Questions About 529s, Smart Watches, Coursera, Windfalls, Outdoor Exercise, 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. Is 529 a scam?
2. 529 or private school?
3. Pay bump worth it?
4. Why get a smart watch?
5. Windfall needed to immediately retire
6. Labeling frozen items in freezer
7. Safety concerns about outdoor exercise
8. Financial state before marriage important?
9. Community college advantages and disadvantages
10. Any value to Coursera?
11. Updates to backpack recommendations?
12. Good but inexpensive notebooks

During September, there’s always this weekend when you suddenly realize that the days are shorter and the weather is getting cooler and that leaves are starting to change color and that fall is here. That was this past weekend for me. I pulled out a hoodie for the first time in months because there was a nice evening chill and I was almost shocked that it was getting dark at about 7 PM. Fall is here. Winter is coming. The cycle continues.

On with the questions.

Q1: Is 529 a scam?

Saved money for years in my daughters 529 and just learned that it is going to reduce her financial aid making it harder for her to go to college. Absolutely sad that I can save for years and years and all it does is mean that some other family that didn’t bother to save gets lots of free aid and we get nothing. Scam!
– Anthony

The money saved in a 529 plan by a student or their guardians reduces their need-based financial aid by 5.64%. So, if you saved $10,000 for your daughter, her need-based financial aid is reduced by $564. That’s it.

Money in a 529 plan owned by another relative or friend with that same student as a beneficiary doesn’t count at all, but any money withdrawn and used counts toward the next year’s financial aid (because it basically counts like a cash gift from an outside source). So, that money should be held onto until the student’s last year in college.

That’s really not that much of an impact and it shouldn’t disrupt anyone’s savings plans for their children. It’s a giant stretch to refer to a 529 plan as a “scam” because students with no savings at all get a little over $500 in additional financial aid versus a student with $10,000 in savings. I’d agree with you if $10,000 in 529 savings meant a $10,000 reduction in financial aid, but that’s nowhere near the case.

Another reader had an interesting, somewhat related question.

Q2: 529 or private school?

If you have several thousand a year to put aside for your child’s education, would you use it to send that child to a private school or to save in a 529 college savings account? We’re trying to figure out how to get the most bang for our educational buck.
– Adam

It really depends on where you live and the relative quality of public and private schools in your area. If you live in a state with good public schooling and your public schools are above average for your state, the gap in quality between public and private schooling isn’t going to be that big. If you live in a state with poor public schooling and the schools in your area are below average, then the gap between public and private schooling is going to be much larger.

I would start by doing research into the quality of public schools in your area compared to the rest of the state, and in your state compared to the rest of the country. My general feeling is that if your state is average and your local school is above the state average, or if your state is above average and your local school is near the state average or above, then the gap between public and private school won’t be enormous and you’re probably better putting money in a 529.

On the other hand, if your state is below average or your local district is below average, I’d look seriously at private schools in your area and evaluate their costs and how they compare to nearby public school.

Not all public schools are the same. There is an enormous variance in public school quality in America, largely related to the funding that schools receive from local taxpayers. Some areas are very education focused, fund their local districts well, and thus those districts have much better teacher-to-classroom ratios and are able to attract and retain top quality teachers. Other areas have poor taxpayer support of schools and that often results in much worse teacher-to-classroom ratios and the schools have a harder time retaining good teachers. That’s simply the reality of public schools in America – there are a lot of good teachers, but they’re naturally going to be attracted to districts that pay well, support them well, and have reasonable teacher-to-student ratios.

Q3: Pay bump worth it?

I’ve been internally recommended for a promotion that will increase my salary by about 60%, but I am very wary of what the job entails. I will be moving from a job where I mostly repaired computer systems to a job where I will be managing a group of people doing repairs and jumping in to fill gaps as needed. My understanding in talking to others is that this job varies in stress depending on who the people are you’re working with – if you get good people, it’s actually way easier, but if you get idiots or [bad workers] it can be a nightmare. The idea of trying to manage a zoo makes me want to quit just thinking about it but the pay increase would get rid of all my student loans ASAP.
– Adam

Do you really love what you’re doing right now? I don’t just mean the specific job, but the full situation. Are you happy with most of your coworkers and have good relationships with them? Or is it a situation where things are good enough but not great?

If you really, really love everything about your current position, stick with it. If it’s just “pretty good” or “good enough,” step up to the new challenge.

Why? You have less to lose and more to gain if you’re not over the moon with your current position. If you end up taking the new job and decide later that it’s not for you, you can always move on without feeling like you lost something special. However, if your current job is truly great, then adding some more pay for something that could be a nightmare for you is not worth it.

Q4: Why get a smart watch?

I see a lot of people wearing smart watches lately and I don’t get the point. Why would I want to pay $500 to get texts on my wrist instead of the phone in my pocket? Seems like a waste.
– Bill

Smart watches have a lot of features beyond “receiving a text on your wrist.” My issue is whether any of them are really essential or valuable.

They do work well as an activity monitor and step counter, features you can get with a much less expensive device (like a $100 Fitbit or an even less expensive pedometer). As you mentioned, it’s good at receiving texts and other notifications, which you can read at a glance. It’s also pretty useful at creating quick reminders. It’s a pretty nifty timer that’s always available.

The issue is that the handful of features a smart watch provides are kind of neat and sort of useful, but they don’t really add up to $500. The “killer feature” of fitness tracking is handled by a $100 Fitbit, and it can let you read texts, too.

It’d be a fun toy. I’d probably enjoy one if I was gifted one, but there’s nothing about it that says “Essential!” I’d rather have $500 in a retirement account.

Q5: Windfall needed to immediately retire

How big of a windfall would a person need to immediately retire in their 30s or 40s? How big of a windfall would you need?
– Abraham

You can figure this out by looking at your spending. How much do you spend in a year, including the cost of health insurance? Take that and multiply it by 40 and you have the number I’d want before I’d retire in my 30s and 40s.

Multiplying that number by 40 implies a 2.5% withdrawal rate from your investments for the rest of your life, which is a small enough rate that you have essentially zero chance of your investments running out if they’re sufficiently invested (in a largely aggressive set of index funds).

So, let’s say you calculated that you needed $100,000 a year in today’s dollars to live on for the rest of your life. You’d need a $4 million windfall – or enough to add to your already existing investments – to retire and continue to live on that same $100,000 a year without worry of running out.

The closer you get to the end of your life, the higher that percentage withdrawal rate can be. I usually use the average life span plus about ten years when figuring this for myself, so somewhere around 85 years old. So, if I’m 65, my withdrawal rate could be somewhere around 4% or even 5% for the rest of my life.

It’s a bad idea to completely drain your retirement account because you don’t know for sure when you will pass on. I’d far rather leave some money behind for my kids and for some charities than to run myself dry five years before the end of my life.

Q6: Labeling frozen items in freezer

What is the best method for labeling reusable containers in the freezer? Single-use containers can just be written on with marker obviously but what about containers you want to reuse? Do you use labels?
– Aaron

I just have a giant roll of masking tape. I make sure the surface is dry before I put the tape on and then I write whatever it is on the masking tape with marker. This works pretty well and almost never peels off unless you buy super-cheap masking tape – this is a product I usually don’t buy in store brand form because there’s often inadequate adhesive on cheap masking tape.

When I pull the item out of the freezer, I just peel the tape off and discard it. Then, the next time I use the container, I apply a new piece. I usually write what is in there and the current date. That way, if I go through the freezer, I can tell pretty quickly if the stuff is getting “old” and needs to be used soon.

Scotch does sell a type of masking tape that’s supposedly designed specifically for freezers and it does work like a charm, but it’s a little more expensive than normal masking tape, and the normal tape seems to work well for my use.

Q7: Safety concerns about outdoor exercise

Not really a question, just a comment about your recent answer to a question about exercising outdoors in public. I can relate to this, but in another way. I used to love to walk, run and bike on the trails in central Iowa, but now I’m afraid to go out by myself for safety reasons. As many women can relate to, I’m tired of getting honked at, whistled at, stared at, heckled — you name it — whenever I try to enjoy some time on the trail by myself. Now I try to take group exercise classes at my gym at work. Yes, I’m very fortunate to have a fitness facility where I work, and it’s free for use. But I know there are other low-cost indoor exercise options: community centers & gyms, the Y, churches, for those of us who want to exercise safely indoors on a budget.
– Connie

It’s sad that anyone has to feel this way in modern society. The thing is, although crime does still exist, it’s actually far safer to exercise outside today than it was in the 1970s and 1980s – the difference is the prevalence of 24 hour media which gives far more coverage to these types of incidents. In the past, individual incidents were relegated to a report in a local newspaper or a local television station, so they seemed rarer. If it didn’t happen in your local area, you likely never heard about it. Now, such incidents are blasted nationwide on tons of flavors of media. If you had 50 incidents nationwide in the past, you might hear of the one or two in your area. Today, if there are ten incidents nationwide, media makes sure you hear about all of them, so it feels like there’s more crime even when there’s less. And that’s enough media criticism for today.

If you’re looking to mostly go on long walks, any sufficiently large indoor place will work well for this. Just Google “places to walk indoors near me” and see what pops up.

If you have other exercise needs and feel unsafe exercising outdoors, you’re going to be shopping around for a gym if you don’t have room at home to do them.

Q8: Financial state before marriage important?

How important do you think it is that your partner be in a good financial state before you get married? My husband-to-be has more than $50K in student loans and a car loan and I am worried about being tied to a lot of debt. I have worked really hard to get through college and have a car and not have any debt.
– Shelley

I would look more at his day to day behavior rather than the amount of debt he has. I don’t think a car loan or some student loans is a sign of egregiously bad financial behavior (a bunch of credit cards might be different).

Does he seem to spend a lot on unnecessary things? Don’t focus on things like going out to dinner with you, but rather on things like having a bunch of expensive but unnecessary stuff around his dwelling or constantly having the latest and greatest phone or other gadgets. Does he eat out a lot when he’s by himself or does he prep food at home?

What you’re really looking for is consistent behavior that points in a good financial direction. That would be a bigger sign for me than the presence of student loans or a car loan in someone in their twenties. If you see him spending money wildly, that means he won’t be paying off those debts soon and probably doesn’t have any tendencies toward saving for the future. At the very least, this kind of difference in perspective would be something you need to carefully talk through before getting married.

Q9: Community college advantages and disadvantages

Why would a person not just get their degree for cheap from a community college instead of spending tens of thousands of dollars at a four year?
– Marianne

There are certainly situations where a degree from a community college fits the bill, but there are a lot of advantages to a four year college that a community college usually can’t match.

One big one is the networking. A big school usually affords an opportunity to build connections with a lot of people entering your career path at once. Most four year schools have extracurricular groups and study groups oriented toward forming those kinds of deep relationships. They’re extremely rare at the community college level.

Another advantage is internship opportunities. Those tend to go heavily toward people at established four year universities with good programs in that field because those companies want (perceived) skilled interns.

Another advantage is, whether it’s perceived or not, that more challenging four year schools offer more rigorous classwork, thus students earning a degree from those schools are simply more prepared for the job. The harder classes will also force you to learn a lot more.

If you go to a four year school, put in the effort to get involved with the other people in your area of study, build a study group where everyone’s motivated and you push each other, get some internships, and aim for great grades, you’ll get a lot more value out of a four year school than a community college. It boils down to networking, building relationships, internships, and academic rigor.

Q10: Any value to Coursera?

Is there any value to Coursera without paying money for certificates? Listing completed Coursera classes on a resume doesn’t seem like it would be a good idea.
– Dalton

The value in Coursera is that it provides an organized way to learn about a particular topic, either for personal interest or for professional advancement, for free. I’ve gone through several Coursera courses (and courses on similar sites) in the past just to learn about the subject matter, and they’re universally well done.

The question is whether you value lifetime learning on principle or not. Lifetime learning means you’re engaged in learning even if it doesn’t directly lead to an item on your resume. You learn for the sake of self-improvement and for the sake of sharpening your ability to quickly learn information. Coursera is great for both of those skills, but there are many other sources, too.

Rather than specifically saying Coursera is great, I’m much more inclined to say that lifetime learning is great and Coursera is a good tool for that.

Q11: Updates to backpack recommendations?

I bought a backpack for college last August and it’s already falling apart. Shouldn’t have bought a cheap one. Found your old recommendation of either using a North Face Surge or a Goruck. Do you still recommend those for backpacks?
– Adam

If you’re buying a backpack that you intend to use for many years after college, then I still stand by those two. I have one of each – the North Face Surge II is kind of a “portable office” with all of my work stuff permanently in it, whereas the Goruck GR1 is what I grab whenever I need a bag for non-work things, like hiking or weekend trips or anything like that. They’re both in great shape after many years of use – I’ve probably had the North Face for ten years of multiple-times-a-week use and the Goruck for many trips and probably twice-weekly use besides that.

The thing is, I don’t know if I would recommend a really high end backpack for anyone who may not use one again after college. If your goal is to get through college with it and then you’ll scarcely need one, I’d buy another cheap one at the store.

I chose to buy those long lasting backpacks because my bag from high school and college finally started to fail along the bottom a few years into my professional life and I realized that I really liked carrying a backpack a lot of places, particularly when I started working as a writer. I then found that I didn’t like completely dumping out my “portable office” a few times a week so I could use it for non-work purposes, so I gout a second bag with a somewhat different design.

I think if you want a bag for hiking and weekend trips, a Goruck is a really great choice. For a “portable office,” I’ve really found a lot of value with my North Face Surge II. I would probably investigate other backpacks at this point but, honestly, I don’t have a reason to invest my money in a high end backpack. I have had many readers and friends recommend the Tom Bihn Synapse 25, the 30 liter Peak Design Everyday Backpack, and a few others, but I wouldn’t buy those unless a backpack is an every single day item for you.

If I were to recommend one daily use backpack in terms of bang for the buck, I’d probably point to the North Face Surge II. You can often find it on sale well below $100 and it has worked well for me for many years as a “working backpack.”

Q12: Good but inexpensive notebooks

I am looking for good but inexpensive notebooks for a research project. The standard notebooks people use in our field tend to fall apart in field use but everyone keeps suggesting the same stuff or suggests using a tablet and stylus. I prefer paper but want a notebook that doesn’t fall apart easy without paying $20 for something stitched. I’ve looked but haven’t found anything. You seem to have your finger on the pulse of this.
– Mary

It depends on your price threshold.

The best notebook for under $1 I’ve found in terms of sturdiness is a plain composition book from any office supply or department store. If you’re going cheap, these seem to always hold up better over a long period than spiral-bound notebooks if you’re never wanting to remove any pages from the notebook.

If your budget is $5 or under… man, I’d probably still just get composition notebooks, but perhaps somewhat nicer ones. I have had a lot of issues with spiral bound notebooks lasting in the past. If I were to recommend a spiral bound notebook, I’d probably point toward Oxford single subject notebooks.

If your budget is $10 or under, my recommendation is the Minimalism Art notebook, which is very similar to a Moleskine but at a much better price. If you fill up a lot of notebooks quickly and will be beating them around a lot, this is a good choice. The price is low enough that you won’t be devastated if you ruin one, but they’re sturdy enough that you can carry them a lot of places. The Amazon Basics classic lined notebook is really nice, too.

If your budget is $20 or under, you’re in the range of my favorite notebook I’ve ever used, the Leuchtturm 1917 A5 dotted notebook. It’s got a hard cover, paper that lets you write with all kinds of things without bleeding or smearing, a very sturdy binding… it’s just about perfect all around. It’s pricy, though.

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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