Get smart with your money
Let’s face the grim truth: Those 10 pounds you want to lose will likely be among your New Year’s resolutions next year, too.
If you really want a sense of accomplishment, take care of money tasks that don’t require ongoing discipline and that you typically don’t have to repeat every year. In my latest for the Associated Press, what you can do to create a sense of progress towards your financial goals.
Despite what you often read, credit card debt isn’t typical. One quarter of U.S. households don’t use credit cards at all, and another 35 percent or so regularly pay their balances in full, according to Federal Reserve statistics. Among households that carry credit card balances, the median debt–where half owe more and half owe less–is somewhere around $3,000.
Whopping “average credit card debt” statistics are what grab headlines, though. They’re typically compiled by taking the total amount charged on plastic at the end of the year and dividing it by the number of card-carrying households. Those total charges include amounts that are about to be paid off by us so-called “convenience users,” and often business credit card balances as well. Also, averages can be misleading, since a relatively small number of households carrying a lot of debt can skew the average upward.
If you’re the one with the debt, though, you know it doesn’t feel good. If your balances grew over the holidays, you may be stressing already about how to pay it off. Here are some ideas:
Skip the post-holiday sales. You’ve heard it over and over: You can’t get out of debt if you don’t stop digging. But our brains tells us sales are the exception. We’re saving money! Nope, we’re spending–and adding to our debt stress. Whatever’s on sale likely will be on sale again, so let it go.
Have a no-spend month. I hosted one of these more than a decade ago on MSN, and readers reported saving $300, $400 and more. A no-spend means you spend only on essentials: no eating out, paid entertainment or shopping. You’ll learn frugality skills like planning and making do that can help you save year round.
Check the cushions. You may have money tucked away in various forms–jars of coins, unused gift cards, rewards programs that can be converted to cash back or gift cards. (Sites like Gift Card Granny can help you convert plastic to cash.)
Make weekly credit card payments. Don’t wait until the bill arrives to pay it–start whittling down your balance with regular injections.
Lower your interest rate. If you have good credit, you may be able to qualify for low- or zero-rate balance transfer offers. Use them as a way to speed up your debt repayment.
Dear Liz: My mother is 74 and her health is starting to deteriorate. She had a last will made up about 15 years ago when my stepdad left her. I found out that she named me executor and gave me power of attorney for healthcare decisions. After the last year, when she became very contentious about giving me any information to do this (such as sharing her credit cards numbers), we have decided it would be better to assign these jobs to another sibling. There are also big differences in what each sibling is to receive. This will cause huge problems with two of the siblings.
I do not want to be a part of that as these two cannot even be civil to each other right now. I am afraid that my mother will not get around to changing her will. Am I legally obligated to fulfill this? It is causing me extreme anxiety as I am dealing with her decline in health as well.
Answer: No one is forced to become an executor. If your mother doesn’t name an alternate, the probate court can appoint someone to take the job — and it may not be the person your mother preferred. Let her know that if she wants to have a say in who settles her estate, she needs to change her will.
You’re smart not to want to oversee a situation that’s bound to get ugly. It’s not clear, though, why you thought you needed access to your mother’s credit cards while she was still alive. The job of executor, which would require settling her accounts, wouldn’t start until after she dies. Healthcare decisions typically don’t require access to credit cards — although she should also have named someone to make financial decisions for her if she’s incapacitated.
If you’re worried about your mother’s ability to handle her finances, now or in the future, you can start the discussion by mentioning how important it is to have a power of attorney for finances as well as one for healthcare decisions. It’s not uncommon to name different people for these roles, because the skill sets needed are not the same. Someone who’s “good with money” isn’t necessarily equipped to carry out someone’s end-of-life wishes, which may include fights with medical providers about which treatments will and won’t be pursued.
Once you’ve covered that ground, you can segue into talking about what she would like to happen if she starts having trouble keeping up with daily money management tasks. Many parents add a trusted child to their bank accounts so the child can monitor transactions and make sure bills are paid. Or your mother may prefer to hire a daily money manager (referrals are available from the American Assn. of Daily Money Managers at www.aadmm.com).
Dear Liz: A couple I’ve known for years recently adopted 2-year-old twins. Both will need considerable medical care, as they were born to a drug-addicted mother. In sending out announcements, my friends suggested sending funds for the twins’ medical needs, rather than toys. I took note and sent a check earmarked for their healthcare. My question is: Can I include the gift in my own medical deduction for this year’s income taxes?
Answer: No. Only medical expenses paid for yourself, your spouse and your dependents typically qualify for the medical expense deduction on your income tax returns.
The expense isn’t a charitable deduction either. Contributions have to be made to qualified charities to be deductible, and individuals don’t qualify.
Dear Liz: Can you address parents who never throw anything away? It can be a burden to their children when parents leave behind massive amounts of collected, hoarded items, broken cars, old furniture, memorabilia, clothing unworn for decades, etc. This can be troublesome in terms of time off from work to clear an estate and may even necessitate the expense of hiring a professional or paying to have items hauled off.
Answer: Compulsive hoarding is a serious disorder that’s hard to treat unless the person is willing to change—and hoarders rarely are. You can offer to help your parents sort through their possessions, but ultimately it’s their decision what to keep and what to discard. Children of hoarders often have to resign themselves to spending a lot of time and money clearing out the mess when their parents are gone.
If your parents aren’t actually hoarders but simply have too much stuff, the holidays can be a good time to raise the issue of helping them downsize. It’s important to do so with empathy and without judgment. Your parents may not have the energy to organize their stuff, or they may have been traumatized by poverty or other financial setbacks that cause them to cling to things. If the task is too big for them or you, consider hiring a professional to help. The National Assn. of Professional Organizers is a good place to start.
Today’s top story: Credit card late fees are expected to rise in 2017. Also in the news: 10 New Year’s resolutions for your wallet, will Millennials be ready for retirement, and 3 signs you should switch banks.
Look for Credit Card Late Fees to Rise in 2017
More incentive to pay on time.
Sean Talks Money: 10 New Year’s Resolutions for Your Wallet
Starting the news year off on the right foot.
Only 30 Years to Go. Will Millennials Be Ready for Retirement?
The clock is ticking.
3 Signs You Should Switch Banks in 2017
Knowing when it’s time to switch.