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The Authors of “On My Own Two Feet” Answer Your Questions


A little while ago, I reviewed the book, On My Own Two Feet: A Modern Girl’s Guide to Personal Finance” by Manisha Thakor, MBA, CFA and Sharon Kedar, MBA, CFA.

A little while later, I was given the go ahead to see if any of you had questions for them and they answered ALL of your questions!

Without further ado, here are the questions and answers:

From Amanda:

“Oh, me, me!! I hope it doesn’t get too long. We have recently (just last Friday!) paid off all of our debt except for the house so now what? We need to restart our college and retirement savings (we were saving a little before but halted that to have extra money to knock out the debt). I don’t have any idea how much we should be saving. Savings has always been an afterthought, just saving a portion of what was left after paying the bills. I’d really like to start paying ourselves first but I don’t have any idea what we should be saving to meet our goals. I’ve run several online calculators but keep coming up with VERY different numbers and I’m really feeling confused. We’ve been following Dave Ramsey’s advice to get out of debt and he says to save 15% of our income for retirement. Is that acceptable? But even with that I have no idea what we should be saving for college. Our children are 2 and 4 and we’re 28, if that helps.”

First, kudos to you for paying off all of your non-housing debt. That is a HUGE accomplishment. Go you!! It’s often been said that your kids can get a scholarship for college – but that no one is going to give you a scholarship for retirement. One of the best gifts you can give your children is the peace of mind of knowing that they will not have to fund Mom & Dad’s retirement. When it comes to saving, we recommend that you first build up at least a 3-month emergency fund (if you don’t have one already) and then kick into gear with your retirement savings. If you are just getting going in your late 20s, striving to save 10% or more of your gross (before-tax) income for retirement is an ideal goal. AFTER you’ve hit both your emergency fund and your retirement goals, then you can start setting aside money for your kids in a college savings plan such as a 529 plan.

From Da big D:

“How much is enough? I have paid off my debt, sans mortgage, max my 401k, my IRA, and save 10% to another account for a rainy day. But since I didn’t start till 5 years ago (39 now) I am way behind the curve. I have no clue what I need for retirement. So how much should I be saving??”

Here’s how the numbers work out. If you save 10% of your gross income and are in your 20s or 30s when you start doing this, assuming you invest wisely, the odds are high that you’ll end up with a standard of living that’s similar to what you have today. Since you started in your mid-30s, saving a bit more than the 10%, so closer to 15% of your gross income will help you toward your retirement goals. That said, don’t forget to invest that money wisely. When you are under age 50 and have 5 or more years of an investment time horizon, we like stocks and specifically index funds such as the S&P 500 index fund. We wouldn’t recommend you try to pick individual stocks unless you plan to do that for a living. If you want to work through some math, check out the retirement calculators as websites such as Vanguard, Fidelity, and Charles Schwab.

From sf mom:

“My question(s) are along the same lines. I’m 32, my husband is 41. I max my 401(k), Roth, put $175 a month into our 2-year-old daughter’s 529 plan, we have no credit card debt and I have $25K in an emergency fund (HSBC online savings earning 5.05%). What’s next? A non-tax-deferred online brokerage account seems like the next logical investment. My uncle highly recommends Buyandhold.com because of the very low fees. My goal is to work hard in my peak earning years, sock as much money away so that I can retire comfortably, help out my children (we have #2 due in August) with a bit of college if not all of it, and travel. We have a home here in SF and an investment property in Baton Rouge, Louisiana. So, what’s next? My husband wants to invest in another property, I say that I want to diversify and put some cash away in a brokerage account? Help!”

SF Mom, our vote goes to you (sorry SF Dad!). While real estate has had quite the run in the US over the past 7 years, the party looks to be winding down. On top of this, historically, stocks have done much better than real estate once you take in to consideration all the other things that go along with investment properties (property tax, insurance, maintenance, upkeep, finding tenants, etc.). We are big fans of low cost buy and hold investments for the portion of your savings that you will be keeping in a taxable account. While we are usually wary of “hot tips” from Uncles – your Uncle sounds quite wise to us indeed!

From KCLau:

“I’ll have a newborn baby this September. My question is simple: When should I start teaching him about money?”

Alas, teaching wee ones about personal finance is not our area of expertise. We recommend you read Joline Godfrey’s wonderful book, RAISING FINANCIALLY FIT KIDS (affiliate link) for some quality advice on this subject.

From spinsterlady:

“How do you pay off $13,500 in credit card debt when you’re already the most frugal person you know? I make $24k a year, and my husband makes about $28k after child support payments. This credit card debt has sneaked up on me over the years, and I relied on cards to pay for “life’s emergencies” such as unemployment, car repairs, a modest wedding, vet bills, etc. I have a house with some equity, but I don’t want to take out a home equity loan. After basic bills, our budget is stretched tight as a drum. Help!”

First, kudos to you for living frugally. If you’ve already streamlined all the typically areas for cutbacks (eliminating cable, bringing lunch to work, exercising outside in lieu of paying for a gym membership, etc), the only other “for sure” option is to make more money. It sounds like you are working very hard as it is, so this probably is not the answer that you wanted to hear – but we concur whole-heartedly that you don’t want to take out a HELOC to pay off that credit card debt. Our suggestion is for you to try to take on some temp work. Life won’t be fun for a while, that’s for sure, but if you can earn an extra $150 a month add to your credit card debt pay down in a few years you’ll have worked that debt off. And we’re sending you an extra big hug, because we know it’s not fun to be in this position.

From FlatGreg:

“Mortgage acceleration programs have been available in certain countries and are now starting to appear in the US. There’s only a couple programs available, but they all work similarly by combining your checking account with your mortgage. The amount you normally keep in your checking account reduces your principal, however it’s still available to use whenever you wish. The benefit is a significantly quicker payoff of your mortgage without making additional payments. Do you have any comment on these programs? They’re so new they’re hard to find information on. I’ve also heard you can accomplish the same thing yourself using a HELOC and your existing mortgage.”

When it comes to personal finance – simple is better. Our feeling is that if you want to pay off your mortgage faster, it’s best to send in an extra payment every 6 to 12 months yourself. Snazzy programs that offer to accelerate your mortgage pay down in a pain-free manner are not devised for your benefit. They are out there so that someone else can make a little extra profit for something you can well do on your own. We say go you for wanting to get rid of that mortgage but stick to the old-fashioned way!

From Tyler:

“I am 24 y/o and my wife is 26. Our annual income is around 65k net. The only debts we carry are our mortgage and my wife’s student loans. We decided to make minimum payments on the student loans (10k left) since the interest is at almost 2%, and accelerate the process right now of saving 5 months expenses into our emergency fund. The thing we would like to do is refinance our mortgage. We currently have an 80% of around 121k remaining on it, and a 20% HELOC of 30k remaining (all interest payments). We want to combine these two to a one 30 year loan to start reducing principle on the HELOC. Should we still combine our 2 loans even though we may move in about 3 years? Also, I go to school part time and we pay cash for it – reducing the ability to get a 15 year. We are also holding off on our retirement until Jan of next year (due to the funding of the full e-fund). When we finish this, we’ll be contributing 30% (to make up for a couple years lost). Does this make sense for a couple our age?”

Well, sort of – to be honest, it worries us that you have a $30,000 HELOC. Truth be told, that really is pretty much like using a credit card (albeit one where the interest is deductible). If taking equity out of your house via that HELOC has been the only way you’ve been able to make your budget work, it’s a sign that you may want to tighten that belt buckle. However, your desire to move from interest-only mortgages into a 30-year fixed situation where you are actually paying down principal is one we applaud with hands and feet. We’d also toss out that when you move – unless you sell the house yourself, you’ll face realtor costs that can be as much as 6% of the selling price, so don’t forget to factor that into the equation when you think about whether or not you’re ready for a new house. Our rough rule of thumb is that you are ready to buy a (new) house ONLY when you are sure you are going to live there for at least 5 years AND you can pay 20% down (a quaint notion, we know, but one that came about for good reason – housing prices don’t always go up!)

From Renee:

“I have a Roth IRA that I started when I was about 22 based on financial advice from my mom’s financial planner. I’m now 25, and I’ve barely contributed to it (around $800 total). I realize it’s early in my life and I have time to build it up, and I usually need the money in a savings account “emergency fund” instead of a long-term IRA. Question is, at my age, how much should I be contributing to the IRA per year? And when I get a little extra cash, should I immediately save some of it in the IRA for long-term, or put the whole amount in my savings account, then transfer only the pre-decided amount to the IRA every year?”

In an ideal world, you would have an emergency fund AND “max out” your Roth IRA every single year (in 2007 you can put $4,000 in your Roth). That may seem like a Herculean goal right now, but we’d encourage you to go for it. The budgeting chapter of ON MY OWN TWO FEET can walk you through some steps to figure out how to squeeze some more savings out of your income. Our advice is to save for a 3-month emergency fund first, and then funnel as much money as you possibly can after that into your Roth IRA. It sounds to us, however, that you may want to take a long hard look at what kinds of things you are calling “emergencies.” It’s possible that they are recurring and that your root problem is the need to cut your spending in some other areas so that you’ve planned for those expenses in advance.

From Rich:

“I have started my own business and it has been going for about 8 months. I am happy and lucky to report that I am already making a profit on the business and have made more than I have invested, and the business appears to be growing. I have quite a bit of credit card debt from before I started the business and am in the process of paying it off aggressively. My question is, my wife and I have three 401 (k) accounts from previous jobs and I need to know where I should put the money as a self-employed person. What would be your recommendation?”

Congratulations on your business success! We’d first urge you to pay off that credit card debt as fast as possible. If your income level is such that you qualify for a ROTH IRA, we’d suggest fully funding that next. If you still have money to sock away after that, we’d suggest you open a SEP-IRA (which is sort of like a 401(k) for self-employed people) at a discount brokerage firm such Vanguard, Fidelity, or Charles Schwab. You can contribute up to 25% of your income into a SEP-IRA up to an income limit of $44,000 for 2007. We’d also suggest that for ease of record keeping you consolidate those 401(k) accounts into a Rollover IRA at the same discount brokerage firm so you can more easily keep track of your investments.

Thank you to Manisha and Sharon for answering everyone’s questions. It was very, very nice of you!!!

And it doesn’t end there!

I have received two copies of On My Own Two Feet: A Modern Girl’s Guide to Personal Finance(aff. link) to give away!

All you have to do is leave a comment on this post to say you’re interested by 11:00pm EST on Sunday, June 17, 2007. I will use random.org to select two random commenters. I will announce the names here on Monday, June 18, 2007 as well as email the commenters. At that time the commenters will need to provide their address (US addresses only, please) so I can ship them their book free-of-charge. If I do not hear back from the commenter(s) selected by midnight on Wednesday, June 20, 2007, I will randomly select another commenter(s). Your chances of having your comment selected will depend on the number of comments received, only one entry per person, and I promise to ship the items out but cannot guarantee their safe arrival. Please note that I do have a pet friendly home.

What are you waiting for? Leave a comment!


  • Reply Ashley |

    I am definitely interested in the book! I only recently started reading personal finance blogs and books and actually find them fun to read.

  • Reply Beth |

    Those were helpful answers, so I thank the authors. I’d also like to be entered to win the book.

  • Reply Rich |

    me me me!! Thanks for the answer Manisha and Sharon!!! And thanks Tricia for doing this!

  • Reply Maria |

    I’d like to be in the drawing for the book–I thought the answers to the questions posed were terrific!

  • Reply Jessica |

    I’d love to read this book! And thanks for your blog too! I check it every day. 🙂

  • Reply Mike |

    I enjoyed the responses, very interesting.

    Also, I’m interested in the contest, count me in 🙂

  • Reply Ashley |

    This was a very helpful post. Thanks for the opportunity, Tricia! Maybe I’ll win something for the first time in my life. 🙂 I’m very interested in the book.

  • Reply Dawn |

    These questions and responses have really perked my interest in this book! I want a chance too 🙂


  • Reply Jaime |

    I loved the advice! It makes me want to read the book! But reading it for free would be EVEN better! 🙂

  • Reply Brenna |

    Hmmm…I didn’t see my comment post the first time. So, I’ll try again. I’m always interested in new books to read.

  • Reply Heather |

    Would love to read the book! I’m a Dave Ramsey fan but am open to other perspectives too 🙂

  • Reply Susan |

    Please enter me in the drawing. I check the blog just about every day since I heard about it via the New York Times. It’s a little addictive! Since then I’ve become more disciplined about my own finances (50k in total debt, 35k of which is cc debt, the rest home equity); have built up my emergency savings a little, and for the first time ever tracked my expenses down to the penny for a month, using the same categories as Tricia. An eyeopener to be sure. Anyway, I would love to receive a copy of the book. And thanks, Tricia, for everything you do!!!

  • Reply Joy |

    Wow, great questions and responses! I’m definitely interested in the book!!

So, what do you think ?