How debt ‘solutions’ could dig you in deeper

Americans are slipping ever deeper into hock. To cope, many people turn to debt consolidation loans, cash-out mortgage refinancing and retirement plan loans that promise relief but could leave them worse off.

Paying off high-rate debt such as credit cards with lower-rate loans may seem like a no-brainer. Unfortunately, many of these loans have hidden costs and drawbacks. And consolidation by itself can’t fix the problems that led to the debt in the first place. In my latest for the Associated Press, how such loans can make matters worse.

Friday’s need-to-know money news

Today’s top story: There’s more than one way to slay a debt. Also in the news: How to know when it’s OK to spend, 3 steps to spring cleaning your credit card debt, and what to do when you desperately need help with medical bills.

There’s More Than One Way to Slay a Debt
These key points could help.

How to Know When It’s OK to Spend
Loosening the purse strings.

3 Steps to Spring-Cleaning Your Credit Card Debt
Time to shake the dust off.

What To Do When You Desperately Need Help With Medical Bills
Looking into medical debt forgiveness.

Friday’s need-to-know money news

Today’s top story: Paying debt back home vexes expats. Also in the news: 6 surefire ways to delay your tax refund, can your employer cure your money woes, and how paying your credit card minimum puts you in a debt spiral.

Paying Debt Back Home Vexes Expats
When your debt follows you around the world.

6 Surefire Ways to Delay Your Tax Refund
Avoid them to get your refund faster.

Can Your Employer Cure Your Money Woes?
Debt solutions as employee benefits.

How Paying Your Credit Card Minimum Puts You in a Debt Spiral
Paying just the minimum won’t make a dent.

Can your employer cure your money woes?

Millions of Americans get their health insurance and retirement accounts through their employers. Now some are getting help with their debt.

Companies including insurer Aetna and accounting firm PwC help employees pay down student loans. Others partner with startups to offer debt solutions as an employee benefit. In my latest for the Associated Press, a look at the approaches employers are taking to help employees with debt.

Q&A: Stop judging that overspending friend

Dear Liz: My friend is not good with money. He has always lived above his means. He lived in a fancy apartment, leases a BMW and goes out to eat often. To make matters worse, he lost his job a year ago and had to move in with a mutual friend. He continues to spend money he doesn’t have. I tried to help him with his finances and setting a budget, but he lost interest after one conversation. He’s 41 with no savings and more than $10,000 in credit card debt.

My question: Should I feel guilty about inviting him to things? When he was unemployed, I suggested doing things that don’t cost money, but he never seemed interested. I’m planning a trip for my 40th birthday and I’d like to invite him, but I don’t think he has the self-control to say, “No, I can’t go, I can’t afford it” because it will add $2,000 or more to his debt. How do you deal with someone when you’re more concerned with his financial well-being than he is?

Answer: You let go of the idea that you’re responsible for another person’s behavior.

Financial planners often encounter clients who, despite the planners’ best efforts, sail blissfully on toward economic disaster. And those clients paid for the advice that could save them. You’re not being paid. Your friend may not have even asked for your help. So you can stop offering it.

This will be hard for you. You understand how important it is to avoid credit card debt and save for the future. You may be thinking that if you could come up with the right words, you could persuade him to change his ways. Give up that fantasy, because he won’t change — if he ever does — one second before he’s ready.

There are a number of things you can do to prepare for that moment, if it ever comes. The first is to let go of any judgmental attitudes and feelings you might have about his situation. He may already feel a lot of shame about his circumstances. Even if he doesn’t, he’s unlikely to seek you out if he feels judged and blamed.

The next is to look for other resources that might help him, such as a financial counselor or coach. You can get referrals from the Assn. for Financial Counseling & Planning Education. He may find it easier to work with a professional than a friend.

Finally, resist the urge to offer opinions or observations about his situation. He knows you’re there to help if he ever wants it, so wait to be asked.

Tuesday’s need-to-know money news

Today’s top story: 5 tips for cutting the cost of having your taxes done. Also in the news: How to find the dirt on your tax preparer, making the most of a gig economy to pay down debt, and 11 smart ways to spend your tax refund.

5 Tips for Cutting the Cost of Having Your Taxes Done
How to rein in the costs.

How to Find the Dirt on Your Tax Preparer
Don’t give your info to just anyone.

How I Ditched Debt: Making the Most of a Gig Economy
A woman pays down over $25K in three years.

11 smart ways to spend your tax refund, according to personal finance experts
Don’t think of it as a windfall.

Q&A: Options for high debt, low income

Dear Liz: I’m 87 and drowning in debt, owing more than $21,000 with an income of $23,000 from Social Security and two small pensions. I don’t like the idea of debt consolidation but is that better than bankruptcy? My only asset is a 2003 car.

Answer: Debt consolidation merely replaces one type of debt (say, credit cards) with another, typically a personal loan. You are unlikely to qualify for such a loan and even if you did, your situation wouldn’t improve much if at all because your debt is so large relative to your income.

You may be confusing debt consolidation with debt settlement, which is where you or someone you hire tries to settle debts for less than what you owe. Debt settlement can take years and may not result in much savings, since the forgiven debt is considered taxable income and hiring a debt settlement company can cost thousands of dollars. In addition, people in the debt settlement process risk being sued by their creditors. Bankruptcy is typically a better option for most people because it costs less, is completed more quickly and ends the threat of lawsuits.

You may not need to file for bankruptcy, however, if you’re “judgment proof,” which means that even if you stop paying your creditors and they successfully sue you, the creditors wouldn’t be able to collect on those judgments. That’s typically the case when someone’s income comes from protected sources, such as Social Security and certain pensions, and they don’t have any assets a creditor can seize.

Please discuss your situation with a bankruptcy attorney who can review your options. You can get a referral from the National Assn. of Consumer Bankruptcy Attorneys at www.nacba.org.

Friday’s need-to-know money news

Today’s top story: Get to know your 401(k) plan. Also in the news: How one couple ditched debt, having the talk about college costs with your teen, and what to do if you’re affected by Marriott’s huge data breach.

Get to Know Your 401(k) Plan
Everything you need to know.

How I Ditched Debt: ‘We Have Choices Again’
One couple’s story.

Having ‘The Talk’ About College Costs With Your Teen
Keeping expectations in check.

What to Do If You’re Affected by Marriott’s Data Breach
Over 500,000,000 customers are affected.

Wednesday’s need-to-know money news

Today’s top story: Identity theft risks for holiday shoppers. Also in the news: What to buy and skip in December, paying down student debt on a nonprofit salary, and how to make the most of the child tax credit this year.

Holiday Shoppers, Beware of These 3 Identity Theft Risks
Watch out for grinches.

What to Buy (and Skip) in December
Hold off on jewelry.

Debt Diary: Paying Down $19K in Student Debt on a Nonprofit Salary
One man’s journey.

How to make the most of the child tax credit this year
A look at the changes.

Tuesday’s need-to-know money news

Today’s top story: With money goals, multitasking pays off. Also in the news: Snagging hotel loyalty perks, what to know about high yield reward checking accounts, and how to not let debt ruin your holiday.

With Money Goals, Multitasking Pays Off
There needs to be more than just paying off debt.

Snag These Hotel Loyalty Perks, Even if You’re Disloyal
It all depends on the right card.

What to Know About High Yield Reward Checking Accounts
Some accounts offer interest as high as 5%.

Don’t Let Debt Ruin Your Holiday
Some people are still paying off last year’s gifts.