She told me I was being elitist. I had money to buy nice presents for my family. Many of those waiting in the cold, dark night for the Walmart doors to open didn’t, and Black Friday might be their only shot at getting something nice for their kids and spouses and parents.
She had a point. Maybe that characterization doesn’t apply to everybody caught up in the post-Thanksgiving frenzy, but it was true enough back then to make me shut my mouth about it.
Now they’re messing with Thanksgiving itself, which sucks for the employees forced to work and for the shoppers who are letting themselves be tricked into deals that usually aren’t. “The stuff on sale now will be even cheaper in a few weeks,” wrote New York Post columnist Nicole Gelinas who goes on to write:
There’s nothing wrong with marketing ploys. But there is something wrong with preying on people’s impulses to the extent that they are sacrificing time with their families for one day that shouldn’t be commercialized. Time is the real gift.
Because you know what’s next, right? After-Christmas sales…starting on Christmas morning.
It’s probably my Lutheran upbringing that makes me wary of extremism in any form. Moderation in all things, doncha know.
Lately, I’m noticing extremism when it comes to paying off debt.
People think they’re doing the right thing by targeting student loans and mortgages for early payoff. But they could be hurting themselves if they’re stinting their retirement funds or leaving themselves with too little financial flexibility.
Let’s take student loans. Their interest is tax-deductible. If they’re federal loans, they have fixed rates and a number of consumer protections, including the ability to delay payments if you run into economic hard times.
Once you prepay those loans, though, the money’s gone. You can’t borrow it back, as you could with a line of credit.
I just heard of another family that rushed to pay off student debt, only to face an emergency fund on fumes when the father was furloughed.
Mortgage pre-payers face a similar problem these days. Before the financial crisis, they could have opened a new equity line even if their incomes were diminished or non-existent. These days lenders are wary of anyone who’s lost a job, which can make borrowing against a home problematic when you’re facing a financial crisis.
One solution is to open a home equity line of credit and keeping it open and unused for emergencies. Another is to simply make sure your debt payoff strategy makes sense with your larger financial picture. If you’re not saving enough for retirement or emergencies, those should be your priorities long before you target low-rate, tax-deductible debt.
Dear Liz: I’m a single mom with three kids. My mortgage is $1,700. My other monthly bills include $355 for a car loan, $755 for school tuition, $350 for utilities, $790 for credit cards, $200 for gas, $208 for braces and $235 for a 401(k) contribution. This leaves no money for food. I get no child support. How can I pay down my credit card debt? I don’t have any money for a baby sitter or I could get a second job.
Answer: The way you pay down credit card debt is by reducing expenses and increasing income to free up extra cash. If that’s not possible, you may need to consider bankruptcy, given the amount of debt you’re carrying.
If you’re paying only the minimums on your credit cards, that monthly bill indicates you have close to $40,000 in credit card debt. Since you can’t cover your basic expenses, you’re probably adding to that debt pile every month. That needs to stop.
You don’t say why you aren’t receiving child support, but if the father isn’t dead or disabled he should be helping to support his kids. Your state has an enforcement agency that can help you. Child support enforcement is often part of a state’s social services department, although it may also be offered by the state attorney general or its revenue (tax) department.
One obvious, if painful, place to trim is private school tuition. If the school can’t offer you financial aid, you should consider placing your kids in the best public school you can manage.
What you don’t want to do is trim your retirement plan contribution. You’re probably getting a company match, which is free money you’ll need to sustain yourself in retirement.
In general, your “must have” expenses — shelter, transportation, food, utilities, insurance and minimum loan payments — should equal no more than 50% of your after-tax income. If your must-haves exceed that level, it will be tough to make ends meet, particularly if you’re trying to pay off debt and save for the future.
Dear Liz: You had an interesting column recently about the filial responsibility laws that most states have on their books requiring adult children to support indigent parents. I have friends that transferred their parents’ funds to the grandchildren so the parents will qualify for Medicaid. Doesn’t the government see through this scam? Besides being unethical, it should be illegal.
Answer: The government does indeed see through transparent attempts to artificially impoverish older people to qualify for Medicaid, which offers nursing home care for the indigent.
Medicaid has “look back” rules that examine asset transfers made within the previous five years. Transfers made during that period can delay the older person’s eligibility for the program. In other words, your friends’ maneuvers may well backfire. You should advise them to consult an elder law attorney. Referrals are available from the National Academy of Elder Law Attorneys at http://www.naela.org.
Dear Liz: In your answer about filial responsibility, your statement that the letter writer’s financial situation is the result of her own choices and that she needs to stop blaming her parents is completely misjudged and inappropriate. Clearly, the writer is not blaming the parents and seems amazingly strong and clear thinking for one with her early background.
Answer: Here’s what the writer wrote about her situation:
“I am an only child in my late 30s and received no financial help from [my mother] from the age of 18. In addition, my father died when I was very young, leaving us fairly destitute with no life insurance. I feel that both of these legacies have contributed to my less-than-optimal financial situation.”
The writer goes on to say that she’s trying to catch up financially but she feels it would be futile because she may have to support her mother in the future.
The writer started her adult life at a financial disadvantage compared with people whose parents helped them pay for college. She may now regret the choices she made — perhaps she took on too much student loan debt or spent more than she earned to make up for early deprivation. Those were her choices, however, and at some point she needs to take responsibility for them. Twenty years later, it’s time to let go of the idea that her financial situation is her parents’ fault.
In a way, what he said was kind of flattering. He obviously thought his wife would have no trouble finding his replacement.
The reality, though, is that middle-aged women with kids aren’t often a hot commodity on the dating market. And even if she were the suburban version of Angelina Jolie, the underlying message was disturbing. He was putting his wife in the position of having to remarry for money. If she couldn’t find someone suitable, she’d face a lifetime of reduced financial circumstances.
That’s a hell of a legacy to leave behind, particularly when term life insurance is so cheap and easy for most people to buy.
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