Dear Dave,
My wife and I are on Baby Step 4 of your plan. Recently, we were offered the opportunity to take part in a three-day, hands-on stock trading class. The only problem is we don’t have the $5,000 registration fee at the moment. What do you think about us temporarily taking that amount from our emergency fund, then replacingitoverafewmonths’ time? We would still have the minimum three months of expenses you recommend still there for emergencies even after taking the class.
Pete Dear Pete,
I wouldn’t waste my money on the course. And I especially wouldn’t blow any of my emergency fund on something like that. Your emergency fund is for, repeat after me, emergencies only! In my mind, a short course on single stock investing is about as far from an actual emergency as you can get.
Now,Idon’tknowtheexact course you’re talking about, but I do know quite a bit about the concept of buying and selling stocks—or day trading—if you want to call it that. Research shows over 90%ofdaytraderslosemoney over time. And I can tell you something else, too. One hundred percent think they’ll never be the ones losing out. That includes people who take courses like the one you’re looking at.
I’ve seen no data points— none—showing that on a consistent, level basis across a broad population, that people who take courses like these make money and become wealthy as a result. Buying and selling single stocks is an ultra-high risk proposition. That’s why I don’t buy them. I know some people who buy and sell single stocks as a very small percentage of their . nancial world. And when I say “very small percentage,” I mean it’s like a hobby they dabble in once in a blue moon, with a very small amount of cash.
But my best advice, Pete, is to stay away from this kind of thing. Someone might make a little money playing around like this from time to time, but it’s nothing you should spend a lot of time on, or make a serious . nancial investment in. And it should never, ever be the main focus of an investing strategy.
— Dave Dear Dave,
My mom is 76, and the only debt she has is about $60,000 left on her mortgage. She has $600,000 in retirement accounts, plus a long-term care insurance policy. But she has just $25,000 in a money market account with check-writing privileges for everydaybillsandpurchases. To be honest, this worries me. She has always lived within her means, so am I wrong to be concerned? She has also been talking about paying off her mortgage, and I’m not sure how I feel about that, either. I’d love your opinion.
Kelly Dear Kelly,
You sound surprised that she’d still be in the stock market at her age. In my mind, that’s not a bad thing at all. It might not be what the typical . nancial planner would tell you to do, because for the most part they’ll try to get you to be superconservative with your money as you get older. But fromthewayyou’vedescribed things, it sounds like she’s not planning on using this money, but using the income from the money. If that’s the case, she won’t whittle it all down to nothing. So, if she’s in good mutual funds—not single stocks—I think she’ll be just . ne. Now, let’s talk about the mortgage. I would absolutely recommend she go ahead a pay it off. If she can do that at age 76 and still have $540,000 left, that’s the way to go. Let’s pay off the house, and then she can start taking her income off a percentage of the remainder. She won’t need much with the house payment out of the way, because she won’t be sending money to the bank to pay the anymore.
—Dave Dear Dave,
I stopped contributing to my 401(k) temporarily to help us build an emergency fund a little faster. Things are going slowly, though, and I’m getting worried. My wife and I are both 46, have no debt except our home and we have a combined household income of $100,000 a year. We have $20,000 in a single stock, and I was wondering if we should cash out that stock and use the money for our emergency fund.
Doug Dear Doug,
That’s exactly what I’d do. I’d cash out that stock as soon as possible, and put the cash in a simple money market account with check writing privileges and no penalties for early withdrawals.
Basically, your emergency fund is in stock right now, and that’s a bad place to keep it. You never know when life will throw unexpected expenses your way, or when the stock market will go down. You always want your emergency fund to be safe and easily accessible. Remember, your emergency fund is insurance—not an investment.
After that, make sure you keep pushing forward and jump back into Baby Step 4. That means start pouring moneyintoyour401(k)again. Great question, Doug!
— Dave Dear Dave,
Our son is in high school, and he has a car and a part-time job nights and weekends. We’ve worked with him on saving, spending and giving, but should a teenager have an emergency fund, too? If so, how much do you recommended them setting aside?
Dominic Dear Dominic,
This is a great question! I’m glad to know you’re working with your son and teaching him wise . nancial habits.
I always recommend an emergency fund of three to six months of expenses for adults, and I think that’s a fair expectation for teens, as well. He won’t need as big an emergency fund as a married couple with kids if his expenses consist only of those connected to his car and social life. So, I’d suggest him saving up three months’ worth of what it takes to operate the car—gas, insurance and maintenance. I think those are fair financial responsibilities for a responsible teen in his situation.
— Dave Dear Dave,
I had an interview for a sales management position during the first week of January. Since then, I’ve sent two follow-up emails. One was to thank the human resources representative for their time and for considering me for the job. In the second, I reiterated my interest in the position and desire to work for the company. Was this a proper and professional approach? If not, how would you suggest handling things after a . rst interview?
Tiffany Dear Tiffany,
In this situation, I would recommend sending another email. You want to walk right up to that . ne line that separates bold and con. dent from pushy, because that’s one of things a good sales manager should be able to do. Thank them again for their time, and respectfully tell them you understand any hiring decision can be a lengthy process, but you’d like to know when you can expect an answer.
I’mtalkingaboutusingyour experience and the idea that you’re a great sales person, who has transformed herself into a great sales manager. In other words, treat it almost like a professional sales call. And don’t be afraid to have a little fun with it. If you’re still under consideration, that means they like you and you have a shot at the position. You might even hint at the fact they don’t want to hire a sales manager who doesn’t know how to follow up.
You obviously have sales skills if you worked your way up to a manager’s position. So, put those skills to work. If you’re on a sales call, and the customer needs to perform some due diligence before deciding,asmartsalesperson will request to schedule a follow-up. In your email, ask if checking back on a certain day in the next couple of weeks will work. You don’t want to be obnoxious, but you’re looking for an appointment of sorts—a time frame—so you’ll know when to follow up without seeming pushy or desperate.
I hope this helps, Tiffany. Good luck!
— Dave