with around the office if you feel interacting with those people isn’t something you want to do any more.

Q11: Credit card closing

I have had a credit card for about 10 years. About four years ago I got fed up with their inscrutable “points” program and opened up a different card. I have not used the old one since. A few days ago, they sent me a letter that they were closing my card due to lack of use. Will this have a negative impact on my credit score?
– Joel

It might have a very small short term negative impact, but nothing that will last.

The big impact will come in the form of a reduced overall line of credit. Let’s say both cards had a credit limit of $5,000. Combined, that meant your overall revolving line of credit was $10,000. With that one card closing, it just dropped to $5,000.

This isn’t a big deal if you keep that one card paid off in full, but if you carry a significant balance on it, then there’s a potential problem. Let’s say you carry an average balance of $3,000. That means your credit utilization score just went from 30% (which is fine) to 60% (which can have a bit of a negative impact on your score).

The solution? Just get into the habit of paying off your card in full each month. Then this won’t matter at all.

Q12: Office Secret Santa ideas

My office of about 10 people draws a Secret Santa each year with a $20 price target ($15-25 is the acceptable range). You’re supposed to put a gift under the tree in the break room and then next Wednesday after lunch we all go in there, grab a present that isn’t ours, and open it. Any good ways to handle this? I don’t like the impersonality of it but it seems to be part of the office culture.
– Alex

Honestly, I don’t like these kinds of things either. What I usually do in these situations is give something that’s going to be generally useful to anyone when they open it, or else a consumable item.

If you’re thinking of going the consumable route, a $20 pack of good chocolates from a local chocolatier is a good idea, as is anything that’s easy to share with others or put out during the holidays.

If you’re not wanting to go the consumable route… it’s tough. The best idea I’ve seen recently is a phone charger – a small battery that you can plug a phone into to charge it while out and about. Put a note with it that says “Charge me up and put me in the glove box for those emergencies when you need just a little more charge.”

Other than that, I’ve got nothing. The best gifts are ones where you know the recipient well. These just seem random.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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