Ask Liz Weston

photo credit: heureuy

One of my friends mentioned the other day that we’ve reached the age where we worry as much about our parents as they used to about us.

Aging isn’t for sissies, as Bette Davis aptly noted, and our parents face a fleet of health, housing and cognitive issues as they grow older. Sometimes, dealing with those issues is too much for them—and for us, whether we live next door or 3,000 miles away.

Enter the geriatric care manager, a kind of case worker for the elderly who can assess virtually every kind of problem and offer solutions.

The New York Times had an excellent piece about these professionals in its Patient Money section: “When elder care problems escalate, you can hire an expert.”

The article offers this good advice:

Be sure to ask about backgrounds and credentials. If your parent has complicated medical issues, a care manager with a nursing background might be best. If the parent has cognitive problems or is just plain ornery, someone with a master’s in social work might be better.

Find out whether the person is a member of the national care managers’ association, which has strict requirements: members must have a master’s degree in a field related to care management, like nursing or social work, two years of supervised experience and certification by one of three accrediting agencies. Ask for a brochure and a fee schedule. Learn whether the care manager works alone or in a group practice and if they will be available to you 24 hours a day or just on weekdays.

A geriatric care manager, who I found via CareManager.org, was a godsend for us when my father suffered a massive stroke while visiting his sister in Florida. Her background in nursing was invaluable as she translated what the doctors were saying into layperson’s terms and then gave us a clear idea of Dad’s likely prognosis. She helped us find a rehab facility for him and monitored his progress. It was her sad duty to let us know that he was failing, and she even helped with the funeral arrangements.

She was worth every penny—but her services didn’t come cheap, and this is one bill for the elderly that Medicare and insurance typically won’t pay. A one-time assessment can cost a few hundred dollars, while ongoing services can quickly run into the thousands. We paid $90 an hour for many, many hours, although the cost can range from $50 to $200, according to the NYT.

Some families make the cost more manageable by splitting the bill among the siblings or using the parents’ savings, if available.

If you really can’t swing the cost, the Times article mentioned other options, including the Alzheimer’s Association, which offers free care consultations for people with dementia, and the Eldercare Locator, a service of the Department of Health and Human Services, which can link you to local agencies on aging.

For more, read:

• 3 steps to helping parents grow old gracefully
• Look for a financial advisor who can wear many hats
• Should you bail out spendthrift parents?

photo credit: Vincent J. Brown

It’s a wonderful and noble gesture to adopt a pet. But you’re making more than an emotional commitment: you’re making a financial one, as well.

Some new pet owners learn the hard way about those costly overnight emergency visits to the vet. And who knew that puppy “pee” pads, flea controls and other medications could cost so much? Before you bundle up that ball of cuddly fur and head home, make sure you’re up to the financial task.

Here are a few tips from FiLife.com, a Web site devoted to personal finance, and the Insurance Information Institute:

1. Estimate the one-time “start-up” and “maintenance” costs of the pet

Costs vary depending on the type of pet, the size, and its health. The American Society for the Prevention of Cruelty to Animals estimates that adopting a medium sized dog will cost $565 for things like neutering, training, collars and leashes. The ASPCA estimates the same dog will also cost about $695 a year in annual upkeep. That’s $1,580 in the first year as long as your dog is healthy. But that figure will be much higher if your dog has any health issues.

2. Add those annual numbers into your budget

Create a line item for your first-year pet costs and ongoing costs. See if you can trim other areas of spending so that your savings line isn’t affected. Maybe you don’t need that gym membership if you’re going to start running with your dog? Be realistic. If a pet is going to stress your budget to a point of major discomfort, you’re probably not the best match.

3. Prepare for the unexpected surprise

Accidents happen – and not the kind that can be cleaned up with a mop. To prepare for those events, consider pet insurance or build up an emergency fund. You don’t want to get stuck charging a four-figure vet bill to your credit card.

4. Remember, a dog’s bite really is worse than his bark

Dog bites cost U.S. home insurers 8.7 percent more in 2008 than in 2007. And the average claim exceeded $24,000 for the second straight year, said the Insurance Information Network, an industry group. So you can’t ignore insurance. Homeowners and renters insurance policies typically cover dog bite liability. Most policies provide $100,000 to $300,000 in liability coverage.

5. If the numbers don’t add up – maybe a pet isn’t for you right now

It’s tough to sort out wants from needs when it comes to adopting a pet. Often times, our hearts are bigger than our wallets. You could do an animal more harm by bringing him into an environment where he won’t receive the best care. Think carefully about whether the decision to adopt is best for both of you.

6. Get help

If you do adopt and then find yourself in a financial bind, get help. There’s no reason for your pet to suffer or for you to abandon him/her. The Humane Society of the United States provides a list of resources for people who need financial help with a pet HERE.

Need more info? Check out my columns about pets and finances:

• Should you buy pet insurance?
• Your dog’s bite could bankrupt you
• What your pet really costs you

Dear Liz: My husband and I are having a rough time making it from paycheck to paycheck. We make pretty good money. We have four children and end up helping them every month. We cannot seem to make it without going in the hole in our checking account. Could you please help me with what we should do?

Answer: As writer Erica Jong once said, advice is what we ask for when we already know the answer but wish we didn’t.

You know what you need to do: Cut off your children (assuming they aren’t minors, of course). If you can’t make it from one paycheck to the next, you’re in no position to help anyone else. Your children may not know the financial straits you’re in, or they may not care; either way, it’s up to you to close the Bank of Mom and Dad.

Once that financial spigot is shut off, you’ll need to look for the other leaks in your financial system. Track where your money is going using personal finance software such as Quicken, online tools such as Quicken Online, Yodlee or Mint, or a notebook and a pen.

If you’re still spending more than you make, you’ll need to find ways to cut back so that you not only don’t go in the hole but are putting aside money each month. You need to save for retirement and for an emergency fund, among other goals.

To do all this, you’ll need to use a word that apparently hasn’t been given enough of a workout around your home: “no.” “No, we can’t help you.” “No, we’re not going to buy that.” “No, I’m not going let my finances be in chaos because I can’t say ‘no.’ “

Dear Liz: Are banks still lowering the amount of available credit? I’m concerned because we were hoping to use our home equity line of credit to pay for our children’s college educations, if need be.

Our current balance is less than 5% of the total available limit, but my credit reports show our credit line lender recently reviewed our credit history. I am concerned that our bank will lower our available credit as my son is about to start college. Are my concerns valid?

Answer: Perhaps. Lenders have been reducing home equity lines of credit as home values drop. If your mortgage balance and your line of credit total more than 60% of the current value of your home, you may be at risk of having your limit reduced right when you planned to use it.

If that’s the case and your son is heading off to school in the next year, it might be prudent to withdraw the money now and keep it in a savings account.

If college won’t start for several years, though, you might want to explore other options, since it’s generally not a good idea to borrow money so far in advance of when you’ll need it.

Fortunately, you have plenty of options when it comes to paying for college. Just make sure you fill out a Free Application for Federal Student Aid. Even if you don’t qualify for need-based aid, filling out the FAFSA will allow you to apply for federal student loans. Your son can get Stafford loans at a 6.8% fixed rate and you could get PLUS loans with a fixed rate ranging from 7.9% to 8.5%. Although the amount of student loans your son can get is generally limited to $31,000 for an undergraduate degree, PLUS loans allow you to borrow whatever you need to cover any costs not paid for by the student’s financial aid package.

Dear Liz: We just paid off nine cards totaling $49,000. We are credit card debt free. What should we do with the accounts as we are not going to use them except for a couple (to be paid off monthly) as recommended?

Answer: Congratulations! Whether you paid off the debt over time or received a windfall, you were smart to get out from under this burden.

If you can trust yourselves not to run up more debt, your best option is to leave the accounts open and use them occasionally so the issuers don’t shut them down for inactivity.

It’s something of a myth that too much available credit can hurt your scores. Having lots of available credit is actually a positive factor for your FICO credit scores, the ones used by most lenders, while closing the accounts could hurt your scores.

photo credit: apesara

Much is being made of the fact that credit card debt has dropped $70 billion, or more than 7%, since hitting an all-time peak of $975 billion in September 2008. I’ve heard the statistic mentioned several times in stories about how frugality is becoming mainstream.

Yes, we are saving more, as the uptick in the personal savings rate shows. Yes, we are spending less, as retailer bankruptcies demonstrate.

And many folks are laying off their credit cards, either voluntarily or because their issuers have raised rates, lowered limits or even closed their accounts.

What’s often missed, though, is the contribution of charge-offs to the decline in credit card debt. As noted by Phil Britt of insideARM, a newsletter that tracks the collection industry, debt that’s written off as uncollectible by credit card issuers promptly disappears from the Fed’s consumer credit figures.

Quantifying how much of the $70 billion drop is due to bad debt is tough, but Britt noted that credit card charge-offs hit an all-time high of 9.55% in the second quarter–a huge uptick from the first quarter’s 7.64% rate.

So yes, there’s less riding on the cards, but it may be as much consumers hitting the wall as consumers getting religion.

MSN and American Family Insurance are looking for two more families to profile on upcoming episodes of “Building a Brighter Future,” a Web site with videos, tools, resources and advice for improving your finances.

I’ll visit the chosen families in their homes to provide a money makeover, just as I did the four families already featured on the site.

If you’re interested, CLICK HERE for how to enter. Entries must be received by 8:50 a.m. Pacific Time on Oct. 5.

photo credit: rutlo

Face it–you have a lot of stuff. So much that if you tried to list everything you own from memory, you’d probably forget most of what you have. (Do you know how many pieces of clothing are in your closets and drawers? Can you list everything in the medicine chest? How about all those holiday decorations in the attic?)

But trying to remember a houseful of stuff is exactly what people face when they file an insurance claim after their home has been destroyed in a fire or natural disaster. Without a household inventory, it’s all but impossible to remember everything or even most things.

United Policyholders, a non-profit group that educates consumers about insurance issues and their rights, offers a lot of good tips and resources to help you get started on your inventory:

• Create a room-by-room inventory in Excel. UP provides an Excel sheet that lists items found in the typical home so you don’t have to start from scratch.
• Fill out a sample home inventory from a total loss insurance claim.
• Build your inventory with a flash drive that’s preloaded with the inventory spreadsheet. This was created with help from disaster victims who struggled to remember the contents of their home after it was damaged. (UP does request a $10 donation for the flash drive)
• Walk around your home with a video camera, talking about the items as you film. (Store the clip/chip/tape outside your home in a secure location, preferably in another area or state.)
• Pay an inventory specialist to do the work for you. Inventory specialists charge either by the hour or for the project. Some will store the data for you. Others will give you the disk or inventory list to store yourself. Visit the FIND HELP section on UP’s Web site by CLICKING HERE.

To access UP’s links to the Excel spreadsheets and other inventory tips, CLICK HERE.

Also, make sure you’ve got your disaster/home insurance in order. Not sure? Check out some of my previous columns:

• Do you need disaster insurance?
• 10 things your insurance may not cover
• Is your home underinsured? 8 key points

The average family starts saving for college as their child begins preschool, but only 29 percent say they are on track to reach their savings goal, according to a recent survey by student lender Sallie Mae.

Families saved an average $2,676 annually for their children’s education, for a total of $13,827, the survey found. That represents 3.6 percent of their annual household income. However, households earning under $50,000 annually set aside far more than that, saving 7.5 percent of their income, annually, for college.

The survey was conducted from March 20-April 17, 2009, by the Gallup Organization, which conducted more than 1,200 interviews by phone with parents of children under age 18. Some of the survey’s other findings:

• “529” college savings plans are gaining in popularity.  Parents with children under age 7 were twice as likely to use 529 plans (43 percent) compared to parents of teens (20 percent.) Overall, 33 percent of parents used these plans.
• 66 percent of parents said if employers matched contributions that would encourage them to save for college. Another motivator? Parents said a tax benefit (44 percent) would help them save more. (And I can’t leave this one out: 25 percent of parents said a shopping rewards program would also motivate them to save more for college.)
• Families in the Northeast saved the most with an average of $15,846. The West was a close second at $15,589. The South had an average savings of $13,722, and the Midwest had the lowest with an average of $9,693.

College costs are still increasing faster than inflation, so families who want their kids to get a head start in life should be contributing to college savings plans if at all possible. Anything you save could help reduce your child’s future debt load. For more, read:

• If you can save for college, you should
• College plans for the rich, poor and in-between
• Cram for college costs in 5 years or less
• Can colleges keep promises of aid?

Dear Liz: My wife and I each had excellent credit when we married 10 years ago. We are now divorcing (amicably). Since we married, we have put everything in her name: two houses in succession, three cars, all car insurance and utilities. We refinanced our house in February with her name first.

I recently opened checking and savings accounts in my name only and had my paycheck deposited there instead of our joint account.

What steps should I take before a divorce decree to be sure I retain a great credit score?

Answer: To protect their credit, divorcing couples should make sure to close all joint credit accounts and transfer any balances to the partner who will be responsible for paying the obligation.

The same is true for mortgages and other loans that are in both names. Whenever possible, these debts should be refinanced in the responsible party’s name only.

All this should be done before the divorce is final. Otherwise, your ex can trash your credit — deliberately or not.

If your name is still on the mortgage, car loans or credit cards, your scores could plummet if she misses a payment. You would have little recourse because your creditors aren’t bound by your divorce agreement, even if it plainly requires her to stay up to date on these obligations.

Closing accounts and opening new ones can inflict temporary dings on your credit, but these pale in comparison to the damage done by a single skipped payment. If you want to keep that amicable vibe and your excellent scores, separate your credit accounts now.