Dear Ms. Herzog, My husband and I are not Michelle; we indulge in the occasional luxury and trade in our cars before the wheels fall off. However we have no credit card debt, decent returenebt savubgs abd our 3 chidren have nio student debt. Two of them are also pretty responsble. They've made theoccasional novice mistake, which is to be expected, but in general are doing well. But the 3rd is out of control. She soends noney as soon s she gets it, or even before. This is compounded by the fact that she is a singe mother with a sporadic work history. The fathers are not in hthe picture. She gets food stamps and AFDC for the children, which makes us a bit embarrassed. We've been helping her outa little, which makes our other children unhaopy, buit these are our gandchuildren. I know you can't help people who don't want to be helped, but I'm planning to read your book for myself to try to get ideas for how to deal with this. She's probably made every mistake you've made and then some! Please keep your fingers crossed and say a prayer that this somehow works out well.
I'm a mom, too, and I know it's painful when you can't stop your kids from making mistakes. I hope my book helps her. I made just about every mistake possible and I survived. Once your daughter faces her situation and decides she wants to make changes, she'll be on her way. Fingers crossed for you!
It can be frustrating when your kids don't follow your example. But do what you are doing. Help but be careful not to help so much so that she doesn't learn to help herself.
If I have a credit card with a 26% interest rate and a 12,000 bill and the company wants me to pay 362.00 per month which is unaffordable for me what can I do. Thanks
I feel for you because I know this is stressful! If you have excellent credit, you can consider transferring your balance to a credit card with a 0% intro APR and try to pay it down without all that interest adding up. But if this isn't an option, try to negotiate with your credit card company and ask for a lower rate or a lower minimum payment while you catch up on your bills. This will work best if you have excellent credit. You can also ask to speak to the company's hardship department and see if they'll work with you.
You might also seek help to negotiate with the company from a nonprofit credit counseling agency. Go to www.debtadvice.org to search for an agency near you.
DD now has a credit card at the old age of 21, all by herself. Preplanned events were charged, e.g, conference, hotel, etc., and other sundry items. The large bill came in and she asked me how to pay. I told her pay it 100%. She did and watched her checking account take a nose dive. Now, she manages her credit card and pays it off 100%, no matter the bill.
That's an awesome story! Good for you for making her pay her bill. She learned a valuable lesson. Pat yourself on the back for being a great parent!
I don't have debt, except for my mortgage, and one day I realized that I could still budget better. I'm not all-cash yet, but I do write down every purchase I make by category and keep it in my wallet. Wow! What a huge change. I thought for a few days about buying a cheap shredder (I did) and a new picture (I didn't). I now have an awareness of spending I didn't have. I've saved several hundred dollars so far this month, even after putting down vacation deposits. Knowledge is power! Thanks, Michelle, for inspiring me. Keep doing what you do.
What a great testimony.What you found is that prosperity happens on purpose!
When I was in high school, I was hired at minimum wage when I first started working in retail. But, by the time I was a senior in high school, I was making more than minimum wage. I proved to my managers that I was able to do my job quickly and efficiently. I was also able to take on additional responsibility. I got annual raises as a reward for my hard work. I know the same happened with several of my friends who had jobs. Considering my experience, I don't see how someone would live with a minimum wage job. Many companies claim that a good percentage of their management staff began as minimum wage workers. I honestly believe that is someone wants a better life, they will find a way to get ahead. Forcing companies to pay everyone more would hurt those employees who take initiative to be better employees because there will be less money for raises to reward good workers.
You definitely prove that hard work pays off. But what if you worked hard and you have a manager that doesn't promote you, doesn't recognize your efforts? What if a manager cherry picks the people to promote or pay more? We have to find a way to pay people a living wage. And many people want a better life, work hard and still can pay for the basics of life.
It has come to that time, when we need to start looking for the potential replacement vehicle for our aging minivan (the ol' girl is almost 16 years old). Recently, the muffler and the windshield were replaced. One of the doors needs a new motor, which it will get soon. In doing research, I am learning about "certified used cars" through the dealerships and hearing about CarMax from other people during my daily bus commute. Is one recommended over the other? Why? We are saving up towards the replacement. I normally buy used cars (new to me). I will be the primary driver of this vehicle, which must be a minivan or an SUV, due to our family size and three small children in carseats/boosters. Thanks!
The key to getting a good deal on a new or new to you vehicle is research. I do a ton of it before I set foot in any dealership. I've bought cars from private sellers, dealers, Carmax and even rental car companies. Got good deals from all and some lemons. Just know the numbers, know what you can afford, safety record, repair record, etc.
Dear Ms. Herzog, I'm reasonably careful with moneh, have one credut card,primarily for gas and onlne travel purchses that I pay off every month. However, my 24 y ear old edaughter. who graduated from college in 2012, already has substantial debt. I'm going to give her your book! While I feel somewhat derelict in not having taught her better, she was also taken in by the ream of credit card and ofher offers she received offers she received upon graduation. Not only credit cards but let us help you buy a new car (financed, of course); congratulations on your graduation, now you deserve a fantastic vacation (also financed), let us help furnish your new home, etc. etc.l etc.l Parents of recent or upcoming graduates should be alert to this sort of thing and advise their children accordingly.
This is exactly what happened to me when I got out of college. Those credit card offers made me feel like I was very special. I charged an entire cruise once when I was young. It took a long time to get out of debt, but it never happened to me again! You make a great point that this needs to be discussed with kids before they graduate. We can't protect our kids from all the offers, but we can at least arm them with information.
The NY Times did a long series, timed to coincide with the inaugeration of Bill deBlasio, about a child named Dasani who's a completely innocent victim of inequality. Her father's in prison; her mother's a drug addict who's never held a job; and she has seven siblings. Kathleen Parker wrote an op-ed yesterday that marriage is the secret weapon against poverty. If our society's going to "do something" about inequality, where do we start regarding parents who shouldn't be?
We start by providing resources to help them parent better. And I'm not talking just about money. Marriage alone isn't the secret weapon if your marriage is horrible or you don't take the time to marry the right person. We have to be compassionate about this issue and work to develop programs that get at the root of why people are so messed up. That's what will help the children and people become better more productive parents.
We've had a rough start to the year so far; our roof needs to be completely replaced, our basement flooded due to a pipe bursting in the extreme cold, and one of our children needed surgery. Thankfully, all of these things are easily dealt with (and our daughter is recovering well), but we don't have enough in savings to cover this many disasters at once. We have two choices: we can take out a low-interest home equity loan, or we can sell some of our long-term investments, which we planned to use to pay for college down the road. The investments are doing very well, and I really, really don't want to sell them. The loan would involve a monthly payment below $200 which we could easily afford, and I think that's a better idea (the interest rate is so low the cost of the loan amounts to something like $500, which is a pittance compared to the amount of interest we'd be losing if we take the money out of the investment account. I am nearly always anti-debt, but in this case I think a small amount of easily manageable debt is a better option than the alternative. Thoughts?
I just found out that I need a new roof, too. It's horribly expensive, isn't it? You've made a thoughtful analysis of your situation. I don't ever condone debt, but sometimes life is just plain messy and you have to pick the best option that will cost you the minimum amount.
I agree that it appears you've thought this thu and the debt would go to fix the house and not for consumer stuff.
Hi Michelle, How could I best identify financial planners or advisors who can provide guidance to a couple entering retirement? They need general advice (whether to rent or buy after selling the family home, when to stop working, budgeting), rather than investment advice. Many thanks!
Here's the link for a good story from U.S. News & World Report on how to find a financial advisor if you're not rich.
What is the goal when saving for retirement? I like the idea that my retirement savings should be enough that I can live off the interest alone. But, that means needing a much larger amount of money at the time of retirement. If I assume that I will live for 25 years and my savings will last that long if I spend the interest and some of the principle each year is that enough? I would hate to run out of money if I lived longer than expected or interest rates/cost of living changed.
You are right you need to know your number. But that number is unique to you based on more than just your savings. What are you expecting from Social Security. Will you drag any mortgage debt into retirement. Do you have a pension? Do you live in a low cost area? Do you want to do a lot of traveling or other things that may boost your expenses.
Go to choosetosave.org and input your informaiton in their Ballpark Estimate calculator. It will help you firgure out what's your number.
What's the biggest credit mistake people make? Can people really win at this credit game?
It's really hard to pick the biggest mistake because there are so many ways to mess up with credit cards! But I'd say that one mistake I see consistently (and I certainly made this mistake) is not tracking your spending. It's one thing to have a budget, but if you don't track your spending, you can easily end up in debt. As for winning the credit game, I do think it's possible. I make money from rewards credit cards, but I always pay ,y balance off by the due date. No carrying a balance! That's the other big mistake folks make with credit cards.
Not supporting debt here but if the long-term investments are meant for college and in a deferred account (i.e. 529) then the taxes and penalties for withdrawing could well be in excess of the interest cost of the home equity loan. Another reason to consider the debt option.
Specifically, what should someone say if they can't afford even the minimum payment on their credit card. What will work in your experience?
Some consumers have gotten good results by calling their credit card company and simply asking if they can pay a lower amount for a specifc period of time. Now, this works best if you have excellent credit. I suggest having a "script" before you make the call. You want to be able to explain why this has happened and when you foresee being able to make minimum payment again. Also, when you make the call, if you don't get a good response, ask to speak with a manager. The manager may refer you to the hardship department, but that may actually be very helpful while you try to manage your debt.
What advice would you give someone who has a good credit score to keep it that way?.
It's so very important to pay all of your bills on time. Not just credit card bills, but every bill you pay every month. Even a delinquent cell phone bill can get reported to the credit bureaus. But that's just the foundation. Also keep your credit card balances below 30% of your total credit card limits (closer to 10% is even better).
You have to stop being the safety net so your daughter will learn, though that's harder to do when that means the kids will be homeless (not sure if it is that bad, but just saying), so you have to find a way to help the kids. Also, be mindful of your other two; any help you give #3 should come out of her inheritance, and rewrite the will so any money that would be for #3 would go straight to the kids, through trusts that they can't touch until age 25.
I agree about being sure you don't help so much that you enable the daughter to continue being a poor money manager or making decisions that keep her down. As for the inheritance, not sure that's a good idea. Don't make statements with the money you leave because it can often create major issues with the people you leave behind. So for example, what if you helped pay for one or all of the kid's college education, would that de "deducted" from their inheritance?
It's your money, so if at the end of the day you simply want to divide it among the siblings no matter how much you have given to them while you were alive, do that.
Whatever you do, let folks know.
I'm interesting in knowing how retiring is going go impact my credit score and, in particular, my ability to get a mortgage for my "dream" retirement home. Would the lack of employment adversely affect my ability to get a good mortgage rate? Would it make sense to get the home and mortgage in my last year of employment? Thank you.
Your credit score will not go down just because your income does. Income isn't a factor that's considered by the FICO score. As long as you pay your bills on time and keep credit card balances low, your score should be fine. Now, I'm not a mortgage expert, but I think it makes sense to make sure you can get approved for the mortgage before your income goes down. However, be sure that your new mortagage payments fit within your retirement budget.
In reply to the question about this. The Certified Financial Planner (R) Board also has a site that will help you find planners in your area. Some planners will only see people with assets of over $500k, for example. Some don't. http://www.letsmakeaplan.org/choose-a-cfp-professional/find-a-cfp-professional
You can also find a fee only planner at site for the National Association of Personal Financial Advisors www.napfa.org
Michelle, I'm loving the Financial Fast but don't have the most recent copy of your book. Barnes and Noble didn't have it and I wasn't "fast" enough to order it before it started. Will I still be successful with the older version?
I'm so glad you decided to join the nationwide fast that began on Monday. So, you absolutely can use the older version. If you didn't have the book, I would say get the newer one because I've updated it, removed a chapter, added a different one on long term care, put in a new intro and updated stats on the latest version "The 21 Day Financial Fast."
If you are interested in the fast go to wapo.st/financial fast to learn about it.
We have several loans related to a vacation home we purchased about 2 years ago (there were some difficulties with the state of the home, location, etc which made an initial mortgage difficult, but have all since been resolved). I was laid off about a month ago and will be received a severance payout (I have a new job, so that is not a concern). I am torn as to which loans to apply the funds to... We have a 20k 401k loan @1.5%, 40 k home equity loc @2.99, 70k 1st mortgage @3.5%. (and a mortgage on the vacation home, but we aren't looking to do anything there) I should clear about 45k for the payout. What would you suggest? Thanks!
Typically, I suggest people follow my "Debt Dash" plan where you list all your debts starting with the one with the lowest balance. So I would pay off the 401 (k) loan first and in full because it's the one with the lowest balance. Then apply the rest of the money to the debt next on the list. (But we sure you have a good funded emergency fund).
Hi Michelle - I just wanted to add perspective to the posters that insinuated parents who "shouldn't be" or minimum wage workers who don't work hard enough to get a raise. When people are healthy, educated and secure - EVERYONE benefits. The "welfare queen" and "lazy" poor person stereotypes are all myths created to push a political agenda. I am an upper middle class, married, educated and gainfully employed person - and I realize every day how connected my good health is to those people who work in the restaurants I frequent, or the stores I shop in, or the people who service my car or clean my house. We all benefit when everyone prospers.
Amen. Amen. Amen!!!!!!!!!!
To whom much is given, much is required.
Sometimes I feel like I spend so much time worrying about savings that I miss out on certain quality of life issues. For example, I would love to do some renovations to my 44 year old house, but I'm too busy trying to pay down the $100K I have left on my mortgage. I am at a very low interest rate, but spending on anything scares me while I still have debt. Any suggestions?
First, I think you should be commended for being so responsible. We all have different comfort levels when it comes to spending and enjoying life vs. saving all the time. Perhaps you could create a list long-term goals related to renovating your home and see if you can do small things here and there. Again, I think it's great you want to save, but it's also important to enjoy life a little now and then.
Michelle, I hope you can help me find a compassionate way to approach my sister in law. She has undiagnosed medical issues, and currently does not work because she finds it hard to hold a 9-5 job due to those problems. She could do flexible work and is really good at office organization, book keeping, etc, but won't seek the work until her disability claim is decided. So, she's on public assistance and receives a lot of financial help from my in-laws. I have largely stayed out of it, other than to express to my husband that I don't wish to blindly send money that we will see spent on spray tans and other such extras. A few weeks ago, she said she wants to visit us this year. That would mean my in-laws buying her plane ticket, and us footing the bill for her to play tourist in our expensive coastal city. I am having a lot of trouble with this idea. Why should we pay for a vacation for someone who won't work for herself?
So just say, "No."
You don't have to do anything you don't want to do or you think would enable her futher.
But be honest to your in-laws and to her. Be loving. But be firm.
I can't get over how clueless this poster seems to be about the things that allowed him/her to advance. Just guessing here, but a) no kids to get sick and be kept home from school, b) good health to provide enough energy to do job, c) health insurance to maintain said good health, d) reliable transportation to get to/from job on time and in a timely fashion every day, e) I could go on and on, but basically people who don't get that everyone cannot easily be promoted out of minimum wage job are often blind to the things that enabled the to do so.
I think the poster wasn't trying to be "clueless." I like to think he or she was being honest trying to figure out why others can't do what he or she did.
But you lay it out well, why.
Hi Michelle. Happy 2014. My goal at the start of 2013 was to get rid of all outstanding debt except my mortgage. At that time, I still had almost 2 years left on a car loan as well as debt associated with significant remodeling of my home (all 3 bathrooms, total kitchen makeover, refinish hardwood floors, etc). I'm happy to say that as of Jan 3, 2014 I paid off the last of all my debt except my mortgage. It was such a great feeling - just as you have said repeatedly many times in your column. I just want to say THANKS for all the encouragement, tough love and sage advice you've given so consistently over the years. FEELS SO GOOD!!!
I don't know how this happened but I have over $75k in debt through credit cards and car loans, not including mortgage and am now looking at retirement and college for two children. Advice please as I feel like I'm being strangled! Thanks!!
Debt can be very scary, especially when you have kids and so many financial obligations. As for the credit cards, talk to your credit card companies and see if you can get your interest rate lowered. If you have great credit, you can even transfer the credit card debt to a balance transfer card and pay zero interest during the intro period. But you say you feel like you're drowning, so you might want to contatc the National Foundation for Credit Counseling and speak with an accredited counselor. Really, you don't have to deal with this alone.
Also, concentrate on getting rid of the debt right now. Hold off on your worry about retirement and the college funds for the kids until you get that very large monkey off your back.
But you can do it. It will be hard but you can do it!