Hi Michelle I'm trying so hard to get rid of or at least lower our credit card debt that just seems to be not going anywhere. We've stopped using the cards to the best of our ability and are focusing on paying down. That being said we owe almost $35,000 in debt, all cars are paid off, and we have a mortgage. I have a stable good job and husband works part time until he can find something. We have literally two months of oh crap fund. Not enough I know. We're expecting about $5,000 back in refund. Would you use that entire amount to pay down on some debt or save it? We've started to cut expenses and now that I made the final car payments I think this will help. What to do with the refund though... bills or save? I wanted to do bills my husband thinks it needs to be saved.
I love that. An "oh crap fund." Got to remember that.
I would say use all of the refund to attack the credit card debt but ONLY if your husband's steady part-time income is steady. I would only worry about him losing that and then you needing the cash. But if you are managing your regular household expenses on the income coming it, make a major dent in the debt. Now, if you husband is still nervous, you can take say $1,000 and dump it into the oh crap found and then use the use to pay down the credit card debt.
And absolutely you should use the money you were paying the car payments to further pay down the debt.
Oh and one final thought. You said you ahve stop using the cards "to the best of our ability."
Don't use the cards at all! Tough it out without using the cards even if you meant you use them and pay off the debt beofre the next billing cycle. I say that because you may still be spending more than you can afford with cash.
Good luck. You can do this. I know $35,000 is a lot, but I've seen and helped people get rid of much more. One of the women in my program paid off about $85,000 in credit card debt in under 2 years. Now she was single and moved back home but nonetheless she did it cutting back to the bare bones.
Stay focused and determined to get that monkey off your back.
Hi Michelle, thanks for ALL your wonderful advice! I had a baby six months ago, and I'd like to open a savings account for him with all the various checks and donations I keep receiving from family members. But how? He doesn't have any form of ID, do I open the account in my name and later transfer it to him? How do I avoid the various fees all banks now seem to charge?
May I offer an alternative to your plan?
Why not put all that money in a college savings account such as a 529 plan. Unless you think you need the cash for his care and in that case you should just put the funds in your savings account, start saving now for his college education. Trust me, you will need a lot of dough. My daughter is off to college in the fall and we saved well but it's going to be tight. We won't need to borrow but I'm so glad we started saving when she was little because despite her having great grades the competition for scholarship money is tough and so far she hasn't gotten anything.
So go to this website, www.savingforcollege.com and check out the information for 529 plans.
Can you recommend a book for teenagers (14) about budgeting? I am a member of Prosperity Partners and would like something for my son as well. Thank you!
I don't have a specific book for teenagers but many of the books for young adults will do. But really, you are the best teacher. If you grasp the budget thing just pass it on to the teenagers. Contrary to popular belief parents and influential adults in the lives of kids are their best source of information. They watch and do what you do. And just FYI for those who don't know Prosperity Partners is a volunteer financial mentorship program I direct at my church. Taking the class and doing all the homework will give you the tools to teach your son. (And later in the year, I'll be doing a kids and money session, so please bring him).
In the State of the Union, the President suggested raising the minimum wage. While a lot of people would enjoy a free $1/hour raise or an extra $40/week before taxes for fulltime workers, wouldn't that only increase prices for meals at restaurants, gas, groceries, movie tickets, etc. If a boss has to pay all of their employees an extra dollar, they need to increase prices to cover the new costs. The net result would seem to negate the raise. While, I would agree that it would be a challenge to live off a minimum wage job, do people really make minimum wage? When I was in high school, I got a job in retail and started at minimum wage. 90 days later, I was given a raise and another after each year of employment. By the time I was in college and had to quit, I was making $2-3 more than minimum wage. Other employees who had been there 10+ years were making almost as much as the managers.
President Obama said he advocates raising the minimum wage from the current $7.25 to $9.
I hear you and your agrument is one that is often used by businesses that don't want to pay more. But look at the rest of your question/comment. You ended up making minimum wage and the capitalism world didn't end. So if you could make more than minimum wage and still afford to eat, sleep and drink yourself, why not provide a living wage to all. Further you said others were too. So paying people more can and does work. And yes, there are many, many people making just the minimum wage and they are barely living.
Read this very interesting piece by Time magazine.
In it Christopher Matthews writes: For years the conventional wisdom among many economists was that higher minimum wages actually reduced employment ? for the simple reason that if you make something like labor more expensive, firms will purchase less of it.
But research in the 1990s, specifically a study authored by economists David Carr and Alan Kreuger, seemed to prove otherwise, or at least to poke holes in this theory. Carr and Kreuger studied the effect of an increase in the minimum wage in New Jersey from $4.25 to $5.05 per hour in 1992. They surveyed 410 fast food restaurants in New Jersey and nearby counties in neighboring Pennsylvania, which saw no increase in the minimum wage. Their study found that New Jersey?s minimum wage hike didn?t negatively affect employment ? in fact, they found, employment Since this 1992 paper, several other studies using similar methodologies have come to similar conclusions."
Further Matthews says a look at the data by the Center for American Progress found: "Policies that increase the compensation of low-wage workers significantly reduce turnover, boost worker effort, encourage employers to invest in training for their workers, and can increase demand for goods and services?all of which help balance out any potential negative effects.?
I personally don't like being in debt. I look at government spending and the growing national debt and also don't think this is a good thing. The government needs to get the budget under control. While I don't think that the current sequestration would be a good idea since it wouldn't look at the individual programs and their overall value, I also don't like those who say that cutting government spending would be bad for the economy because it would force the government to cancel contracts or lay off workers. If the government did a proper value analysis and determined that a cut was justified, I would rather see the government cut back on the spending instead of paying people to perform tasks that are not needed.
You make some great points. And I agree with you. But I'm concerned right now about the many companies who are trying to figure things out and are already cutting or about to cut people. I have a family member in that boat. She was laid off because of all this budget mess. It's so tough for her (she was a budget analyst). So this budget thing is personal for me.
And yet, we have to do something.
In the spirit of Valentine's Day and the spirit of your column, I have a buy one, get one dinner free coupon at a nice restaurant. How many dates do I need to have with someone before I can expose the frugal side of my personality? I don't want to do this on a first date, but I am not interested in someone who automatically values a relationship on how much a man spends on her. Thanks.
First, I say be your frugal self from the start. There is nothing and I mean nothing shameful about minding your money. And best to know from the start if the other persson thinks it's cheap to be frugal. I say use your coupon tomorrow if you want to. Why wait to save.
Now, if you don't want to broadcast your coupons, take the waiter to the side and give it to him or her away from your date. As long as you tip based on the value of both meals, I'm sure he or she will keep your secret.
Michelle, I think this sort of thing is sad but fairly common. One of my sisters got divorced at 32-years-old, moved into my parebnt's house, never worked and has never left. Dad died five years ago and Mom last October. She left sis the house but sis can't afford the taxes and utilities. Her kids, now in their 20's, are lazy layabouts just like her. She says it's not her fault that our parents were enablers but the rest of us are not buying it. I resent that she ruined the relationship between me and my parents and don't plan to give her a penny.
I hear you. I read the frustration and anger in your note. But in a twisted way, your sister is right. Your parents didn't do anybody a favor by not letting her grow up. They did in fact enabler her to remain irresponsible.
Now that is not to say that she's right to not own up to her irrresponsible ways. It just explains why she does what she does. But grown folks can change. She choose not to. And guess what? She will pay in the end. Sounds like she will lose the house. That's paying for being irresponsible.
But you have a choice. You can hold on to that resentment or let it go. You are doing better and isn't that reward enough? Your sister didn't ruin the relationship between you and your parents. You did. You allowed the way they treated the sister to fill you up with anger. Maybe they weren't being fair enough. But it was their money and their house to do with what they wanted even if it wasn't good.
So let it go. You can love on your sister without approving of how she handles her money. And frankly, I agree with you that you shouldn't bail her out.
But let it go. Because keeping this resentment going is only hurting you.
Michelle, I want to commit to tithing this year. When I look at my finances if I were to give my 10 percent off the top then set aside funds to pay my mortage, there is virtually no money left. How do I approach this without risking not paying my bills?
Of course tithing is a very personal thing. But if you really want to commit to it because of your faith, you have to have faith. You also may have to do a lot of things differently financially. You may have to cut expenses greatly. Even more than you think you have already. Add up all the things you could cut -- cable, a reduced smartphone plan, eating out, entertainment, etc. and it may come close to the 10 percent tithe. But if it doesn't, maybe you could get a roommate or even move to a less expensive apartment or house.
My point is, put tithing first, then see how the rest of your finances work out. If they don't, do what you can to make it add up. Certainly I would never advise you to skip paying your bills in favor or tithing (that wouldn't be right) but I've seen people with tight, tight budgets (such as a single low-income mother) commit to tithing and then cut like mad. She made it work. She's also seen amazing financial blessings that she attributed to her being faithful. Of course you don't tithe expecting to get something back. But faith has an amazing way to reward the faithful.
Any tips for starting a conversation about saving with a spouse who hates talking about money (except spending it)? Every time I bring up budgeting or planning with our money, he thinks I'm ruining a pleasant evening/weekend. And of course, I don't want to bring it up if he's NOT in a pleasant mood!
I would try to bring in a mediator, such as a financial planner or money coach. Try approaching the subject from the angle that you want to be sure you are making the best of your money.
Or see if your spouse will sign up for a financial class. I know this is hard. I run up against this all the time with spouses. But you are doing the right thing to force the issue and in the right spirit.
If you spouse still won't seek help, you take a class or go to the planner and pass along the information in a calm, sweet way.
In my program at church many spouses come at first by themselves. But then later after they've made some changes or just kept talking about what they were learning, their spouses wanted to hear for themselves. Then they signed up to come.
Doesn't always work but worth a try.
Your baby isn't able to open an account until he's 18. Ask your bank if you can open a 'child' account for him. We did that for our kids, and we could put anything into it (we started it with $18) and it gets 1 cent in interest a month. We put lots of birthday, etc money into it (yes we also have a 529).
Yes, of course, good tip.
But really there isn't a need for another account and far too few people save for their kid's college expenses early enough.
Michelle, Happy Valentine's Day. Hope the family was good to you. Sanctimonious questions like this make my blood boil. For those living on a minimum wage, they will spend every last cent on consumption. I believe that the multiplier is about 2.5X for every dollar spent. Second, 70% of our economy is driven by consumer demand. The only thing a business needs isâ€¦..demand (customers). And customers with a few more dollars to spend will grow the business.
Well Happy Valentine's Day to you too.
And good sweet points.
I plan on getting a new car in the fall. I will be spending in the $25,000 to $30,000 for a car that has all the features that I want/need (hand arthritis means that I have to have a push button ignition, which jacks up the price somewhat). I could take the cash out of my liquid assets and buy the car outright (that's about a quarter of my liquid assets), but I'm wondering if it makes more sense to either lease or finance, since my credit score is just about 800. What do you advise?
Don't lease. What will you do when the lease is up?
You paid all that money and still got to get another car.
Also are you sure you can't get what you need in a less expensive used car? Push button technology has been out there for awhile, right?
I would pay cash.
Hello, I'm saving for my four children to go to college...12,6,5, and age 3. I didn't go when I was younger, but it is in my heart to go now. Our money is SO tight. I can't stress that enough. I already took one class that was total a little under $600. I'm about to sign up for another. Since, money is so tight and I have to save for all of them...should I continue or wait until they are older. I know that the sooner I get in the sooner I'll make more money to help my husband. I just feel guilty for spending the money on myself. What do you think?
I wish I had more time to address in full your question but in short, if I were you I would really look at what a degree could bring you in a bigger salary. Would it really now? Have you really investigated? And if the answer is yes, your spending on you utlimately will help the kids. It's not being selfish.
And if you can't save for both, just know your kids may have to do college differently. Go in-state. Community college first. Live at home. All solutions that are just fine.
Hi Michelle, I was inspired by your column about your friend who passes away to organize my files. As the CFO in our house, I want to make things as easy as possible should something happen to me. My question is, I'm not sure what paperwork I can keep and what I can toss? We're on paperless bills for most things, but I never know what to do with EOBs from the insurance company, or how long to hang on to things like registration and tax records for cars we don't own anymore. As I'm streamlining, what can I get rid of without getting rid of too much?
Go to www.bankrate.com and search for "How long to keep financial records." It's a great feature on when to toss documents.
I am wondering...why do banks/credit unions want you to buy a car rather than just loaning you money to do whatever? If they check your credit and deem you "worthy", why do they say yes to say, a $40,000 car, but not yes to just giving out the cash? If they think that your history shows you will repay the money? They also ask, why do you want the money? If you say you want to do something for your home, they push for a home equity loan. If you don't want that, they don't offer any other option. I thought that the equity in my home was for my future, not to tap into for every little thing. Thanks for answering.
One word - collateral.
As the definition goes it's property such as a car or some other asset that the lender can use to secure a loan. Don't pay and they can at least get some of their money back. They typically won't repossess your actual roof if you use the loan money for that.
I know that you can get your credit report for free once a year, but is there anywhere to get a free credit score? It seems like you have to pay to get your credit score. Thanks.
You do have to pay for your credit score or sign up for a service to get a free score or scores.
Write to Congress. They should make scores free once a year just as they do credit reports.
I have been helping a relative who has been in financial straits for a long time. This relative has pushed me to the last limit. How do I begin to withdraw so that the relative doesn't end up homeless or something equally bad? I know you have experience. I can't sleep at night and I'm crying over the stress. Why do people take advantage of generosity?
Sometimes the best thing you can do it let people fall hard before they will start to pick themselves up.
You shouldn't feel guilty if you've been helping. But you shouldn't continue to help if your aid is enabling the relative to be irresponsible.
Let go. Let go of the crying and stress.
He or she may fall, probably will fall, but perhaps that's what's needed and you are standing in the way of that revelation.