Ask Liz Weston

Get smart with your money

Liz Weston

Q&A: More on teens and cars

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Dear Liz: Your answer to the parent wanting to purchase a convertible for his son reminded me of something that happened long ago. When I graduated from high school in 1966, a friend’s wealthy parents bought him a brand-new Lamborghini Miura as a graduation present. Two days after he got the car, he missed a curve in the mountains and rolled the vehicle. By a miracle he was not badly hurt, but the car was scrap. You gave good advice. Giving your teenage son the keys to a high-performance car is like handing him a live grenade. Kids often want things that they should not have.

Answer: These stories are legion at affluent schools where parents are so focused on indulging their children, or flaunting their wealth, that they don’t fully consider the risks involved. Sometimes the children aren’t as lucky as your friend was.

Parents can still make an ostentatious display by buying their children new four-cylinder luxury sedans, replete with air bags and other safety features, and replacing them when they’re inevitably totaled. But everyone involved would be better off if parents avoided high-horsepower vehicles, new or used, that tempt their kids to test their driving limits.

What the Fed rate hike means to you, and your wallet

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For everyone who has been saying interest rates can only go up, well – now is their time. But what does the Federal Reserve’s decision to raise interest rates actually mean for your wallet?

Probably not much for the near-term.

One small interest rate hike of one-quarter of a percentage point is unlikely to have much impact on your budget, but that does not mean you should ignore the Fed’s first rate increase since 2006.

In my latest for Reuters, what to expect as a result of the hike.

In my latest for MoneyWatch, three money resolutions for 2016 – and how to keep them.

Wednesday’s need-to-know money news

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kids-and-credit-cardsToday’s top story: Five of the most inspiring personal finance stories of 2015. Also in the news: How to avoid holiday fraud, helping your kids establish credit, and when it’s time to leave your bank.

The 5 most inspiring personal finance stories of 2015
Inspiration for the new year.

Three Ways To Avoid Holiday Fraud
Staying on your toes.

How to help your kids establish credit
Starting them off on the right foot.

Signs It’s Time to Leave Your Bank (and How to Choose a New One)
Making the first move.

Tuesday’s need-to-know money news

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Credit card backgroundToday’s top story: The credit card mistakes you make every year. Also in the news: How to make a stress-free loan to your adult kids, how to bounce back from a financial setback, and the questions you should ask your employer about your 401(k).

5 Credit Card Mistakes You Repeat Every Year
Breaking the cycle.

Still Playing Parental ATM? How To Make A Hassle-Free Loan To Your Adult Kids
Handling a stressful situation.

8 Ways to Bounce Back From a Financial Setback
Don’t become complacent.

10 Big 401(k) Questions to Ask Your Employer
Getting the 411 on your 401(k).

Monday’s need-to-know money news

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Zemanta Related Posts ThumbnailToday’s top story: Tax mistakes newlyweds make and how to avoid them. Also in the news: What financial documents are safe to shred, how to rebuild your credit after a bankruptcy, and tips on negotiating a higher salary.

5 Tax Mistakes Newlyweds Make
It’s a whole new tax world.

Drowning in bank statements, etc.? Here’s what you can toss
Fire up the shredder!

How To Rebuild Your Credit Before Turning 45
Life post-bankruptcy.

Negotiate a Higher Salary With This Simple Formula
Getting what you’re worth.

Q&A: Student loans and mortgages

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Dear Liz: I recently completed a master’s degree in counseling and am now paying student loans. I am punctual and consistent in my payments. How does having a $30,000 outstanding student loan look to home lenders? We recently sold our home and moved. We are planning to buy another home and have a large down payment. Does this student loan affect my home purchase potential? My husband and I are retired, and we pay our bills on time.

Answer: Student loans can have a positive effect on your credit scores if they’re paid on time. On the other hand, your payments are factored into the equation of how much mortgage you can afford and will reduce the amount you can borrow.

You should be rethinking the notion of borrowing more in any case. It’s not clear why you spent so much on a degree if you’re not using it. Perhaps a health setback made working impossible or an inheritance made it unnecessary. Generally, though, you should borrow for an education only if you expect it to increase your earning power enough to easily replay the loan. If you’re pursuing an education just for the pleasure of it or for a feeling of accomplishment, you should pay for it out of pocket or with savings.

A mortgage in retirement is tricky as well. Although some wealthy people keep their mortgages so they can invest the money elsewhere, most people are better off without loans once they stop working. Having to pay a mortgage often means having to take more out of your retirement funds and increasing the odds of running short of money. Also, remember that your income will drop when one of you dies because one Social Security check goes away. That could make it harder to pay the bills.

Consider meeting with a fee-only financial planner who can assess your financial situation and offer advice about the best course. It could be that you can well afford student loans and a mortgage. Or you could be headed for disaster. It’s better to find out while there may still be time to put that degree to work to boost your income or take steps to conserve your funds.