Get smart with your money
Amazon. Chipotle. GoPro.
These household-name businesses were launched thanks to investments by the founders’ parents. But parents also have sunk plenty of money into their offsprings’ doomed enterprises, sometimes endangering their retirements and family relationships in the process.
In my latest for the Associated Press, how not to offer money you can’t afford to lose.
Today’s top story: TSA-Approved ways to cut the airport screening line. Also in the news: How to talk retirement with your spouse, the most and least affordable areas in the country, and things to consider before co-signing a student loan.
TSA-Approved Ways to Cut the Airport Screening Line
Is TSA pre-check worth the price?
How to Talk Retirement With Your Spouse
One of the most important conversations you’ll ever have.
Home Affordability Watch, Q1: California Buyers, Keep Dreamin’
The most and least affordable areas in the country.
Piggybacking on good credit: Things to consider before co-signing a student loan
A few things to think about.
Dear Liz: I have a terminal illness and have less than a year to live. My wife and I are in our 80s and don’t own anything: no cars, no homes. My wife has an IRA worth $140,000 that pays us $2,000 a month, and she has a small pension of $1,400 a month. We receive $3,900 from Social Security, for a total monthly income of $7,200.
We have $72,000 in credit card debt that is strangling us. I told my wife that after I’m gone she should simply ignore that debt and advise creditors that I have passed away. Or should we attempt to file bankruptcy now?
Answer: Your return address shows you live in California, which is a community property state. Debts incurred during marriage are generally considered joint debts, so expecting creditors to go away after your death is not realistic.
Your wife’s retirement also could be at risk because California has limited creditor protection for IRAs. Federal law protects IRAs worth up to $1,283,025 in bankruptcy court, but outside bankruptcy, creditor protection depends on state law. In California, only amounts “necessary for support” are protected.
You really need to consult with a bankruptcy attorney to discuss your options. You can get referrals from the National Assn. of Consumer Bankruptcy Attorneys at www.nacba.org.
Dear Liz: You’ve written about the potential financial flexibility and options for preserving quality of life for seniors by using a reverse mortgage line of credit. I believe there is a great need for much more cautionary advice regarding reverse mortgages.
Someone I know entered into a reverse mortgage and the consequences have been disastrous. She was barely past the minimum age of 62 when she got the loan and took the lump sum option, only to spend it hastily on various purchases and debts.
Having no income other than Social Security, and almost nonexistent savings, she faces many years of figuring out how to pay property taxes and ongoing maintenance costs to avoid foreclosure. So although she has her home, it’s a precarious situation from year to year. She also no longer has an asset that could be used for long-term care or other expenses because the reverse mortgage makes it unlikely the owner will receive any leftover proceeds after paying off the lender.
Answer: You didn’t say when your friend got her reverse mortgage, but the rules for lump-sum payouts have been tightened under the Federal Housing Administration’s Home Equity Conversion Mortgage program.
In the past, borrowers could take 100% of the loan proceeds upfront. Today, only 60% is typically available in the first year. The total amounts that can be borrowed overall have been reduced as well. These changes were meant to shore up the program’s finances, but they also could lead to fewer situations like your friend’s.
That said, people should be extremely careful about encumbering their homes in retirement. Prospective borrowers have to meet with HECM counselors to discuss a reverse mortgage’s financial implications and potential alternatives, but they would be smart to also meet with a fee-only financial planner.
Dear Liz: Is freezing one’s credit reports the safest bet even though it’s inconvenient to get it temporarily unfrozen? Plus you have to pay a fee. At my son’s urging, I had my credit reports frozen since the Equifax incident but I find it very inconvenient whenever some financial firms need to look into my credit score.
Answer: Credit freezes remain the best way to prevent new account fraud, which is when criminals open up bogus credit accounts in your name.
It is somewhat inconvenient to have to remember to thaw the freezes when you apply for credit or other services, and you have to keep track of the personal identification numbers (PINs) that allow you to do so.
The good news is that the fees for instituting and thawing freezes will go away as of Sept. 21. The Dodd-Frank reform that Congress passed this spring included a clause requiring credit bureaus to waive those fees.
Today’s top story: How your credit card can help you save on summer travel. Also in the news: 7 steps to save on hardwood flooring costs, how not to be a knucklehead on Venmo, and how to boost your benefits at work.
How Your Credit Card Can Help You Save on Summer Travel
Using credit card rewards to pay for vacation.
7 Steps to Save on Hardwood Flooring Costs
How to keep your budget grounded.
How Not to Be a Knucklehead on Venmo
Don’t make things uncomfortable.
Boosting your benefits
Don’t leave money on the table.
Today’s top story: One couple’s journey from debt to $1.5 million in savings. Also in the news: What to buy and skip in July, Whole Foods joins Amazon’s Prime Day, and how the lawsuits against student loan service Navient could affect you.
One Couple’s Journey From Debt to $1.5 Million in Savings
Communication is key.
What to Buy (and Skip) in July
Making the most of midsummer sales.
Prime Day Alert: 10% Back at Whole Foods with Amazon Prime Visa
Whole Foods joins the Prime Day excitement.
How the lawsuits against student loan servicer Navient could affect you
Four states are currently suing the student loan giant.
Today’s top story: Credit cards can give you a break on back-to-school purchases. Also in the news: How credit card perks can be your ticket to a cheaper vacation, 3 questions to help grow your retirement savings, and a nonprofit that will give you $1000 if you take personal finance classes.
Credit Cards Can Give You a Break on Back-to-School Purchases
Easing the pain of fall’s big expenses.
Credit Card Perks Can Be Your Ticket to a Cheaper Vacation
Saving on fun.
3 Questions to Help Grow Your Retirement Savings
Give your retirement a boost.
This nonprofit will give you $1,000 if you take a few personal finance classes
Giving Millennials a head start.
Most of us have wasted money on ill-considered purchases or stuff we really couldn’t afford. As we get more financially savvy, that happens less often. But we can still profit from other people’s bad choices.
People who prize the latest and greatest, for example, quickly need to upgrade to the next shiny thing. That leaves plenty of lightly used cars and electronics for sale at a discount.
People who can’t look beyond cosmetic damage also provide buying opportunities for those who can, since surface flaws can ding price without hurting functionality. Then there are the “d’oh” mistakes: the stuff that didn’t fit or turned out to be the wrong shade of robin’s egg blue. That stuff gets returned so it can be discounted and snapped up by frugal buyers.
In my latest for the Associated Press, three ways to profit from others’ mistakes.
Today’s top story: The benefits of a just-for-debt credit card. Also in the news: July’s stock market outlook, bogus organic fruit, and how long it takes your credit score to recover from a drastic drop.
Just-for-Debt Credit Card: It Has One Job
Use this card for only one thing.
Stock Market Outlook: A Market That Giveth and Taketh Away
Buckle your seat belts.
$6 Million in Bogus Organic Fruit Sold to U.S., Costa Rican Report Finds
Bogus pineapples fill the shelves.
How Long It Takes Your Credit Score to Recover from a Drastic Drop
Be prepared to wait.