Can a Gap card wreck your credit rating?

Store credit cards, Roth IRA vs. 401k's, and other reader questions

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. Second computer needs
2. Getting unstuck
3. Career choice
4. Setting up a trust
5. Moving on
6. Print and play games?
7. Buy or not buy?
8. Roth or 401(k)?
9. Store credit cards
10. Investing in collectibles

My hobbies are the biggest challenge I have for adequate sleep.

Let me explain what I mean. By 9 or so in the evening, the children are in bed and the needed household tasks are done. I usually have an hour or so for hobbies, and I usually take advantage of it.

I’ll read a good book. I’ll paint something. I’ll read the rules for a board game or card game. I’ll play a computer game. I’ll go for a walk.

What I often find is that I’ll get engrossed in that hobby and find myself going to bed way too late. Then, the next day, I’m exhausted because of completely inadequate sleep.

It’s a balancing act. The key for me is to simply say, “It’s time to go to bed,” and stick with it.

Q1: Second computer needs
I work at home as a freelance graphic artist, and am fortunate to have lots of work lately. I have one computer which I use all the time. I need to have maintenance done on it occasionally, and have to be without for several days. This happens at least once a year, and I think it’s a necessity to keep it in top form for my job.

The question…what is the best way to handle those several days without a computer? I can’t depend on it being done on a weekend, and meanwhile I miss a lot of work time. I easily work full time or more, and generally that includes weekends if I have the work. Also, I feel like I need a way to stay in contact with people via email at the very least.

I am very frugal, and can normally do without things like an iPhone, since I’m mostly at home a lot anyway, but it is hard on the rare occasions when I need to travel or in situations like this. The options as I see it are:
1. Just deal with being out of email contact and not working for a few days, and not having internet access
2. Buy something like an iPad so even if I can’t work, I can at least explain the situation to people and stay in contact, and have web access (my husband will oppose this because he’s even more frugal than me, and doesn’t even use a computer at all)
3. Get a second computer.
(a) After talking to my computer guru, my options for this are a cheaper Macbook Air for around $1500 that could be used to work on a limited basis
(b) or spring for a full-on second computer like the one I normally work on, which would end up costing closer to $5000 (that seems really crazy and hard for us to swing right now, but I don’t want to be frugal in an area where I shouldn’t be for business, if that makes sense.)
- Ellen

I think (2) is the worst option if you’re actually considering an iPad for this purpose. If you’re just looking at something to email someone and have web access, a netbook provides these services at $300-400 less expensive than an iPad. An iPad does certain things very well, but for the services you mention, it’s not the thing you’re looking for.

I think (1) is a poor idea if this is a thriving business with significant contact with clients.

This leaves us with (3). I’m not sure if a full-on second workstation is the right choice here, either. If I were to have a backup system, I would not drop thousands to have it match what I already have. I would get something lower-end that could do some minimal things that I might need to do. It doesn’t necessarily have to do everything, just enough so that I can get by for a week.

If I were you, I’d probably go for a netbook or a low-end PC laptop. It can do the minimal things you need to do (email, web access) and perhaps a few lower-end things for your work at a very good price.

Q2: Getting unstuck
My husband and I are stuck. We live near DC and want to move away. We are a single car family with the car paid off. We commute together and we are gone from our house a minimum of 12 hours a day (longer if it’s a day where we have to go to the grocery store or library). We both dislike our clerical type jobs… they are just jobs to pay the bills. We have Liberal Arts BAs.

We have basic internet and cell phone plans (no home phone, no cable, no credit cards). We are in the least expensive rental (at roughly 26% of our income) that I could find that would accept our two cats AND where I felt safe to be by myself (I think this is more than reasonable). Our only debt is student loans at around $29,000. We have roughly $10,000 in savings.

Our issue is that we are DESPERATE to leave this area as our current lifestyle makes us both miserable (and unhealthy as there is not much time to exercise). Additionally, we want to start a family soon (within the next 4 years) and it would be impossible in this area at our current salaries (additionally, I would like to KNOW my kids…. I feel bad enough for my CATS after we’re gone 12 hours). We want to move to a much quieter (and less expensive) area where hopefully we will be able to live close to work.

On weekends, we have been looking at towns from Southern VA to New England. Do you know anyone who has just got up and moved or have advice for attempting it? We have been working on this project from over a year and it feels just as far away now as it did in the beginning. We are scared to leave these jobs though because we know the job market is shaky and we are afraid we won’t be able to find anything when we move…. and if we don’t have jobs… we won’t be able to pay our bills or find any place to rent. We really can’t figure out how to solve this problem.
- Casey

My suggestion is to secure a job first. Simply look for jobs in areas where you’re willing to move.

You seem to be attracted to the New England area. I would probably include the upper Midwest (Minnesota, Wisconsin, most of Iowa) in that search as the culture and climate (particularly in the cities) is not too different than New England and the cost of living is substantially lower.

Once one of you secures a job in an area that looks promising for the other to secure a job, move. Go there, rent a small apartment for six months or so, and give the other one time to find a job.

I don’t think there’s anything in your financial situation that precludes you from doing exactly that.

Q3: Career choice
I am 25 years old, graduated with one degree almost 3 years ago, and now going to school at a Tech College full-time in a similar but different field. I work part-time as an intern in my field, and I am set to graduate next May, and if things go well, my internship will be upgraded to a permanent career in programming. I live with my boyfriend of 3 years as well and we have 2 pets together. As an independent full-time student, I am given a set amount of financial aid in the form of student loans every semester. This semester I received about $5k to cover my education costs. After tuition, I get about $3k leftover, which I use for textbooks and other education costs, but primarily to pay my larger bills like rent and utilities. At my part-time job I make enough to cover gas and groceries; the rest are paid for by financial aid.

There are many financial goals that I have, the most important being to pay off my student loans, as I will have $60k in student debt by next May. Other ones include getting a newer car, saving money (along with my boyfriend) for a down payment on a house, getting married (possibly), and other things. Given these huge goals, I want to start putting money away for them. I want to start putting away an x amount of money from my paycheck from my internship, but since I make so little ($160 per week before taxes), I’m not entirely sure what amount I should start with. $5? $10? Really that’s all I can do after gas and groceries. I’ve questioned about whether using the leftover money from my financial aid at the end of the semester to save is feasible, but really it feels like I am just saving my loan money, not the money I worked hard for. Also, something always seems to come up and I end up using the financial aid for something, like extra bills. This was an issue when I worked only part-time between semesters, and I needed money to cover them.

I’ve been frugal for the last 3 years and I still have no money tucked away into a savings account for my goals to show for it. My boyfriend and I have about $1000 in a savings account for emergencies, but most of that money is his saving, and while I did put some of my money into it, I have roughly $200 of my money in there. It’s mainly for vet bills and car repairs. Should I stick to saving as much as I can from my part-time job, albeit slow saving? Should I start now, or does it not make sense to do this until after I have a stable and higher-paying career?
- Shelley

As long as you’re cohabitating with your boyfriend, your financial futures are intrinsically tied together. You have to make the rent together. You have to pay the other utilities together. If you’re not doing it together, then one of you is just covering the bills and thus reducing the money that he or she has left over to pay for debts and other such things.

The solution here is to sit down with your boyfriend and have a serious talk about your joined financial lives. The debts you each have are going to impact the freedom you both have as a couple, as is the relatively limited income.

Come up with a plan together. Not only will this cement your relationship, it will also help you figure out what you should be doing with your limited income.

Q4: Setting up a trust
I am 33, married, full time student (just started back). I work part-time to pay for school, my wife works and picks up all the rest of our expenses. We worked pretty hard to get here over the past five years that we’ve been married, saved up a lot of money and bought a house. We are proud of what we’ve done in so little time, and as a result we like to counter that pride by being supportive and giving when possible. This starts with our immediate family, and here’s the breakdown:

Both our parents are middle to upper middle class, they own their homes or are very close to paying them off. They have decent retirement savings and are all in the age range of 61-64. Basically, I think they are fine, but we like to not rely on them financially at all because we worry about external drains ruining their retirement. My wife has two sisters who are very young but finding their way in post-undergrad world (they both have jobs, a great accomplishment in this economy). I also have two siblings; both older than me. One is 35, the other is 40. My 35 yr old brother is married and has a family, and they are very successful. However my sister still lives with my parents. She works in education, and I do not think she makes even 30K / yr. So you can see that this is our only real problem… my parents don’t have a lot of money (my father still works but wants to retire in 2-3 years) and in addition to supporting my sister, all three are in poor health due to weight. I’m really worried my father will keep working until he’s 70 or older because of my sister, and that he’ll work himself into an early grave. My mother is retired, and keeps the house in order and babysits my brother’s children (and she is paid for it). All of us live in the same city.

My sister has a small amount of debt and obviously, relies heavily on my parents for everything. She has absolutely no savings (I do not think she has any retirement at all, or if she does it isn’t even 10K). I have gotten my mother to the point where they are eating healthier, but I would still not say healthy. Assuming though, that one or both of my parents pass by the time they are 80 (a little morbid but realistic), I do not know what we can possibly do with my sister. She requires transportation to her job (she has tried learning how to drive, but it was just too expensive and she never quite got the hang of it) and there’s no public transportation. She has very expensive health costs that nearly 100% of her salary go to (this is after her work insurance of course) and she has absolutely no concept of money… she can’t balance a checkbook or understand how credit (interest) works. She is very sweet but naive, and has a boyfriend who, like her- works paltry jobs for very little income. I cannot count on him to take care of her.

My brother and I have already spoken to my mother and made her understand that she needs to create a will where all of their estate would be in a trust for my sister, and we’d use that. However I’m still concerned that this might not be enough… what if my sister outlives this trust? Can you possibly think of what else we can do to prepare? Do you have any ideas of what we can do right now to ease the burden on my parents? Any idea how to get my sister a little more self-sufficient? They won’t take money of course, so I need something more subtle. I appreciate anything you can come up with- we want to help we just don’t know how.
- Jeff

You can’t make a person be who you want them to be. Your sister is who she is and if a significant change is going to come in her life, it’s going to come from within her. You can’t make it happen.

I agree that the best thing you can do is to make sure that the trust is actually put in place to take care of your sister. I would talk to a lawyer and make sure it’s set up in the best possible way with the laws and rules in your state.

As for her outliving the trust: you’re just going to have to accept that it’s a possibility. Hopefully, her jobs are earning her Social Security credits, so she will eventually have something.

Remember, you can’t make someone be who you think they should be. Trying to do that eventually ends in failure.

Q5: Moving on
I am about to turn 26 and have recently ended an 8 year relationship with my boyfriend ( it was his choice to end it) I have an Associated degree in LIberal Arts & Sciences from a community college. My dream is to be a writer/screenwriter and I have been working on a novel for a couple of years and recently two screenplays. It is truly what I see myself doing, most of the time the other times I am paralyzed thinking that I will never have something good enough that people will want to read, that I am not a good enough writer and I have no talent.

Knowing how hard it is to break into the business sometimes makes me want to turn my back and run but another part of me crazily believes that I will make it. I have been ‘babied’ over the years, have 2 good friends and have lost all contact with my high school friends, I basically have lived with my boyfriend and he is my best friend. I have had very few financial obligations over the years since my boyfriend paid for the apartment and house we now live in. I have never had to learn about paying bills or credit scores, he takes cares of those things for me. I am soo confused and upset about everything, I cannot imagine being on my own. RIght now I am working for a temp agency and have minimal savings, about 300.00 I have no cc or student loan debt but do have a monthly car payment of 210.00 and cell phone bill of 45.00 which I will soon be getting rid of for a pay by minute phone.

I am looking into moving in with a friend into a two bedroom apartment but feel so overwhlemed about the future, I don’t know if I can handle the stress and emotional turmoil, he is my first boyfriend and I am so terrified of making it on my own. I have never felt very smart and my family is not well-off and basically live paycheck to paycheck, I was homeless for awhile as a child and sincerely wish that I will never be homeless again because it is the scariest thing in the world. I don’t know what to do because I have never been around successful people other than my boyfriend. I see myself as a loser, following in my parents footsteps. I don’t know whether or not I should go back to school. I have been tossing and turning about that decision for a couple of years, my boyfriend tells me that I am a writer and writers don’t need to go to college. I read a ton of library books and I have learned a lot from them, they taught me how to think, and in all honesty college did not provide me with lasting knowledge than books do. I am worried about my future, should i point my dream of being a writer on hold and go back to school to get a degree in the medical field? Something I know will make a lot more money than I have right now or stick it up and work minimum wage jobs while writing away? Sometimes i Just don’t feel like I have it to make it.
- Kelly

You can do this. A lot of people make a great go of it from your very position.

You’re going to have to make a fundamental choice, though. You can either continue to chase the writing dream by, as you mention, working at a minimum wage job and focusing your energies on writing and living in near-poverty or going back to school to chase a higher-earning career.

I can’t tell you what the right path is for you. It depends a lot on who you are. My rule of thumb would be that I would look at the path I dream about (the one involving writing) and ask yourself whether that path fills you more with excitement or with fear. If it’s fear, then I’d choose the safer path.

Q6: Print-and-play games
When I was in college, we used to play this weird little game that someone printed off the internet. It involved playing squares with four colors on them and trying to make groups of the colors.

I was wondering if you knew what game this was and if you knew of any other free games that can be printed off of the internet.
- Eric

I think you’re talking about micropul, which is indeed a game you can print off the internet that involves playing squares and trying to group the colors. It’s a very fun game that’s wonderful to pack in a spare pocket on a camping trip.

There are a lot of print-and-play games out there that are quite fun. If you add in a few basic components, such as a deck of playing cards and a chess/checkers set, there are more great games out there than you can ever play.

Here are six worth looking at in addition to micropul: Merchant of Venus, Zombie in My Pocket, Rat Hot, Decathlon, Richelieu, and Cronberg. If you have a deck of cards as well, the possibilities are endless.

Q7: Buy or not buy?
I’m 23 and I just got married (he’s 28). He’s an E-6 in the Navy, so a good steady income while I’m an artist (starving artist at the moment, but I’ve gotten into a lot of shows in my area so hopefully that’ll get better soon). We live in Virginia Beach, so rent/housing prices are pretty high here. We’ve been in this apartment for 3 years already and dislike not having enough space for my business or a yard to grow a garden in. He already works 12+ hour days, so we don’t really want to move farther away from the city and increase his commute. A woman I used to work with is trying to sell her deceased parents’ house and she’s asking $180k for it, though I’m sure she’d come down a bit.

I guess I was just looking for the opinion of an outside party on the matter. The reason I’m hesitant is that we’ve no guarantee that we’re going to be here longer than 3 years and I’m worried about what we’d do with the house. We could stay here forever if he gets lucky, or we could move at the end of this tour. We -think- we’ll be here at least 6 more years. Our rent increases every year so that means we’d wind up paying in the neighborhood of $90k in rent over 6 years. We have about $200k that’s fairly liquid and quite a bit more in retirement accounts that we don’t intend to touch. We have no debt to speak of and enough savings dedicated to replace both our cars outright and have a healthy emergency fund (the figure I gave you does not include any of that as I view those all as essential).
- Emily

It sounds like you can write a check for the house right now. If that’s the case, I would probably buy it.

I probably would not buy the home if it involves taking out a mortgage. The advantage you have in this case is that you can buy the home without a mortgage, which means if you do move, you can easily move out and sell the house after you’ve moved to another area and still have enough for a down payment on another home if you decide to buy a home elsewhere.

Is it a good investment? It would make your monthly rent payment vanish. Instead of handing money to a landlord, you put it in your own pocket instead. I think that’s a very good move.

Q8: Roth or 401(k)?
I’m 22 years old, I graduated from college this past December, and I just started working at my current job as an Administrative Assistant at the beginning of March this year. I make $36,000/yr, I have a small emergency fund of $700 (will reach my goal of $1000 – per Dave Ramsey – in about a month), I have about $29K in student loans ($10K of which is 0% interest – borrowed from an aunt), and about $500 in credit card debt (down from $1000!). Every month I pay $800 for rent, I round my student loan payments up to the nearest $10 increment ($150/month) and I try to pay double the minimum on my credit cards (I’ve paid off two out of five cards so far using this method).

Following the advice of my mom and others, I immediately started contributing 10% of my income to my 401(k) provided by my employer as soon as I was fully contracted with the company (which was this past May). However, after reading some articles on the difference between Roth IRAs, 401(k)s, and other retirement accounts – especially your piece on it – I’ve come to realize that the only benefit a 401(k) has over a Roth is the employer match. That being said, I’m not quite sure if I should keep contributing to my 401(k) – my employer matches 3% of my salary REGARDLESS of how big my own contributions are or if I even choose to contribute at all. So far I have contributed about $1000 to my 401(k) (keep in mind I just started!).

So what do you think? Should I stop contributing to my 401(k) and open up a Roth IRA instead? Either way, there’s money being put into my 401(k) no matter what. Also, I’ve read a lot about Dave Ramsey and (from what I’ve read) he doesn’t even mention contributing to any retirement account until after all non-mortgage debt is gone. Does this mean I’m starting too early? Should I focus on eliminating my student loans at a faster rate?
- Angie

I would absolutely open up a Roth IRA and start contributing to that instead of the 401(k) in this situation.

I wouldn’t worry about starting too early. It is never too early to start saving for retirement. Your debt seems to largely be under control, though it might be fine if you spent a few months between stopping your 401(k) contributions and opening a Roth to pay off that remaining credit card debt. After that, I’d go right back to plugging away at retirement.

Angie has a follow-up question.

Q9: Store credit cards
Another question that I have is in regards to store credit cards. I’ve always regretted accumulating a lot of store credit cards while in college (Kohl’s, JCPenney, Target, etc.) but plenty of my friends have been telling me that these store credit cards do not count on your credit score. At first I didn’t believe them, but so many people were telling me this that I’m starting to think there’s some truth to it. Is it true – do store credit cards not count against you?
- Angie

It entirely depends on whether the cards are reported to the credit bureaus, and that’s entirely dependent on the policy of the company issuing them.

The best way to find out is to simply download your credit report and see what’s on there for you. The legitimate way to get your credit report is to use the FTC’s site (annualcreditreport.com).

My understanding is that some are reported and some are not.

Q10: Investing in collectibles
You’ve mentioned before that you have a pretty strong knowledge of some types of collectibles. I think you mentioned vintage baseball cards and some other kinds of trading cards.

Would you ever invest in them? I guess I’m asking a broader question. Would you invest in any collectible that you had quite a bit of knowledge about?
- Vincent

If I was absolutely sure I was getting a good deal on the collectible, I’d happily invest.

I have purchased many sports cards and trading cards over the years with the purpose of turning a profit on them by reselling them either on the internet or to other interested parties. It can be done if you know exactly what something is worth.

This becomes a very fun hobby when you’re looking at yard sales and estate auctions. I have stumbled upon a few really good buys in such situations.

Got any questions? Email them to me or leave them in the comments and 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 hundreds of questions per week, so I may not necessarily be able to answer yours.