Ask the grumpies: Socially responsible investing

Linda asks:

So many times I read/hear about “greedy corporations” doing bad things, but then I start to think about the following.

Public companies (which are mostly what people mean when they call out corporate greed) are owned by shareholders. The executives of those companies have a responsibility to earn money for those shareholders, which is why so many of these “greedy things” happen: execs make decisions based on the bottom line. (Yeah, those execs are also earning money (a LOT of money) for themselves, as well. They are hired to make money for the company (a.ka. the shareholders) and if they meet the goals/targets for sales, etc. they get lots of money and bonuses. But that’s a sideline here.)

However, just who are these shareholders who are ultimately behind this drive for making profits and increasing the value of their shares? Why…it’s us! We’re the ones putting money in our 401(k)s, 403(b)s, and/or state and private pension funds, which are comprised of shares in these “greedy corporations.” Right?

And if I’m not misunderstanding it…holy hell, isn’t this a moral dilemma for people who care about values and issues, such as the environment, human rights, and social justice? How many of us who say (for example) we abhor Walmart’s employment practices and/or boycott shopping there, are actually shareholders in Walmart? Or if we hate frakking, yet are also shareholders in companies that do so?

Ethical investing is HARD when you have a limited set of funds to choose from. I’ve poured over the prospectuses of my Vanguard 401(k) funds and shut that information away in my brain so I can pretend I don’t know what’s in those funds and that life is all sunshine, blue skies, kittens, and puppies.

Am I totally misunderstanding how my 401(k) works? Or is there really a utopia of steady investment growth for a comfortable retirement (one where I don’t have to live in a box and eat cat food) that doesn’t exploit others?

You would probably be interested in looking into SRIs (Socially Responsible Indices) within your retirement plan.

For the most part though, those of us doing broad-based index investing aren’t paid attention to by companies.  We’re neutral– sinning by omission, not by commission.  We’re not forcing them to change their behavior and we’re not causing them to have the bad behavior.  We’re not the people who move the markets because we’re not paying attention to individual companies.  Yes, we could do better by doing as you say, picking funds that are socially conscious companies and when we do that we miss out on Exxon’s growth or Phillips 66’s dividends.  We could do even better, if we’re wealthy, by buying huge amounts of stock and going to share-holder meetings to make our social justice positions known.  But of course that adds risk, and most of us aren’t that wealthy.

An alternative, of course, is to keep your money in the broad-based indices and invest your extra returns in charities that you care about.

Ask the grumpies: Intra-family mortgage or wait to buy?

Sapience asks

Do you have any thoughts or recommendations for dealing with intra-family mortgages? I’m up for an academic job at a relatively stable school in a part of the country where I could afford to borrow the entire cost of a (very modest) house from my parents. My parents have offered to the possibility of doing an intrafamily mortgage so I don’t have to worry about as big of a down payment (probably what would happen is I wouldn’t do any down payment, but would use some of the money I would have spent on the down payment on renovations, furnishings that I don’t really have right now, etc.). I know it has to be registered and that there’s the minimum interest rate required in order for it to be taxes as a mortgage, but are there any other benefits or pitfalls that I should be aware of if we go this route?

I’ve got the 20% for a downpayment, but was planning on putting off any renovation until I had more cash. My parents were the ones saying that instead of delaying renovations till I have the additional money saved up I should just do it all at once before I actually move in.

If you don’t have a 20% downpayment, don’t buy a house. Period. Don’t borrow for furnishings. Include the cost of renovations in the cost of the house when you’re doing your budgeting (meaning you need more money rather than less money to get 20% down).

It’s very nice of them to offer, but I’ve been seeing so many people (online mostly) with really good incomes hurt by not doing the recommended thing when it comes to housebuying and renovating.  What happens is they get crunched on cashflow from the monthly cost of the mortgage added to the unexpected additional costs of homeownership, which means they can’t live on >100K in, say, Indianapolis or on 175K in San Francisco.

There are definitely benefits to doing renovations right when you move in (see: living with carpet in the kids’ bathroom for 10 years), but that would argue for putting off buying until you can afford them rather than having too much debt servicing during home-ownership. Because home ownership really does bring in a lot of additional required spending over renting that people just don’t expect. A little more hassle from renovating later (if you buy) is better than having to worry about your cashflow on a regular basis, just in terms of stress levels.

Also, as Rosa notes:  “there are also downsides to doing all the renovations up front. You might not like them as much, since you haven’t actually lived with the space to see the real deficiencies. You will probably still need to redo them in 10 or 15 years. And you may find other priorities that you didn’t see before you moved in, but have already spent your reno budget.”

Ask the grumpies: Best practices for cleaning your glasses/keeping your glasses clean?

Monsterzero asks:

[What are b]est practices for cleaning your glasses/keeping your glasses clean?

Although we do not know the answer to this question ourselves, one of us happens to have a husband who has made an in depth study of this question and has strong opinions on the topic (though he is continually searching out new suggestions and will probably read the comments of this thread with great interest).

DH says:  What I do now is, if they’re dirty with oil or grease, I wash them with soap and water in the sink, then shake them as dry as I can get them and then sort of lightly dab them with a towel to get the water off, then use micro-fiber cloth.

For everyday use, like when I get up in the morning, I wipe them down with micro-fiber.

I also have Zeiss disposible wipes, but I haven’t bought any in a while.  I keep some in the car.

Note to follow the instructions on washing the micro-fiber cloths.  They can be hand-washed (without fabric softener!) but shouldn’t be dried in the dryer.

When you get glasses, I recommend always getting the hardness coating.  I’ve gotten other coatings and they’ve been of varying benefits, but they always scratch too easily, whereas with the hardness coating my glasses tend to last until the frame breaks.

I think that’s pretty much it.

[end DH]

Ask the grumpies: How to handle the emotional aspects of moving for a job

Katherine asks:

A question about moving for a job, with a spouse:

I am about to finish my phd, and I’ve been interviewing for jobs all over the country. My husband and I currently live in his home state (where we met, but I have no ties to this place other than I love his family who mostly live in state), and if I wasn’t in the picture he would want to stay here (in this state) for the rest of his life. He hates our current city and doesn’t have good job prospects here anyway. We’re both really excited about moving away from here, but I’m feeling increasingly guilty about being the reason he’s going to move across the country to a place he’s never been – and nervous myself about moving to a place I will have probably only visited for 30 hours, tops. How did you and your partners handle the emotional aspects of moving for academic jobs?

Don’t feel guilty! This is a fun new adventure for both of you! Going to a new place that you’ve never been before and living there is a wonderful thing to do– you become more cultured and a better person. Like that wear sunscreen graduation speech goes (“Live in NYC but not so long that it makes you hard, live in LA but not so long as it makes you soft”). And if it doesn’t work out, you can do like #2 did and move again.  It’s only a permanent thing if you want it to be.

(Note:  #2 had to move for a job without her significant other– that was pretty awful emotionally.  But the moving to a new place means lots of fun new discoveries at first, even if you end up someplace that turns out to be a Blasted Wasteland and not a permanent living place.)

Good luck!

UPDATE:  We are NOT saying that there is anything wrong with Katherine.  We are not saying her feelings are abnormal.  We are not saying she’s a bad person for feeling guilty.  We are giving her permission to NOT FEEL GUILTY and to reframe this move as an adventure and a potential learning experience and not something permanent (unless they want it to be permanent).  Her husband is already excited about the opportunity.

So please, no more comments saying, “I disagree, Katherine has every right to feel guilty.”  Yes, she can continue to feel guilty if that’s what she wants to do.  But it wasn’t our sense that that was how she wanted to handle the emotional aspects of moving to a new place and trying to solve the two-body problem.

Ask the grumpies: Save in a 401k on a low income?

Leah asks:

When can you start using a 401(k)? On a smaller salary, isn’t it better to save liquid cash or in another vehicle? When is it possible to save TOO much for retirement?

Tip:  If you are matched, you should *always* contribute up to the match.  Why?  Because if you’re strapped for cash, you can take that money (and the match) out now with a 10% penalty.  You’re still better off.  A lot of places giving you the advice to contribute to the match as your first step don’t mention this option, but it is an important one if you are low income.  They don’t mention it because they don’t want people to get into the habit of draining retirement savings.  But it’s still free money with the penalty, just less free money.

If you have a truly small salary, chances are you also don’t *have* 401(k) options.  But if you do, at what point should you not save at all?  If you’re in a situation where social security will be replacing most of your income.  In that situation your spending is already really low and you are probably talking serious (health, safety, etc.) risks for cutting it more because you are already living in poverty.

Sidenote:  If you do have extra each month because your salary is small but not at poverty levels, the Roth IRA is a good place for a longer-term emergency fund because you can take out the principal without penalty.  There are also some pretty nice tax credits for low income people who put money away for retirement,  which could mean up to a 50% return on up to $2-4K of your savings at tax time depending on your situation.  (Note it might be worth getting the match for the credit, but not completely maxing out the IRA/401K depending on your situation.)

Is it possible to save too much for retirement?  Of course.  That happens when you’re hurting your consumption today in unhealthy ways in order to save huge amounts for you don’t know what tomorrow.  For example, back when DH and I both had university jobs, we were saving 12% of our incomes mandatory, then we had room to save an additional 17.5K each in 403(b) and an additional 17.5K each in 457(b) and whatever the max was each for IRAs (maybe 4K?).  We didn’t use that room.  We have no plans for early retirement and were living with one car in a house without important furniture like a washer/dryer and there was a baby on the way.  We needed the income more than we needed to max out our retirement spending.

Now we wish we had more space to save for retirement (coincident with us having less room to save since DH no longer has access to a 457 and his 401k sucks).  That’s because we’re making more money now and it doesn’t really hurt us today to put more money away for tomorrow.  Looking ahead, whether or not our kids are eligible for financial aid will depend a lot on how much we have in non-retirement savings.  The more we hide in retirement savings and our house the less we’ll have to give to a private university with a huge endowment.

So what do I recommend one’s savings strategy be (as always, I’m not an expert– consult with a real expert before making important monetary decisions)?

  1. Contribute your 401k up to the match.  Take the money out at a 10% penalty if (2) or (3) are problems.
  2. Pay off your high interest debt and do not create any more of it.
  3. Get a small emergency fund that will help you not accrue the kinds of fees you get hit with when you don’t have liquidity (ex. work reimbursements being slow, a paycheck snafu, etc.)
  4. Contribute 15-20% of your income to retirement using 401K or IRA or a combination thereof.
  5. Ease up on your not-spending some.
  6. Get a bigger emergency fund that will cover you in case of a job loss.  Feel free to invest this in IRA Roths since you can withdraw principal without penalty (it doesn’t need to be in stocks!).
  7. Pay off some of your other debt if there’s a lot of it, especially if your monthly payments are high.  (This helps your cash-flow.)
  8. Ease up on your not-spending to more middle-class levels.
  9. Get a secondary taxable emergency fund that will cover you for a while in case you want to find yourself one of these days.  (Again, IRA Roths are a good choice for starting.)
  10. Start stuffing money into easy retirement advantaged vehicles, like your 401k/403b/457/IRA
  11. If you have kids and will need to pay some of their college expenses, 529s are nice.
  12. Start looking into fancier vehicles like backdoor Roths (because at this point you’re probably unable to contribute to a regular IRA) or super-mega-backdoor Roths.
  13. Hire a tax adviser to tax advantage your assets in ways that legally cheat the government.

 

Ask the grumpies: Managing bedtime for an obsessive reader

zenmoo asks:

any ideas on how to manage an obsessive reader? My just 6 year old’s reading ability has exploded over our long holidays. This is great but she gets very caught up new stories to the extent of finding it hard to sleep… I was an obsessive reader at her age too (still am) but it never stopped me sleeping!!

Make sure that your 6 year old has a flashlight that doesn’t get too hot and that hir covers are the kind that won’t melt if say, they have a bare lightbulb touching them. Not that I ever accidentally melted a sleeping bag (much).

You can forbid reading after a certain hour and turn off the light, but one of the great joys of childhood is sneaking to finish a novel late into the night under the covers.  If it interferes with functioning the next day, eventually zie will learn how to regulate it, most of the time anyway.  So long as the next new book isn’t too enthralling.  Fortunately at 6, falling asleep in class is unlikely to result in damage to one’s permanent record.

You also may want to put bedtime a bit earlier so that when you head to bed you can check and remove any lit flashlights or open books from drooling children who have fallen asleep mid-chapter.

Ask the grumpies: When to start music lessons?

Alyssa asks:

When is it age-appropriate to put children into music lessons (piano/guitar at this point)? Son is 5 and a bit, and he says he’s interested, but not sure if we should wait a bit more?

Five is a great age!  To be honest, I started at 6 and DC1 started at 6 because of laziness on the part of parents, but 5 would have been fine.  (DC1 did start swimming lessons a lot earlier.)  Most music teachers in our area start accepting students at age 5, and Suzuki teachers will often accept children as young as age 3.  A bunch of the internet suggests that starting music lessons before age 7 is best for various quasi-scientific reasons I’m not entirely convinced by but may be true.

And if it doesn’t work out, you can always take a break and try again later.

Follow

Get every new post delivered to your Inbox.

Join 321 other followers